Social Space (Issue 8, 2016-2017) - The Social Finance Issue

Since its debut in 2008, Social Space, the bi-annual flagship publication of the Lien Centre for Social Innovation at Singapore Management University, has provided a platform for local and international practitioners and thought leaders to share their perspectives on social innovation and entrepreneurship. Available in print and online (http://www.socialspacemag.org).

Since its debut in 2008, Social Space, the bi-annual flagship publication of the Lien Centre for Social Innovation at Singapore Management University, has provided a platform for local and international practitioners and thought leaders to share their perspectives on social innovation and entrepreneurship. Available in print and online (http://www.socialspacemag.org).


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<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT I

II <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


6 COMING<br />

TO TERMS<br />

AQuick<br />

Guide<br />

to <strong>Social</strong> Change<br />

Buzzwords<br />

16 FEATURE<br />

31 FEATURE<br />


70 POP QUIZ<br />

4 SOCIAL<br />


Hot Topics and<br />

8 FEATURE<br />

Collective<br />

<strong>The</strong> Strength of Giving Together<br />

Happenings<br />

in <strong>Social</strong> Innovation<br />

A Focus on Women’s Livelihoods<br />


Understanding<br />

<strong>Social</strong><br />

<strong>Finance</strong><br />

SoFi 101<br />


Philanthropy: Business<br />

<strong>The</strong><br />

of Giving<br />

Pay for Success &<br />

SoCIAL Impact Bonds IN SINGAPORE:<br />

Measurably Improving the Lives of People Most in Need<br />

40 FEATURE Scaling Impact<br />

Investing through<br />

Innovative <strong>Finance</strong>:<br />

<strong>The</strong> Macro Behind<br />

Microfinance<br />

Cambodia's Financial<br />

Inclusion Success Story<br />

54 FOOD FOR THOUGHT Investing<br />

in Impact: A Perspective<br />

on <strong>Social</strong> Impact Bonds<br />

Venturing<br />

into Venture Philanthropy<br />


Increasing<br />

Energy Access<br />

in Southeast Asia<br />

through <strong>Social</strong> Enterprises<br />

Banking on It:<br />

Investment Banks<br />

As the Next Step for<br />

Impact Investing<br />

66 THE SHORT LIST Good Reads: Best Books<br />

for <strong>Social</strong> Entrepreneurs and Changemakers<br />

Who’s Your Inner <strong>Social</strong>preneur?<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 1

<strong>2016</strong> / <strong>2017</strong> ISSUE EIGHT<br />


Editor-in-Chief<br />

Jonathan Chang<br />

Deputy Editor<br />

Eunice Rachel Low<br />

Contributing Editor<br />

Christian Petroske<br />

General enquiries & feedback: hello@socialspacemag.org<br />

Editorial & submissions: editorial@socialspacemag.org<br />

Advertising: advertising@socialspacemag.org<br />

Special thanks to the following individuals for their unique contributions:<br />

Emma Glendinning, Florian Parzhuber, Ho Han Peng, Jared Tham, Shee Siew Ying,<br />

Shirley Pong, Sujith Kumar Prankumar and Yina Song<br />

Aside from the editorial, all articles written by the authors, including individuals associated<br />

with the Lien Centre for <strong>Social</strong> Innovation, do not necessarily reflect the views or standpoint<br />

of the Centre. No part of this publication may be reproduced or transmitted in any form<br />

or by any means, or stored in any retrieval system of any nature without the prior written<br />

permission of the Centre.<br />

ISSN 1793-7809 (print)<br />

ISSN 2424-9157 (online)<br />

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<strong>Social</strong> <strong>Space</strong> is a publication of the Lien Centre for <strong>Social</strong> Innovation, Singapore Management University,<br />

81 Victoria Street, Singapore 188065. Visit www.socialspacemag.org for more information.<br />

2 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

EDITOR’S<br />

NOTE<br />

Dear readers,<br />

As Executive Director of the Lien Centre for <strong>Social</strong> Innovation at Singapore<br />

Management University, I travel a lot for work, mostly to give talks, lead<br />

workshops, and form partnerships with other leading universities and<br />

institutions across Southeast Asia and greater Asia. Time and time again,<br />

I am in awe of the sheer number of innovative business ideas that many<br />

social innovators have come up with, from both the non-profit and for-profit<br />

sectors. <strong>The</strong>se socially minded and highly motivated people are working<br />

hard to address, and possibly solve, some of the most pressing societal<br />

issues we are facing today, ranging from access to clean energy, to financial<br />

inclusion and women empowerment—just to name a few.<br />

One challenge, shared by many people I have spoken to, is that we tend to<br />

work in silos. Because many innovators do not often talk to one another,<br />

and are not always aware of similar ideas in other places, they do not<br />

collaborate, share best practices and combine resources. We see this<br />

as a missed opportunity in an ever-connected world. This is why <strong>Social</strong><br />

<strong>Space</strong> is now published twice a year instead of once, in order for us to<br />

be more active as well as proactive, and, most importantly, relevant to our<br />

readers. We are also making several major changes in content creation and<br />

content dissemination with the aim to make <strong>Social</strong> <strong>Space</strong> more accessible<br />

to academics, practitioners and students. You will find that the physical<br />

size of the magazine has been reduced to make it easier to hold and carry,<br />

and each issue will be centred on a theme: in this January <strong>2017</strong> issue, we<br />

dive into the various forms of social finance and their implications. Lastly,<br />

to democratise the content of <strong>Social</strong> <strong>Space</strong>, we are building an online<br />

platform where all its issues will be made available for download, as well<br />

as publishing articles or blog entries to keep our readers up-to-date with<br />

relevant happenings in the region.<br />

<strong>Social</strong> <strong>Space</strong> is more than just a publication. It is an online and offline<br />

community, showcasing success stories, challenges, innovative ideas and<br />

the transformative efforts of innovators in both public and private sectors.<br />

Of course, we are still a work in progress and need your support. We are<br />

an open book in more ways than one, and therefore welcome your valuable<br />

feedback and suggestions on how to improve our future publications.<br />

Similarly, our readers are encouraged to reach out to contribute articles or<br />

submit new ideas.<br />

Let’s make <strong>Social</strong> <strong>Space</strong> our collective space. Thank you so much for your<br />

support, please do sign up to our mailing list so you can be notified when<br />

the next issue is available.<br />

Warm regards,<br />

Jonathan Chang<br />

Editor-in-Chief<br />

jonathan@socialspacemag.org<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 3


Hot Topics and Happenings<br />

in <strong>Social</strong> Innovation<br />

Dream Homes,<br />

One (Lego) Brick<br />

at a Time<br />

Build your own Lego house and live in it?<br />

Why not? To alleviate the strain of<br />

urbanisation in Phnom Penh, social<br />

entrepreneur Kongngy Hav set up<br />

My Dream Home, a social enterprise<br />

that aims to revolutionise Cambodia’s<br />

housing sector. It produces lego-like<br />

bricks made from soil and sand, which<br />

are both environmentally friendly and<br />

affordable. Thanks to My Dream Home,<br />

young Cambodians can now build their own<br />

homes at a fraction of the regular cost.<br />

Children in Cambodia, 2013 by Sodanie Chea, via Flickr (CC BY 2.0)<br />

https://www.facebook.com/mydreamhomekh<br />

What’s Up, Doc?<br />

Young children often experience anxiety at the prospect<br />

of seeing doctors and getting injections. To address this<br />

issue, Esther Wang, founder of the social enterprise<br />

Joytingle, came up with Rabbit Ray—a patient-engagement<br />

device that teaches children about medical procedures<br />

such as vaccinations and blood-taking in a fun and<br />

educational way. For Rabbit Ray, Joytingle bagged the<br />

top prize of US$15,000 at a global innovation competition<br />

organised by Shell. It retails at S$280.<br />

http://rabbit-ray.joytingle.com<br />

Buyers and Cellars<br />

Californian wine company One Hope has<br />

come up with a sustainable business<br />

model whereby half of its profits are<br />

directed towards various non-profit<br />

organisations. Since it was founded in<br />

2007, One Hope customers get to decide<br />

where their money goes—by selecting the<br />

colour of their wine bottles. Silver ones<br />

buy meals for the hungry, red bottles<br />

go towards fighting heart disease, pink<br />

combat breast cancer, and so on.<br />

By working their social giveback into<br />

their business model, One Hope has,<br />

among other things, helped plant over<br />

50,000 trees and provided about one<br />

million meals to the needy.<br />

https://www.onehopewine.com<br />

Image of wine glass via Flickr<br />

(CC BY-SA 2.0)<br />

Image courtesy of Joytingle<br />

4 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


App-y Meal<br />

DingGo, the brainchild<br />

of three Singapore<br />

Management University<br />

(SMU) graduates, Jeff<br />

Chin, Wallace Ang and Hayden Leow,<br />

is well on its way towards becoming<br />

a staple smartphone application for<br />

Singapore’s foodies.<br />

DingGo app interface<br />

$2<br />

Users can enjoy<br />

Koufu food vouchers by<br />

downloading the DingGo<br />

app. Redeem the vouchers<br />

via www.dinggo.co/<br />

socialstratosphere<br />

Matching supply with demand, this app<br />

allows restaurants and catering services<br />

to reach out to people in the vicinity<br />

with an empty stomach. With DingGo,<br />

restaurants can increase their revenues<br />

during non-peak hours, customers enjoy<br />

great discounts, and food wastage is<br />

minimised. To date, the app has helped<br />

the SMU community save 120kg of food<br />

from being wasted.<br />

In 2015, DingGo’s founders beat over<br />

200 contestants to clinch the top prize<br />

of S$10,000 cash for “Most Innovative<br />

Startup” in an entrepreneurial competition<br />

organised by the Nanyang Technological<br />

University.<br />

http://dinggo.co<br />

Eyes On You<br />

Wouldn’t it be great to actually see how your donations are<br />

impacting the lives of others? Virtual reality (VR) can now<br />

make that happen.<br />

RYOT, a four-year-old start-up specialising in recording<br />

360-degree movies all over the world, has notably<br />

documented an average school day in Ghana, and received<br />

overwhelmingly positive response from its donors. While<br />

VR technology is still in its infancy stages and movies are<br />

costly to produce, the investment has been worthwhile.<br />

For instance, upon viewing a VR-enabled documentary<br />

about a parched Ethiopian village, donors at RYOT’s annual<br />

fundraising banquet were so moved that they pledged<br />

close to US$2.4 million in support of helping people in<br />

need to gain access to clean water.<br />

https://www.youtube.com/user/<br />

RYOTFoundation<br />

http://www.ryot.org<br />

VR glasses, via Flickr<br />

(CC BY 2.0)<br />

Bank scrabble by Jeff Djevdet, via Flickr (CC BY 2.0)<br />

Branchless Banking<br />

Kiva.org’s co-founder Matthew Flannery has successfully<br />

raised US$9.2 million for his new start-up Branch,<br />

a cloud-based microfinance system that allows<br />

smartphone users in developing countries to obtain<br />

micro-loans from $2.50 up to $500. Without the need for<br />

any brick-and-mortar bank, Branch operates through<br />

a smartphone application that analyses the borrower’s<br />

mobile data to determine whether he or she is eligible for<br />

a line of credit.<br />

By taking his microfinance idea online, Flannery has<br />

succeeded in reducing significantly his enterprise’s<br />

operational costs.<br />

https://branch.co<br />

If you have a hot social innovation news story to<br />

share, we’d love to hear from you. Email us at<br />

editorial@socialspacemag.org<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 5


A Quick Guide<br />

to <strong>Social</strong> Change Buzzwords<br />

By Jay Boolkin<br />

<strong>Social</strong> Impact, Intrapreneurship,<br />

Benefit Corporation, Shared Value—<br />

these are just a few of the many<br />

buzzwords that get thrown around in the<br />

social arena. But what do these terms<br />

mean and how do we apply them?<br />

JAY BOOLKIN of socialgoodstuff.com<br />

has come up with a handy guide that<br />

demystifies the myriad jargon and<br />

fanfare surrounding social change.<br />


For-profit companies certified by the non-profit B Lab<br />

to meet rigorous standards of social and environmental<br />

performance, accountability and transparency.<br />

https://www.bcorporation.net/what-are-b-corps<br />


<strong>The</strong> delivery of both a social or environmental return<br />

and a financial return. It’s a win-win that does not<br />

require compromise on either side of the social or<br />

financial equation.<br />

http://tdi.org.au/library/what-is-blended-value<br />


A term coined by the social entrepreneurship organisation,<br />

Ashoka, meaning one who desires change in the world<br />

and, by gathering knowledge and resources, makes that<br />

change happen.<br />

https://www.ashoka.org/changemakers<br />


Collective impact occurs when organisations from<br />

different sectors agree to solve a specific social problem<br />

using a common agenda, aligning their efforts, and using<br />

common measures of success.<br />

http://www.fsg.org/ideas-in-action/collective-impact<br />


<strong>The</strong> continuing commitment by businesses to contribute<br />

to economic development while improving the quality<br />

of life of the workforce and families, as well as the<br />

community and society at large.<br />

http://www.wbcsd.org/work-program/business-role/previouswork/corporate-social-responsibility.aspx<br />


A distinctive process of developing innovative solutions,<br />

rooted in principles of physical, spatial, graphic<br />

and user-interface design. It is characterised by an<br />

emphasis on deeply understanding the practical needs,<br />

behaviours, and perspectives of actual users and<br />

constituents—and may be applied to a wide variety<br />

of challenges, including programmes, services, products,<br />

and processes. It is an action-oriented approach<br />

towards generating creative solutions to complex<br />

problems.<br />

http://www.bridgespan.org/Publications-and-Tools/Nonprofit-<br />

Management-Tools-and-Trends/Design-Thinking.aspx#.<br />

Vz0wfud97u1<br />


A philosophy and social movement which applies evidence<br />

and reason to work out the most effective ways to<br />

improve the world. It is built upon a simple but profound<br />

idea: that living a fully ethical life means using your<br />

spare resources for the “most good you can do”.<br />

https://www.ted.com/talks/peter_singer_the_why_and_how_<br />

of_effective_altruism?language=en<br />

http://www.amazon.com/<strong>The</strong>-Most-Good-You-Can/<br />

dp/0300180276/&tag=collpart-20<br />


Used to describe the act of misleading consumers<br />

regarding the environmental practices of a company or<br />

the environmental benefits of a product or service.<br />

http://www.stopgreenwash.org<br />

6 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

A Quick Guide to <strong>Social</strong> Change Buzzwords<br />


A set of corporate policies and practices that enhance<br />

the competitiveness of a company, while simultaneously<br />

advancing social and economic conditions.<br />

http://www2.deloitte.com/au/en/pages/about-deloitte/articles/<br />

social-innovation-shared-value.html<br />


<strong>The</strong> institutions, relationships and norms that shape the<br />

quality and quantity of a society’s social interactions.<br />

Increasing evidence shows that social cohesion is<br />

critical for societies to prosper economically and for<br />

development to be sustainable. <strong>Social</strong> capital is not just<br />

the sum of the institutions which underpin a society—it is<br />

the glue that holds them together.<br />

https://twitter.com/Senscot<br />


<strong>Social</strong> entrepreneurs drive social innovation and<br />

transformation in various fields including education,<br />

health, environment and enterprise development. <strong>The</strong>y<br />

pursue poverty alleviation goals with entrepreneurial<br />

zeal, business methods and the courage to innovate and<br />

overcome traditional practices. A social entrepreneur,<br />

similar to a business entrepreneur, builds strong and<br />

sustainable organisations, which are either set up as<br />

not-for-profits or companies.<br />

http://www.schwabfound.org/content/what-social-entrepreneur<br />


An organisation that applies commercial strategies to<br />

maximise social impact rather than profits.<br />

http://socialgoodstuff.com/2015/11/wtf-is-social-enterprise<br />


A novel solution to a social problem that is more effective,<br />

efficient, sustainable, or just than current solutions.<br />

<strong>The</strong> value created accrues primarily to society rather<br />

than to private individuals.<br />

http://www.gsb.stanford.edu/faculty-research/centersinitiatives/csi/defining-social-innovation<br />


People within a large corporation who take direct<br />

initiative for innovations that address social or<br />

environmental challenges while also creating<br />

commercial value for the company.<br />

http://www.forbes.com/sites/ashoka/2014/02/24/the-innovativebeat-of-corporate-social-intrapreneurs/#2ba149e156a5<br />


A form of stakeholder-driven evaluation blended with<br />

cost–benefit analysis tailored to social purposes. It tells<br />

the story of how change is being created and places<br />

a monetary value on that change, and compares it with<br />

the costs of inputs required to achieve it.<br />

http://socialventures.com.au/assets/SROI-Lessons-learned-in-<br />

Australia.pdf<br />


<strong>The</strong> ability to understand interconnections in such a way<br />

as to create sustained and meaningful social change.<br />

http://www.bridgewaypartners.com/WhoWeAre/Principals/<br />

DavidPeterStroh.aspx<br />

http://www.chelseagreen.com/systems-thinking-for-social-change<br />


Consists of three Ps: profit, people and planet. It aims<br />

to measure the financial, social and environmental<br />

performance of the corporation over a period of time.<br />

Only a company that produces a TBL is taking account of<br />

the full cost involved in doing business.<br />

http://www.economist.com/node/14301663<br />


Philanthropic giving to social ventures that operate<br />

a business model and is generally associated with<br />

social start-up or growth capital needed to deliver or<br />

grow a social mission. It typically means the donor<br />

is not seeking anything other than a social return or<br />

community (non-private) benefit.<br />

http://www.psi.org.au/faq<br />


All forms of significant change experienced by individuals<br />

and communities. This includes income and labour<br />

market impacts, education impacts, social inclusion and<br />

relationship changes, mental and physical health effects,<br />

and overall impact on quality of life and well-being.<br />

Professor Paul Flatau, Director of the Centre for <strong>Social</strong> Impact<br />

at the UWA Business School: http://bit.ly/1U0y6ws<br />

This article is reproduced with the kind permission of Jay Bookin from his original<br />

blog post at http://socialgoodstuff.com/<strong>2016</strong>/03/a-quick-guide-to-social-changebuzzwords-and-terminology.<br />


Investment with the intention to achieve both a positive<br />

social, cultural or environmental benefit, and some<br />

measure of financial return.<br />

http://www.socialventures.com.au/sva-quarterly/how-to-growimpact-investing/#_edn1<br />

Jay Boolkin blogs at <strong>Social</strong> Good Stuff<br />

(http://www.socialgoodstuff.com) and is founder<br />

of Promise or Pay (http://www.promiseorpay.com),<br />

an online platform that uses small promises to drive<br />

real, wide-scale social change. Promise or Pay won<br />

the <strong>Social</strong> Startups MVP Program, a worldwide<br />

competition based on social impact scalability.<br />

In mid-November 2014, it won the Deloitte Australia<br />

<strong>Social</strong> Innovation Pitch Competition and in early 2015 received funding<br />

from the Myer Foundation. Contact Jay at jay@socialgoodstuff.com or<br />

connect with him on Twitter @socialgoodstuff and @promiseorpay<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 7


SoFi 101<br />

By<br />

Understanding <strong>Social</strong> <strong>Finance</strong><br />

Christian Petroske, Florian Parzhuber,<br />

Haneol Jeong, John Kinsella,<br />

Maaya Murakami, Mitchell Laferriere<br />

and Remi Cordelle<br />

purely social returns<br />

What is social finance? Rachel Kalbfleisch<br />

of the International Development<br />

Research Centre (IDRC) defines it as<br />

a collection of approaches to managing<br />

money that create value for society or the<br />

environment, often while producing<br />

a financial return, 1 while the MaRS Centre<br />

for Impact Investing calls it “an approach<br />

to managing money to solve societal<br />

challenges”. 2 In other words, social<br />

finance is a movement that covers various<br />

ways of using finance—via socially<br />

responsible investments, micro-loans,<br />

community investments, and so on—to<br />

achieve a social or environmental impact.<br />

Who is involved in this process?<br />

While charities, socially driven<br />

businesses and governments all work<br />

towards creating positive social change,<br />

those who finance them are the ones<br />

facilitating the creation of social and<br />

environmental value (hereafter<br />

“social value”). <strong>The</strong>se funders are<br />

thus considered to be practising<br />

social finance.<br />

So Who Needs<br />

<strong>Social</strong> <strong>Finance</strong>?<br />

<strong>The</strong> recipients of social finance<br />

span charities, non-profit<br />

organisations and various kinds of<br />

social enterprises. In this section,<br />

we will discuss their role in the<br />

spectrum of social finance.<br />

1<br />

2<br />

3<br />

4<br />

5<br />

6<br />

Charity<br />

A charity is a non-profit-making organisation set up<br />

exclusively to achieve a social or environmental mission.<br />

It relies solely on donations and/or grants, which often<br />

come with strings attached, e.g. funding cycles and<br />

reporting requirements.<br />

Revenue-Generating Not-for-Profit<br />

This label refers to any non-profit-making organisation,<br />

dedicated to a social or environmental cause, that<br />

generates income by selling products and services.<br />

It includes businesses that make typically up to 75 per cent<br />

of their income through commercial activities, with the<br />

rest covered by grants and donations. 3<br />

Revenue-Generating <strong>Social</strong> Enterprise<br />

Also dedicated to creating social or environmental value,<br />

a revenue-generating social enterprise typically makes<br />

over 75 per cent of its income from commercial activity. 4<br />

Many are able to break even through commerce, but all<br />

surplus is reinvested to help the organisation achieve<br />

its mission. Thus, they come in many organisational<br />

forms, from non-profits, to LLCs, to worker-owned<br />

cooperatives, to a hybrid of two or more.<br />

<strong>Social</strong> Purpose Business<br />

Organisations in this category are set up like traditional<br />

private or public businesses, but are driven by a social<br />

or environmental mission. <strong>The</strong>y have shareholders and<br />

distribute profit, but see business growth as a means to<br />

create their intended social impact.<br />

<strong>Social</strong>ly Responsible Business<br />

This is a traditional business entity that also makes<br />

conscious efforts to benefit society at large through<br />

various means, including targeted CSR programmes,<br />

staff initiatives and supply chain management. Operations<br />

of socially responsible businesses may not have social<br />

impact as their first priority, but they cause few negative<br />

externalities in the long run.<br />

What Doesn’t Count as a Recipient of<br />

<strong>Social</strong> <strong>Finance</strong>?<br />

Commercial Business that Gives Profits to Charity<br />

Into this category fall many of the world’s businesses,<br />

which pursue profit maximisation but also contribute<br />

a fraction of profits to charity. Daily operations are not tied<br />

to any social cause, so investment into these companies<br />

does not fall under “social finance”. However, they may<br />

be considered social financiers themselves.<br />

purely financial returns<br />

Source: Adapted by the authors from MaRS Centre for Impact Investing,<br />

“Your Guide to <strong>Social</strong> <strong>Finance</strong>”. http://impactinvesting.marsdd.com/knowledgehub/social-finance-guide<br />

