A Brave New World of Social Purpose Finance

By on December 8, 2014

This is the title of a new article in the November/December 2014 issue of The World Financial Review in which Center Director Dr. Lester Salamon examines the remarkable changes taking place in social purpose finance today. Below is a brief excerpt from the article. Please click here to download the full article.
Excerpted from the November-December 2014 issue of The World Financial Review:

On September 28, 2011, Microfinance Africa, a newsletter serving the microfinance industry on the African continent, reported news of an important, if unusual, development designed to help East Africa cope with the region’s food shortage and resulting skyrocketing food prices. An unexpected consortium had come together to channel $25 million to a series of small and medium-sized East African agricultural enterprises whose businesses could help link the region’s small-holder farmers to improved production and marketing opportunities. Although the US Agency for International Development (USAID) was a party to this consortium, this was not your normal top-down, government funded, development project. Rather, USAID had teamed up with three foundations (the UK-based Gatsby Charitable Foundation, and the US-based Rockefeller and Gates foundations), a major US investment firm (J.P. Morgan Social Finance), and Pearl Capital Partners – a private, Kampala-based investment company dedicated to channeling private equity of small-holder agricultural enterprises in Africa.
What may be most unusual about this deal in the current climate of development assistance, philanthropy, and finance, however, is that it is no longer unusual at all. Rather, it is an example of what students of the field have begun referring to as “yin-yang” deals, deals that bring together, as in Chinese thought, seemingly contrary forces that turn out to be uniquely capable of producing new life forms when taking advantage of their interdependencies.
Sizable yin-yang deals of this sort are slowly becoming the new normal in efforts to combat the enormous social, economic, and environmental problems that confront our world today. And none too soon. With the resources of both governments and traditional philanthropy barely growing or in decline, yet the problems of poverty, ill-health and environmental degradation ballooning daily, it is increasingly clear that new models for financing and promoting social and environmental objectives are urgently needed.
Fortunately, a significant revolution appears to be underway on the frontiers of philanthropy that is providing at least a partial, though still embryonic, response to this dilemma…
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For more information on the two new books on the “new frontiers of philanthropy and social investment” by Lester Salamon on which this article draws, please visit the New Frontiers of Philanthropy project page.