MICROCAPITAL STORY: Omidyar-Tufts $100m Microfinance Fund Earns 12 Percent Return and $6.6m for Tufts University in 2008

In 2005, MicroCapital reported enthusiastically that Pierre Omidyar, founder of eBay, and his wife donated USD 100 million to their former school Tufts University, to be managed as a for-profit fund exclusively for investments into microfinance initiatives. At the time, the Omidyar-Tufts Microfinance Fund was the largest single for-profit microfinance fund in the world.

Four years later, with an economic downturn hurting Tufts’ endowment as a whole, the Omidyar-Tufts Microfinance Fund continues to be productive. The payouts to the university have increased each year as a larger portion of the fund has been invested. Tufts received USD 1.38 million in fiscal year 2006, USD 2.6 million in 2007, and, as recently announced, USD 6.6 million in the latest fiscal year. MicroCapital has reported in the past on the microfinance sector apparent insularity from global economic turmoil.

Although the Microfinance Fund is a part of Tufts University’s endowment, it has a separate governing structure. Mr. Omidyar sits on a board of trustees, made up of five individuals who vote on the fund director’s investment recommendations. Thus far, the fund has been invested in microfinance institutions in 35 developing countries in Asia, Africa, Eastern Europe, Central America, and South America that provide microfinance services to more than one million people.

USD 6.6 million constitutes only half of the dividends earned from the fund in 2008. The other half was reinvested. The fund earned a 12 percent return in 2008, surpassing the management’s goal of a 9 percent annual return. However, according to Tryfan Evans, the fund’s director, it is difficult to predict earnings in the young microfinance investment sector.

Tufts will use its USD 6.6 million payout to support faculty and students through scholarships, research grants and student loans.

By Ryan Hogarth, Research Assistant

Additional Resources:

Omidyar Tufts Microfinance Fund: Home

MicroCapital article, November 4, 2005: “Watershed Moment? Ebay Founder Pierre Omidyar Invests $100m in Microfinance”

MicroCapital article, January 26, 2009: “MICROFINANCE PAPER WRAP-UP: Microfinance Still Hums, Despite Global Financial Crisis, by Jeremy Caplan”

The Chronicle of Higher Education: “Tufts Learns How Far a Big Gift Can Go”, by Kathryn Masterson