8 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

SoFi 101<br />

It’s Complicated: Other Things Also<br />

Called “<strong>Social</strong> <strong>Finance</strong>”<br />

<strong>Social</strong> Impact Bonds<br />

<strong>Social</strong> impact bonds (SIBs), also known as “Pay for<br />

Success” financing, are perhaps the most confusing form<br />

of social finance. For one, they aren’t really bonds, but<br />

complex contracts that are used to pay for large social<br />

impact projects. <strong>The</strong>y essentially work like this: investors<br />

invest their cash in a social project and evaluate its<br />

results. <strong>The</strong>se results are then tallied based on how<br />

much money they save the government—for instance,<br />

by reducing prison recidivism, the state doesn’t need to<br />

pay for as many prisoners as it would’ve had to without<br />

the programme. Once the project is completed, the<br />

government pays out a portion of the savings to the<br />

investors who originally put up the money. Often, these<br />

savings are so large that the investors can make returns<br />

at or above market rates.<br />

Microfinance<br />

Championed by Nobel laureate Muhammad Yunus,<br />

founder of Grameen Bank, microfinance is a way of<br />

providing financial services to the working poor at<br />

low interest rates so as to increase their incomes and<br />

improve their livelihoods. Originally only referring to<br />

loans, microfinance has expanded to encompass other<br />

services like savings and insurance. Large banks<br />

don’t typically provide loans to the poor because they<br />

consider it too risky. If they or others do, it’s usually<br />

at astronomical interest rates. Microfinance brings<br />

interest rates down and often pairs loans with financial<br />

literacy training.<br />

<strong>Social</strong> <strong>Finance</strong><br />

Explained Further<br />

This section covers the relationship between risk, financial<br />

returns and social impact; touches briefly on the tricky<br />

issue of impact measurement; presents an around-theworld<br />

glance at social finance initiatives carried out in<br />

various countries; and identifies some of the biggest<br />

players in the field of social finance.<br />

Risky Business?<br />

From the investor’s perspective, risk is defined in terms<br />

of how difficult it will be to get one’s money back, with<br />

interest, from an investment. 5 <strong>The</strong> less “risky” and the<br />

higher the return, the more investors can be convinced to<br />

put up more of their funds. <strong>The</strong> impact investor, or social<br />

financier, looks to achieve positive social value, and often<br />

considers the level of social impact that their investment<br />

might yield. Different investors use different financial<br />

tools, depending on their appetite for risks, financial<br />

returns and social impact. <strong>The</strong> following illustration<br />

shows the various levels of financial return and social<br />

impact associated with different forms of social finance.<br />


RETURNS &<br />



Form of <strong>Social</strong> <strong>Finance</strong><br />


It depends<br />

Grants/Donations<br />

Grants and donations are given for specific<br />

programmes or projects in return for social<br />

impact of some kind. Of course, they come<br />

with no expectation of financial return.<br />

Non-profit organisations and charities<br />

usually relyon this type of funding mechanism.<br />

Patient Capital<br />

Patient capital is a long-term loan offered<br />

at a lower interest rate over a longer period<br />

by investors prioritising social returns over<br />

quick profit.<br />

Quasi-Equity<br />

Quasi-equity is a flexible term, but it<br />

commonly refers to a loan that gets paid<br />

back with a portion of future performance<br />

instead of just cash. It allows enterprises to<br />

raise debt capital without high interest rates.<br />

Unsecured Loan<br />

This is the form that most loans take:<br />

provided without collateral, and only<br />

based on the borrower’s credit or<br />

calculated trustworthiness. Loans are<br />

considered low-risk because lenders have<br />

the government’s help in collection.<br />

Equity<br />

Equity is the ownership that comes from<br />

buying a small piece of a company. It is<br />

often used by companies to raise cash<br />

without taking on debt. For investors, equity<br />

means that they share in all the future<br />

successes, or failures, of the company.<br />

Earned Income<br />

Earned income has the lowest risk for an<br />

organisation to get capital. It is generated<br />

by the firm’s own activities, so there’s no<br />

one to pay back or surrender ownership to.<br />

Plus, barring a huge shift in the market,<br />

earned income can often be counted on in<br />

the future.<br />

SOCIAL<br />


<strong>Social</strong> Impact: Context Matters<br />

<strong>The</strong> expected social impact of many types of investment<br />

depends on what the recipient does with it. For instance,<br />

a company raising capital in the form of equity could use it<br />

to expand its low-cost health treatment to new geographies,<br />

helping many more low-income people live healthier lives.<br />

Another company could also use equity to develop a new<br />

technique to drill for fossil fuels. <strong>The</strong> financial tool is the same,<br />

but the social or environmental impact is widely different.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 9

Market-Rate Returns?<br />

Is it possible to achieve both social and financial returns<br />

simultaneously? A new analysis conducted by the<br />

Cambridge Associates Impact Investing Benchmark, in<br />

association with the Global Impact Investing Network<br />

(GIIN), shows that the answer is yes: “market rates of<br />

return are achievable through impact investing”, states<br />

GIIN CEO Amit Bouri. 6 In this study, the benchmark<br />

compared normal venture capital and private equity<br />

funds to funds that have both financial and social<br />

impact objectives. Overall, the analysis found an<br />

internal rate of return (IRR) of 6.9 per cent for impact<br />

funds, as compared to 8.1 per cent for non-impact<br />

funds—“within spitting distance”, as classified by<br />

one commentator. 7 However, breaking down the data<br />

reveals an even more compelling story. For instance,<br />

impact investing funds in emerging markets posted<br />

returns of 9.1 per cent; impact investing funds that<br />

were smaller (under US$100 million) saw 9.5 per cent<br />

returns; and smaller impact investing funds focused on<br />

the US returned a whopping 13.1 per cent. 8 This robust<br />

data shows that investors who seek social impact do<br />

not have to sacrifice profits, and might even be able to<br />

outperform the market in some cases.<br />

Measure for Measure<br />

Almost everyone (with good intentions) hopes to achieve<br />

positive social impact. According to Mark Florman,<br />

Robyn Klingler-Vidra and Martim Jacinto Facada,<br />

“<strong>The</strong> notion of the social impact of business has<br />

become so mainstream that government at the highest<br />

levels—including G8 leaders and even the Pope—<br />

advocate the creation of institutions to give greater<br />

attention to driving social impact”. 9 However, one of the<br />

most difficult challenges facing social finance revolves<br />

around the question: how do we measure social impact?<br />

<strong>The</strong>re are, in fact, many ways to measure it, but the<br />

crucial question concerns how to consolidate these many<br />

methods under one impact measurement and evaluation<br />

system. At present, the impact measurement field is<br />

quite chaotic: each institution or region typically has its<br />

own assessment criteria for impact, and creates its own<br />

metrics. Though in recent decades the Global Impact<br />

Investing Network (GIIN) and <strong>Social</strong> Value UK (formerly<br />

the SROI Network) have made efforts to consolidate their<br />

metrics, there has not been a single governing authority<br />

to establish an official and centralised system of impact<br />

measurement and evaluation.<br />

<strong>The</strong>re are, in fact, many ways to measure it [social impact], but the<br />

crucial question concerns how to consolidate these many methods<br />

under one impact measurement and evaluation system.<br />

People<br />

Triple Bottom Line (People, Planet, Profit)<br />

<strong>The</strong> triple bottom line is one way to think about what an<br />

organisation’s relationship to its impact should be. <strong>The</strong> triple<br />

bottom line consists of three Ps: people, planet and profit.<br />

Organisations that take this approach are understood to<br />

prioritise social, environmental and financial impact equally<br />

in order to take into account the full costs of operating their<br />

business. 10<br />

PLANET<br />

PROFIT<br />

10 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


d.light 11<br />

USA<br />

Founded in 2006, d.light aims to<br />

bring solar lighting and power<br />

systems to developing countries<br />

not only through producing and<br />

selling solar products, but also<br />

through innovative financial<br />

products. To date, d.light has sold<br />

over 10 million solar products<br />

across more than 60 countries,<br />

and improved the lives of some<br />

50 million people. A growing portion<br />

of d.light’s sales come through its<br />

pay-as-you-go system, which allows<br />

customers to combine top-up<br />

cards, microloans, savings groups,<br />

employer sponsorship, cash and<br />

mobile money to make d.light’s<br />

solar products radically affordable. 12<br />

South Africa’s <strong>Social</strong><br />

Impact Bonds 16<br />

South Africa<br />

Two government departments in<br />

the Western Cape of South Africa<br />

have committed 25 million rand<br />

(US$1.62 million) for three social<br />

impact bonds (SIBs) designed<br />

to improve maternal and early<br />

childhood outcomes. This is the<br />

first time a middle-income country<br />

has committed to a pay-for-success<br />

scheme—to date, no low-income<br />

country has done so.<br />

SoFi 101<br />

Brazil’s <strong>Social</strong><br />

Stock Exchange 15<br />

Brazil<br />

Launched in 2003, the <strong>Social</strong> Stock<br />

Exchange for BOVESPA (Brazil’s<br />

Community Interest Stock Exchange) is the world's first<br />

Companies (CICs) 13 social stock exchange. Focusing<br />

United Kingdom<br />

on education-based initiatives and<br />

environment-related projects, it<br />

was recognised by UNESCO as<br />

<strong>The</strong> UK was one of the earliest<br />

a pioneering model and adopted<br />

countries to recognise social<br />

by the United Nations Global<br />

enterprises as a separate business<br />

Compact Office as a case study to<br />

entity. <strong>The</strong>y designate social<br />

be recommended to other stock<br />

enterprises, legally, as “Community<br />

exchanges. Unlike a traditional stock<br />

Interest Companies”. Since 2005,<br />

exchange, however, this one shies<br />

more than 12,000 companies have<br />

away from all valuation; instead, it<br />

registered as CICs. <strong>The</strong>se are<br />

matches social ventures to investors<br />

subjected to asset locks, dividend<br />

in the style of online marketplaces<br />

caps and interest caps to ensure<br />

like Kiva or Kickstarter.<br />

that their assets are used for the<br />

benefit of society. Being a hybrid<br />

form, CICs can get funding from<br />

private philanthropy, public funding<br />

and venture philanthropy firms<br />

such as UnLtd, which supports<br />

social entrepreneurs through<br />

challenge grant awards, advice and<br />

networking opportunities. 14<br />

UBERIS Capital &<br />

Coco Khmer<br />

Cambodia<br />

Dasra<br />

India<br />

A true double- or triple-bottomline<br />

investor, UBERIS invests in<br />

Working across India, Dasra<br />

early-stage social businesses<br />

combines research, organisational that seek impact and financial<br />

capacity-building and philanthropic sustainability. For instance, one of<br />

networks in its mission to bring their investees, Coco Khmer, creates<br />

800 million Indians out of poverty. fair trade coconut-based skincare<br />

<strong>The</strong>y report to have strengthened products while providing economic<br />

the growth plans of over 200<br />

empowerment for marginalised<br />

successful non-profits and enabled Cambodians. When Coco Khmer was<br />

over US$11 million in funding to breaking even but needed capital in<br />

social businesses and non-profits order to grow, UBERIS provided early<br />

in India. Dasra actively works to capital in the form of a convertible<br />

bridge the gap between social loan, and paved the way for future<br />

entrepreneurs and philanthropists investment and Coco Khmer’s<br />

by providing research, support, and continued growth. 18<br />

a platform for both. 17<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 11

Biggest<br />

<strong>Social</strong> Financiers<br />

# Name<br />

Financial Resources<br />

(US$ billion)<br />

1 International <strong>Finance</strong> Corporation 45.3<br />

2<br />

Inter-American Development<br />

Bank Group<br />

14.0<br />

3 Enterprise Community Partners 13.9<br />

4<br />

5<br />

6<br />

Morgan Stanley Institute for<br />

Sustainable Investing<br />

Netherlands Development<br />

<strong>Finance</strong> Company<br />

National Community<br />

Investment Fund<br />

10.6<br />

8.4<br />

5.8<br />

7 Responsibility Investments AG 3.6<br />

8 Capricorn Investment Group 3.5<br />

9<br />

Goldman Sachs Urban<br />

Investment Group<br />

2.4<br />

10 Triodos Investment Management 2.2<br />

Source: Adapted from Christa Hangl, "A Literature Review about the Landscape of<br />

<strong>Social</strong> <strong>Finance</strong>", Table 1, 77–92. 19<br />

<strong>The</strong> International <strong>Finance</strong> Corporation<br />

Founded in 1956, the International <strong>Finance</strong> Corporation<br />

(IFC) is the private investment branch of the World<br />

Bank. Over US$45 billion in investments from the IFC<br />

go towards loans and venture capital. In turn, most of<br />

its funding comes from issuing triple-A rated bonds<br />

in several different capital markets. Most of its bonds<br />

are of the traditional variety, marking investments that<br />

lack an exceptional focus on social impact. However,<br />

certain innovative themed bonds such as Green Bonds,<br />

Banking on Women Bonds, and Local Currency Bonds<br />

also allow investors to target causes and communities<br />

they want to support. <strong>The</strong> reach and financial power<br />

of the organisation is impressive: a Google search for<br />

“IFC” will typically yield headlines such as “IFC plans<br />

to invest $75 million in Glenmark Pharmaceuticals”;<br />

“IFC to invest $15 million in Vietnamese animal feed<br />

firm Anova’s Bond”; or “IFC to invest $20 million in<br />

Abraaj Group”. <strong>The</strong> IFC example foregrounds the<br />

complexity of drawing hard-and-fast boundaries around<br />

the field of social finance. Even though many of the<br />

IFC’s investments are in private-sector businesses and<br />

multinational corporations (i.e. investments that are<br />

not particularly “social”), its ultimate mission is a social<br />

one: to create jobs and seed economic growth in order<br />

to advance development.<br />

Crowdfunding<br />

Othmar M. Lehner defines crowdfunding as the act of<br />

“tapping a large dispersed audience, dubbed as ‘the<br />

crowd’, for small sums of money to fund a project or<br />

a venture” and one that is “typically empowered by the<br />

social media communication over the Internet, through<br />

for example embracing user-generated content as<br />

guides for investors”. 20<br />

Industrial machines featured in Open Source<br />

Ecology’s GVCS, taken from the company’s website.<br />

<strong>The</strong> idea of funding a project through small contributions<br />

from a large audience is not new. However, due to its<br />

informal and democratic nature, crowdfunding has<br />

become more widespread in recent years. As its investors<br />

generally care more about social rather than financial<br />

returns, crowdfunding seems an appropriate tool for social<br />

entrepreneurs to raise capital. <strong>The</strong> emergence of online<br />

platforms, such as Kickstarter, Indiegogo and GoFundMe,<br />

has aided social enterprises in raising both awareness<br />

and capital for their ideas. Typically, out of the plethora<br />

of initiatives, only a selected number of crowdfunding<br />

projects receive adequate funding and see their ideas<br />

turned into reality. Open Source Ecology is one particular<br />

social enterprise that used crowdfunding for its Global<br />

Village Construction Set (GVCS). Aimed to bring affordable<br />

industrial machines to rural communities around the<br />

world, the company has, to date, raised over US$60,000<br />

for its GVCS project.<br />

12 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

SoFi 101<br />

Conclusion:<br />

Looking Ahead<br />

Going forward, social finance faces a broad set of<br />

opportunities and challenges. Ellie Howard of Cicero<br />

Group suggests that “in time, social finance will become<br />

inherent to the practice of investing in line with the<br />

progression to a conscious economy”, but that “the<br />

sector first needs to establish itself”. 21 In other words,<br />

what is now somewhat of a fringe concept—investing<br />

to achieve measurable social impact—will eventually<br />

become inextricable from “plain-old” normal investing.<br />

When that happens, we’ll have an economy that includes<br />

social impact in its core calculus; that incorporates more<br />

of the full costs and benefits of doing business; and<br />

that is more “conscious” of the impacts it has. Howard<br />

goes on to call for “the creation of a platform to not only<br />

attract the investment, but also the brightest minds and<br />

expertise for the sector to flourish”. 22 <strong>The</strong> table below<br />

presents a summary of the prospects and obstacles<br />

facing social finance, and its potential to thrive.<br />

Opportunities<br />

• Population growth in emerging countries<br />

• Innovative technologies that<br />

- allow for global reach<br />

- increase collaboration<br />

- reduce transaction costs<br />

• More collaborative efforts between businesses,<br />

charities and governments<br />

• Increased professionalism from impact investors<br />

• New investment tools<br />

• Growing legislative support<br />

• Academic support (professional programmes,<br />

incubators and competitions)<br />

• High payback rates for micro-loans<br />

• Positive mindset shifts and generational changes<br />

Challenges<br />

• Returns from social instruments are on average<br />

lower than those of traditional instruments<br />

(for now)<br />

• Insufficient education about and training in<br />

social finance<br />

• <strong>Social</strong> enterprises still largely seen as charities<br />

• Fragmented social enterprise market due to<br />

varied agendas of organisations<br />

• Lack of available quantitative data<br />

• Lack of standards for measuring social impact<br />

• Too little readily available funding<br />

• More regulations that potentially curb the<br />

growth of social enterprises<br />

Now that we’ve examined the kinds of organisations that<br />

receive social finance, discussed the financial tools used,<br />

cited examples from around the world, and highlighted<br />

some exciting opportunities ahead, we hope this “SoFi<br />

101” has covered some important ground, albeit not<br />

exhaustively, on the topic of social finance. Maybe<br />

the next time someone asks, “What is social finance<br />

anyway?”, this article can be a place to start.<br />

All opinions expressed in this article, unless otherwise stated, are those of the<br />

authors. Any errors or omissions are the authors’ own.<br />

Notes<br />

1<br />

Rachel Kalbfleisch, “<strong>Social</strong> <strong>Finance</strong> Week: <strong>Social</strong> <strong>Finance</strong> 101”,<br />

Charity Village. https://charityvillage.com/Content.aspx?topic=<strong>Social</strong>_<br />

<strong>Finance</strong>_101#.V5cCl2R97u2<br />

2<br />

MaRs Centre for Impact Investing, “Your Guide to <strong>Social</strong> <strong>Finance</strong>”.<br />

http://impactinvesting.marsdd.com/knowledge-hub/social-financeguide<br />

3<br />

Eva Varga and Malcolm Hayday, A Recipe Book for <strong>Social</strong> <strong>Finance</strong><br />

(Brussels: European Commission, <strong>2016</strong>). http://ec.europa.eu/social/<br />

main.jsp?catId=738&langId=en&pubId=7878<br />

4<br />

Ibid.<br />

5<br />

Investopedia, “Risk Definition”. http://www.investopedia.com/<br />

terms/r/risk.asp<br />

6<br />

Cambridge Associates and Global Impact Investing Network,<br />

“Private Impact Investing Funds Yielded Financial Performance<br />

in Line with Similar Private Investment Funds with No <strong>Social</strong><br />

Objective, According to New Impact Investing Benchmark”, <strong>The</strong>giin.<br />

org, 25 June 2015. https://thegiin.org/assets/Benchmark%20PR.pdf<br />

7<br />

Anne Field, “New Study: Impact Investors Don’t Have to Sacrifice<br />

Financial Returns”, Forbes, 26 June 2015. http://www.forbes.com/<br />

sites/annefield/2015/06/26/new-study-impact-investors-dont-haveto-sacrifice-financial-returns/#3c33ebe66853<br />

8<br />

Cambridge Associates and Global Impact Investing Network,<br />

“Introducing the Impact Investing Benchmark”, 25 June 2015.<br />

https://thegiin.org/assets/documents/pub/Introducing_the_Impact_<br />

Investing_Benchmark.pdf<br />

9<br />

Adapted from Mark Florman, Robyn Klingler-Vidra, and Martim<br />

Jacinto Facada, “A Critical Evaluation of <strong>Social</strong> Impact Assessment<br />

Methodologies and a Call to Measure Economic and <strong>Social</strong> Impact<br />

Holistically through the External Rate of Return Platform”, LSE<br />

Enterprise Working Paper #1602 (February <strong>2016</strong>). http://www.lse.<br />

ac.uk/businessAndConsultancy/LSEConsulting/pdf/Assessing-socialimpact-assessment-methods-report.pdf<br />

10<br />

<strong>The</strong> Economist, “Triple Bottom Line”, Economist.com, 17 November<br />

2009. http://www.economist.com/node/14301663<br />

11<br />

Shell Foundation, “D.light Launches $5 Solar Lantern”. http://www.<br />

shellfoundation.org/Our-News/News-Archive/d-light-Launches-$5-<br />

Solar-Lantern<br />

12<br />

Esha Chhabra, “Bite-Size Payments Go Global: Solar’s Next<br />

Challenge”, Forbes, 12 August 2014. http://www.forbes.com/sites/<br />

eshachhabra/2014/08/12/bite-size-payments-go-global-solars-nextchallenge/#13c490d773fe<br />

13<br />

CIC Association, “What Is a CIC?”. http://www.cicassociation.org.uk/<br />

about/what-is-a-cic<br />

14<br />

UnLtd UK, “About UnLtd”. https://unltd.org.uk/about_unltd<br />

15<br />

Chhichhia Bandini, “<strong>The</strong> Rise of <strong>Social</strong> Stock Exchanges”, Stanford<br />

<strong>Social</strong> Innovation Review, 8 January 2015. http://ssir.org/articles/<br />

entry/the_rise_of_social_stock_exchanges<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 13

SoFi 101<br />

16<br />

Sophie Gardiner and Emily Gustafsson-Wright, “South Africa is<br />

the First Middle-Income Country to Fund Impact Bonds for Early<br />

Childhood Development”, Brookings Institution, 6 April <strong>2016</strong>.<br />

https://www.brookings.edu/<strong>2016</strong>/04/06/south-africa-is-the-firstmiddle-income-country-to-fund-impact-bonds-for-early-childhooddevelopment<br />

17<br />

AVPN, “About Dasra”. https://avpn.asia/organisation/dasra<br />

18<br />

UBERIS Capital, “Our Portfolio”. http://www.uberiscapital.com/<br />

ventures-portfolio<br />

19<br />

Christa Hangl, “A Literature Review about the Landscape of <strong>Social</strong><br />

<strong>Finance</strong>”, ACRN Journal of <strong>Finance</strong> and Risk Perspectives 3, 4<br />

(December 2014): 64–98. http://www.acrn-journals.eu/resources/<br />

jofrp201404b.pdf<br />

20<br />

Othmar M. Lehner, “Crowdfunding <strong>Social</strong> Ventures: A Model and<br />

Research Agenda”, Venture Capital 15, 4 (2013): 289–311<br />

21<br />

Ellie Howard, Challenges and Opportunities in <strong>Social</strong> <strong>Finance</strong> in the<br />

