OPINION: Why Social Investment Is A Threat To Charity Values

Monday, July 25, 2016

In a world where charities are already pitted against each other by funders looking to procure impact, using tools of social investment over grants makes a lot of sense. In a world where we move beyond charity competition into a collaborative one, it becomes much less interesting.

There are three areas where social investment makes sense:

Firstly, if you see a charity paying extortionate amounts on your rent and a building comes up for sale at a bargain price, then providing finance so that they can buy the building and pay you back cheaper than a bank loan makes sense. Expanding charity shops or setting up commercial retail operations might come under this same category.

Secondly, if a charity is going to go bust for cash flow reasons because the government department it contracts with pays so slow, then a bridging loan may make more sense than a donation to help bail them out.

And finally if there is an organization doing nothing “new” but delivering a good service at a decent margin and wants to expand that service, then if you can make it cheaper and easier for them to access capital than a bank would, great. More eco-lodges, more distributors and retailers for solar lanterns, more good in the world and no harm done.

Source: Forbes (link opens in a new window)

impact investing, philanthropy, social enterprise