Sarina’s Journey: How she and InVenture Fund came together
Sarina met Manvi Goel, her Mexico Pilot co-captain, in their high school just outside Washington, D.C. They continued on to MIT together, where they studied economics and became interested in the question of how to eliminate poverty without charity. They discovered quickly that the easy answer—ground-up economic development—was both hard to implement and hard to find.
“I was looking for a more sustainable way to help people,” Sarina said. “I’d traveled to India a lot, and saw that the urban areas that needed a lift most weren’t able to get it.”
While microfinance loans and other organizations provided help, Sarina explained, in most cases the change was small and temporary and didn’t eliminate the underlying causes of poverty and inequality. She and Manvi wanted bigger changes and longer-term growth, and so they decided to explore a new and largely untested idea in the development landscape: micro-equity.
A trip to Mexico their junior year helped answer their questions about whether equity could work on the ground—and whether it was even needed. Sarina and Manvi contacted 30 different MFIs in both rural and urban areas to see who needs equity financing and how it would work in different environments.
“We really wanted to answer the question of, ‘Is this product necessary?’” Sarina explained. “We didn’t want to take a product and force it on these clients. We want to work from the ground up.”
And the response from microfinance organizations and clients about whether the product was needed?
“The answer we heard over and over again,” Sarina says, “was yes.”
Sarina and Manvi found many clients who were pushing the boundaries of traditional microfinance—who had successful businesses but not enough financial freedom for growth and risk. These businesses—often referred to as the “missing middle”— couldn’t access traditional funding from banks and therefore were stuck on a cycle of small loans and debt. If these businesses were giving the financing they needed to grow, they could ultimately stimulate further economic growth in their regions and build markets, thereby leading to the kind of sustainable development Sarina and Manvi were seeking.
“We understood that microfinance works for the poorest of the poor, but equity financing is needed for the next tier of businesses,” Sarina added. “With equity, investors share some of the business risk, so investments encourage the entrepreneurs, too.”
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Enter InVenture Fund, which was already operating micro-equity funds in Ghana, India, and Mali. InVenture was looking to enter the Latin American market, but didn’t have the manpower needed to work there; Sarina and Manvi wanted to start a project in Mexico but needed operational resources.
“It was a perfect meeting of needs,” Sarina said. “It was amazing to talk to Shivani [InVenture Founder & CEO] and find an organization already working on the same idea.”
With support from MIT’s Public Service Center and fundraising from InVenture, Manvi and Sarina were able to connect with Arpos, an MFI based in Mexico City, and invest in a pilot entrepreneur. Griselda Flores, the 42-year-old entrepreneur behind a medical analysis clinic, won the 2009 PlaNet Finance International Microfinance Award in the “Microfinance and Health” category. She will receive equity financing to expand her businesses and give back to her community through the InVenture model.
Sarina is especially excited about Mexico because it is a relatively new microfinance market and because of its proximity to the U.S. Immigration and labor tie the two countries together at the border, and the U.S. has a direct interest in economic development in Mexico. The country, though, is not without its challenges: the microfinance market, for one, is known for scandalously high interest rates. But at the same time, the market is younger than in places like Africa and India, and therefore more willing to experiment with new types of financing.
“We do believe this model will facilitate growth,” Sarina said, “and we’d like to see it grow up to even bigger levels of equity and expand into new markets. We’ve seen clients that have an ambition to do more, and it seems that the missing piece for them should never be finance. If they want to grow their business, they should have the means to do it.”