UK (London: Cicero Group, 2012). http://www.cicero-group.com/<br />

Research-Analysis/Pain_in_spain_report.pdf<br />

22<br />

Ibid.<br />

Christian<br />

Petroske is<br />

an Assistant<br />

Manager at the<br />

Lien Centre for<br />

<strong>Social</strong> Innovation.<br />

He drives forward<br />

a diverse range of projects,<br />

including the Centre’s research,<br />

capacity-building, partnerships,<br />

events, and is Contributing<br />

Editor for <strong>Social</strong> <strong>Space</strong>. Before<br />

joining the Centre, Christian<br />

helped Year Up build databased<br />

feedback loops into its<br />

core decision-making as Sales<br />

Operations and Market Research<br />

Fellow while participating in a<br />

selective, applied management<br />

training programme through<br />

New Sector Alliance’s Residency<br />

in <strong>Social</strong> Enterprise. Christian<br />

holds a BA in Sociology with<br />

Honours from Brown University,<br />

where he chaired the state’s<br />

biggest social enterprise<br />

conference, worked with two<br />

start-ups and founded one,<br />

conducted both applied and<br />

academic research, and wrote<br />

an award-winning Honours<br />

thesis on feedback and power in<br />

social finance. He can be reached<br />

at cpetroske@smu.edu.sg<br />

Florian<br />

Parzhuber is<br />

a senior at the<br />

Singapore<br />

Management<br />

University (SMU)<br />

where he majors<br />

both in <strong>Finance</strong> and Operations<br />

Management. Presently a Data &<br />

Operations Associate at the Lien<br />

Centre for <strong>Social</strong> Innovation,<br />

he has previously conducted<br />

research on water access in Laos<br />

(specifically the regional water<br />

management along the Mekong<br />

River), social entrepreneurship<br />

in the Philippines, as well as<br />

the social entrepreneurial<br />

landscape around the globe.<br />

His research interests include<br />

water and sanitation systems<br />

across different continents,<br />

financial inclusion, as well as the<br />

future outlook of crowdfunding.<br />

He can be reached at<br />

fparzhuber.2013@smu.edu.sg<br />

Originally from<br />

Seoul, South<br />

Korea, Haneol<br />

Jeong is a student<br />

at the Wharton<br />

School of the<br />

University of<br />

Pennsylvania, and a member<br />

of the Joseph Wharton scholars<br />

program. He was a Summer<br />

Research Associate at the Lien<br />

Centre for <strong>Social</strong> Innovation,<br />

where he conducted an<br />

independent research project<br />

on increasing energy access<br />

in Southeast Asia through<br />

investment in social enterprises.<br />

He can be reached at haneolj@<br />

wharton.upenn.edu<br />

John Kinsella<br />

is a sophomore<br />

at the University<br />

of Pennsylvania.<br />

Originally from<br />

Houston, Texas,<br />

he earned an<br />

Eagle Scout award and received<br />

the Princeton Prize Certificate<br />

in Racial Relations. He was a<br />

Summer Research Associate<br />

at the Lien Centre for <strong>Social</strong><br />

Innovation, during which time he<br />

conducted independent research<br />

on interdisciplinary solutions to<br />

issues facing the world. He can be<br />

reached at jkin@sas.upenn.edu<br />

Maaya Murakami,<br />

formerly a Summer<br />

Research Associate<br />

at the Lien Centre<br />

for <strong>Social</strong> Innovation,<br />

is a senior at the<br />

University of<br />

Pennsylvania, where she majors<br />

in International Relations and<br />

Economics. Born in Japan but<br />

raised in the Netherlands and<br />

Germany, Maaya’s research<br />

interests include ASEAN’s<br />

strengthening of social protection<br />

measures in its member states,<br />

and its challenges and implications;<br />

social entrepreneurship in Cambodia;<br />

and Germany’s dominance in the<br />

management of the European<br />

economic crisis. She can be reached<br />

at maayam@sas.upenn.edu<br />

Mitchell<br />

Laferriere was a<br />

Summer Research<br />

Associate at the<br />

Lien Centre for<br />

<strong>Social</strong> Innovation.<br />

During this time,<br />

he studied theory, strategy and<br />

developmental curriculum for the<br />

teaching of impact investing to<br />

university students. His primary<br />

research interests cover impact<br />

investing, sustainable finance,<br />

social entrepreneurship and<br />

social innovation. He is currently<br />

based in Manhattan, New York,<br />

where he attends the Gabelli<br />

Business School at Fordham<br />

University. He can be reached at<br />

mlaferriere1@fordham.edu<br />

Remi Cordelle is<br />

a rising sophomore<br />

at the University<br />

of Pennsylvania,<br />

where he majors<br />

in Economics<br />

and Computer<br />

Science. Formerly a Summer<br />

Research Associate at the Lien<br />

Centre for <strong>Social</strong> Innovation,<br />

Remi conducted research on<br />

income inequality. His areas of<br />

interest include social mobility<br />

in emerging economies; financial<br />

inclusion in Southeast Asia;<br />

financial literacy in marginalised<br />

communities; social enterprises<br />

in Indonesia; microfinance<br />

in developed and emerging<br />

economies; and leadership in<br />

social finance. He can be reached<br />

at remicor@sas.upenn.edu<br />

14 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

You.<br />

When others see a child in need,<br />

You see people who can meet that need.<br />

When others see social issues<br />

that seem insurmountable,<br />

you see hope and possibilities.<br />

When others see the good being done,<br />

We see You.


Collective By Rob John<br />

Philanthropy<br />

<strong>The</strong> Strength of Giving Together<br />

Giving to charity has never been a solitary<br />

activity in any culture. People have joined<br />

together to give for millennia. In Asia,<br />

clan associations, religious groups or<br />

just friends have enjoyed the benefits of<br />

giving as a group. But there appears to<br />

be a renaissance of collective giving with<br />

the advent of more organised, strategic<br />

and outcome-focused philanthropy. At the<br />

Asia Centre for <strong>Social</strong> Entrepreneurship<br />

and Philanthropy (ACSEP) where I am<br />

presently based, our research team’s<br />

curiosity about giving circles was first<br />

piqued when investigating the nature<br />

of innovation in Asian philanthropy in<br />

2012. 1 In that study, we reported several<br />

initiatives where individuals pooled<br />

their resources and jointly selected<br />

a non-profit organisation to fund. Since<br />

then, the number and variety of giving<br />

circle models have increased across the<br />

region, leading me to believe that giving<br />

circles will contribute significantly to the<br />

development of philanthropy in Asia over<br />

the coming decade.<br />



Giving circles are presently<br />

a well-established phenomenon<br />

in contemporary American<br />

philanthropy. Since the mid-<br />

1990s, their numbers have grown,<br />

especially through networked circles<br />

such as <strong>Social</strong> Venture Partners<br />

(SVP), <strong>The</strong> Women’s Collective Giving<br />

Grantmakers Network and Impact<br />

100. 2 Studies of US giving circles<br />

generally support the view that they<br />

are more than a fundraising tool,<br />

but also an opportunity for<br />

individuals to learn more about<br />

giving, non-profits and social<br />

needs in their own communities.<br />

Most giving circle models require<br />

individuals to donate quite modest<br />

sums and engage their members<br />

more deeply than casual “donation<br />

tin” or “chequebook” giving. This<br />

engagement and the multiplied<br />

resources of pooled funds can<br />

approach the level of philanthropy<br />

more often associated with wealthy<br />

individuals or managed charitable<br />

funds. Angela M. Eikenberry, an<br />

academic at the University of<br />

Nebraska who has extensively<br />

studied giving circles, calls them<br />

“a transformation in the way we<br />

[ordinary citizens] are attempting<br />

16 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

Collective Philanthropy<br />

to address community problems<br />

through giving and volunteering”.<br />

Her definition of a giving circle<br />

remains a helpful starting point in<br />

understanding why they are<br />

an important innovation in Asia.<br />

Giving circles are hard to<br />

define, are flexible in form and<br />

nature, but typically exhibit<br />

five major characteristics—<br />

they pool and give away<br />

resources, educate members<br />

about philanthropy and issues<br />

in the community, include<br />

a social dimension, engage<br />

members, and maintain their<br />

independence. 3<br />

While the most obvious characteristic of<br />

a giving circle is syndication—the pooling of<br />

capital to make larger donations—we know<br />

from research that a giving circle also engages<br />

its members to release human capital and<br />

provides a learning experience that solitary<br />

giving does not.<br />

While the most obvious characteristic<br />

of a giving circle is syndication—the<br />

pooling of capital to make larger<br />

donations—we know from research<br />

that a giving circle also engages its<br />

members to release human capital<br />

and provides a learning experience<br />

that solitary giving does not. A survey<br />

of 341 members of 26 giving circles<br />

supported the assertion that<br />

participation had a positive impact<br />

on individuals’ philanthropic and<br />

civic engagement. Giving-circle<br />

members gave more time and money<br />

and in a more focused and strategic<br />

way compared to those who did<br />

not give collectively. <strong>The</strong> members’<br />

knowledge of philanthropy, non-profit<br />

organisations, and problems in<br />

their community also increased<br />

as a result of giving with others. 4<br />

On the American landscape, it<br />

appears that gender is a major factor<br />

in the formation and dynamics of<br />

giving circles: one study revealed<br />

that 44 per cent of circles were<br />

composed of women only, with two<br />

per cent being exclusively male. 5<br />

Many US giving circles are hosted by<br />

other philanthropic organisations,<br />

usually community foundations,<br />

which enable circles to offer their<br />

members tax exemptions without<br />

having to independently file for<br />

charitable status. In addition, a few<br />

giving circle networks in North<br />

America have opened chapters<br />

internationally, or inspired others to<br />

adapt their model and form circles<br />

in Asia.<br />


<strong>The</strong> 34 nations and special<br />

administrative regions that<br />

constitute Asia form a diverse and<br />

complex patchwork of cultures,<br />

languages, political systems and<br />

economies spread across vast<br />

distances. In the US and much of<br />

Europe, philanthropy is relatively<br />

well developed: there is a robust<br />

regulatory environment for<br />

charitable giving and taxation, and<br />

a considerable body of academic<br />

research on philanthropy and<br />

its place in civic engagement<br />

and culture. Ancient traditions<br />

of charitable giving, such as the<br />

clan associations of 19th-century<br />

Chinese migrant traders, have<br />

existed for centuries in Asia.<br />

In 1915, 23 women formed the<br />

Singaporean Chinese Ladies<br />

Association. Most were the wives<br />

of wealthy business leaders, and<br />

together they pursued health and<br />

education projects amongst the<br />

island’s disadvantaged. Several<br />

of the Association’s presidents<br />

were to become instrumental in<br />

establishing some of Singapore’s<br />

most respected grant-making<br />

foundations, such as the Tan<br />

Foundation, Cathay Organisation<br />

and Lee Foundation. 6<br />

<strong>The</strong> concept, however, of organised<br />

philanthropy in order to effect<br />

specific societal benefit is relatively<br />

new, emerging from post-colonial<br />

wealth creation and private<br />

foundations. <strong>The</strong>se relatively<br />

new expressions of philanthropy<br />

are developing rapidly—even<br />

in countries like China, which<br />

has no modern tradition of<br />

institutional philanthropy. Despite<br />

the comparatively less robust<br />

and underdeveloped philanthropy<br />

“ecosystem” in Asia today, there are<br />

many indications that organised,<br />

strategic philanthropy will boom<br />

in the next decade: we are seeing<br />

an increased interest from middleand<br />

higher-income earners in a<br />

more engaged approach that adds<br />

value and is focused on efficiency<br />

and results. 7 <strong>The</strong> transfer of<br />

family business and associated<br />

philanthropy to a new generation<br />

of foreign-educated children<br />

is one driver of this evolution<br />

from traditional giving to more<br />

intentional, professionalised familybased<br />

philanthropy. In this context<br />

of rapidly evolving philanthropy in<br />

Asia, models of collective giving<br />

are likely to play an influential role,<br />

as individuals and communities<br />

seek to maximise the impact of<br />

their donations and deepen their<br />

experience of giving by learning<br />

from one another.<br />


In the first attempt to map their<br />

growth in the region, my 2014 study<br />

identified 37 giving circles in Asia, 8<br />

which I broadly categorised as either<br />

“transplanted” or “indigenous”<br />

giving circles. 9<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 17

Transplanted Giving Circles<br />

<strong>The</strong>se models can trace their origins<br />

to a network outside Asia, usually in<br />

the United States or United Kingdom.<br />

Additionally, transplanted giving<br />

circles are typically promoted by<br />

a strong, locally based “champion”<br />

who has personally understood the<br />

potential benefits of collective giving<br />

and can rally others to participate.<br />

None of the transplanted circles from<br />

my 2014 research resulted from any<br />

aggressive international corporate<br />

franchise, but rather were initiatives<br />

driven locally and supported by circles<br />

and their networks in the West.<br />

For example, SVP was founded<br />

in Seattle in 1997 and has to date<br />

grown to 31 chapters in the US<br />

and Canada. Each partner typically<br />

donates US$5,000 a year, enabling<br />

each city chapter to make several<br />

large grants to local non-profits.<br />

SVP’s venture philanthropy approach<br />

encourages partners to engage<br />

with the management team of the<br />

supported non-profit as an active<br />

“investor” rather than a passive<br />

donor. As early as 2005, SVP inspired<br />

the start-up of an affiliate group in<br />

Tokyo, but it was not until 2012 that<br />

the network significantly expanded<br />

to Asia. <strong>The</strong>re are presently SVP<br />

affiliates in India, China, South<br />

Korea, Japan and Australia, all led<br />

by local individuals and supported<br />

by the international network. Further,<br />

SVP India has grown organically to<br />

three city chapters, while SVP in<br />

China plans to expand beyond its<br />

first base in Beijing, which launched<br />

in 2013 with 50 partners. However,<br />

whereas SVP chapters in the US<br />

are registered as independent<br />

non-profits with tax deductibility<br />

status, the onerous procedures for<br />

registering a non-profit organisation<br />

in India and China have led SVP to<br />

choose an umbrella structure in<br />

India, and for SVP China to launch<br />

under the auspices of the Leping<br />

Foundation.<br />

In another case of adapting to local<br />

conditions, SVP Melbourne set up<br />

a dual fund structure to support the<br />

country’s growing social enterprise<br />

sector—a charitable fund offering<br />


Ravi Venkatesan,<br />

courtesy of SVP<br />

India.<br />

140<br />

Partners<br />

raised nearly<br />

half a million<br />

US dollars<br />

4,000<br />

hours<br />

donated their<br />

time to support<br />

11 non-profits<br />

By<br />

2020<br />

Goal<br />

SVP India plans<br />

to help create<br />

a million jobs<br />

and mobilise<br />

the resources of<br />

1,000 partners<br />




Ravi Venkatesan transformed Microsoft India during his<br />

seven years as the company’s chairman, making India the<br />

technology giant’s second largest market. Working for Microsoft<br />

brought him into close contact with a unique community of<br />

technologists and philanthropists, specifically the Seattle<br />

chapter of <strong>Social</strong> Venture Partners (SVP), whose members<br />

include several Microsoft executives. <strong>The</strong>y sowed a seed in<br />

Venkatesan’s mind that the collective giving model pioneered<br />

by SVP could be relevant for the burgeoning professional<br />

class in India’s own “Silicon Valley”. After stepping down from<br />

Microsoft in 2011, he gathered technology entrepreneurs in<br />

his home city of Bangalore, and SVP India started to take<br />

shape. “You start small and insignificant,” he said, “but<br />

particularly after my experience of Microsoft, I knew we had<br />

to plan for scale—to be one of the largest and most influential<br />

organisations on the Indian philanthropy landscape.”<br />

SVP partners work<br />

with agri-focused<br />

organisations<br />

to create better<br />

livelihood impact<br />

for farmers and<br />

producers.<br />

Photo courtesy<br />

of SVP India.<br />

Venkatesan planned to take the basic components of the<br />

SVP model—individuals pooling their capital, and engaging<br />

with promising non-profits in their locality to offer funds and<br />

business advice—and adapt to the Indian context, where scale<br />

of impact is key to addressing the country’s social issues.<br />

<strong>The</strong> first adaptation was to reduce red tape: SVP India was set<br />

up as a single registered entity, an umbrella structure where<br />

city chapters would be added as each was launched. After the<br />

Bangalore chapter was established in 2013 with 65 partners,<br />

chapters in Mumbai and Pune joined the network, with further<br />

expansion to other cities planned. Unlike US chapters, which<br />

are independent from each other, the umbrella model in India<br />

gave the city chapters an opportunity to collaborate and set<br />

common objectives. <strong>The</strong> chairman of each chapter sits on the<br />

SVP India board to help steer countrywide strategy. Livelihood,<br />

including job creation and vocational training, is an overarching<br />

national focus area for all Indian chapters. Each group will then<br />

choose additional localised social and environmental challenges<br />

that particularly touch on the well-being of their communities.<br />

<strong>The</strong> Bangalore chapter has chosen waste management as its<br />

local issue, one that is critical for a city whose population size<br />

has grown rapidly to 10 million people without sustainable<br />

policies on the sorting, collecting and disposing of domestic<br />

waste. Bangalore produces over 2,000 tons of dry waste every<br />

day, but only a fraction of that is processed in the city, most<br />

of it being sent to landfills outside the area. Partners of SVP<br />

Bangalore worked with multiple agencies to study the city’s<br />

waste management and identify gaps and opportunities for<br />

recycling, and in December 2015 presented an in-depth report<br />

and roadmap to the municipal authorities.<br />

During the first two years of the Indian chapters, 140 partners<br />

raised nearly half a million US dollars and donated 4,000 hours<br />

of their time to support 11 non-profits. By 2020, SVP India<br />

plans to help create a million jobs and mobilise the resources<br />

of 1,000 partners.<br />

18 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

Collective Philanthropy<br />

Transplanted giving<br />

circles are typically<br />

promoted by<br />

a strong, locally based<br />

“champion” who has<br />

personally understood<br />

the potential benefits<br />

of collective giving<br />

and can rally others<br />

to participate.<br />

Lastly, when the Impact 100 network<br />

of women-only giving circles in<br />

the US inspired chapters to be<br />

launched in Australia, it chose to be<br />

mixed gender, thus illustrating that<br />

transplanting is not a “cookie cutter”<br />

approach, but one that adapts to local<br />

circumstances and preferences.<br />

Indigenous Giving Circles<br />

<strong>The</strong> number of giving circles in<br />

Asia, apparently unconnected to<br />

any model outside of the region, is<br />

growing. In the globalising field of<br />

philanthropy, they are likely to be<br />

influenced, even if unconsciously,<br />

by established models elsewhere.<br />

<strong>The</strong> founder of New Day Asia (NDA)<br />

had her first experience of collective<br />

philanthropy in her home country<br />

of South Africa. After relocating to<br />

Hong Kong, she wanted to kickstart a<br />

giving circle amongst the expatriate<br />

business community to respond<br />

to sex trafficking in Asia. Although<br />

NDA requires its members to pledge<br />

a modest monthly donation, it has<br />

leveraged the pooled funds with cash<br />

and in-kind donations from corporate<br />

partners, and works strategically<br />

alongside established grantmakers<br />

in Hong Kong.<br />

tax deductibility so that partners can<br />

give grants to non-profits; and an<br />

operating company that is permitted<br />

to make impact investments in social<br />

enterprises.<br />


(HONG KONG)<br />




<strong>The</strong> Funding Network (TFN) is<br />

another transplanted model that<br />

is gaining traction in Asia. TFN<br />

originated in London in 2002 as<br />

an events-driven variation of<br />

collective philanthropy that uses<br />

“live crowdfunding”. <strong>The</strong> network’s<br />

funding events are open to the<br />

public and feature short pitches by<br />

preselected non-profits, which elicit<br />

pledges from the floor. Unlike most<br />

giving circles, funds are not pooled.<br />

Rather, individuals commit direct<br />

donations during the pitching events,<br />

with some offering beyond their<br />

donations (their time and skills).<br />

Since 2012, TFN has supported<br />

“affiliate” events in North America,<br />

South Africa, continental Europe and<br />

three countries in Asia: Singapore,<br />

New Zealand and Australia. TFN<br />

Australia has placed engagement<br />

with corporate partners at the centre<br />

of its strategy, with firms hosting<br />

events, and encouraging staff and<br />

clients to participate. Corporatefocused<br />

events give the company an<br />

opportunity to match funds pledged<br />

by its staff or offer gifts in kind to<br />

early stage non-profits. During<br />

the pitching sessions, companies<br />

pledge cash, or offer desk space or<br />

volunteers to young non-profits.<br />

Co-founder Chris Green (right) visiting<br />

a supported project in Cambodia in 2010.<br />

Photo courtesy of New Day Asia.<br />

US$<br />

750k<br />

Total Fund<br />

was raised in<br />

the middle of<br />

<strong>2016</strong><br />

Co-founder Liza Green visiting a supported project in<br />

Cambodia in 2008. Photo courtesy of New Day Asia.<br />

Liza and Chris Green are banking professionals in Hong<br />

Kong who were troubled by the “dark undercurrent of poverty<br />

in Asia and wanted to respond by giving intelligently”. Liza<br />

researched the abuse of young women by sex traffickers and<br />

made this the focus of what would become New Day Asia.<br />

NDA crystallised as a giving circle when the Greens presented<br />

their proposal at an informal dinner with eight friends in 2007.<br />

One of the members, a lawyer, helped the initiative become<br />

incorporated as a private company with tax-exempt status in<br />

Hong Kong. Earlier, Liza had already contacted the local office<br />

of the Asia Foundation, asking them to suggest a project that<br />

NDA could support with a US$10,000 donation. Over five years,<br />

membership grew organically to 86, through dinner parties,<br />

word of mouth and articles in Hong Kong’s financial press.<br />

Members pledge a modest monthly contribution of HK$500<br />

(US$65), although many give far more, especially when they<br />

receive their work bonuses. NDA members are generally<br />

expatriate professionals, but many are Hong Kong Permanent<br />

Residents. <strong>The</strong> total pooled funds raised by the middle of <strong>2016</strong><br />

was around US$750,000, supplemented by approximately<br />

US$200,000 in co-funding from corporate businesses donated<br />

to projects in Cambodia, India, China and Nepal.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 19


