Social finance, rather than detracting an organization from their mission, provides the ability for an organization to achieve their mission using a more robust diversity of tools, namely, generate revenue. Too often we assume a broad philosophical gap between for-profit and non-profit organizations. Non-profits are laden with cumbersome attempts at fundraising through donations and grants, which can be said to detract from time spent on their mission, where as generating revenue from any type of activity could provide a steady source of funds.
For-profit organizations and their ability to provide income to investors have been offered numerous financial options and products. Rather than detracting from a for-profit organizations business or product, these options allow for and encourage growth and success. The added advantage that for-profit organizations have is that they can rely on market indicators to let them know if they are failing. The non-profit sector is working on ways to create these feedback mechanisms and social finance can be one way of assisting.
Does social finance capital compete with grant funding that nonprofits rely on? At this point in time, in Canada, that’s a hard question to answer. The field of social finance is so young and very disconnected, that it would be easy to say, of course not! But if we imagine the growth and possibilities of what social finance can do, you may start to see foundations moving away from traditional grant making, you may see governments asking whether their infusion of money is still necessary, and you may see business competing with social good organizations instead of merely donating to them.
Competition within our capitalist system is something North America admires. Too often we hear that there are too many non-profits; that donors can’t determine where to give. Without proper mechanisms allowing for competition, the non-profit sector continues to mirror the logo of a hand reaching out. With social finance, you could imagine that hand instead is put to work and allowed to compete.
Perhaps a good place to look for an example of resiliency is to the businesses who have survived the recent economic slump. Did they survive because they tightly focused around their mission, cut costs, and had access to capital? Their success likely relied on the actions they took with the tools they had at their disposal.
In the for-profit sector, we may feel the heaviness of the economic downturn moving away. In the non-profit sector, organizations are just starting to feel the real impact of government cuts and decreases in private funds. In its current state, the sector remains reliant on the whims of government, business, and private funders. A resilient model of social finance would put the ability to succeed in an organization’s hands, no matter that organizations legal incorporation.
Originally posted at SocialFinance.ca on December 15, 2009