Rob Katz

Social Capital Markets: New Spin on Old World Development

Aden Van NoppenAden Van Noppen is a senior at Brown University where she studies International Development. She is also an intern for Acumen Fund, where she works to develop programs that teach college students about private sector solutions to poverty. Aden was formerly an intern for Dalberg Global Development Advisors where she worked on the development of the Aspen Network of Development Entrepreneurs.

By Aden Van Noppen

These four panelists are without a doubt putting a new spin on development. All four use investment as their social impact tool of choice, but what made the panel so compelling is understand how and why they have all chosen to do it a little differently.Charly Kleissner, co-founder of KL Felicitas Foundation, moderated the panel of Vineet Rai from Aavishkar, Jill Chen from the Grameen Foundation, Arun Gore from Gray Matters Capital (GMC), and Noah Beckwith from Aureos.

Together, the panelists demonstrated a myriad of methods that fall under umbrella of social investing. They showed that the objective of the investment determines the appropriate size and nature of the investment vehicle. Aureos, for example, gives loans of between $2 and $10 million to bring small and medium enterprises (SMEs) to scale. They created their first fund in 1989, making them one of the oldest investors represented at the conference.? Aureos? premise is that providing capital to the ?missing middle? of the developing world (i.e., the SME sector) will create more jobs and have a more sustainable effect on the macro economy than traditional approaches.

Aavishkar and Gray Matters Capital have a different focus than Aureos – they both invest solely in social enterprises, which they believe have the hardest time getting capital, but also have the greatest impact on the poorest populations. Therefore, the two organizations structured their investments differently to account for riskier, more modest returns than Aureos?.

The Grameen Foundation, on the other hand, has traditionally focused on supporting microfinance institutions (MFIs) that turn around and make micro loans. In addition to finance, the Grameen Foundation provides MFIs with a variety of services, such as capacity building and loan guarantees; they believe providing the capital is not enough to ensure the success of their investees.

However, even with their different approaches, all four panelists agreed on a number of fronts. They all felt it necessary to have people on the ground performing due diligence and working with investees, especially because of the complex environments in which the entrepreneurs work.

They also agreed on the need for sound metrics. Metrics have been a theme of the conference, and these panelists illustrated compelling techniques to overcome the challenge of measuring social impact. The Grameen Foundation has standardized its metrics by developing a ?Progress Out of Poverty? index that tracks changes over time; Aavishkar performs ?asset mapping? to measure incremental changes in the assets owned by their investees.? The consensus across the panel was that their creative approaches to poverty alleviation also require creative approaches to tracking social impact.

While the panelists fall on different parts of the investment size and financial return spectrums, I left feeling that each of their approaches is a necessary component of enterprise development, and each provides investment vehicles for population unaddressed by the others. Just as Jed Emerson recommended earlier that day, these panelists are a manifestation of the ?silver buckshot? approach that we need to truly accomplish our goals.