(HONG KONG)<br />



TRAFFICKED WOMEN (cont'd)<br />

New Day Asia<br />

members take<br />

part in a hike<br />

fundraiser on<br />

Lantau island in<br />

2015 to support<br />

the Matara<br />

Girls Home in<br />

Sri Lanka.<br />

Photo courtesy<br />

of New Day<br />

Asia.<br />

New Day<br />

member Dana<br />

Barrett with<br />

children from<br />

the Kalki project<br />

in India in 2010.<br />

Photo courtesy<br />

of New Day<br />

Asia.<br />

India’s largest collaborative giving<br />

effort, Dasra Giving Circles, emerged<br />

out of the Indian Philanthropy<br />

Forum, a platform for high net worth<br />

donors convened by the Mumbaibased<br />

philanthropy intermediary,<br />

Dasra. A circle generally comprises<br />

10 individuals who each commit one<br />

million Indian rupees (US$20,000)<br />

per year for three years. Most of<br />

the funds support the growth of a<br />

non-profit, but 15 per cent is used<br />

to cover the cost of Dasra, delivering<br />

250 days of non-financial support<br />

through mentoring and technical<br />

advice over the three-year funding<br />

cycle. Dasra Giving Circles are<br />

formed to address a specific social<br />

problem only after Dasra’s research<br />

team provides a comprehensive<br />

mapping of a particular social sector<br />

together with a shortlist of nonprofits<br />

which are making innovative<br />

efforts to address the chosen social<br />

issue and have a scalable business<br />

model. Since the launch of its first<br />

giving circle in 2010, Dasra has<br />

raised US$5.6 million of direct<br />

member contributions from 11<br />

giving circles. <strong>The</strong> impact has been<br />

further leveraged by grantmakers<br />

who contributed US$15.1 million to<br />

projects that were initially supported<br />

by the giving circles.<br />

US$<br />

12,600<br />

Initial Grant<br />

offered by<br />

New Day Asia<br />

for LOVEQTRA<br />

Sengchemdrukmo<br />

Girl’s Home<br />

in China for<br />

refurbishment<br />

work at the<br />

Home<br />

New Day Asia members gather twice each year to decide<br />

which new projects to support. “If we fund anything new,<br />

then a member must take that project on as a champion.<br />

Ideally we want to support no more than three or four<br />

projects because that’s what we can comfortably manage<br />

as volunteers,” explained Liza Green. This giving circle<br />

emphasises member involvement and is reluctant to hire<br />

professional staff, thereby keeping costs as low as possible<br />

through volunteerism. Members are involved at all stages<br />

of grant management—evaluating potential projects,<br />

making site visits, as well as posting videos online.<br />

One of NDA’s earliest donations was to LOVEQTRA<br />

Sengchemdrukmo Girl’s Home, a registered non-profit<br />

organisation in China. Remotely situated on the Tibetan<br />

plateau, the Home offers protection to young girls rescued<br />

from domestic slavery and abuse. One member had<br />

a personal connection with its founder and recommended<br />

the project to the group. New Day Asia offered an initial<br />

grant of US$12,600 for refurbishment work at the Home,<br />

with follow-up grants for other capital expenditure in<br />

subsequent years. Liza, who feels the circle model works<br />

well, would like to see it replicated in other Asian cities.<br />

“I’d like to see a New Day Singapore, a New Day Jakarta,<br />

and so on; different cells run by people who want to do<br />

that and working independently from us in Hong Kong, but<br />

perhaps using our ideas and guidelines. We’ve created this<br />

structure; we just want people to use it.”<br />

Focus India Forum (FIF), a giving<br />

circle that targets members of<br />

the Indian diaspora in Singapore,<br />

has 250 members, of whom 180<br />

give regularly. Unlike Dasra’s<br />

focus on relatively large member<br />

donations, FIF requires its members<br />

to give only S$20 (about US$16)<br />

each month. Members are Indian<br />

nationals living in Singapore or<br />

people of Indian heritage who have<br />

adopted another nationality. Since<br />

its establishment in 2002, FIF has<br />

distributed S$161,000 to Indian<br />

non-governmental organisations via<br />

grants that are typically less than<br />

S$2,900. <strong>The</strong> group has a strong<br />

social and educational focus: its<br />

objective is to keep its diaspora<br />

members informed about the<br />

non-profit sector in India and of<br />

the impact of their donations.<br />

20 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

Collective Philanthropy<br />

<strong>The</strong> giving circles as described<br />

above so far generally comprise<br />

professionals who are in the middle<br />

to late part of their careers, live close<br />

to one another geographically—<br />

usually in the same city—and their<br />

giving is local, or sometimes regional.<br />

One recently formed giving circle is a<br />

community of interest: its members<br />

UBS 20/20 YOUNG<br />



are young professionals scattered<br />

across Asia and further afield, and<br />

their families usually own or manage<br />

major businesses in the region.<br />

<strong>The</strong>se next-generation business<br />

leaders and philanthropists formed<br />

the 20/20 <strong>Social</strong> Impact Leaders’<br />

Group as an opportunity to learn<br />

about giving through collaboration.<br />




IN ASIA?<br />

As the giving circle movement gains<br />

momentum across Asia, individuals<br />

are finding imaginative ways of<br />

learning-by-doing. <strong>The</strong>re seems little<br />

doubt that the number of circles is<br />

increasing, and like an iceberg, there<br />

is far more beneath the surface than<br />

we are aware of. We will see the<br />

growth of giving circles accelerate<br />

as community foundations, wealth<br />

managers and governmentsponsored<br />

giving campaigns<br />

promote collective giving.<br />

UBS<br />

20/20<br />

<strong>Social</strong> Impact<br />

Leaders Group<br />

created in 2013<br />

in partnership<br />

with UBS Optimus<br />

Foundation<br />

Members of the<br />

UBS 20/20 impact<br />

circle visit a school<br />

in Daliangshan,<br />

China. Photo<br />

courtesy of UBS<br />

20/20 <strong>Social</strong> Impact<br />

Leaders Group.<br />

Simon Feng Ou grew up in Taiwan, was educated in the US,<br />

and helped in his family’s sports equipment business in China<br />

before pursuing a career in the sustainable energy sector.<br />

Singaporean En Lee worked for over a decade in finance and<br />

law before moving on to pioneer impact investing in Asia,<br />

which he has been involved in for the last six years. <strong>The</strong> two<br />

met at the UBS global philanthropy forum in Switzerland, and<br />

“lamented over how few philanthropy events are catered for<br />

the younger generation”—as well as the fact that very few<br />

of these events discussed innovative approaches like social<br />

entrepreneurship and impact investing.<br />

Deciding to change that, Simon and En gathered other likeminded<br />

individuals in their twenties and thirties who wanted<br />

their giving to create meaningful and sustainable impact.<br />

In 2013, in partnership with UBS Optimus Foundation, 11 they<br />

created the UBS 20/20 <strong>Social</strong> Impact Leaders Group, hoping<br />

“to engage next-generation leaders through peer-to-peer<br />

learning for the purposes of collective action”. <strong>The</strong> wider<br />

purpose of the group is to support and incubate at least<br />

20 new “social impact leaders” in Asia by 2020, empowered<br />

by expertise, resources and networks, to create positive,<br />

sustainable social impact through action. <strong>The</strong> giving circle<br />

is the group’s first collective action. Its 20 or so members,<br />

mostly from Hong Kong, Taiwan, Singapore and China, pool<br />

their funds and commit to attending at least three of the four<br />

physical meetings held each year.<br />

Notably, the group is involved in a project to provide early<br />

childhood development to the Yi ethnic minority community<br />

in Daliangshan, China, through a “public–private philanthropy<br />

partnership” involving local government and grassroots<br />

organisations, and academic and international partners.<br />

Simon described how involvement has been a more positive,<br />

insightful experience than just passive giving alone: “It’s been<br />

time-consuming and harder than we originally anticipated,<br />

but it’s been more fun and collaborative … and despite<br />

coordination difficulties, we were able to keep the circle<br />

members fully engaged and updated on project progress.”<br />

<strong>The</strong> kind of in-depth research on<br />

giving circles in the US and UK has<br />

not yet been duplicated in Asia,<br />

leaving us uncertain as to how these<br />

new models in collective giving are<br />

impacting their members and the<br />

non-profits they support. Academic<br />

research is thus needed to help<br />

us understand the place for giving<br />

circles in the broader development of<br />

contemporary philanthropy in Asia.<br />

In an attempt to map activity in Asia,<br />

document real-life examples and<br />

encourage curiosity about collective<br />

philanthropy, I have launched<br />

www.givingcircles.asia as Asia’s<br />

first information portal about giving<br />

circles. <strong>The</strong> website provides a<br />

stream of news items and case<br />

studies, and interactive map details<br />

of known giving circles, country by<br />

country. <strong>The</strong> table in the next two<br />

pages shows a snapshot of active<br />

giving circles in Asia. While the<br />

number is still modest, it is likely to<br />

grow as more are formed or become<br />

more public about their activities.<br />

<strong>The</strong> site has already helped giving<br />

circles in different countries connect<br />

and collaborate, and serves as a<br />

platform where they can share news<br />

and events.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 21

Giving Circles in Asia<br />

Country City Name Affiliation Partnership<br />

Australia Perth 100 Women<br />

Australia Melbourne 10x10<br />

Australia Adelaide Awesome Adelaide Awesome Foundation<br />

Australia Melbourne Awesome Melbourne Awesome Foundation Pozible (crowdfunding platform)<br />

TEDx Melbourne<br />

Australia Sydney Awesome Sydney Awesome Foundation<br />

Australia Sydney First Seeds Fund Little Black Dress Group Little Black Dress Group<br />

Australia Fremantle Impact 100 Fremantle Impact 100 Fremantle Foundation<br />

Australia Melbourne Impact 100 Melbourne Impact 100 Australian Communities Foundation<br />

Australia Adelaide Impact 100 South Australia Impact 100 Australian Communities Foundation<br />

Australia Perth Impact 100 Western Australia Impact 100 Australian Communities Foundation<br />

Australia Melbourne Melbourne Women's Fund Lord Mayor’s Charitable Foundation<br />

Australia Brisbane PICCA<br />

Australia Melbourne SVP Melbourne SVP Network Affiliate ten20 Foundation (institutional member)<br />

Australia Multiple cities TFN Australia TFN<br />

Australia Brisbane Women & Change<br />

Australia Sydney Impact 100 Sydney<br />

Australia Melbourne <strong>The</strong> Channel<br />

China Beijing SVP Beijing SVP Network Affiliate & SVP China Leping Foundation<br />

China Hong Kong Future Funders<br />

China Hong Kong New Day Asia Linklaters<br />

India Delhi Awesome Delhi Awesome Foundation<br />

India Mumbai Dasra Giving Circles (10)<br />

India Mumbai Caring Friends<br />

India Bangalore SVP Bangalore SVP Network Affiliate & SVP India<br />

India Mumbai SVP Mumbai SVP Network Affiliate & SVP India<br />

India Pune SVP Pune SVP Network Affiliate & SVP India<br />

India Mumbai ToolBox India ToolBox Belgium<br />

Japan Tokyo ARUN<br />

Japan Tokyo SVP Tokyo SVP Network Affiliate<br />

New Zealand Whangarei Awesome Whangarei Awesome Foundation<br />

New Zealand Auckland Fabulous Ladies Giving Circle Auckland Community Foundation<br />

New Zealand Auckland TFN New Zealand TFN Auckland Community Foundation<br />

Singapore Singapore Awesome Singapore Awesome Foundation<br />

Singapore Singapore Focus India Forum<br />

Singapore Singapore Little Red Dot Giving Circle<br />

Singapore Singapore SVP Singapore<br />

Singapore Singapore 100 Women Who Care Singapore 100 Women Who Care<br />

South Korea Seoul SVP Seoul SVP Network Affiliate<br />

Taiwan Taipei TFN Taiwan (TBC) TFN<br />

Source: www.givingcircles.asia<br />

Notes<br />

1<br />

Rob John, Pauline Tan and Ken Ito, Innovation in Asian<br />

Philanthropy, Entrepreneurial <strong>Social</strong> <strong>Finance</strong>: Working Paper<br />

No. 2 (Singapore: Asia Centre for <strong>Social</strong> Entrepreneurship and<br />

Philanthropy, NUS Business School, 2013).<br />

2<br />

Many giving circles in the US are members of networks, which<br />

have very likely contributed to their popularity and growth.<br />

<strong>The</strong>se networks are either independent or affiliated in structure.<br />

An independent network is a collection of giving circles without<br />

any other relationship with each other. For example, <strong>The</strong> Women’s<br />

Collective Giving Grantmakers Network comprises more than<br />

10,000 women from 48 independent giving circles across the US.<br />

An affiliated network is a franchise model that grows as “branded”<br />

giving circles are added as new city chapters. <strong>Social</strong> Venture<br />

Partners is an instance of an affiliated network with more than<br />

3,500 partners in 31 North American and 9 international chapters.<br />

3<br />

Angela M. Eikenberry, Giving Circles: Philanthropy, Voluntary<br />

Association and Democracy (Bloomington, IN: Indiana University<br />

Press, 2009), 57.<br />

4<br />

Angela M. Eikenberry, Jessica Bearman, Hao Han, Melissa Brown<br />

and Courtney Jensen, <strong>The</strong> Impact of Giving Together: Giving<br />

Circles’ Influence on Members’ Philanthropic and Civic Behaviors,<br />

Knowledge and Attitudes, Public Administration Faculty<br />

Publications, Paper 42 (Omaha, NE: Digital Commons@UNO,<br />

2009). http://digitalcommons.unomaha.edu/pubadfacpub/42.<br />

22 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

Collective Philanthropy<br />

Gender<br />

Women<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Women<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Women<br />

Mixed<br />

Mixed<br />

Mixed<br />

Women<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

Website<br />

https://www.facebook.com/100womenaus<br />

https://www.facebook.com/pages/10x10Melbourne/549435665163395?ref=hl<br />

http://www.awesomefoundation.org/en/chapters/adelaide<br />

http://www.awesomefoundation.org/en/chapters/melbourne<br />

http://www.awesomefoundation.org/en/chapters/sydney<br />

http://firstseedsfund.com.au<br />

http://www.fremantlefoundation.com/impact-100<br />

https://www.facebook.com/impact100fremantle<br />

http://www.impact100melbourne.org<br />

http://www.impact100sa.org.au<br />

http://www.impact100wa.org.au<br />

http://melbournewomensfund.org<br />

http://picca.org.au<br />

http://www.socialventurepartners.org/melbourne<br />

https://www.thefundingnetwork.com.au<br />

http://www.womenandchange.com.au<br />

http://www.impact100sydney.org.au<br />

http://www.the-channel.org<br />

http://www.socialventurepartners.org/svp-beijing-site-coming-soon<br />

http://www.newdayasia.org<br />

http://www.awesomefoundation.org/en/chapters/delhi<br />

http://www.dasra.org<br />

https://sites.google.com/a/caringfriends.in/caring-friends/home<br />

http://www.socialventurepartners.org/bangalore<br />

http://www.socialventurepartners.org/svp-mumbai-site-coming-soon<br />

http://www.socialventurepartners.org/pune<br />

http://www.tbxi.org/home<br />

http://www.arunllc.jp/en<br />

http://www.svptokyo.org/english<br />

http://www.awesomefoundation.org/en/chapters/whangarei<br />

Research on giving circles in the US<br />

has shown that they are an important<br />

part of giving culture. Giving circles<br />

provide powerful opportunities<br />

for people of all financial means<br />

to experience the satisfaction of<br />

impactful giving. <strong>The</strong>y also help<br />

individuals engage more intelligently<br />

with their communities, promote<br />

better understanding of social<br />

problems, and support the non-profit<br />

organisations that address these<br />

same social issues. We may be<br />

witnessing the birth of a similar<br />

movement in Asia.<br />

Rob John is a Visiting Senior<br />

Fellow at the Asia Centre<br />

for <strong>Social</strong> Entrepreneurship<br />

and Philanthropy at the<br />

NUS Business School, and<br />

an independent consultant<br />

based in Cambridge, UK.<br />

He was the first executive director of the<br />

European Venture Philanthropy Association<br />

(EVPA) and co-founded the Asian Venture<br />

Philanthropy Network (AVPN). Following a<br />

15-year career in international development,<br />

his involvement with philanthropy began as<br />

a director of a small venture philanthropy<br />

fund and a Fellow at the Skoll Centre for<br />

<strong>Social</strong> Entrepreneurship, Oxford Said Business<br />

School. Rob's current research interests<br />

include innovations in Asian philanthropy,<br />

giving circles and angel investing for impact.<br />

View his publications at about.me/robjohn.<br />

He can be reached at rob.john@nus.edu.sg<br />

Mixed<br />

Mixed<br />

Mixed<br />

Mixed<br />

http://www.thefundingnetwork.org.nz<br />

http://www.awesomefoundation.org/en/chapters/singapore<br />

https://groups.yahoo.com/neo/groups/FocusIndiaForum/info<br />

Women<br />

Mixed<br />

https://www.facebook.com/100WomenWhoCareSingapore/info<br />

http://www.socialventurepartners.org/svp-seoul-site-coming-soon<br />

5<br />

Eikenberry, Giving Circles, 84.<br />

6<br />

Keith Chua, “Philanthropy in Singapore, Early Initiatives and Its<br />

Influence on Current and Future Trends”, Speech given at the<br />

Philanthropy in Asia Summit, Singapore, 10 September 2012.<br />

7<br />

<strong>The</strong> Economist Intelligence Unit, Something’s Gotta Give: <strong>The</strong><br />

State of Philanthropy in Asia, A Report from the Economist<br />

Intelligence Unit commissioned by HSBC Private Bank (London,<br />

New York, Hong Kong and Geneva: EIU, 2011).<br />

8<br />

Rob John, Virtuous Circles: New Expressions in Collective<br />

Philanthropy in Asia, Entrepreneurial <strong>Social</strong> <strong>Finance</strong> in<br />

Asia: Working Paper No. 3 (Singapore: Asia Centre for <strong>Social</strong><br />

Entrepreneurship and Philanthropy, NUS Business School, 2014).<br />

9<br />

I excluded one class of collective giving from this study: “donor<br />

circles”. Established by a non-profit organisation as a means<br />

of raising funds exclusively for its own work, donor circles<br />

generally lack the element of independence in their choice of<br />

organisations that will benefit from funds raised by the group.<br />

10<br />

<strong>The</strong> full case study is available at http://givingcircles.asia/casestudies-details.aspx?cs=12.<br />

11<br />

An independent grant-making foundation set up by UBS in 1999<br />

with a focus on children’s well-being.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 23


<strong>The</strong> Business<br />

of Giving<br />

Paul Dunn is shaping<br />

a new generation of<br />

socially conscious<br />

businesses by providing<br />

a sustainable platform<br />

that connects company<br />

with cause.<br />

By Eunice Rachel Low and<br />

Christian Petroske<br />

When it comes to giving, Paul Dunn means<br />

business—literally. As the chairman of Buy1Give1<br />

(B1G1), the 72-year-old oversees a social enterprise<br />

devoted to making business philanthropy<br />

a more effortless process. A firm believer that it<br />

is in giving that one receives (joy, that is), he tells<br />


how joy, rather than duty or guilt, sustains giving<br />

corporations. PHOTOGRAPHY BY KEN KOH<br />

24 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


From the UK to Australia, then to<br />

Singapore, Paul Dunn has traversed<br />

continents in the span of his fivedecade<br />

career. However, it was a<br />

chance encounter with a pastor from<br />

Bangalore that led him to discover<br />

his raison d'être: helping businesses<br />

derive meaning and purpose through<br />

the act of giving—made convenient<br />

and accessible via a unique platform<br />

linking causes with corporations.<br />

Born and raised in Dover, Kent,<br />

Paul’s first job was in the engineering<br />

industry designing antennae for a<br />

research lab. However, preferring<br />

customer relations to desk-bound<br />

work, he relocated to Brisbane at the<br />

age of 21 to join Hewlett Packard’s<br />

Australian start-up. During his<br />

seven years there, he led the then<br />

newly formed small computer<br />

group. After HP, Paul moved on to<br />

form one of Australia’s first locally<br />

based computer companies. With<br />

a natural flair for marketing, Paul<br />

helped grow that company to a US$23<br />

million enterprise. Following that,<br />

he spent the next two decades in<br />

corporate consulting, during which<br />

he mentored companies in areas<br />

like improving customer value and<br />

increasing profits. In this time, he<br />

built a succession of businesses<br />

from scratch—including <strong>The</strong> Results<br />

Corporation (TRC) and Results<br />

Accountants’ Systems (RAS).<br />

<strong>The</strong>n, in 2000, Paul decided to “wind<br />

down” and move to the south of<br />

France. After selling his businesses,<br />

he purchased an 18th-century<br />

farmhouse in Provence, out of which<br />

he wrote several books, including his<br />

highly acclaimed Firm of the Future,<br />

still regarded as a standard text for<br />

professional service firms.<br />

A turn of events in 2006, however,<br />

made Paul emerge from his early<br />

“retirement”. During a trip to<br />

Bangalore, India, he was introduced<br />

to a local pastor, whose personal<br />

story touched him deeply. Two<br />

years earlier, a tsunami struck<br />

while the pastor was teaching at a<br />

Sunday school. Fortunately, he and<br />

his class of 12 children managed<br />

to escape to higher ground, but<br />

they watched on helplessly as their<br />

homes and families were washed<br />

away. Moved by their plight and<br />

the pastor's struggle to help these<br />

children rebuild their lives, Paul<br />

donated the US$3,500 needed to<br />

build a new house for them, which<br />

they completed and even christened<br />

“Paul Dunn Home”. Through this<br />

experience, not only did Paul begin to<br />

feel more empathetic towards social<br />

causes, he derived immense joy from<br />

the act of giving per se.<br />

Serendipitously, Paul’s newfound<br />

desire to give materialised when<br />

he met Masami Sato almost exactly<br />

a year later. While mentoring a group<br />

of entrepreneurs in Bali, he<br />

connected with the 42-year-old<br />

future co-founder of B1G1 over<br />

a shared vision to create a community<br />

of giving businesses based on a<br />

refreshingly simple premise: each<br />

time a customer purchases a<br />

particular product or service, the<br />

company makes a donation to a<br />

designated global cause. <strong>The</strong> rest,<br />

as they say, is history.<br />

Since its launch in 2007, B1G1<br />

has helped SME businesses achieve<br />

81 million giving impacts, and is<br />

on track towards reaching 1 billion<br />

giving impacts by 2020.<br />

EL: Your career has taken you<br />

across the globe and you’re a<br />

well-known international speaker.<br />

What made you choose Singapore,<br />

over other countries, as the<br />

headquarters for B1G1?<br />

PD: Shortly after launching B1G1<br />

in 2007, we were in Brisbane having<br />

a management meeting. During<br />

one particular discussion, we were<br />

studying a series of flipcharts which<br />

read, consecutively: “Create a world<br />

full of giving”—“Because that’s<br />

a happier world”—“How?”—and<br />

“By creating giving nations”. Just<br />

as we were contemplating that bit<br />

about the giving nations, one of our<br />

latecomers strode in brandishing a<br />

copy of one of the Sunday Australian<br />

newspapers. Its headline read:<br />

“Singapore’s President Says Singapore<br />

Must Become A Giving Nation”. Right<br />

there and then, we felt like we had<br />

our answer.<br />

However, there was a caveat.<br />

<strong>The</strong> 2005 NKF scandal 1 was still<br />

fresh on the people’s minds, and<br />

public confidence in charities was<br />

at an all-time low. <strong>The</strong> Singapore<br />

government had also begun to put<br />

stricter controls over anybody who<br />

wanted to do anything in the charity<br />

space. But President Nathan’s timely<br />

quote made us see that there was<br />

a great opportunity to make a huge<br />

difference not just in Singapore but<br />

globally. And taking that international<br />

focus is so important.<br />

Many people ask, “Is B1G1<br />

a charity?” but no, we are a<br />

registered society. <strong>The</strong>re’s our<br />

not-for-profit side, as well as the<br />

operational side where all the giving<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 25

