Author: Sarah Stuewe, Associate Director, Philanthropy, Windmill Microlending
This case study is part of a social finance case studies series on investment readiness. Through a partnership with Investment Readiness Program (IRP), SI Canada is working with ten entities (SPOs non-profits, co-operatives, for-profit social enterprises) that have achieved investment readiness and provide them with an opportunity to share their journey and profile this work through a case study and a virtual event.
Download the case study here.
Background
Windmill Microlending is a national charity serving newcomers to Canada since 2005. Windmill affordable loans of up to $15,000 to help skilled immigrants and refugees pay for the costs of education and training programs, credentials, licensing and more, to reach their career goals. Windmill’s mission is to empower skilled immigrants to achieve economic prosperity by providing microloans and support to achieve Canadian accreditation.
Windmill supports newcomers who arrive with education, skills and experience but face significant barriers to employment. For many immigrants, what prevents them from entering the labour market is a lack of financial support. You can learn more about the success stories here (windmillmicrolending.org/success).
Immigrants often require Canadian accreditation to continue their professional careers in Canada and achieve their economic potential. Many need loans to fund their Canadian licensing, training and education. But with no credit history in Canada, traditional banks often cannot provide them with the financial support they need to restart their careers. Windmill’s low-interest loans help them pay for their accreditation, education and training costs. Our unique coaching, mentorship and programmatic supports complement our affordable loans and empower our clients to achieve incredible career outcomes.
The results of a Windmill microloan are life changing. Our clients experience a 3.6X income increase on average. Unemployment is reduced from 42% to 8%. Our repayment rate is over 97%. We saw more demand for our loans than ever before last year and the need for our services is only continuing to increase.
In 2017, Windmill’s new CEO was approached by the founder of the Social Venture Exchange (SVX) to see if Windmill would be interested in developing a social impact investment product. It seemed like an interesting idea to explore whether or not there would be interest among investors in a product that offered a lower interest rate than RBC was charging for their line of credit. The SVX believed there would be and helped us design a community bond with a GIC-like rate of interest.
Windmill’s Community Bond has become one of the essential ways that we raise the loan capital needed to serve a growing number of newcomer clients.
Types of financial support sought out
Community Bond with fixed rate return. Terms of 1, 3 and 5 years are offered and the minimum investment size is $250,000. As of October 2022, the rates are:
Challenges
When Windmill’s Community Bond was launched in 2017, social finance and impact investing were relatively new phenomena in Canada. The barriers to accessing impact investments were a lack of awareness of Windmill Microlending’s work, and a lack of awareness of impact investing, generally. Windmill was the first impact investment for many of the foundations and individuals who invested in the early years of the Community Bond. A group of foundations who were early proponents of impact investing were critical to helping us hit our target in that first year. Inspirit Foundation created an investment memorandum, which they shared with other foundations and allowed us to share, to help others make a well-informed decision about the investment opportunity.
Over time, as Windmill’s brand has grown and impact investing has grown in popularity, the size of the investments has grown. Recently, the Lucie and André Chagnon Foundation invested $5M in our Community Bond, our largest ever investment investment to date. Our success securing larger investments has allowed us to significantly increase our Community Bond funding targets, with a $6M capital raise in 2022/23.
The government’s involvement in Windmill’s impact investing journey
The Federal government and several provincial governments are key funders of Windmill’s operating budget, including the wrap-around client supports our clients receive, such as client success coaching and our mentorship program, as well as funding outreach so newcomers who would benefit from a Windmill loan learn about the supports available.
Windmill Microlending participates in the Table of Impact Investing Practitioners (TIIP) a community of practice for social finance intermediaries supported by the Investment Readiness Program. Windmill also received $50,000 in funding through the Investment Readiness Program to understand the impact of affordable loans and microloans on the lives of newcomer women, and use those findings to more effectively market our community bonds. This funding allowed Windmill to complete qualitative and quantitative research to gain insight on how affordable credit and microloans impact the ability of immigrant and refugee women to gain recognition of their foreign credentials. Key findings were captured in several pieces of creative collateral for an investor audience.
Measuring Impact
How impact was measured and demonstrated to investors
We monitor and evaluate our impact using these key indicators:
- Income multiple: This is the increase that we see in our clients’ incomes. On average, our clients’ incomes increase from $15,779 at the time of their loan application to $54,360 upon completion of their training. Our standard indicator is to see an income multiple greater than 3X.
- Repayment rate: This is the percentage of our clients who pay back their loans without defaulting. We must maintain a high repayment rate to continue to provide our services. Our standard metric for this indicator is to have a repayment rate greater than 97 per cent. With the average loan amount of $10,000 and this exceptional repayment rate, we know our loans are repaid and reloaned out to another newcomer every 3.3 years.
- Net Promoter Score: Net Promoter Score (NPS) measures customer experience and predicts business growth. This is a proven metric that provides the core measurement for customer experience. This information is collected by asking our clients the following: “On a scale of 0-10, how likely is it that you would recommend Windmill Microlending to a friend or colleague?” The score can range from a low of -100 to a high of 100. High scores indicate that customers are loyal enthusiasts who will refer others, and fuel continued demand for our services. Our standard for NPS is to receive an average score of greater than 85.
