Micro Finance

Micro Finance

I found this video link interesting which
is about Micro Finance.

According to capitalizing  social ventures and providing fund to invest
in social activities one approach is micro finance which will provide a way for
cooperation between business, public and non profit organization. Its goal is helping
to get sustainable social change.

Social finance is a market based
approach which reduces the cost of capital for NGO's and increasing social factors.
It also provides access to capital, loans and credit which helps to gain basic
needs. This way benefits both parts by providing competitive rate of interest
to investors and helping social communities to access cheaper capital to help society.

 

Link: http://socialfinance.ca/what-is-social-finance



--
Bahar Forghani

Subjective Well Being and the Measurement of Social Value

On the article "Measuring Social Value" I found the next paragraph
"...most metrics assume that value is objective, and therefore
discoverable through analysis. Yet as most modern economists now agree,
value is not an objective fact."

It made think that the author was being quite harsh and unfair to social
entrepreneurs. Since the subjectivity approach is far from being widely
accepted among economists and in fact some of them are still being
"marginalized" by the mainstream economics school of thought.

In fact this approach is so new that economists haven't developed highly
sophisticated and articulated theoretical frameworks to address
subjectivity yet.

Nonetheless, some efforts have been done in recent years with very
interesting results that could be useful to measure the social value
derived from social investments.

Subjective Well Being is the name of an economic school of thought which
actually instead of making all kinds of theoretical and "scientific"
assumptions tries to deal directly with people's subjective perceptions
of value or as one review to the field states it:

"Subjective Well Being is able to capture's people actual experience in
a direct manner, while economic, social and environmental indicators do
so only indirectly"

However, what does SWB exactly means? well, the same review proposes the
next definition:

"SWB is a broad category of phenomena that includes people's emotional
responses, domain satisfactions, and global judgments of life
satisfaction"

How doest it relates to supply, demand, indicators and willingness to
pay?

Well the position of this school of thought is that consumers would know
better how their willingness to pay looks like than a bunch of math
savvy geeks with a bunch of equations, and the only way they can assess
it is by evaluating their own overall position with respect to their
aspirations and effective possibilities.

Of course this statements should be subjected to further analysis, but
maybe SWB economists and social entrepreneurs and activists could gain a
lot of insight by partnering in trying to find better ways to measure
social value.

If you want to learn more about SWB click an the link below:

http://internal.psychology.illinois.edu/~ediener/

--
Ruben Fernandez <rfernand@andrew.cmu.edu>

Tracking Social Return on Investment

The ability of entrepreneurs operating at the Bottom of the Pyramid to be leap from their current operating environment, which is weighed-down by the impact of the equilibrium of underdevelopment, requires the civic organizations that advocate the economic participation of these communities to be able to quantify and track the social return of investment achievable by potential funders. This necessitates the development of a social value metrics that is transparent and thus able to justify the sustainability of capital outlays to stakeholders of development funding. Thus, the social value metrics should guide the assessment of service innovations and investment decisions made by social venture capital market institutions (Mulgan: 2010).

Social impact tools are misaligned with standard market models for assessing value, as social benefits are public goods in their nature. Therefore, the non-rivalry component of public goods makes standard financial and economic accountability methods inappropriate for social value measurement. However, (Mulgan: 2010) suggests that “social value should be thought of as the product of the dynamic interaction between demand and supply in the evolution of markets for social value”. In light of what has been said about the effect of the concept of non-rivalry, Mulgan’s suggestion may be a challenging exploit without complete information on the impact of social actions.

In all fairness though, Mulgan does suggests that there should be cross sectoral collaboration in assessing and measuring the outcomes of resource allocations made in the interest of social benefit. Thus civic organizations should collaborate with government in terms of accessing important data depositories.

The Heritage Foundation (http://www.heritage.org) has developed an economic freedom index.

The index is constructed based on the conceptualization of what economic freedom is. The foundation defines economic freedom as “The fundamental right of every human to control his or her own labor and property... in an economically free society.” One of the indicators to their composite measures business freedom; “the ability to start, operate, and close a business that represents the overall burden of regulation as well as the efficiency of government in the regulatory process”. I should think, before discussing the how conflating the impact of the roles of accountability are for the performance reporting activity of civic organization, the priority should be measuring the access to economic participation. This should better inform whether, everyone is given the opportunity to be social entrepreneurs (Muhammad Yunus).

Dreams are Free: Students let’s make it happen!

