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Monday, February 8, 2010

Spending Money to Solve Systemic Problems

In Speaking of Faith on NPR this past weekend, Jacqueline Novogratz, talked about a third way for development, somewhere in between charity and business. She pointed out that despite having the largest population of NGOs per capita, Haiti has made limited advances. Traditional quarterly returns driven capitalism doesn’t help much either in the poorest economies.

Novogratz describes the market as one of the best listening devices we have on the planet. As she puts it, “if I give you a gift you would be highly unlikely to tell me what is wrong with it – when I come visit, you might put it on the mantelpiece to show me how much you like it. The same happens with charity. But if I ask you to buy something from me you suddenly become a customer with a big attitude as to what’s right about it and what’s wrong with it. Suddenly that conversation that we are having becomes much more real. The market is one of the best listening devices we have on the planet “

Novogratz talks about Patient Capitalism, a form of social entrepreneurship that she addresses through the Acumen Fund.

From a CR perspective I like to think in terms of finding a source of funding within companies that is ring-fenced. It would be dedicated to funding ventures with commercial potential and social/economic benefit, but that carry levels of risk, or timescales, that put them below the threshold for investment on a ‘business as usual’ basis. Maybe this could be a proportion of community investment or foundation money, maybe it comes from the business, or maybe this is a new category of spend.

Either way it presents an opportunity to combine the motivational and ‘survival of the best’ characteristics of capitalism with the patience and risk tolerance that we see in the non-profit world. If we could get it right this might be part of the solution to how we give money to solve systemic problems.

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