Windmill uses robust data collection methods to best serve our clients and ensure efficient return on investment for our funders. We’ve implemented automated checkpoint messages to our clients at specific follow-up terms (6, 12, 18 months) and manual monitoring of these messages by staff so that we can constantly improve the response rate. We collect inbound referral data at two key points of the application process and ensure consistency through our Data Quality and Compliance Specialist. For example, we collect the income of our clients at intake, and then compare that to their income upon repayment of their loan. This helps us to demonstrate the impact of our work.
At Windmill, we believe that those who can empathize with the immigrant experience are best positioned to serve our clients. Understanding the challenges that come with navigating a new life in Canada is one of the reasons that we can provide a positive experience (demonstrated by the fact that 98% of our Google reviews are 5-stars). When hiring for new roles, we purposely seek out those with immigrant experience. As a result, our staff directly reflects the population we serve, as half are BIPOC and 60 per cent were born outside of Canada. Of those born in Canada, about half were born to immigrant parents. Collectively, the Windmill team speaks 24 different languages.
This diverse and passionate group of staff makes constant efforts to gain client feedback and to share their stories with our stakeholders. We include client stories in our publications, each board meeting begins with a client story and we prominently feature client success stories on our website (windmillmicrolending.org/ success).
Our Alumni and Mentorship Coordinator leads the engagement of our former clients (alumni). Through our mentorship program, alumni can give back by helping new clients navigate the Canadian labour market. The mentors provide the new clients with the necessary tools and skills to find employment that is commensurate with their skills, education and experience.
In 2021, Windmill alumnus Dapo Bankole joined our Board of Directors. Dapo is the founder and president of Mopheth Systems in Calgary and is also a donor to Windmill. We value his perspective as a former client and a current donor to the organization.
Windmill has also signed on to Canada’s 50 – 30 Challenge as a sign of our commitment to diversity and inclusion at Windmill. The Challenge asks organizations to aspire to 50% representation of women and/or non-binary people at the board and senior management level and 30% representation of other under- represented groups among board and senior management. Windmill is currently exceeding those challenge guidelines at the board and senior management level. Windmill is committed, in all aspects, to equitable service access and outcomes.
This is a sampling of the ways that we work to include the population we serve in every aspect of our organization.
Next steps for the social finance project
Community bonds are crucial to funding our growth. We are serving a record number of clients with microloans and coaching supports this financial year, with a 24% year-over-year increase in the number of loans approved. This will require more loan capital, both donated and invested, to power our growth. Our goal is to scale from serving 1,100 clients per year to 4,000 by 2026/2027. This will require an additional $50M in invested loan capital through our Community Bond program.
Lessons learned from “investment readiness” journey
We have evolved how we set our interest rate, as a result of feedback collected from a number of our current investors. When we launched the bond in 2017, we set the interest rate with input from nonprofit financial services firm SVX, who structured the offering and made the investment opportunity available to impact investors across Canada on its investment platform. The interest rate was set ranging from 0.75% to 2%. This strategy worked for several years, during a time of relatively stable interest rates.
After undertaking a survey of a number of our current Community Bond investors, we decided to shift how we set our interest rate. We have indexed the Community Bond’s fixed rate against an institution’s Guaranteed Investment Certificates (GIC), minus 0.5%. In a volatile market, this allows us to provide a sound rationale to our investors on the reasoning for our impact-adjusted rate of return. This also means that we have raised the interest we pay on our Community Bond several times over the past year, making it a more compelling product for new investors.
Hopes for the future with regard to social finance
We hope that more foundations, corporations and individuals will consider placing a portion of their capital in social finance projects. Using capital to drive social change is a key piece of the puzzle when it comes to solving today’s most complex problems.
Social finance campaign timeline
June – September 2017
- Research and design of the initial community bond in conjunction with the Social Venture Exchange
November 2017
- Launch of Windmill’s Community Bond
March 2018
- First close in March 2018, we closed $390,000 in investments from five investors.
April 2018 – March 2019
- Our goal was to raise $4MM in our 18/19 Fiscal Year and we surpassed it, raising $4,365,000.
April 2019 – March 2020
- Our goal was to raise $3MM in our 19/20 Fiscal Year, and we fell short, raising $2,600,000.
- We began offering our investors monthly close dates, allowing us more flexibility to accept capital throughout the year.
- We secured our first six figure investment, a $1MM investment from the Hamilton Community Foundation.
April 2020 – March 2021
- Our goal was to raise $2.7MM in our 20/21 Fiscal Year, and we successfully raised $4,200,000.
- We secured our second six figure investment, with a $2MM investment from the TELUS Pollinator Fund for Good.
April 2021 – March 2022
- Our goal was to raise $3.5MM in our 21/22 Fiscal Year and we successfully raised $3,940,000.
April 2022 – Current
- In our 22/23 Fiscal Year our target is to raise $6MM.
- We secured our largest investment to date from the Fondation Lucie et André Chagnon, a $5MM investment that will be invested over ten quarters.
View the presentation slides from the SI Canada Investment Readiness Case Study Webinar.