Ebay Founder “Gives Back” - $100 million!

From StartUpJournal.com…

Ebay Inc. founder Pierre Omidyar and his wife, Pamela, have given $100 million in eBay stock to Tufts University in suburban Boston to create a fund that will invest in microfinance, the practice of loaning small sums to people who are too poor to qualify for traditional lending. The university says it will be converting the stock to cash over the next few weeks.

The Omidyar-Tufts Microfinance Fund will be administered by Tufts, where the couple met and graduated in the late 1980s. The Omidyars’ goal is to accelerate the growth of the microfinance sector and encourage other institutions to invest in it.

Current microfinance initiatives, which are targeted most often to developing countries, largely rely on private donations and support from nongovernmental organizations. The Omidyars want to get institutional investors involved by demonstrating that investments in microfinance can provide a competitive rate of return. Tufts will lend money to institutions offering microfinance loans, such as banks, which will in turn pay interest to the university; in addition, they will invest in institutional equity funds and loan guarantees.

“It’s a fundamentally different way of looking at how to make a social impact,” says Mr. Omidyar, 38 years old. “It’s using business as a tool to make that happen.”

Encouraging Entrepreneurship

Mr. Omidyar has long encouraged entrepreneurship as a way to improve the economic status of small-business owners. He says that personal philosophy played a role in the founding of eBay, an online auctioneer that supports many businesses that depend on the Web site to attract new customers. The Omidyars have been active philanthropists, giving $85.9 million last year to programs such as MicroVest, a microfinance institution.

About a year ago, Mr. Omidyar called Tufts University President Lawrence Bacow to discuss how institutions could support investments in microfinance. Mr. Omidyar later approached him with the idea of creating the microfinance fund, emphasizing that not only would Tufts benefit by receiving income on the investment, but that the university would be creating a new type of investment that would appeal to other institutions. “People will be interested in our returns, in how we do financially,” Mr. Bacow says.

The $100 million gift is the largest amount that Tufts has ever received. The fund will be managed separately from the university’s $880 million endowment and will be governed by a board of five trustees, including Mr. Omidyar and Mr. Bacow, an economist.

The fund will be invested entirely in microfinance — in a diversified portfolio that spreads the money among different microlending institutions — in developing countries in Asia, Latin America, Africa and Eastern Europe. The university says it has not yet decided in which institutions it will invest. It plans to divide the funds between existing providers and new initiatives it will create.

Tufts says it hopes the Omidyar fund will provide a similar rate of return as its endowment. The school’s endowment has a target return of 9%; as a rule, the school uses a 5% return on its investments to fund university operations, and reinvests the rest into its endowment. Similarly, half of the interest generated each year by the microfinance fund will go to the university and the other half will be reinvested into the fund.

I’m glad he’s “Giving Back”… but will the media acknowledge how much he’s given and already prospered “micro enterprises” by giving them an international trading platform for the price of an online auction?

Read it all…