David Stevens and Marianne Pellegrini are changing SME-Finance

David Stevens and Marianne Pellegrini, winners of Changemakers’ early entry prize for the G-20 SME Finance Challenge, take a remarkably innovative approach to catalyzing funding for Small and Medium Enterprises (SMEs). Through their new organization, Affinity Macro Finance (AMF), and with the support of the Results for Development Institute (R4D), Stevens and Pellegrini have initiated a loan program that utilizes local currency—guaranteed, development bonds—as the vehicle to inject much needed capital into the economic “missing middle” that SMEs represent. Developed by Stevens, the former CEO of a successful financial guarantee insurance company, AMF plans to issue AAA rated, local currency bonds to government treasuries and pension funds in developing nations, as a means of financing SME lending. Prior to AMF, Stevens was CEO of XL Capital Assurance (XLCA), once the fourth largest AAA bond insurer in the United States. Still, Stevens has always held social entrepreneurship as a core value. He began his career as an English teacher at a school in North Carolina that had recently undergone desegregation. Inspired, he sought to effect a more macro-level impact which led him to pursue his longtime interest in economic and social development. Stevens’ path to social entrepreneurship crystallized in 2004 when he stepped down as CEO of XLCA and founded a single-person initiative to launch his vision. “I surprised a lot of people,” Stevens said. ”Since then, I’ve spent the last six years knocking on doors and trying to bring financial technology to the developing world.” Stevens has found willing supporters at R4D and in AMF’s Managing Director, Marianne Pellegrini. In the wake of the economic collapse brought about by subprime mortgage lending, and the toxic credit default swaps and collateralized debt obligations that exposed so much of the market to risk, securities products have been the target of much criticism. In light of this, Stevens asserts that when applied to good use and leveraged responsibly, certain financial instruments (such as structured finance bonds) have an enormous potential to achieve a high-level of social impact in low-income countries. Stevens’ first stroke of inspiration came in 1997 while working in Chile for MBIA the word’s largest financial guarantee company. Chile faced a hurdle as it attempted to finance a national toll road construction project. The challenge stemmed from the fact that Chile’s national pension funds could only hold bonds of the highest rating, and therefore with the least associated risk, but the toll road bond did not meet these requirements. Stevens and MBIA helped the Chilean government finance construction of the national toll road system by insuring, and thereby converting to AAA risk, the bonds purchased by the nation’s pension funds and local insurance companies. Guaranteeing the bond meant that Chile could fund its toll road construction via its own pension assets and other local capital sources without relying on foreign lending, which would have exposed Chile to currency risks it could not afford. This approach would become the inauguration of Stevens’ concept for leveraging an estimated $1 trillion in untapped pension fund assets residing in the developing world, and the basis of AMF’s bond-lending initiative. “[Pensions are] a huge resource,” he said. “I thought, if you could find a way to tap them safely, at a very high level of credit protection, then you’ve found a way to let these countries develop without relying on foreign loans.” With his knowledge of guaranteeing municipal bonds and support from the Results for Development Institute (R4D), Stevens next partnered with Pellegrini, who has an educational background in Human Development, but has maintained a thriving career in structured finance for many years. “AMF is a dream come true,” said Pellegrini, “it combines so many different things that are important to me.” Together, they are pioneering a solution that merges public and private strategies and establishing a partnership that they believe will create a dedicated, permanent SME lending sector in the nations with which they partner. The bond structuring initiative is able to issue low-cost, fixed-rate, local currency, long-term bonds to developing nations because the bonds are guaranteed by a donor nation, giving pension funds a safe way to achieve above-market yields on their investments. This structure also enables developing nations to become more financially self-reliant, because in most cases the donor nation only provides the guarantee, with no actual capital being expended. The guarantees also allow AMF to issue the bonds at low interest rates and which they then pass on to SMEs in the form of a lower cost of borrowing. Having received support from USAID to reach out to several African nations and gauge interest for the bond initiative, AMF and R4D have, together, received mandates to organize financing for bond issuances and begin the program in three countries: Nigeria, Uganda, and Rwanda. By leveraging their untapped pension assets, these nations will be able to finance their own economic development without relying on foreign aid, which tends to become scarce in an economic downturn, or high-risk dependence on foreign debt. People have begun to take notice of this highly innovative solution that addresses the lack of finance available to SMEs. AMF—which in addition to its bond plan aims to become a development‐stage financial guarantee firm—was recently awarded top honors at the Marketplace on Innovative Financial Solutions for Development, a competition hosted by the Agence Française de Développement, the Bill and Melinda Gates Foundation, and the World Bank. “The great thing is that the solution is very replicable,” said Pelligrini, who noted that Latin America was a likely place to expand the program in the future. “Ours is, by design, a very macro approach. It’s a big picture solution,” Stevens continued. “We want to help countries magnify the value of resources they may not have thought about—like the pension funds.” According to him, there are potentially 80 other developing countries that could benefit in the future from AMF’s bond-lending innovation. AMF is in the process of raising seed capital and gaining firm commitments from interested donor guarantors. Stevens hopes that AMF’s early entry prize awarded by Ashoka’s Changemakers for the G-20 SME Finance Challenge will help jumpstart the program. “To win a prize like this is huge for us, because we can finally get some public recognition—and credibility,” he said. “We really appreciate the recognition we’re getting from this competition, because that recognition just makes all the difference in the world in terms of people opening their minds to your ideas—even if you aren’t an official at a large organization. Recognition will also help us unlock the financing we need to get our deals done.” The G20 SME Finance Challenge is looking for the best models worldwide that catalyze finance for small and medium enterprises (SMEs). This challenge is open to all private sector participants that demonstrate success and ability to scale, including private financial institutions, private investors and companies, socially responsible investors, foundations, and civil society organizations.