B1G1 is in a sense<br />

a customisable type<br />

of giving engine for<br />

businesses. You get to<br />

tell your clients that<br />

every time they do<br />

business with you,<br />

they made something<br />

great happen.<br />

takes place. Realising it’s natural to<br />

wonder how much of one’s actual<br />

donation reaches the end beneficiary,<br />

we set up B1G1 in such a way that<br />

fully one hundred per cent of what<br />

you give goes to the charity, with no<br />

exceptions.<br />

Could we have set up our HQ in any<br />

other country? Sure. But our choice<br />

of Singapore, with its regulatory<br />

environment and reputation for<br />

being corruption-free, really bolstered<br />

people’s confidence that they could<br />

absolutely trust what is going on<br />

with us.<br />

CP: A core piece of B1G1’s model<br />

is made up of businesses that<br />

donate to hundreds of social<br />

impact projects worldwide. What’s<br />

different about these businesses,<br />

and could every company engage<br />

in giving like this?<br />

PD: If you look at giving as a whole,<br />

and use the US as an example, there<br />

was something like US$380 billion<br />

of giving in 2014. However, diving<br />

into that number, you’ll find only<br />

5.46 per cent of that amount comes<br />

from businesses, and of that 5.46 per<br />

cent, almost all are big companies<br />

with CSR 2 departments. So where<br />

are the SMEs? Statistics from most<br />

developed nations can tell you that<br />

SMEs comprise about 70 per cent<br />

of their economy, so we identified<br />

a huge potential market there. But<br />

since these smaller companies can<br />

be so focused on their day-to-day<br />

business operations, they lack both<br />

the time and resources to engage<br />

in a sustainable pattern of giving<br />

(even if they wanted to). B1G1 thus<br />

comes in to make giving easy and<br />

accessible for them.<br />

Any type of business can engage<br />

in giving via our platform. Is there<br />

anything special about these<br />

businesses? Perhaps it is this<br />

common desire to derive deeper<br />

meaning and purpose over and above<br />

what they already do—something<br />

that the act of giving is able to give<br />

them. In our rapidly changing world,<br />

we find increasingly that people are<br />

leaving big corporations because<br />

that work cannot bring them the<br />

meaning and purpose that they seek.<br />

As a case in point, there’s Rohan,<br />

an ex-intern of B1G1. Rohan later<br />

landed the “dream job” at a large<br />

global consulting firm, and while it<br />

might seem to most that he’d “made<br />

it”, the work there did not fulfil him<br />

on a deeper level.<br />

26 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


He resigned after only three months<br />

to return to India, where he founded<br />

a social enterprise devoted to<br />

helping people get fit, and at the<br />

same time providing people in need<br />

with access to clean water.<br />

B1G1 is in a sense a customisable<br />

type of giving engine for businesses.<br />

You get to tell your clients that every<br />

time they do business with you, they<br />

make something great happen.<br />

Let’s say you’re a restaurant owner:<br />

at the end of a meal, you approach<br />

the diner and say, “We hope you<br />

enjoyed the food. We didn’t tell you<br />

at the start, but thought you’d like<br />

to know—you dining with us tonight<br />

has meant that seven children have<br />

access to life-saving water.” Imagine<br />

also the sort of multiplier effect<br />

that the joy of giving can have on<br />

that customer: who knows if that<br />

might inspire him to go on giving just<br />

because it makes him feel so good?<br />

You’ll also be amazed at how<br />

giving has the power to transform<br />

businesses. A dentist shared how<br />

it used to be such a challenge to<br />

hire and retain talent in his clinic.<br />

However, by incorporating giving<br />

as part of the company ethos and<br />

bringing up their involvement<br />

with B1G1 during the recruitment<br />

process, he saw increased<br />

enthusiasm from candidates who<br />

wanted to be part of an enterprise<br />

with a giving spirit.<br />

EL: What’s your giving philosophy<br />

and how do you deal with<br />

scepticism?<br />

PD: Scepticism comes from<br />

wondering where the money goes,<br />

and thus we make every effort to be<br />

transparent to our businesses by<br />

enabling them to track where their<br />

money goes. When people say giving<br />

feels good, it’s not so much quantified<br />

by how much they gave, but that<br />

impact it created. For example: it’s<br />

less about “I just gave $10 or $50”,<br />

and more about “I just gave 10 kids<br />

access to clean water.”<br />

I think so often people still see giving<br />

as conditional, i.e. when you do X,<br />

I will do Y. But I believe true and<br />

Masami Sato, B1G1’s co-founder. Photo courtesy of B1G1.<br />

sustainable giving doesn’t work that<br />

way. <strong>The</strong> approach has to be soft,<br />

subtle, and flow naturally. If you make<br />

giving a part of who you are, rather<br />

than some kind of add on, that’s when<br />

it starts to transform. <strong>The</strong> other thing<br />

is connection. It wouldn’t be the same<br />

if the restaurant owner advertised at<br />

the front of his establishment, “Come<br />

dine with us because then so much<br />

goes to X cause”—if you do that, the<br />

giving becomes conditional.<br />

Often when we tell our businesses<br />

how we have over 800 projects, some<br />

think it’s a good idea to let their<br />

customers choose which to support.<br />

But we don’t recommend doing that:<br />

once you ask customers to choose,<br />

they think it’s all about charity, and<br />

will question what makes one<br />

particular cause more special over<br />

others, and wonder why they couldn’t<br />

just donate directly to a charitable<br />

organisation. We’re coming at it from<br />

a different angle: the businesses<br />

should instead reference the projects<br />

as an expression of gratitude—like<br />

in my earlier example of how the<br />

restaurant owner thanks his patron<br />

for dining with them because it helped<br />

give children access to water. That<br />

way, people are then more inclined to<br />

think, “Hey, that is cool, maybe I can<br />

start doing something like that too.”<br />

We also never want to guilt-trip<br />

anyone into giving because B1G1 is<br />

all about the joy of giving. If you show<br />

me pictures of emaciated children<br />

on the basis that I’m going to feel<br />

bad and then make a donation, that<br />

is simply not sustainable. <strong>The</strong> reason<br />

is that nobody likes to feel guilty! On<br />

the other hand, if you've experienced<br />

the joy of giving, wanting more of<br />

that joy fuels you to keep on giving.<br />

CP: How did you arrive at such<br />

a clear vision of what works for<br />

charity and what doesn’t?<br />

PD: [laughs] All the credit goes to<br />

Masami Sato. As co-founder of B1G1,<br />

she is one of those thinkers who will<br />

turn an obvious solution on its head<br />

and force you to approach an issue<br />

from a radically different angle.<br />

Before we met at a mentoring<br />

session I was conducting in Bali,<br />

my background was in marketing,<br />

so I was seeing most things through<br />

that lens. When Masami first shared<br />

her concept of B1G1 with me,<br />

I remarked how it was one of the<br />

best marketing ideas I’d ever heard,<br />

and she took offence at that.<br />

Her exact words were, “This is not<br />

a marketing idea. It’s about creating<br />

a world full of giving because<br />

a giving world is a better world.”<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 27

If you show me pictures of emaciated<br />

children on the basis that I’m going to feel bad<br />

and then make a donation, that is simply not<br />

sustainable. <strong>The</strong> reason is that nobody likes to feel<br />

guilty! On the other hand, if you've experienced<br />

the joy of giving, wanting more of that joy fuels<br />

you to keep on giving.<br />

At the time, she was running a<br />

company dealing with gluten-free<br />

frozen food. Even back then, every<br />

business she created was her way<br />

of finding some way to give back.<br />

I remember her placing this package<br />

of frozen food on the table in a room<br />

full of people, and its label read:<br />

“Every time you buy this nutritious<br />

food, you help us support a soup<br />

kitchen in India.” However, when<br />

someone saw that and quipped, “Oh,<br />

buy 1, give 1”, her eyes instantly lit up.<br />

A week after the seminar, she called<br />

me to say she hadn’t slept well for<br />

the past seven days because she<br />

was so moved by the idea of<br />

“buy 1, give 1”. My understanding<br />

of the phrase was something else,<br />

then: I thought it meant every time<br />

I bought something, I’d get a freebie.<br />

But she enlightened me with a few<br />

examples: each time you buy a TV,<br />

someone who cannot see gets the<br />

gift of sight; or every time you buy<br />

you a book, a tree gets planted.<br />

I was so impressed that I asked if<br />

I could be her mentor for the rest<br />

of her life. She said no, by the way<br />

[laughs]. Anyway, we arranged to<br />

meet over coffee the next day, and<br />

she showed me a movie slideshow.<br />

Against the soundtrack of John<br />

Lennon’s “Imagine”, the short film<br />

comprised phrases and images<br />

depicting the various ways in which<br />

businesses can facilitate giving.<br />

It moved me to tears, and I was<br />

entirely sold on the idea.<br />

Many years on, our team will be<br />

celebrating B1G1’s ninth birthday<br />

at the very conference room in Bali<br />

where Masami first conceived the<br />

idea of “buy 1, give 1”.<br />

CP: That’s such an amazing story.<br />

What are some obstacles B1G1 has<br />

had to overcome to get to where<br />

it is today, and what are some of<br />

your immediate future plans?<br />

PD: B1G1 was such a simple idea<br />

at the time. However, its execution<br />

hasn’t been quite so straightforward.<br />

How do you select the projects<br />

and ensure the money reaches the<br />

beneficiary? How do you build a<br />

business model that allows B1G1<br />

to be sustainable? It took us three<br />

years to figure it out, and to date,<br />

we’re still refining our processes.<br />

We’ve just hit the 81 million giving<br />

impacts milestone, and our goal<br />

is to reach 1 billion by 2020. To<br />

achieve that, we’ll need to bring<br />

more businesses onboard. We’ve<br />

invested a fair bit in technology<br />

that enables us to track every cent<br />

that the companies are giving; for<br />

instance, we have a tracking map<br />

that updates the number of giving<br />

transactions in real time, and we<br />

provide special banners and widgets<br />

that businesses can upload to their<br />

websites, showing how their giving<br />

impacts the beneficiaries. Of course,<br />

all this technology comes at a cost,<br />

so businesses have to pay an annual<br />

membership fee: a typical SME pays<br />

something like US$340 a year—<br />

a very affordable sum that helps<br />

offset our operational costs.<br />

EL: Some people feel emotionally<br />

disconnected from social causes<br />

because they’ve never personally<br />

experienced poverty or hardship.<br />

Is it possible to be a social<br />

entrepreneur or changemaker<br />

without empathy?<br />

PD: Let’s just suppose the opposite<br />

of empathy is “only thinking about<br />

yourself”. If you’re only thinking about<br />

you, and join B1G1 with the sole<br />

motive to attract more customers,<br />

it’s never going to work out. So the<br />

answer is no. I think empathy is<br />

only born out of experience, and not<br />

something that can be taught.<br />

To help the businesses really<br />

emotionally connect with the various<br />

causes, we bring them on yearly<br />

study tours, where we visit existing<br />

and would-be projects. On this one<br />

trip, we went to an Indian village<br />

where the rural kids were given<br />

e-learning tools. One of our business<br />

members, Roger, had been reluctant<br />

to come along, as he would’ve<br />

preferred to spend the holidays<br />

back home boating with his mates.<br />

But he grudgingly made the trip at<br />

the request of his wife. However,<br />

by the end of the tour, there was a<br />

noticeable change in him.<br />

At dinner on the final day of the trip,<br />

Roger came up to do a sharing.<br />

28 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


Speaking against the background of<br />

a beautiful photo of him and a tribal<br />

elder, he said, in between tears,<br />

“I was talking to this guy and we<br />

couldn’t understand each other, but<br />

whilst I was standing there, I realised<br />

that I was him, and he was me.”<br />

This incident reminded me of what<br />

Brené Brown said at her famous<br />

2010 TED talk on vulnerability:<br />

“Connection is why we’re here. It’s<br />

what gives meaning and purpose to<br />

our lives.”<br />

EL: Let’s talk about your own<br />

life-changing encounter with the<br />

Indian pastor. How did this event<br />

influence how your life and career<br />

played out subsequently?<br />

PD: I was on a trip to Bangalore,<br />

shortly after selling off all my<br />

businesses and buying an 18thcentury<br />

farmhouse in France.<br />

One night, I went to dinner with<br />

a friend, who introduced me to<br />

Pastor Selva. But when I innocently<br />

asked what brought him here,<br />

I had no idea how his answer would<br />

forever change my life.<br />

Pastor Selva, who<br />

had a profound<br />

impact on Paul’s life<br />

and desire to give.<br />

He told me how, two years ago,<br />

while teaching at a Sunday school<br />

on an island off the coast of India,<br />

he heard an incredible noise.<br />

He rushed out to see a wall of water<br />

rushing towards them, about to<br />

engulf them all. Thinking quickly<br />

on his feet, he said to the 12 kids,<br />

“We’re going to play a game. Let’s<br />

hold hands and run to high ground.”<br />

Thankfully, they managed to escape<br />

to safety, but had to watch their<br />

beloved church and the kids’ parents<br />

being swept away by the tsunami.<br />

Following that, it took them four<br />

weeks to get off the island, and<br />

16 months on, Pastor Selva had<br />

been travelling around India with<br />

these 12 children in search of a<br />

place to live and a school for them to<br />

attend. He told me they’d just found<br />

a place to stay but not yet a school<br />

for the kids because they couldn’t<br />

afford the insurance, uniforms and<br />

books. Without hesitation, I helped<br />

pay the US$3,500 needed.<br />

<strong>The</strong>n, about five weeks later, he<br />

emailed me several photos featuring<br />

their house and the children—but<br />

next came the shot that changes it<br />

all. It’s a close-up of the house, and<br />

at the top of it, written in great<br />

big letters is: “Paul Dunn Home”.<br />

I guess you could say I had a<br />

“Roger” moment.<br />

Up until then, what had driven me<br />

in business was: (i) how do I add<br />

honest value to you as a customer;<br />

and (ii) how do I have fun doing<br />

that? But at that precise moment,<br />

I realised I was connected with<br />

these people forever. You know how<br />

people become products of their<br />

ecosystem? Through my experience,<br />

I became part of what was to be<br />

B1G1’s ecosystem.<br />

CP: Speaking of ecosystems,<br />

how do you think the social change<br />

ecosystem is evolving?<br />

PD: Change is happening at a level<br />

and speed we cannot comprehend—<br />

did you know that every second,<br />

there are something like 6,000<br />

tweets, 2,000 Skype calls, and 55,000<br />

Google searches taking place? 3<br />

<strong>The</strong>re are more people who stayed<br />

at Airbnb last night than at the<br />

Marriott and Ritz Carlton combined,<br />

and yesterday in New York City, more<br />

people have taken Uber instead of<br />

yellow cabs. Yet at the same time,<br />

whilst living in such an environment,<br />

people are also wondering about<br />

“meaning and purpose”.<br />

So I very much do think that we’re<br />

going to see a world where people<br />

will find innovative ways to bring<br />

about social change. Think about it:<br />

not too long ago, using credit cards<br />

to make donations was unheard<br />

of, but now we even have what you<br />

call micro-donations, whereby your<br />

donations can be reflected as part of<br />

your phone bill.<br />

<strong>The</strong> model of “giving” will also likely<br />

become more democratised. When<br />

B1G1 first started, 100 per cent of<br />

donations would reach beneficiaries,<br />

but with an asterisk: bank charges<br />

applied. We’ve since done away with<br />

that (bank charges are now offset by<br />

businesses’ membership fees), and<br />

we can confidently say that, with no<br />

asterisk, everything you give gets<br />

channelled to a project.<br />

Going forward, I also believe we’ll see<br />

more realism in the corporate giving<br />

space. Currently, companies’ CSR<br />

departments still issue guidelines<br />

that make giving a sort of KPI to be<br />

met. But who’s to say if, sometime<br />

in the near future, a global bank<br />

wouldn’t approach B1G1 because<br />

they wanted to connect with our<br />

SMEs, and as a result get onboard<br />

with giving on a larger scale?<br />

A few years ago, some local<br />

university students researching<br />

social innovation in Singapore<br />

interviewed me, and they asked,<br />

“Should the government make<br />

it easier and offer incentives for<br />

people to create social innovation<br />

projects?” To which I replied,<br />

“I understand why you’re asking<br />

this, but I don’t think in five to ten<br />

years it’d be a relevant question,<br />

because all businesses will be<br />

social enterprises by then.”<br />

My observation is that corporate<br />

philanthropy will make a very<br />

significant shift away from<br />

government involvement to business<br />

responsibility. I get that it would be<br />

nice to receive financial support<br />

from the government, but it’s more<br />

important to think about how to<br />

make a business sustainable, with<br />

an added social giveback, rather<br />

than to be entirely dependent on<br />

external funding.<br />

Increasingly, businesses will also<br />

recognise that social responsibility<br />

is an important part of their ethos<br />

that will positively impact the lives<br />

of others as well as on their own<br />

businesses—and find that this is<br />

what customers, employees and<br />

suppliers expect of them.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 29


EL: <strong>The</strong>re was an SSIR article 4<br />

discussing how teams with more<br />

women on them are more creative<br />

and innovative. What are your<br />

thoughts on the role that women<br />

can play in social change?<br />

PD: I am so glad you asked that<br />

question: I am just in awe of women.<br />

How do you do all that you do and be<br />

all that you are? Most men will tell<br />

you their wives are way more intuitive<br />

than they are. As author Bernadette<br />

Jiwa says in her book, Meaningful:<br />

<strong>The</strong> Story of Ideas That Fly: “<strong>The</strong> best<br />

products and services in the world<br />

don’t simply invite people to say ‘this<br />

is awesome’; they remind people how<br />

great they themselves are.” I’m not so<br />

sure if a man could’ve expressed this<br />

fact quite as masterfully as she did.<br />

Frequently in my mentoring sessions<br />

with entrepreneurs, I get them to<br />

complete this sentence: “I get up<br />

every morning to …”<br />

<strong>The</strong> men would typically say:<br />

“I get up every morning to find<br />

innovative ways to improve my<br />

business” or something general<br />

and straightforward, rarely involving<br />

children. However, the women<br />

frequently say something to the<br />

effect of: “I get up every morning to<br />

be a great example to my children<br />

so that they in turn can inspire those<br />

kids they meet, and together we can<br />

make a dent in the universe.” <strong>The</strong>y<br />

really get it: that if I’m thinking only<br />

about myself, my circle is inherently<br />

small; but if I’m thinking of others,<br />

it becomes inherently bigger and as<br />

a result, I can meet people I need to<br />

meet to create a more giving world.<br />

Notes<br />

Bottom line is, giving requires you to<br />

be empathetic and to understand that<br />

we are all connected; that the smallest<br />

action from me can create the largest<br />

ripple for you. And women have<br />

such a natural capacity for empathy<br />

that makes them so well placed<br />

to effect social change. Masami’s<br />

a great example of someone who<br />

understands the power of tiny stuff to<br />

have huge impacts.<br />

EL: Speaking of whom, has Masami<br />

since consented to letting you<br />

mentor her for the rest of her life?<br />

PD: Since you asked: about exactly<br />

two years ago, after returning from<br />

a trip, I knocked on her door, fell on<br />

one knee and said, “You know how<br />

I wanted to be your mentor for the<br />

rest of your life and you said no?<br />

Well how about this: can I instead<br />

be your husband?”<br />

EL: I knew it! I saw that coming!<br />

That’s incredible.<br />

CP: Wow, I sure didn’t!<br />

Congratulations on your<br />

anniversary!<br />

PD: [laughs] Thank you so much.<br />

EL: One final question: what are<br />

some misconceptions about giving<br />

that you’d like to debunk?<br />

PD: In 2014, billionaire James<br />

Packer started a $200 million<br />

philanthropic fund to support<br />

arts and indigenous education in<br />

Australia. Now when somebody<br />

reads a news report like that,<br />

they might think, “Oh when I get<br />

200 million dollars, or become<br />

‘successful’, then I’ll start giving<br />

1<br />

http://eresources.nlb.gov.sg/infopedia/articles/SIP_2013-07-01_120748.html<br />

2<br />

“Corporate social responsibility, often abbreviated ‘CSR,’ is a corporation’s initiatives to<br />

assess and take responsibility for the company's effects on environmental and social<br />

wellbeing. <strong>The</strong> term generally applies to efforts that go beyond what may be required by<br />

regulators or environmental protection groups.” Definition taken from Investopedia at<br />

http://www.investopedia.com/terms/c/corp-social-responsibility.asp#ixzz4CCR0vDwN.<br />

