A new place for philanthropy

We’ve talked a lot in class about how unsustainable charity giving can be for sustaining social impact. It can be difficult insure the sustainability of a business model that relies on the giving of others. Having a profitable business model is a way to help insure the long-term stability of a social enterprise.

However, with these sustainable enterprising thriving on their own support, it begs the question:  what is the place for charitable giving in the social enterprise structure?

Philanthropic giving is deeply woven in fabric of society, Giving away a portion of earned income is an important aspect of the majority of world religions, and deeply woven into the underlying values in many cultures. Often, people are often enthusiastic to give. This is seen in the trendy explosion of brands like TOMS shoes, and crowdfunding websites like GoFundMe. While this philanthropic spirit has spurred the creation of many impactful non-profit organizations, it may be even more powerful if harnessed in conjunction with traditional money lending tools.

That’s what makes me so excited about the new financial innovations that many social entrepreneurial ventures are considering. By combining of philanthropy and more traditional methods that build funds, the impact of philanthropy can be compounded. By using funds to help increase returns or alleviate the risks of social ventures that made them unpalatable for traditional investors, these innovative new funding options open a new world of options for charitable giving.

In addition to giving charity a new, arguably more effective place in solving global problems, these new funding models allow more players to get into the game. Capital for growing and scaling social ventures from traditional investors or governments, in the case of social impact bonds, is unlocked.