Tim Scheu's picture

Thanks David and Marianne for such a creative and high-impact innovation. Best of luck throughout this competition, and I hope you secure the resources needed to bring this incredible idea to scale.

Dear David,

Excellent work in closing the gap between markets. I am the other side of the coin of what you are doing and have also submitted a G-20 proposal for this competition for the AllWorld Network. Our goal, like yours, is systems change. Our mission is to find and advance all the growth entrepreneurs of the emerging world by 2015. We are creating the Arabia 500, Africa 500, Asia 500, Eurasia 500 and Latin 500 to find all the growth entrepreneurs of these regions and put them on the global radar screen. The objective is that capital will come to them, and that requires people like you.

If you have a moment, have a look at our web site at AllWorldLive.com.

I further appreciate your efforts as I used to be a municipal bond banker with Morgan Stanley.

Sincerely, Anne Habiby

Many thanks, Anne, for your encouraging and kind comments. I've taken a look at your web site and think it is a terrific idea for your organization to recognize the key growth companies in these regions. I hope we will have the opportunity to meet and work together.

Thanks, Tim, for your remarks. We are very grateful for the opportunity the G20, Rockefeller Foundation and Ashoka have provided us and the other entrants.

Der David and Marianne,

The was nice to read and learn about your solution.
In my opinion a global policy and a to develop global standard for funding techniques and SME finance including suport and guidlines would support you approach. I think Central Banks, MFIs and for example Savings and Credit Cooperative can play a larger role in this.
Solving of the following issues can make live a bit easier:
•Lack of local and national laws and legislation regarding various
financial activities of more informal financial Institutions.
•Lack of rules, regulations and guidelines regarding non-profit,
activities taxes, fund rising, charging of interest rates.

What's your opinion on this,
Kind Regards,
Rob Gerards
The Netherlands

Fantastic to hear about the inroads you are making, David and Marianne, and Anne too. I was a securitization/structured finance banker for many years with Credit Suisse in London and Hong Kong. I am still based in Hong Kong - and very interested to help develop creative financing partnerships in sectors which have limited access to finance in Asia. SMEs and the last mile are of particular interest, and I have several ongoing consulting projects with this theme. I will contact you directly through your websites to explore how to help your initiatives.

Stella, Many thanks for your comments. I would like to hear from you further. You can write me at [email protected].

Best regards,


Daniel Bond's picture

The Bond Buyer just published an excellent article about this attempt to launch a new monoline focusing on local currency capital markets in developing countries.

The Bond Buyer reporter Patrick McGee writes: "Despite waning demand for U.S. municipal bond insurance, a startup company believes there is value in exporting the credit enhancement model to the world’s emerging markets. David Stevens, an industry veteran who was the chief executive officer at XL Capital Assurance, plans to launch Affinity MacroFinance, a mutual financial guaranty insurance company, in the second quarter of 2011. Stevens believes AMF could increase investment in development while securing returns for investors. He is convinced a bond insurer devoted to nascent markets could be more profitable than the monolines ever were. And, he argues, it could be safer, too."

The full article is available via the link below.


I think that a monoline of this type could help local pension funds and other institutional investors in developing countries invest in structured pools of SME and small infrastructure loans, thus providing much needed longer term financing for development. I would be interested in learning what others think about this effort.

nelly maria baste's picture


that was a very good solution and it was an excellent article you have done the good work on it.
Medical billing and coding

AMF plans to issue AAA rated, local currency bonds to government treasuries and pension funds in developing nations, as a means of financing SME lending. short term loan