October 2022 / INVESTMENT INSIGHTS
T. Rowe Price Global Impact Equity Fund Case Study: Intuit
Enabling Social Equity
Pressure Points
In the U.S., small businesses account for 99% of all firms and are key to job creation and economic growth.1 Unfortunately, by the end of their fifth year, the survival rate of U.S. small businesses is only 50%.2 With cash flow pressures being the main reason for failure for 29%3 of start- ups, overcoming financial and regulatory challenges is key to unlocking growth potential. However, access to funding from traditional financial institutions can be a challenge. Online financing helps improve SMEs’ financial inclusion, often providing faster access to credit than traditional lenders and can offer loans with short-term maturities.
Impact Thesis
Intuit developed a set of integrated digital productivity solutions that help with the development, formalization, and growth of SMEs and sole proprietors. They help accounting professionals, employees, and consumers overcome financial and compliance challenges at a lower cost (e.g., payroll, time tracking, and financial and taxation compliance). Intuit also provides capital to SMEs. In addition, new offerings enable SMEs to better access and expand their end markets. We measure the impact on SMEs by reporting on the number of SMEs served and their success rate.
Key Performance Indicator (KPI): Number of SMEs supported
Five Dimensions of Impact
What: Supporting decent jobs and fostering economic development Who: SMEs, self-employed, unemployed, individuals in vulnerable jobs in the U.S.
How much: 102 million customers including 8 million SMEs and self- employed individuals served across all platforms as at financial year 2021, a 79% year-over-year increase. It is estimated that the term loans issued to SMEs by Intuit in 2020 (USD 243 million) helped create 8,721 new jobs.4
Contribution: Intuit set ambitious SME enablement goals for 2025: double the household savings rate, improve the small and medium-sized business success rate by 10 points versus industry standard, and serve 200 million customers. For the five-year period to end 2020, the survival rate of new SME accounts opened on Quickbooks is 69%, 19% more than the national average.5
Risks: Lack of financial literacy, market oversaturation leading to client over-indebtedness, and new SMEs engaging in harmful social and environmental practices.
Progress Monitoring
We are monitoring Intuit’s progress toward its 2025 goals and its ability to make financial management, taxation, and related software accessible.
Note: T. Rowe Price uses a proprietary custom structure for impact pillar and sub-pillar classification.
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October 2022 / INVESTMENT INSIGHTS
Hari Balkrishna is a portfolio manager for the Global Impact Equity Strategy. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd. He completed an internship at T. Rowe Price in 2009. Prior to joining the firm in 2010, he worked at Goldman Sachs, Sydney, Australia, in the financial institutions group of the Investment Banking Division.