Students are arguably in the best position to start a social venture. They
have incredible support from professors, access to unbelievable resources,
and can take on risk that others can't. Think about it... I for example in
the social innovations and enterprise class should take advantage of the
course. (I believe that is why I took this class).Learning the
fundamentals of starting a social innovation venture, how to position our
innovations and pitch our ideas to investors present an opportunity to
change our community and the world at large. And we need to make it
happen. How do we do that??Think big, dream big.
Coming from a third world country, I am deeply saddened by the situations
the masses are facing in their daily lives and I am sure majority of the
people would like to see change. I realize I cannot change the whole world
in a day but our ideas can steer the wheels in motion for a better
tomorrow. Many people are put off by social innovative ideas because they
are afraid of disappointment, but we are students need to trust
ourselves....we know more than we think we do. Besides, It's kind of fun
to do the impossible. Students need to change their mentality and allow
their minds to swim in pleasurable thoughts of reaching their dreams by
visualizing of them coming true. But it does not stop there either. These
dreams and ideas must spur us to take action. Ideas must work through the
brains and arms of good and brave men (and women) or they are no better
that just dreams.
SIFE students are changing the world by making a difference in their local
communities. They invent new futures for themselves and for others through
entrepreneurial educational outreach projects. SIFE challenges students to
take what they learn and apply their knowledge in real situations for the
benefit of all concerned. Better still, when it comes to planning for a
career after college these students are better prepared and qualified and
stand high chance of accessing the country's most successful executives
and entrepreneurs. And not to forget the satisfaction that comes with it;
the feel that you have made a positive difference in your community by
helping others to be or become more empowered citizens is just priceless.
Will dreaming big always make your wishes come true? No, maybe not
exactly, but I can pretty much guarantee that you'll get a lot closer
than if you squash thoughts of your dreams every time they surface. So, if
you are currently a student, I encourage you to make the most of your time
at your University trying to start a social venture. If your school
doesn't have any courses on social entrepreneurship, talk to your
professors and ask them why not.
"Only as high as I reach can I grow, only as far as I seek can I go, only
as deep as I look can I see, and only as much as I dream can I be."
Blog by Caroline Kiriga.

Crowd Funding- Meeting Capitalization Needs of the "Last Mile"

Social ventures face problems when it comes to raising enough capital to finance their viability or in most cases their sustainability over a long period of time. International donors and the government increasingly find it difficult to provide assistance to the far off rural communities, hence the "Last Mile" Problem. It has been a practice since the birth of civilization that people have mobilized as a community to fix problems in their surroundings by pooling their meagre resources.

Crowd Funding as a concept means collective cooperation by the community to pool resources to support a cause or an organization. In recent times it has been mostly through the Internet or social networks. One prime example being the political campaign of President Obama in 2008. He got $137 million in small donations for his election campaign.The same model is also being used to meet the capital needs of social enterprises. The main driver behind crowd funding is the common interest shared between people that motivates them to pay a monetary sum for its development.

Crowd funding has been the main idea behind formation of cooperatives in rural areas to solve the problems of the community. Around 1990s the state of Kerala in rural India was facing a acute water shortage. The villagers decided to take the matters in their own hands and started collecting funds for their own mini piped water dreams. There were only three water supply schemes run by the government . The villagers started their own private water supply scheme using private resources and funds. A cooperative was formed and members were charged a nominal membership fee. The more poor segments paid their membership fee in installments. The scheme was a huge success and was able to meet the water requirements of that village. This is a great example of what community intervention and cooperation can do where governments fail.

The main idea is to empower people to create that "first mile" capability in their communities through a crowd funding approach, instead of waiting for the government to bridge that "Last Mile" gap.

Some question that comes to mind are

1. How can crowd funding approach be used in rural communities to create microfinance and micro insurance cooperatives?
2. What role can technology play in promoting these crowd funding approaches in the rural areas, similar to what social networks support in more urban areas. Connectivity limitations in rural areas is one of the main challenges.

Links

• http://www.uwcc.wisc.edu/pdf/Staff%20Papers/Community-Based%20Health%20Cooperatives.pdf
• http://www.wsp.org/wsp/sites/wsp.org/files/publications/sa_pipe.pdf
• http://en.wikipedia.org/wiki/Crowd_funding