3<br />

http://www.internetlivestats.com/one-second<br />

4<br />

http://ssir.org/articles/entry/women_and_innovation_making_the_connection<br />

back.” But hang on, giving back is<br />

not the destination but the journey.<br />

<strong>The</strong> truth is, you can give at any<br />

amount, and wherever you’re at in<br />

life. At B1G1, we’ve seen modest<br />

amounts, even one cent, make<br />

a significant difference. Our average<br />

giving is less than $100, yet it’s all<br />

these tiny $100s that have contributed<br />

to our 81 million giving impacts.<br />

So give. It literally does make<br />

an amazing difference.<br />

Eunice Rachel Low is the<br />

Editorial Consultant for the Lien<br />

Centre for <strong>Social</strong> Innovation and<br />

Deputy Editor of <strong>Social</strong> <strong>Space</strong>.<br />

She is also Adjunct Editor with<br />

the Centre for Liveable Cities<br />

at the Ministry of National<br />

Development, where she sees to the content<br />

development of urban studies publications.<br />

With 14 years of editorial experience, and<br />

a specialisation in academic and research<br />

publishing, Eunice was previously based<br />

at the National University of Singapore for<br />

seven years: as Editor at the Energy Studies<br />

Institute; and prior to that, as Editor and<br />

Head of the Journals Division at NUS Press.<br />

She was previously Team Leader (Journals<br />

Content Management) at John Wiley and<br />

Sons, and Assistant Senior Editor at Marshall<br />

Cavendish. Eunice obtained her BA (with<br />

merit) from NUS’s Faculty of Arts and <strong>Social</strong><br />

Sciences, majoring in Sociology and European<br />

Studies (French). A published author under<br />

the pen-name “Rachel Tey”, her middle-grade<br />

action adventure novel, Tea in Pajamas, was<br />

featured in <strong>The</strong> Straits Times and is into its<br />

second printing. When not busy editing, writing,<br />

or conducting book readings, Eunice enjoys<br />

classical music and medieval European history.<br />

Connect with her at eunicelow@smu.edu.sg<br />

Christian Petroske is an<br />

Assistant Manager at the<br />

Lien Centre for <strong>Social</strong><br />

Innovation. He drives forward<br />

a diverse range of projects,<br />

including the Centre’s research,<br />

capacity-building, partnerships,<br />

events, and is Contributing Editor for its<br />

flagship publication, <strong>Social</strong> <strong>Space</strong>. Before<br />

joining the Centre, Christian helped Year Up<br />

build data-based feedback loops into its core<br />

decision-making as Sales Operations and<br />

Market Research Fellow while participating<br />

in a selective, applied management training<br />

programme through New Sector Alliance’s<br />

Residency in <strong>Social</strong> Enterprise. Christian holds<br />

a BA in Sociology with Honours from Brown<br />

University, where he chaired the state’s biggest<br />

social enterprise conference, worked with two<br />

start-ups and founded one, conducted both<br />

applied and academic research, and wrote an<br />

award-winning Honours thesis on feedback<br />

and power in social finance. He can be reached<br />

at cpetroske@smu.edu.sg<br />

30 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT



and SOCIAL<br />


in SINGAPORE<br />

By Richard Edwards and Kevin Tan<br />

Measurably Improving<br />

the Lives of People<br />

Most in Need<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 31



Two developments are transforming the social sector<br />

around the world. <strong>The</strong> first is the rise of impact<br />

investment. Today’s investors care about the good<br />

that they are doing, and philanthropies are searching<br />

for more sustainable ways to give. Second is the<br />

proliferation of data and tools to analyse it. Instead of<br />

relying on guesswork and anecdotes, it is now possible<br />

to use data to rigorously determine whether a social<br />

programme is working.<br />

Pay for Success (PFS) and <strong>Social</strong> Impact Bonds (SIBs)<br />

are an exciting tool for governments and philanthropies<br />

to combine the use of finance and data to improve<br />

outcomes for those most in need. To see why, let us<br />

start with an example of a real PFS/SIB project that is<br />

currently operating in the US.<br />

In the Commonwealth of Massachusetts, USA, youth<br />

recidivism is a problem. That is, when juvenile prisoners<br />

aged between 18 and 24 finish their sentences, a large<br />

percentage of them re-offend. Examining the top 4,000<br />

highest-risk individuals, you would find that 64 per<br />

cent return to prison within five years of their release.<br />

On average, each individual who goes back to prison<br />

costs the Commonwealth US$47,500 a year. Given that<br />

each person who returns to jail does so for 2.3 years on<br />

average, this means that the government is paying a total<br />

of US$280 million in incarceration expenses just for this<br />

group of 4,000 individuals. 1 This excludes the social cost,<br />

such as lost productive employment opportunities, and<br />

the harm to victims of crime.<br />

Given the size of the problem, a range of government<br />

and philanthropically funded programmes exist to tackle<br />

the issue, all of which are well intentioned and deliver<br />

innovative interventions. Yet, in spite of the millions of<br />

dollars spent a year on these programmes, the needle is<br />

not moving on the rate of youth recidivism.<br />

Why is this so? <strong>The</strong> core problem is that funding is not<br />

directed to the programmes that work. <strong>The</strong>re are many<br />

potential explanations for this state of affairs, but these<br />

three interrelated factors present in many social sectors<br />

worldwide are likely to have played a big role:<br />

1. Lack of outcomes data: Long-term outcomes are<br />

often not tracked, and when they are, are not shared<br />

with providers. In addition, where providers can see<br />

the outcomes of the people whom they have treated,<br />

they do not know whether those outcomes were due<br />

to their work or if some other factor had caused<br />

those outcomes. As a result, each provider can only<br />

offer anecdotes about their programme’s supposed<br />

success, and it is difficult to tell which programme<br />

really works.<br />

2. “Frozen recipe funding”: Since government and<br />

philanthropy cannot tell which programme has the<br />

best outcomes, the norm is to fund those based on<br />

some combination of inputs that resemble a recipe.<br />

Too often, these recipes are not based on current<br />

evidence—at worst, they are based on political<br />

preference, and at best, on outdated studies in very<br />

different contexts. This ends up funding providers<br />

who are focused on conforming to these “recipes”<br />

instead of incentivising new ways to improve<br />

outcomes.<br />

3. Inability to fund data infrastructure: As funders<br />

have difficulty knowing which programmes work,<br />

they spread their funding thin between many<br />

organisations, resulting in each organisation being<br />

underfunded. In addition, one common funding<br />

“recipe” is to fund organisations with the lowest level<br />

of overheads. <strong>The</strong> result is that providers find it very<br />

difficult to build capacity and invest in infrastructure<br />

to track data. In the long run, this perpetuates the<br />

cycle of not knowing what works and therefore being<br />

unable to fund what works.<br />

If this diagnosis is accurate, then the solution is to find<br />

a way to rigorously evaluate organisations and direct<br />

funding towards the ones that work. A PFS contract<br />

is one way to do this—and SIBs can circumvent some<br />

issues inherent in PFS contracting.<br />

Pay-for-Success Contracting<br />

PFS<br />

Outcomes-based contracting measurably<br />

improves the lives of people most in need<br />

by driving resources towards more effective<br />

programmes<br />

<strong>Social</strong> Impact Bond Financing<br />

SIB<br />

Financing that bridges timing gap between<br />

outcome payments and upfront capital<br />

needed to run PFS-contracted programmes<br />

32 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


<strong>The</strong> rise of impact investors and philanthropies looking<br />

to give loans has been another enabling factor in the creation<br />

of <strong>Social</strong> Impact Bonds.<br />


PFS refers to an outcomes-based contract. That is,<br />

instead of the current “cash-upfront” method by<br />

which most social service organisations are funded,<br />

a PFS contract is “cash-on-delivery”. Crucially, what<br />

is “delivered” in a PFS contract is an “outcome”—<br />

something that we really want—rather than inputs<br />

that may or may not lead to those outcomes.<br />

In Massachusetts, most providers of services tackling<br />

recidivism were being reimbursed on a cost<br />

reimbursement or per-person-served basis. With<br />

Pay-for-Success contracting, the government is now able<br />

to pay only for the number of jail days that a provider<br />

actually helps a participant avoid. To accurately calculate<br />

the impact of the programme, the government would<br />

track the results of participants over four years against<br />

a similar comparison group. Doing this kind of tracking<br />

at a reasonable cost has only become possible recently,<br />

due in large part to the increasing amounts of data,<br />

new statistical techniques and cheap computation.<br />


What then is the role of a <strong>Social</strong> Impact Bond? In short,<br />

PFS contracts create a cashflow and risk issue for service<br />

providers. “Cash-on-delivery” might be permissible for<br />

a billion-dollar organisation, but many smaller service<br />

providers cannot afford to provide services upfront in the<br />

hopes of getting repaid down the line, especially when<br />

multiple factors outside of their control can affect that<br />

repayment (e.g. policy changes, government transition,<br />

and so on). To solve these issues, third-party funders<br />

can play an important role in offering bridge financing<br />

while the results of a programme are being observed,<br />

and in absorbing some of the financial risk should the<br />

programme not work.<br />

In Massachusetts, Third Sector Capital Partners, Inc.<br />

raised US$16 million from a variety of third-party<br />

funders to help an especially promising service provider<br />

called Roca expand its services. Roca has 20 years<br />

of experience providing intensive services for very<br />

high-risk youth. <strong>The</strong> terms of the project were this:<br />

for each day in jail avoided amongst individuals in the<br />

project’s treatment group versus those in a comparison<br />

group, the Commonwealth would make success<br />

Roca has 20 years of<br />

experience providing<br />

intensive services for<br />

very high-risk youth<br />

payments to repay third-party funders. If Roca hit its<br />

targets to reduce recidivism, funders would get their<br />

money back plus a small return. Funders included the<br />

impact investing arms of commercial banks such as<br />

Goldman Sachs, philanthropic aggregators such as<br />

Living Cities, and national foundations that wanted their<br />

grants returned should the programme succeed. Thus,<br />

the rise of impact investors and philanthropies looking<br />

to offer loans has been another enabling factor in the<br />

creation of <strong>Social</strong> Impact Bonds.<br />

Let us pause for a second to take stock of what happens<br />

as a result of the PFS/SIB structure. In the short run,<br />

programming improves because service providers are<br />

given the freedom to innovate. If the programmes work,<br />

funders get repaid, and can direct their capital towards<br />

another high-performing intervention, functioning like<br />

a catalyst. This means that in the long run, the nozzle of<br />

government and philanthropic funding will be focused<br />

on the highest performing organisations, allowing them<br />

to scale. With incentives and capital aligned to drive<br />

performance, we should expect greatly improved services<br />

for those in need.<br />

Now that we have described the overall principle of<br />

PFS/SIBs, we will examine how a they actually function in<br />

more detail.<br />


One useful analogy to describe PFS/SIBs is a “line dance”.<br />

<strong>The</strong> main dancers are: 1) an outcomes payer who<br />

decides what outcomes to pay for; 2) a set of private<br />

funders who provide upfront financing; 3) a service<br />

provider who uses the upfront financing to deliver services;<br />

and 4) an evaluator who measures results. This is how<br />

the dance looks step by step:<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 33

Pay for Success Mechanics<br />

STEP<br />

1<br />

Government identifies a critical social<br />

issue with historically poor outcomes such as<br />

recidivism, chronic homelessness, or early<br />

childhood education.<br />

STEP<br />

2<br />

STEP<br />

3<br />

STEP<br />

4<br />

Private Funders such as foundations,<br />

banks, and businesses, provide upfront capital<br />

to a high-performing social service provider that<br />

is helping a specific, at-risk target population.<br />

SERVICE PROVIDERS deliver services to<br />

key at-risk communities, in an effort to reach or<br />

exceed predetermined outcomes for success.<br />

Evaluator rigorously measures<br />

outcomes to ensure providers achieve impact.<br />

Project Manager<br />

At the centre of this complex<br />

dance, there is an organisation<br />

that acts as a conductor,<br />

facilitator and advisor to<br />

the overall process. This<br />

is sometimes called the<br />

Intermediary, Project Manager,<br />

or Technical Assistance<br />

Advisor (like Third Sector).<br />

STEP<br />

5<br />

Government repays private funders initial<br />

investments only if the project is successful in<br />

achieving positive outcomes.<br />

<strong>The</strong>se stakeholders are not used to dancing together.<br />

Few other initiatives require policymakers, financiers,<br />

non-profits and academics to collaborate in such close<br />

fashion. As a result, the first time the “music” comes on,<br />

there is usually confusion. Third Sector plays the role of<br />

“dance instructor”, bringing these different stakeholders<br />

together and coaching each through the moves. In due<br />

course, everyone is synchronised and moves to the same<br />

beat. While this is complex, there are good reasons to<br />

believe that PFS and SIBs are worth doing in Singapore.<br />


PFS/SIBs have been growing quickly. <strong>The</strong> first PFS/SIB<br />

was launched in the UK in 2010. By 2012, there were<br />

12 launched projects, growing to 44 worldwide by 2015. 2<br />

PFS/SIB projects are now being explored in varied<br />

jurisdictions from the US to Australia to tackle issue<br />

areas as diverse as early childhood education, healthcare<br />

and recidivism.<br />

<strong>The</strong> Singaporean context differs in important ways.<br />

For example, Singapore faces less immediate budgetary<br />

constraints than governments of other developed<br />

nations, and the Singapore government provides many<br />

2012<br />

12<br />

PFS/SIBs<br />

launched projects<br />

2015<br />

44<br />

PFS/SIBs<br />

launched projects<br />

worldwide<br />

34 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


social services in-house. However, the country’s unique<br />

status as a financial hub and its “Smart Nation” push<br />

may mean that PFS/SIBs could be particularly beneficial.<br />

Chiefly, these benefits could include:<br />

1. Accelerating development of a performance-driven<br />

social sector: <strong>The</strong>re are hundreds of social sector<br />

organisations in Singapore. <strong>The</strong> National Council<br />

of <strong>Social</strong> Service (NCSS) is the main coordinator<br />

of local Voluntary Welfare Organisations (VWOs),<br />

and had 443 VWO members in 2014. 3 PFS/SIB<br />

contracting can be used to further enable the<br />

development of these organisations to deliver<br />

long-term outcomes.<br />

2. Driving government resources to innovations that<br />

work: NCSS disbursed S$242 million to VWOs in<br />

2014. Beyond VWOs, the Singapore government also<br />

deploys millions of dollars in delivering healthcare,<br />

prisons and other socially beneficial services.<br />

By specifying outcome targets rather than inputs,<br />

PFS/SIBs can help the government steward taxpayer<br />

resources for maximum effect by directing them to<br />

the best interventions.<br />

3. Increasing impact of philanthropic dollars:<br />

Singapore’s philanthropic sector is growing in size.<br />

In 2014, individuals donated a total of S$1.25 billion<br />

to philanthropy, a 14 per cent rise from 2012. 4<br />

A SIB can help philanthropists maximise their impact<br />

in the short run by leveraging commercial capital<br />

to make a bigger impact: each philanthropic dollar<br />

committed in a SIB is often accompanied by capital<br />

from sources, such as commercial banks, that would<br />

not have invested otherwise. Furthermore, funders<br />

stand to get their capital back if the intervention<br />

succeeds. This allows for the same philanthropic<br />

funding to be deployed multiple times towards<br />

high-performing organisations.<br />

4. Building Singapore as a regional hub for non-profits<br />

and impact investment: Singapore is at the centre<br />

of an exciting growth region of the world, and SIBs<br />

could position it as a leader in the social sector and<br />

impact investing field. First, SIBs could be used<br />

to enhance the capabilities of local organisations<br />

with best practices of the social sector worldwide.<br />

Given its strong regional brand, this could eventually<br />

be another “export” area for Singapore. Second,<br />

SIBs could also jumpstart the product market<br />

for impact investments and further increase the<br />

sophistication of the philanthropic ecosystem.<br />

Third, SIBs will additionally help create demand for<br />

impact evaluation and specialised legal services—<br />

both potential growth areas in Singapore’s service<br />

industry portfolio.<br />

Ultimately, PFS/SIBs are an exciting tool to stimulate<br />

innovation and the creation of a performance-based<br />

ecosystem. <strong>The</strong> key is to find the correct area to apply<br />

this tool.<br />


PFS/SIB<br />

A successful SIB requires several key pieces to be in<br />

place: an intervention with a promising evidence base;<br />

a solid cost-benefit proposition; well-defined and<br />

measurable outcomes; funder interest; and coherence<br />

with the existing policy landscape.<br />

Cost–Benefit<br />

Proposition<br />

Alignment<br />

with Policy<br />

Priorities<br />

Intervention with<br />

Promising<br />

Evidence Base<br />

Well-Defined<br />

and Trackable<br />

Outcomes<br />

Funder<br />

Interest<br />

<strong>The</strong> process of determining whether these pieces<br />

exist to a sufficient degree in any given issue area in<br />

order to construct a SIB requires intensive diligence<br />

work over several months—what we call a “Feasibility<br />

Study”. However, it is possible to quickly filter out which<br />

interventions are non-starters and to zoom in on which<br />

issue areas are worth further investigation. In this<br />

vein, Third Sector has had ongoing conversations with<br />

Singaporean stakeholders in the government, non-profit,<br />

and funder arenas. Our research indicates that the<br />

following issue areas may be worth investigating further<br />

for a SIB.<br />

Diabetes Diagnosis and Management<br />

<strong>The</strong> NUS School of Public Health estimates that the<br />

annual cost of diabetes in Singapore was US$787 million<br />

in 2010. By 2050, this cost will increase to US$1.8 billion<br />

and there will be one million diabetics, potentially leading<br />

to an over-burdening of the healthcare system. 5 In Israel,<br />

a SIB is already underway to help individuals who are very<br />

likely to develop diabetes—“pre-diabetics”—not succumb<br />

to the disease. In Singapore, our discussions indicate<br />

that a SIB could be valuable in two related angles:<br />

diagnosing undiagnosed diabetics, and in managing the<br />

health outcomes of diagnosed diabetics. Third Sector is<br />

currently working with a promising provider in the US<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 35

2010 2050<br />

US$<br />

estimated<br />

annual cost<br />

of diabetes in<br />

787 Singapore 1.8<br />

million<br />

US$<br />

billion<br />

increased<br />

annual cost<br />

of diabetes in<br />

Singapore<br />

that helps diabetics manage their diets. <strong>The</strong> positive<br />

outcomes we hope to see from their intervention are a<br />

decrease in patients’ blood sugar levels and a reduction<br />

in emergency hospitalisation events. What would make<br />

this or a similar programme promising for a SIB in<br />

Singapore is that the outcomes are objective and can be<br />

measured in a reasonable timeframe. <strong>The</strong> intervention<br />

is also cheap relative to the high cost of hospitalisation.<br />

With the recent launch of the “War on Diabetes” and the<br />

Diabetes Prevention and Care Taskforce, this is clearly a<br />

priority issue area for the Singapore government.<br />

Exercising to Prevent Elderly Falls<br />

International trials have shown that resistance and<br />

balance training for the elderly has a significant positive<br />

effect on health outcomes, in particular a reduction in the<br />

rate of dangerous falls. A SIB would be an effective way<br />

of taking this promising intervention to scale, improving<br />

the health of the elderly, and reducing healthcare costs<br />

resulting from falls.<br />

A key advantage of this programme is the presence of<br />

a clear outcome metric (elderly falls) that can be<br />

rigorously measured and on which there is an evidence<br />

base. <strong>The</strong> prevention of elderly falls can lead to<br />

significant benefits. Elderly falls often lead to serious<br />

injury, hospitalisation, the need for a caretaker, and the<br />

cost/lost productivity related to that caretaker. <strong>The</strong> Lien<br />

Foundation is currently implementing a multi-site pilot<br />

of Gym Tonic, a specialised gym programme for seniors. 6<br />

Should this show promising results, the track record<br />

could be built upon to attract funders for a SIB.<br />

Reducing Youth Recidivism<br />

An average of 1,600 juveniles (aged between 7 and 16<br />

years) were arrested each year from 2008 to 2014. 7<br />

A SIB could deploy several proven evidence-based<br />

therapies that could break this cycle, thereby helping<br />

youth turn their lives around, reduce incarceration<br />

costs, and increase the number of productively<br />

employed members of society. While local service<br />

delivery organisations may not be currently delivering<br />

these evidence-based therapies (e.g. Moral Reconation<br />

<strong>The</strong>rapy), training and certification to do so can be<br />

obtained for a reasonable cost abroad. A SIB could<br />

hence be a capacity-building opportunity for local<br />

organisations.<br />

Many jurisdictions have started with SIBs targeting<br />

recidivism (e.g. Massachusetts in the US). This is because<br />

involving recidivism is extremely high (involving the police,<br />

courts, jail, lost productivity, harm to victims), and the<br />

effects of a successful programme can be measured in<br />

a very short timeframe.<br />

Helping Abused Children and Youth Graduate from<br />

the Residential Care System<br />

<strong>The</strong>re are presently 22 Children and Young Persons<br />

Homes providing residential care programmes for<br />

children and youth in Singapore who suffer from family<br />

violence, abuse or neglect. 8 A SIB could help these<br />

abused children and youth graduate from the residential<br />

care system by providing them with foster homes.<br />

It could even help these children leave the foster system<br />

altogether by providing the necessary services to<br />

reunite them with their families.<br />

In Cuyahoha County, Ohio, USA, Third Sector is<br />

implementing a SIB that reunites children in foster care<br />

with their mothers. <strong>The</strong> programme concentrates on<br />

stabilising the family’s home environment using<br />

a mixture of trauma reduction therapy and transition<br />

therapy, with the aim to significantly reduce the number<br />

of days a child spends away from his or her family.<br />

Research has shown that this leads to better outcomes<br />

for the child, and it also helps the government free up<br />

scarce foster care slots for other children who may be<br />

unable to reunite with their families.<br />

Helping to Improve the Skills of the Unemployed/<br />

Underemployed<br />

Skills are a big concern of the Singapore government,<br />

with the Committee on the Future Economy underway.<br />

A SIB could help spur innovation in the types of<br />

programmes, and direct government funding towards<br />

the best programmes.<br />

36 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


What is most intriguing about this particular area is<br />

the ability to help funding—that was already going to be<br />

spent—be deployed for the greatest possible impact.<br />

In the US, Third Sector is helping the federal government<br />

conduct five different Feasibility Studies to better direct<br />

existing spending on their US$870 million per year youth<br />

workforce programming. 9 A Singapore SIB in this area<br />

could focus on a different age group if more appropriate.<br />

This list is by no means exhaustive. Many areas where<br />

significant social benefits can be captured might be<br />

amenable to a SIB: the US has looked at providing<br />

pre-natal care; Israel is looking into SIBs to<br />

tackle highly unique areas such as ultra-orthodox<br />

employment; and some African countries are looking<br />

at malaria. <strong>The</strong> key is to conduct a rigorous study to<br />

ensure that the success factors for a SIB are in place<br />

before constructing a project.<br />

FAQs<br />

Q: Are Pay For Success and <strong>Social</strong> Impact Bonds<br />

only useful for non-profits?<br />

A: PFS contracting is beneficial not just for<br />

non-profits, but also for for-profits and<br />

social enterprises. Third Sector has advised<br />

smaller social enterprises and billion-dollar<br />

internationally listed corporations on how to<br />

utilise Pay For Success contracting to scale.<br />

Q: Is Pay for Success only about cost savings?<br />

A: Pay for Success is ultimately about improving<br />

performance and directing resources towards<br />

programmes that work. Some governments are<br />

indeed looking to fund preventative programmes<br />

so as to save money on emergency services<br />

down the line. However, Pay for Success is also<br />

a useful tool for governments who want to<br />

spend money they were already going to spend<br />

better, even if no cost savings result.<br />

Q: Are governments the only ones able to initiate<br />

a Pay-for-Success project?<br />

A: No. Any party willing to pay for outcomes can<br />

initiate a PFS project. In our experience, we<br />

have seen PFS projects initiated by private<br />

philanthropies, hospitals and insurers, and<br />

multinational institutions.<br />


SIBs are a promising means to the end of outcomesoriented<br />

service contracting. In our experience, there are<br />

several challenges that stakeholders must tackle when<br />

creating a SIB.<br />

SIBs Are Complex<br />

A SIB has many moving parts, and requires the<br />

cooperation of a range of stakeholders from very<br />

different fields. Project stakeholders must understand<br />

risks such as operations, payment and referrals.<br />

However, as more projects are implemented, we are<br />

seeing more opportunities for “templatisation” around<br />

common issue areas, as well as a shortening of project<br />

development timing as project parties become more<br />

sophisticated.<br />

At Third Sector, our first project (Commonwealth of<br />

Massachusetts) took three years to turn from idea to<br />

reality. We consciously created a learning community<br />

around this major Pay-for-Success project and ensured<br />

that all project parties shared lessons learned. We<br />

have managed to reduce that time with each one of<br />

our projects since, through a combination of prior<br />

experience, tight project management, and simplifying<br />

the essential components of a SIB.<br />

Transaction Costs Are High<br />

<strong>The</strong> SIB mechanism can require a substantial amount<br />

of ancillary expertise. An intermediary is needed to put<br />

the project together: a lawyer to draft the contracts;<br />

an independent evaluator to measure the results; and<br />

a programme manager to ensure that the project is on<br />

track. <strong>The</strong>se add costs beyond those of service delivery.<br />

<strong>The</strong> key question that the outcomes funder should ask<br />

is whether these additional transaction costs are worth<br />

the benefits—in the short run of only spending money<br />

if the programme works; and in the long run to create<br />

a performance-driven ecosystem. In most cases, the<br />

answer is yes. After one catalyst SIB project imbeds<br />

valuable knowledge and process, governments are able<br />

to continue outcomes-oriented innovation without the<br />

need for the SIB architecture.<br />

Third Sector has put together full projects much smaller<br />

than Massachusetts, of about a US$4–5 million upfront<br />

raise size. Elsewhere in the world, upfront raises of<br />

"pilot SIBs" have been even smaller: in Canada, a SIB<br />

was launched with US$900,000; US$320,000 in Belgium;<br />

and US$150,000 in Portugal.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 37

<strong>The</strong> Need for a Committed Champion<br />

SIBs can represent a profound change from business<br />

as usual. Many SIBs also face a “wrong-pocket<br />

problem”—that is, benefits accrue across many different<br />

government agencies or other parties, resulting in no<br />

single party being willing to sponsor a SIB. In the many<br />

jurisdictions where we have worked, the number one<br />

differentiator between a successful and unsuccessful SIB<br />

is the presence of a forward-thinking champion who can<br />

unify the success payers and drive the project forward.<br />

<strong>The</strong> internal skill of working across departments, thinking<br />

early about the need for resources, research and funding<br />

are critical for a champion.<br />

Given these challenges, one should always honestly ask<br />

if the use of SIBs in financing is necessary to achieve PFS<br />

contracting. SIBs are not always the right choice for<br />

a jurisdiction. <strong>The</strong> distinction between a Pay-for-Success<br />

contract and the type of upfront financing used to achieve<br />

it is critical—it is possible to have a PFS contract without<br />

a SIB.<br />


Having spent some time delving into SIBs, let us regoup<br />

and remember the objective of PFS contracting and of<br />

SIB financing. <strong>The</strong> end goal of PFS is to direct resources<br />

towards what works for those in need. SIBs are one way<br />

to enable PFS contracting by overcoming cashflow and<br />

risk issues for the service provider. But it is not the only<br />

way. <strong>The</strong>re is yet other example of an innovative financing<br />

mechanism, which can help achieve the goals of PFS.<br />

PFS contracting generates cashflow and risk issues<br />

for the service provider if the payer withholds payment<br />

until outcomes are seen. From a payer’s perspective, the<br />

advantage of withholding payment is twofold: first, it only<br />

spends money if the programme works; and second, it can<br />

reap the benefits of the programme now while only paying<br />

later. In short, it is similar to a two-in-one package of a<br />

“money-back guarantee” and a “layaway” plan.<br />

However, not all governments need the two-in-one<br />

package. For payers who would like to have<br />

a money-back guarantee but who do not need the<br />

layaway plan, a <strong>Social</strong> Impact Guarantee (SIG)<br />

may be more suitable than a SIB.<br />

<strong>The</strong> distinction between<br />

a Pay-for-Success contract and<br />

the type of upfront financing<br />

used to achieve it is critical—it is<br />

possible to have a PFS contract<br />

without a SIB.<br />


Here’s an overview of how a SIG works:<br />

• <strong>The</strong> government/philanthropic payer funds a given<br />

social programme upfront, just like it currently does<br />

• At the same time, it purchases a “money-back<br />

guarantee” insurance policy from willing insurers<br />

• <strong>The</strong> programme is delivered and its outcomes are<br />

evaluated<br />

• If the programme is successful, no payout occurs from<br />

insurers to the government/philanthropy<br />

• If the programme is unsuccessful, however, insurers<br />

repay the government/philanthropy for the cost of<br />

services<br />

• At the end of the day, the government/philanthropy<br />

will have only paid out if a programme works, thus<br />

accomplishing the aim of PFS contracting<br />

<strong>The</strong> great advantage of the SIG is that it can be<br />

easily applied to existing spending. A government or<br />

philanthropy can take out this kind of “money-back<br />

guarantee” on any of its current spending. Third Sector<br />

is currently working to implement SIGs in several<br />

jurisdictions in the US. 10<br />

<strong>The</strong>re are many other ways to achieve the goals of PFS, but<br />

an initial study is important to help figure out whether<br />

a SIB, SIG, or some other tool works best in each<br />

particular context. <strong>The</strong>re is much innovation left to do in<br />

this area that can help address the pressing problems<br />

of those in need.<br />


Taking PFS from idea to launch requires commitment<br />

from multiple stakeholders and considerable process<br />

expertise. Our initial exploration has led us to believe<br />

that many critical ingredients for a SIB in Singapore<br />

are already in place. Two concrete “next steps” are<br />

needed to bring this exciting innovation to fruition<br />

in Singapore.<br />

38 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


Commission a PFS Feasibility Study<br />

To launch a PFS project, it is necessary to find a capable<br />

service provider, define outcomes, build data systems<br />

and structure upfront finances. We have seen in other<br />

jurisdictions that a PFS Feasibility Study can be an<br />

important jumpstart in refining how a PFS project<br />

should be executed, and in bringing the right parties<br />

to the table. We often find the process of doing this<br />

study helpful in and of itself, whether or not it leads to<br />

a project—ultimately, outcome payers, investors and<br />

service providers learn to coordinate the outcomes they<br />

are trying to achieve, gain a better understanding of the<br />

population they are trying to serve, and learn more about<br />

best practices in delivering services.<br />

Sponsor Successful Outcomes in a PFS Project<br />

Both the government and private philanthropy can play<br />

the role of outcome payer for a PFS project. By only<br />

paying for successful outcomes, sponsoring a PFS<br />

project allows for every dollar to achieve a clear “bangfor-buck”<br />

in impact and innovation. Our experience has<br />

taught us that identifying a committed and innovative<br />

outcomes sponsor is indispensable for project success.<br />

Private philanthropy can take the lead in sponsoring<br />

a pilot PFS project to convince the government that this<br />

type of innovative structure is feasible. For example, in<br />

the State of Utah, USA, a group of private philanthropic<br />

donors promised to pay for the outcomes of one year<br />

of a PFS project for a high-quality kindergarten. <strong>The</strong><br />

government subsequently sponsored three more years.<br />

Third Sector Capital Partners<br />

Third Sector leads governments, high-performing<br />

non-profits, and private funders in building evidencebased<br />

initiatives that address society’s most persistent<br />

challenges. As experts in innovative public–private<br />

contracting and financing strategies, Third Sector is<br />

an architect and builder of the United States’ most<br />

promising Pay-for-Success projects, including those in<br />

Commonwealth of Massachusetts, Cuyahoga County,<br />

Ohio, and Santa Clara County, California. <strong>The</strong>se projects<br />

are rewriting the book on how governments contract<br />

for social services: funding programmes that work to<br />

measurably improve the lives of people most in need<br />

while saving taxpayer dollars.<br />

A 501(c)(3) non-profit based in Boston, San Francisco,<br />

and Washington DC, Third Sector is supported through<br />

philanthropic and government sources, including a<br />

grant from the Corporation for National and Community<br />

Service’s <strong>Social</strong> Innovation Fund.<br />

Notes<br />

1<br />

A case study of the project with more details can be found here: “Preparing for a Pay<br />

For Success Opportunity”. http://www.thirdsectorcap.org/wp-content/uploads/2015/02/<br />

Third-Sector_Roca_Preparing-for-Pay-for-Success-in-MA1.pdf<br />

2<br />

Brookings Institute, “<strong>The</strong> Potential and Limitations of Impact Bonds”. http://www.<br />

brookings.edu/~/media/Research/Files/Reports/2015/07/social-impact-bonds-potentiallimitations/Impact-Bondsweb.pdf?la=en<br />

3<br />

National Council of <strong>Social</strong> Services, NCSS Annual Report 2014. https://www.ncss.gov.sg/NCSS/<br />

media/NCSS-Publications/NationalCouncilof<strong>Social</strong>ServiceAnnualReportFY2014(1).pdf<br />

4<br />

National Volunteer and Philanthropy Center Individual Giving Survey 2014.<br />

http://knowledge.nvpc.org.sg/individual-giving-survey-2014-2<br />

5<br />

For estimated costs of diabetics, see May Ee Png, Joanne Yoong, Thao Phuong Phan and<br />

Hwee Lin Wee, “Current and Future Economic Burden of Diabetes among Working-Age<br />

Adults in Asia: Conservative Estimates for Singapore from 2010–2050”, BMC Public<br />

Health 16, 1 (<strong>2016</strong>). doi:10.1186/s12889-016-2827-1<br />

6<br />

Gym Tonic’s website and press release contain more details of the pilot and evidence<br />

base. http://www.gymtonic.sg; http://lienfoundation.org/sites/default/files/Gym%20<br />

Tonic%20Press%20Kit%20Complete.pdf<br />

7<br />

Ministry of <strong>Social</strong> and Family Development, “Juvenile Delinquents: Juveniles<br />

Arrested”, 2015. http://app.msf.gov.sg/Research-Room/Research-Statistics/Juvenile-<br />

Delinquents-Juveniles-Arrested<br />

8<br />

Ministry of <strong>Social</strong> and Family Development, “Children and Young Persons Homes”,<br />

2014. http://app.msf.gov.sg/Policies/Strong-and-Stable-Families/Nurturing-Protectingthe-Young/Child-Protection-Welfare/Children-and-Young-Persons-Homes<br />

9<br />

Third Sector is conducting these services as part of a federal <strong>Social</strong> Innovation Fund<br />

grant. http://www.thirdsectorcap.org/sifcohort2<br />

10<br />

George Overholser, “An Alternative to the <strong>Social</strong> Impact Bond?”. http://www.<br />

thirdsectorcap.org/blog/social-impact-guarantee<br />

Richard Edwards is Partner,<br />

Capital Markets, at Third<br />

Sector. He has led project and<br />

business development efforts for<br />

investment banking, insurance<br />

brokerage and entrepreneurial<br />

businesses for over 20 years. As<br />

the former Global Head of Project <strong>Finance</strong> and<br />

Advisory for JP Morgan Chase based out of<br />

Singapore, he has extensive global experience<br />

in structuring and syndicating funding for<br />

projects in the private and public sectors.<br />

Rick has a particular passion for working on<br />

child abuse prevention. He has been President<br />

and/or board member of numerous civic<br />

organisations, including the Exchange Club<br />

Foundation, Pilgrim Towers Housing, and the<br />

Parenting Skills Center. He can be reached<br />

at redwards@thirdsectorcap.org<br />

Kevin Tan is a Singaporean<br />

based at Third Sector’s Boston<br />

office. He is the project lead<br />

for several Pay for Success<br />

strategic advisory, feasibility<br />

assessment, and project<br />

construction engagements<br />

across the US. Prior to Third Sector, he<br />

spent time working on <strong>Social</strong> Impact Bonds<br />

in Israel and did his graduate work with<br />

the National Council of <strong>Social</strong> Service<br />

on implementing <strong>Social</strong> Impact Bonds in<br />

Singapore. Kevin graduated with an MPP<br />

from the Harvard Kennedy School and<br />

from the University of Oxford with First-<br />

Class Honours in Philosophy, Politics and<br />

Economics. He can be reached at<br />

ktan@thirdsectorcap.org<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 39



IMPACT<br />





A Focus on Women’s<br />

Livelihoods<br />

By Durreen Shahnaz<br />

40 40 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


I embarked on a<br />

journey from the first<br />

steps of my career to<br />

utilise finance to do<br />

good for the world.<br />

This journey has now<br />

turned into a global<br />

movement that is<br />

taking the world<br />

by a storm, known as<br />

impact investing or<br />

social finance.<br />

It is Highly Personal<br />

I am often asked what motivated<br />

me to start IIX (Impact Investment<br />

Exchange Asia). My answer is<br />

a simple one: my life—where<br />

I came from and what I experienced.<br />

Like any other entrepreneur, the<br />

companies I created are extensions<br />

of my life’s defining experiences,<br />

and my attempt to find solutions<br />

and answers to the insurmountable<br />

problems I have witnessed. <strong>The</strong><br />

1970s and 80s for Bangladesh,<br />

my country of birth, faced an<br />

excruciating nation-building struggle<br />

mired with limited resources,<br />

national calamity, political unrest,<br />

and unending donor dependency.<br />

Throughout this time, streams of<br />

“development experts” tried to find<br />

the right path of the country, and<br />

while these efforts resulted in some<br />

much needed social outcomes, the<br />

needle of self-sufficiency hardly<br />

moved. All this translated into my<br />

very personal struggle to break the<br />

poverty cycle with new tools—tools<br />

that would bring about financial<br />

sustainability as well as meet<br />

development goals.<br />

Thus, I embarked on a journey<br />

from the first steps of my career<br />

to utilise finance to do good for<br />

the world. This journey has now<br />

turned into a global movement<br />

that is taking the world by a storm,<br />

known as impact investing or social<br />

finance. Impact investing is now<br />

taking shape in different ways in<br />

numerous countries across the<br />

globe. While different stakeholders<br />

are slowly entering the space, the<br />

question still remains: how do we<br />

mainstream impact investing and<br />

how can we scale the movement?<br />

Impact Investing:<br />

An Emerging Paradigm<br />

Impact investments are investments<br />

made into companies, organisations,<br />

and funds, with the intention to<br />

generate social and environmental<br />

impact alongside a financial return.<br />

Impact investing is therefore the<br />

manifestation of two emerging<br />

trends in the development space:<br />

an increased focus on programmes<br />

that deliver sustainable value; and<br />

a desire to support collaboration<br />

between the public and private<br />

sectors. <strong>The</strong> practice of impact<br />

investing is further defined by the<br />

following four core characteristics:<br />

• Intentionality: An investor’s<br />

intention to have a positive social<br />

or environmental impact through<br />

investments is essential to<br />

impact investing.<br />

• Investments with return<br />

expectation: Impact investments<br />

are expected to generate<br />

a financial return on capital or at<br />

a minimum, a return of capital.<br />

• Range of return expectation<br />

and asset classes: Impact<br />

investments target financial<br />

returns that range from belowmarket<br />

to risk-adjusted market<br />

rates, and can be made across<br />

asset classes, including but<br />

not limited to cash equivalents,<br />

fixed income, venture capital and<br />

private equity.<br />

• Impact measurement:<br />

A hallmark of impact investing<br />

is the commitment to measure<br />

and report the social and<br />

environmental performance of<br />

underlying investments, which<br />

ensures accountability.<br />

While impact investing aims to<br />

mobilise the supply of missionoriented<br />

capital, it is equally<br />

important to develop the demand<br />

side of the equation. <strong>The</strong> recipients<br />

of impact investments are referred<br />

to as Impact Enterprises (IEs),<br />

and these are classified either as<br />

mission-driven for-profits (such<br />

as high-impact Small Medium<br />

Enterprises or <strong>Social</strong> Enterprises)<br />

or revenue-generating non-profits<br />

(such as NGOs that are financially<br />

sustainable). While traditional<br />

development approaches alleviate<br />

symptoms of social issues, IEs<br />

diagnose the issue and create<br />

paths to address the root causes<br />

of these problems. <strong>The</strong> growing<br />

impact investment market provides<br />

capital to IEs operating in highimpact<br />

sectors such as sustainable<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 41

agriculture, clean technology,<br />

microfinance, and affordable and<br />

accessible basic services including<br />

housing, healthcare, energy, water,<br />

and education.<br />

However, as the impact investment<br />

movement consolidates, several key<br />

issues have emerged. <strong>The</strong>se include:<br />

scalability of enterprises, the ability of<br />

the industry to mobilise large-scale<br />

capital, and the need to have<br />

a mechanism to provide liquidity to<br />

the impact investors. Thus, along with<br />

the growth of the supply and demand<br />

of the capital, it is now time to push<br />

on innovative financing to embrace<br />

scale and innovation. Without<br />

embracing these two essential<br />

elements, it will be impossible to<br />

have effectively working social capital<br />

markets that can truly democratise<br />

capital markets. Figure 1 below<br />

demonstrates the effective supply<br />

and demand of impact investing<br />

capital that remains a key balance<br />

for sustainable growth in the impact<br />

investing space.<br />

Asia’s Growth Irony<br />

Over the last five decades, Asia has<br />

enjoyed one of the highest economic<br />

growth records in the world, despite<br />

a multitude of political challenges<br />

and economic shocks. With the<br />

support of global organisations such<br />

as the United Nations (UN), Asia has<br />

led the world in its drive to achieve<br />

the Millennium Development Goals<br />

(MDG): the proportion of people<br />

living on less than US$1.25 per day<br />

is projected to have fallen from<br />

53 per cent in 1990 to 12 per cent<br />

at the end of the 2015.<br />

Figure 1 Supply and Demand of Impact Investment Capital<br />

Level of Demand Developed to Create Demonstrable Impact<br />


• IEs able to scale impact using technology<br />

(via Competition and Accelerator);<br />

• SMEs equipped to achieve double bottom line<br />

(via Impact Magnifier)<br />


• IEs are more investment ready and<br />

can create sustainable impact (via Revolving<br />

Credit Facility and Accelerator)<br />


• NGOs are less dependent on grants<br />

(via financial sustainability program)<br />

• IEs deepen impact (via incubator<br />

and M&E tool)<br />

Short-Term:<br />

Early Stage<br />

Level of Supply of Mission-Oriented Capital Mobilised<br />

Source: IIX Advisory work.<br />


• Private capital funds<br />

upfront cost of resilience<br />

(via Humanity Bond)<br />

• Increased liquidity<br />

(via Outcomes Fund)<br />

Medium-Term:<br />

Growth Stage<br />


• Malaysia considered<br />

attractive impact<br />

investment destination<br />

(via <strong>Social</strong> Investment<br />

Tax Rebate)<br />

Long-Term:<br />

Maturity<br />


• Capital markets are<br />

democratised and<br />

impact investors enjoy<br />

increased liquidity<br />

(via social stock<br />

exchange)<br />

42 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


<strong>The</strong> proportion of people<br />

IN ASIA living on less than<br />

US$1.25 per day<br />

1990<br />

53<br />

%<br />

end 2015<br />

12<br />

%<br />

However, there is still much to<br />

do to maintain the momentum<br />

for the post-2015 era. Asia is at a<br />

crossroads with many of the MDG<br />

targets still unmet. Rising inequality<br />

poses a dire threat to continued<br />

prosperity in the region, where an<br />

estimated 500 million people remain<br />

trapped in extreme poverty, most<br />

of whom comprise women and<br />

girls. <strong>The</strong> huge gap between the<br />

rich and the poor hinders holistic<br />

growth, undermines democratic<br />

institutions, and magnifies the risk<br />

of conflict—making these not just<br />

social problems, but also significant<br />

economic and political concerns.<br />

In the global context, the world has<br />

entered the age of the Anthropocene,<br />

in which the consumption of natural<br />

resources is on an unsustainable<br />

trajectory, climate change is<br />

creating irreversible damage to the<br />

environment, and the future of our<br />

planet and humanity as a whole is in<br />

question.<br />

Traditional development players<br />

(governments, donor agencies,<br />

foundations, INGOs, among others)<br />

continue to face a funding gap,<br />

with many endemic social and<br />

environmental issues competing<br />

for a limited pool of resources.<br />

It is thus imperative to mobilise<br />

new resources that can achieve<br />

scalable and sustainable impact,<br />

and address large-scale, persistent,<br />

and emerging social and<br />

environmental problems that are<br />

straining the economy. Without<br />

creating capital markets that<br />

allow for the convergence of social<br />

progress and economic growth,<br />

Asia's ability to achieve the new<br />

Sustainable Development Goals<br />

(SDG) targets will be compromised.<br />

This mandates a need to redefine<br />

Asia’s current development<br />

narrative and rethink the way the<br />

region leverages the power of<br />

finance to generate holistic value.<br />

Impact Investment Exchange<br />

Asia: REGIONAL Market Leader<br />

Impact Investment Exchange Asia<br />

(IIX) has been at the forefront of<br />

the impact investing movement<br />

in Asia—to date impacting the<br />

lives of over 10 million people<br />

across Asia by bridging the gap<br />

between development and finance.<br />

As the regional market leader, IIX<br />

has created a robust ecosystem<br />

to effectively mobilise supply of<br />

mission-oriented capital, develop<br />

demand to absorb and deploy<br />

the capital, and bridge the gap<br />

between the two. At present, IIX is<br />

facilitating over US$40 million in<br />

impact investing capital, and has<br />

developed a network of over 30,000<br />

ecosystem partners, including the<br />

UN, to support the eradication of<br />

poverty and create resilient nations.<br />

In addition, leveraging its expertise in<br />

innovative finance, IIX has developed<br />

a new financial product that seeks<br />

to close the current gap between<br />

development and finance: the IIX<br />

Sustainability Bond (ISB).<br />

IIX Sustainability Bonds:<br />

An Overview<br />

IIX Sustainability Bonds (ISBs) are<br />

innovative financial instruments<br />

that effectively mobilise largescale<br />

private-sector capital by<br />

pooling together a basket of Impact<br />

Enterprises (IEs), which include<br />

revenue-generating non-profits<br />

or mission driven for-profits and<br />

Microfinance Institutions (MFIs).<br />

Both IEs and MFIs are key drivers<br />

of change owing to their ability<br />

to create scalable impact in a<br />

financially sustainable manner.<br />

ISBs are debt securities that bring<br />

together this group of underlying<br />

borrowers (IEs and MFIs), depending<br />

on their financial needs, repayment<br />

abilities, risk profiles, and impact<br />

potential. ISBs are replicable<br />

instruments that can be structured<br />

and issued around different<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 43