financing social innovations in developed country contexts

I experience a little unease when I consider this issue of financing social innovations. Innovations, of course, are geared to a double bottom line of social and economic return (and in some instances, a triple bottom line including environmental too). Obviously they lend themselves to market based solutions, hence the role of private capital at start up. It is possible to see massive market biases in concepts such as impact investment. In fact, many impact investors presume a particular kind of market: underdeveloped ones where it is possible to extract profit from a mass market shifting huge volumes of product at low cost, often in a developing country context. Whilst I respect any effort to improve social conditions for impoverished populations, I do not wish for social innovation to be defined solely in terms of bottom of pyramid economics. The pyramid that often dominates my thinking is Maslow's: http://www.businessballs.com/images/maslow_hierarchy_sm.gif. The outcomes that I want social innovation to strive for concern top of the pyramid problems like self actualisation and esteem. In my opinion, such concerns are the proper preserve of social innovators in developed country contexts, for decades of welfare state intervention has not improved these indicators (see other posts in this blog about disability and happiness), and they obviously don't lend themselves to base of the pyramid economics. Many argue that this problem represents government and market failure, hence my earlier discomfort. I suspect that this failure is extremely expensive. Yet how do social innovators in developed country contexts attract funding, given the inevitably smaller returns relative to the opportunities presented to investors in developing country contexts? The notion of social impact bonds is quite brilliant in this context (http://www.socialfinance.org.uk/). Whilst private investors bear the investment risk, if the innovation works (e.g. reducing recidivism rates in the UK), government guarantees a return on investment. The pay off for them is that previously intractable social problems are mitigated. I think it is possible that this model might offer my idea a funding source. Like recidivism, I am focussed on an intractable social problem. Across the anglophone world governments are worried about growing populations of people (especially working age men) moving onto disability support pensions, and then never moving off. In a context of increasing health and disability costs connected to an ageing society, this is a huge problem. In addition, I am concerned with some of the most extreme markers of disadvantage in Australia today, i.e. the presence of severe and profound disability. The Australian Bureau of Statistics measures the presence of severe and profound disability in the index of relative socio economic disadvantage, a census based product it publishes every 5 years (with the next edition due in 2013, I think). One of the major measures of severe and profound disability is difficulty accessing community, something my innovation hopes to improve by making it more rewarding.

• People who are more connected to community are having their top of the pyramid needs met.
• People whose sense of agency and self worth is satisfied make fewer demands on the government $.
• Governments can experience improvement in previously intractable social problems (like recidivism), and may experience savings where previously there has only been cost increases.

The Social Finance/Social Investment Bank phenomenon in the UK is quite brilliant in this area of innovation. Lacking an equivalent framework in Aus and the US, where do social innovators go to find institutional and private backers?

Poverty is not a disability

Shukla Bose is giving a TED talk on teaching slum children one-child at a time. It's amazing how much children can learn. A lot of people would just laugh and say these children can't learn. In my personal experience, I have been told to my face by a Barang (a foreign white guy) that Cambodian children, most of them poor, can't learn because they didn't have proper pre-natal care. There might be some truth in it, but I take it as a projection of his lack of competence to teach well. Through out my teaching experience, I have learned that they CAN learn. You just need to know how they learn things and adopt your teaching style accordingly.

This video is worth watching: http://www.ted.com/talks/shukla_bose_teaching_one_child_at_a_time.html

I agree with her. Quality comes first, and scale (quantity) can come later. However, I don't like her not-for-profit way of deliverying the service. I think it's too dependent on donors' funding and not self-sustaining. The question is: how can we make this a social venture model instead?

Innovation funding Innovation: The Social-Impact Bonds

There is no doubt about the funding gap that exists for social entrepreneurs. These entrepreneurs aim to develop a business that in addition of supporting a social mission also generates a financial return. Social enterprises at the early stages of their inception critically need financial backing to survive and grow. We can only see the full impact of these innovative businesses once they have passed their initial development phase and are in good financial health.

To face this challenge we need to think of creative financial tools to fill this funding gap. One such interesting innovation was the British social-impact bonds. This is a derivative tool tied to the performance of a social enterprise in a defined population. Private investors investing in this bond, channel money to a selected social organization. On the part of the social organization, this tool gives them long term capital to scale up their innovative model. On the part of the investors, financial returns are made by the public sector on the basis of improved social outcomes. If outcomes do not improve, then investors do not recover their investment. This can be measured by a suitable social performance metric.

A diagrammatical view of the Social Impact Bond working can be seen below.

This innovative financial instrument has many advantages, including:

1. Provision of long term capital for promising social innovative ideas.

2. Transfer of risk to private capital markets.

3. The use of public tax money only if the enterprise provides promised social benefits.

For more information please go to the link below:

Source:

http://www.socialfinance.org.uk/work/sibs

http://www.economist.com/node/16789766?story_id=16789766&CFID=145242723&CFTOKEN=80436283

To think about this innovation more objectively, let me propose the following questions:

1. There are many stakeholders involved in impacting a social problem. How can we identify a single entity or group of social businesses for the purpose of funding through this bond?

2. Will this innovative social bond attract enough profit seeking private investor’s money?

3. Can philanthropists be attracted to make a potentially profitable investment such as this?

4. What defines a good social metric? To what extent will we be able to measure the social impact?