themes—depending on the target<br />

beneficiary (low-income women,<br />

at-risk youth, among others)—<br />

or sectors (livelihoods, energy,<br />

education, among others).<br />

Figure 2 Structure of THE Women’s Livelihood Bond<br />

Key Objectives of<br />

IIX Sustainability Bonds<br />

• Availability of mission-oriented<br />

capital: To open the floodgates<br />

of mission-oriented investment<br />

capital available to high-impact<br />

organisations that are equipped<br />

to create sustainable impact.<br />

3<br />

1<br />

$$$<br />

Impact<br />

Investors<br />

Bonds<br />

• Accessibility of mission-oriented<br />

capital: To bring together<br />

capital supply from investors<br />

with demand from high-impact<br />

organisations through an<br />

innovative, replicable financial<br />

instrument.<br />

Guarantee<br />

<strong>Issue</strong>r SPV<br />

$$$ to service coupon & principal<br />

• Affordability of mission-oriented<br />

capital: To provide high-impact<br />

organisations access to relatively<br />

low-cost capital that is more<br />

affordable than capital available<br />

from public debt markets.<br />

MFI<br />

Loan<br />

2<br />

MFI<br />

Impact<br />

Enterprise<br />

Bond Mechanism<br />

This section provides a brief overview<br />

of the bond mechanism and how ISBs<br />

coalesce diverse stakeholders from<br />

both the public and private sectors to<br />

create an innovative new instrument<br />

that effectively unlocks private capital<br />

and redirects it towards achieving<br />

development outcomes.<br />

Group of underlying borrowers (MFIs and IEs):<br />

Selected based on Impact Potential and Financial Strength<br />

4<br />

Monitors performance<br />

Writes impact reports<br />

As Figure 2 demonstrates, ISBs<br />

pull together a basket (Special<br />

Purpose Vehicle, SPV) of MFIs and<br />

IEs. This basket is carefully selected<br />

so that the entities combined can<br />

maximise social and financial<br />

returns and minimises the default<br />

risk of the SPV. <strong>The</strong> bond can be<br />

further strengthened if there is a<br />

third party, usually a foundation or a<br />

donor agency, to partially guarantee<br />

the bond. A guarantee is useful<br />

because it brings more comfort<br />

to the prospective buyers (impact<br />

investors) of the bond. Once the<br />

proper due diligence is completed<br />

and the bond is structured, the<br />

1<br />

2<br />

3<br />

4<br />

An SPV issues a US$20 million bond to impact investors, which will include<br />

institutional investors, foundations and high net worth individuals. <strong>The</strong> bond will<br />

be listed on the Impact Exchange<br />

Proceeds of the bond will be lent to a group of pre-identified borrowers<br />

comprising MFIs and IEs focused on women’s livelihoods. FX hedging measures<br />

will be taken to mitigate currency risk of any non-USD loans<br />

An international development agency provides a pari passu guarantee of<br />

50% of the principal amount of the loan portfolio<br />

Shujog will monitor the performance of the borrowers and create periodic<br />

impact reports<br />

Source: IIX Women’s Livelihood Bond deck<br />

44 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


banks can then sell the bond to<br />

their clients (institutional investors,<br />

high-net-worth individuals, Family<br />

offices). <strong>The</strong> ISB is the first impact<br />

investing financial instrument to<br />

be in the market that effectively<br />

addresses the need to scale both<br />

the supply and demand sides of<br />

the impact investing capital and<br />

creates liquidity, as ISBs can be<br />

publicly listed and traded). It is<br />

also forging the much needed path<br />

of establishing impact investing<br />

instruments as a new asset class.<br />

<strong>The</strong> Women’s Livelihood<br />

Bond (WLB) 1<br />

<strong>The</strong> first ISB will be the Women’s<br />

Livelihood Bond (WLB), which aims<br />

to empower women to make the<br />

transition towards sustainable<br />

livelihoods by infusing a large<br />

amount of capital through debt<br />

structuring and the public market.<br />

As an ISB, the WLB is replicable<br />

and can be customised to suit<br />

different geographic contexts from<br />

both a regulatory and needsbased<br />

standpoint. In other words,<br />

although the WLB is the first bond<br />

to focus on women’s livelihoods in<br />

Southeast Asia, it can be replicated<br />

in different geographies, sectors<br />

or focus areas. For instance, ISBs<br />

can be customised to address a<br />

region’s most pressing development<br />

issues in high-impact sectors<br />

such as sustainable agriculture,<br />

clean energy, access to education,<br />

affordable healthcare, water and<br />

sanitation, among others.<br />

WLB’s focus is to create sustainable<br />

livelihoods for women through<br />

effective financing. Although<br />

many organisations like IEs and<br />

MFIs recognise the importance of<br />

targeting women, existing funding<br />

channels fall drastically short of<br />

development goals focused on<br />

women. <strong>The</strong> WLB sets out boldly to<br />

bridge this funding gap, by providing<br />

high-impact entities with the capital<br />

they need to support women in the<br />

most vulnerable communities today.<br />

<strong>The</strong> proceeds of the bond will be<br />

used to make loans to IEs and MFIs<br />

As an ISB, the WLB is replicable and can<br />

be customised to suit different geographic<br />

contexts from both a regulatory and needsbased<br />

standpoint.<br />

that are part of the sustainable<br />

livelihoods spectrum. Underlying<br />

borrowers will have a proven<br />

revenue-generating, high-impact<br />

business model.<br />

Officially announced at the 2014<br />

Clinton Global Initiative (CGI) annual<br />

meeting, the WLB represents<br />

IIX’s commitment to the CGI. <strong>The</strong><br />

structuring of the WLB was funded<br />

with support from the Rockefeller<br />

Foundation and Japan Research<br />

Institute. With its focus on Southeast<br />

Asian nations, namely Cambodia,<br />

Indonesia, the Philippines and<br />

Vietnam, the WLB is making its<br />

multi-country span an even more<br />

unique feature in the world of capital<br />

markets.<br />

IIX is anticipating a bond size of<br />

US$20 million, a tenor of four<br />

years and a target coupon rate<br />

of between six and seven per<br />

cent that will be paid to impact<br />

investors who purchase the bond.<br />

<strong>The</strong> WLB mitigates risk via credit<br />

enhancement features including<br />

a guarantee facility and an inbuilt<br />

debt service reserve account, to<br />

reduce financial risk and protect<br />

investors. For the WLB, this<br />

guarantee facility is supported by<br />

USAID (US government) and DFAT<br />

(Australian government).<br />

Inclusivity, Customisation and<br />

Replicability<br />

<strong>The</strong> three key features of the<br />

WLB are: inclusivity, customisation<br />

and replicability. Prior to structuring<br />

an ISB like the WLB, the impact<br />

investment intermediary structuring<br />

the bond will have to diagnose the<br />

market need and relevant value<br />

chain to assess key gaps that can<br />

be addressed by the ISB, estimate<br />

the profile of the potential pipeline<br />

of underlying borrowers, and<br />

identify regulatory constraints while<br />

designing the mechanism. This<br />

ensures that the ISB is aligned to<br />

address local needs, is designed to<br />

bring in private-sector investors from<br />

both within and beyond the region,<br />

and is well-positioned to mobilise<br />

large-scale capital to accelerate the<br />

region’s development agenda.<br />

Innovative Financial<br />

Structuring<br />

If the impact investing sector is<br />

going to grow, then we need a lot of<br />

innovative financial structuring.<br />

<strong>The</strong> goal of this sector is to channel<br />

large amounts of private-sector<br />

capital to the development and<br />

environment sector. But without<br />

innovative financial structuring,<br />

this goal will be unattainable.<br />

ISB needs to be the first of many<br />

such innovative financial structuring<br />

that the traditional financial<br />

industry can embrace and market.<br />

One perennial challenge for IEs<br />

is access to capital. ISBs aim to<br />

address this very issue by unlocking<br />

greater amounts of investment<br />

capital for these enterprises. By<br />

pooling high-impact enterprises into<br />

a basket of entities and incorporating<br />

various mechanisms to alleviate<br />

risk for investors, ISBs present<br />

a groundbreaking solution that<br />

overturns conventional investment<br />

approaches towards IEs.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 45

<strong>The</strong>re are four innovative aspects<br />

of ISBs that, upon replication and<br />

scale, promise to bridge the<br />

“pioneer gap” facing IEs (Figure 3).<br />

Pooling Together a Basket<br />

of Entities<br />

<strong>The</strong> WLB will pioneer bringing the<br />

IEs and MFIs together in a single<br />

structure to allow impact investors<br />

to leverage on the strengths of both<br />

entities to mitigate risk, maximise<br />

returns, and catalyse impact. By<br />

pooling a group of underlying IEs<br />

and MFIs together, ISBs open up<br />

investment opportunities that were<br />

previously excluded, and provide<br />

a channel to attract greater amounts<br />

of impact investment capital than<br />

these entities could have otherwise<br />

accessed on their own. Additionally,<br />

the basket of borrowers consists of<br />

financially sustainable entities that<br />

are able to repay the loan amount<br />

along with interest.<br />

Achieving a Double<br />

Bottom Line<br />

<strong>The</strong> ISBs focus not only on<br />

unlocking large amounts of capital<br />

from new participants, but also on<br />

effectively utilising this capital to<br />

create scalable and sustainable<br />

impact. This mandates balancing<br />

social impact with financial returns<br />

throughout the bond structuring<br />

process, starting with pipeline<br />

development and continuing<br />

throughout the life of the bond.<br />

Pre-Bond Issuance: Dual<br />

Due Diligence on Underlying<br />

Borrowers<br />

An effective ISB requires the<br />

appropriate risk-return-impact<br />

targets of the instrument. <strong>The</strong><br />

impact investment intermediary<br />

and the Measurement & Evaluation<br />

(M&E) partners should coordinate<br />

to conduct rigorous due diligence<br />

on potential borrowers ahead of<br />

finalising the portfolio, to assess<br />

performance on both business- and<br />

impact-related criteria.<br />

Mitigating Risk<br />

ISBs view risk from a dual<br />

perspective—financial risk, and<br />

mission failure or social risk. This<br />

section outlines how ISBs leverage<br />

the strength of partnerships with<br />

diverse stakeholders to adequately<br />

avoid such perils.<br />

• Mitigating Financial Risk<br />

through Guarantee Facility<br />

Provided by Donor or<br />

Government Partner: ISBs<br />

should include a guarantee<br />

aspect, where the partnering<br />

government or donor agencies<br />

will cover a portion of the losses<br />

in case of default. This guarantee<br />

effectively improves the risk–<br />

<strong>The</strong> ISBs focus not<br />

only on unlocking<br />

large amounts of<br />

capital from new<br />

participants, but<br />

also on effectively<br />

utilising this capital<br />

to create scalable and<br />

sustainable impact.<br />

Women are at the very<br />

heart of development ...<br />

If half of the population<br />

is underdeveloped<br />

or underutilised, an<br />

economy will never<br />

reach its full potential.<br />

Figure 3 Innovation at every stage of ISB development<br />

Pooling Together a Basket<br />

of Entities<br />

Aligning supply and demand to<br />

unlock capital at scale<br />

Achieving a Double<br />

Bottom Line<br />

Building a portfolio that generates<br />

both social and financial returns<br />

Mitigating Risk<br />

Identifying and addressing both social<br />

and financial risk<br />

Listing on <strong>Social</strong> Stock Exchange<br />

Creating secondary liquidity and<br />

mission protection<br />

Source: IIX.<br />

46 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


return profiles of IEs and<br />

compensates for the operational<br />

challenges that young IEs have<br />

to overcome. By incorporating<br />

aspects of blended finance, the<br />

ISBs aim to leverage on public<br />

funds from donor agencies<br />

to trigger and unlock larger<br />

amounts of private capital into<br />

the impact investment space.<br />

If borrowers do not default, the<br />

funds allocated by the guarantor<br />

can potentially be redirected for<br />

subsequent bond issues or other<br />

projects, allowing for a more<br />

efficient use of donor funding. <br />

• Mitigating <strong>Social</strong> Risk and<br />

Linking It to Financial Risk:<br />

M&E experts should focus on<br />

pre-empting and addressing<br />

social risks during the social due<br />

diligence process by proactively<br />

identifying and finding solutions<br />

to issues that could create<br />

negative externalities, cause<br />

mission drift or in any way<br />

compromise the impact potential<br />

of the WLB. This includes<br />

governance-related issues,<br />

negative environmental impact<br />

and social issues faced by<br />

beneficiaries or employees, and<br />

so on. <strong>The</strong> ability of borrowers to<br />

use social outcomes as a way to<br />

diminish long-term financial risk<br />

deepens the sustainability of the<br />

instrument and increases the<br />

probability of success. <br />

Listing the Bond<br />

ISBs can be listed on a public<br />

exchange and the Bloomberg<br />

terminal. <strong>The</strong> public exchange can<br />

be a social stock exchange such as<br />

the Impact Exchange (the world’s<br />

first social stock exchange operated<br />

by the Stock Exchange of Mauritius<br />

in cooperation with IIX, regulated by<br />

the Financial Services Commission,<br />

Mauritius) or a regular public<br />

exchange which allows for the bond’s<br />

financial and social features to be<br />

showcased and reported.<br />

Listing on an exchange provides<br />

a unique opportunity for high-impact<br />

entities to raise investment capital<br />

to scale and deepen their social<br />

and environmental commitments,<br />

while offering investors a means<br />

to invest in and trade securities<br />

issued by organisations that reflect<br />

their values and can be judged on<br />

their values. Thus, this enables the<br />

creation of a liquid market—the holy<br />

grail of working capital markets.<br />

Why Women?<br />

It was a conscious decision to make<br />

the first ISB focus on women. Over<br />

the course of financial history, women<br />

have been excluded from the creation<br />

and operation of financial markets.<br />

However, women are at the very heart<br />

of development, and provide the<br />

underpinning of any economy.<br />

If half of the population is<br />

underdeveloped or underutilised,<br />

an economy will never reach its full<br />

potential. Discrimination against<br />

women can hinder economic growth<br />

by essentially cutting out half the<br />

population's contributions towards<br />

a country’s demographic dividend.<br />

<strong>The</strong>re is a bidirectional relationship<br />

between economic development<br />

and women’s empowerment<br />

(defined as improving the ability of<br />

women to access the constituents<br />

of development, including the<br />

resources and opportunities to<br />

participate in the labour force).<br />

Women are at the heart of<br />

development in Asia: playing<br />

a pivotal role in supporting their<br />

households and communities in<br />

achieving food security and overall<br />

natural resource management,<br />

they are the backbone of rural<br />

enterprises, fuelling local and global<br />

economies. Research reveals that<br />

economically secure women are<br />

more likely to have healthier and<br />

better-educated children, creating<br />

a positive, virtuous cycle for the<br />

broader population. However, women<br />

around the world face four main<br />

challenges, namely:<br />

• Poor Access to Credit and<br />

<strong>Finance</strong>: This results in<br />

vulnerability to economic shocks<br />

and stresses. By unlocking<br />

women’s access to capital,<br />

the WLB will make significant<br />

progress in creating a positive<br />

impact on women’s ability to<br />

obtain financing. Women will<br />

be able to take control of their<br />

immediate borrowing and<br />

consumption, and invest in<br />

income-generating activities<br />

or household assets. More<br />

importantly, with this initial<br />

access to credit and financial<br />

services, women can start<br />

building credit histories that<br />

can help them borrow larger<br />

amounts of capital to expand<br />

their businesses in future. <strong>The</strong>re<br />

is great potential for successful<br />

women-run enterprises to<br />

create follow-on impact through<br />

employment and expanded<br />

supply chains, further providing<br />

sustainable livelihoods for more<br />

women.<br />

• Absence of Market Linkages:<br />

This restricts women to<br />

the informal workforce. By<br />

strengthening women’s access to<br />

market linkages and educating<br />

them on available opportunities in<br />

the market, WLB borrowers can<br />

empower women to negotiate for<br />

more equitable market relations.<br />

Besides strengthening women’s<br />

bargaining positions, exposure<br />

to and integration with marketoriented<br />

models, the WLB will<br />

also enable them to identify niche<br />

areas in the market where they<br />

can capture opportunities to earn<br />

higher incomes.<br />

• Limited Availability of<br />

Affordable Goods: This<br />

limits women’s ability to<br />

maximise productivity. By<br />

providing access to goods and<br />

services (such as education,<br />

training, basic healthcare and<br />

household goods) through<br />

low-cost instalment finance,<br />

WLB borrowers can effectively<br />

unlock purchasing power<br />

and bridge the affordability<br />

gap for female workers in<br />

developing economies. Access<br />

to this market platform can<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 47


also lead to improved spending<br />

behaviour—engineering a shift<br />

away from informal borrowing<br />

and facilitating greater savings.<br />

Through the WLB, female<br />

workers will be provided with<br />

access to affordable lifeenhancing<br />

products and services<br />

to help them transition to a more<br />

economically secure and socially<br />

stable life.<br />

• Lack of Reliable Power Supply:<br />

<strong>The</strong>re is a need for women to<br />

access a cost-effective and<br />

reliable power supply in remote<br />

or rural locations. Considering<br />

the long hours they typically<br />

spend on household activities,<br />

such as cooking and running<br />

home-based micro-enterprises,<br />

improvements such as solar<br />

home systems can increase<br />

their productivity and immensely<br />

empower them. Besides the<br />

direct benefits from improved<br />

health and increased disposable<br />

incomes, women will be able to<br />

ensure a stable and sustainable<br />

environment for their families,<br />

the wider community and future<br />

generations.<br />

<strong>The</strong> social impact of these women<br />

will be measured and reported by<br />

Shujog, IIX’s sister entity that focuses<br />

on impact measurement.<br />

Call to Action<br />

Asian countries need strong<br />

leadership from national heads,<br />

political leaders and policymakers<br />

to create a robust impact investing<br />

ecosystem that is equipped to<br />

address development goals<br />

and empower the people at the<br />

grassroots. However, it is imperative<br />

to adopt a structured approach with<br />

clearly defined goals, customised<br />

interventions and inclusive<br />

implementation strategies. <strong>The</strong><br />

ISB can be replicated in different<br />

countries and customised to the<br />

local context as required.<br />

Five recommended actions are<br />

listed below that countries can<br />

implement in the short term with<br />

the objective to unlock private<br />

capital for development.<br />

I. Replicate innovative financial<br />

instruments, such as the ISB,<br />

that are designed to mobilise<br />

large-scale capital from<br />

private-sector participants.<br />

II. Allow for the creation of more<br />

impact investing funds that are<br />

designed to provide scalable<br />

IEs with access to capital<br />

required to magnify their impact<br />

and sustain results over the<br />

long term.<br />

III. Optimise allocation of existing<br />

sources of mission-oriented<br />

capital to de-risk investments.<br />

For instance, governments or<br />

donor agencies can provide<br />

guarantees in order to<br />

effectively leverage resources<br />

multiple times over the<br />

committed amount, and attract<br />

significantly larger amounts of<br />

private-sector capital.<br />

IV. Encourage linking impact-related<br />

performance with financial<br />

returns by emphasising the need<br />

for outcomes-focused models<br />

and strong focus on impact<br />

measurement and reporting,<br />

which will create greater<br />

transparency and accountability<br />

towards achieving results.<br />

V. Coalesce diverse stakeholders<br />

and empower them to redefine<br />

the dominant development<br />

narrative through forums,<br />

conventions and conferences<br />

that promote cross-border<br />

knowledge-sharing and<br />

create a platform to catalyse<br />

South–South cooperation.<br />

In summary, impact investing is set<br />

to revolutionise the development<br />

narrative, redefine the way capital<br />

markets create value, and position<br />

Asia at the vanguard of the global<br />

dialogue on creating resilient nations,<br />

serving as the voice of progress<br />

across the world. With impact<br />

investing ready to scale and go<br />

mainstream, we now need to have<br />

the desire to make it happen.<br />

Durreen Shahnaz,<br />

a social entrepreneur from<br />

Bangladesh, is the founder<br />

of Impact Investment<br />

Exchange Asia (IIX), home<br />

of the world’s first social<br />

stock exchange and the<br />

largest equity crowdfunding<br />

platform for impact investing. She also<br />

founded Shujog, an impact assessment and<br />

knowledge platform for impact investing<br />

in Asia and Africa. Based in Singapore,<br />

Shujog and IIX’s work have impacted over<br />

10 million people across Asia. Durreen<br />

has previously worked at Morgan Stanley,<br />

Grameen Bank, World Bank, Merrill Lynch,<br />

Hearst Magazines, and Reader’s Digest, as<br />

well as taught and conducted research on<br />

impact measurement and ran the Programme<br />

for <strong>Social</strong> Innovation and Change at the<br />

Lee Kuan Yew School of Public Policy at<br />

NUS. Additionally, Durreen founded, ran,<br />

and sold oneNest, a global e-marketplace<br />

for handmade goods which impacted more<br />

than half a million women globally. <strong>The</strong> 2014<br />

recipient of the prestigious Joseph Wharton<br />

<strong>Social</strong> Impact award, her research interest<br />

focus is on scaling impact investing. She can<br />

be reached at dshahnaz@asiaiix.com<br />

Notes<br />

1<br />

For more information on the WLB, read the Blueprint Paper at http://www.asiaiix.com/wp-content/uploads/<strong>2016</strong>/04/Shujog_WLB-<br />

Interim-Blueprint-Paper_<strong>2016</strong>.compressed.pdf<br />

48 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 49


<strong>The</strong> Macro<br />

behind<br />

Microfinance<br />

Cambodia’s Financial Inclusion<br />

Success Story<br />

By Jonathan Chang<br />

50 50 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


Financial inclusion refers to the delivery<br />

of affordable financial services to<br />

disadvantaged and low-income segments<br />

of society. However, as it also involves<br />

striking a fine balance between managing<br />

businesses’ credit risks and improving<br />

customers’ access to credit, different<br />

countries have made varied progress in<br />

their financial inclusion efforts. To date,<br />

across both developed and developing<br />

nations, SMEs and individuals still struggle<br />

in the face of limited access to adequate<br />

financing. Yet there is one country that<br />

has made considerable strides in this area:<br />

judging from the tremendous success of<br />

its microfinance sector, Cambodia seems<br />

to have found the sweet spot where<br />

businesses can confidently offer affordable<br />

loans to low-income individuals—under<br />

the watchful eye of the nation’s central<br />

bank. Serey Chea, Director General of the<br />

National Bank of Cambodia, chats with<br />

JONATHAN CHANG, Executive Director of<br />

the Lien Centre for <strong>Social</strong> Innovation and<br />

Editor-in-Chief of <strong>Social</strong> <strong>Space</strong>, on how<br />

careful regulation, financial literacy<br />

and technology are key to improving<br />

financial inclusion.<br />

JC: Let’s start with the definition<br />

of financial inclusion, because<br />

it seems that people have their<br />

own understanding of what it is.<br />

When you hear the term “financial<br />

inclusion”, what does that mean<br />

to you?<br />

SC: Financial inclusion is the access<br />

to financial services at an affordable<br />

price. <strong>The</strong> “affordable” bit is very<br />

significant although most people<br />

don’t pay much attention to the part<br />

about pricing. Rather than offering<br />

financial services to everyone<br />

without considering their costs,<br />

financial inclusion instead places<br />

importance on making a range<br />

financial services—including credit,<br />

deposit, money transfer and micro<br />

insurance—accessible to people at<br />

an affordable price.<br />

JC: Why do you think there has<br />

been a lot of talk lately about<br />

financial inclusion?<br />

SC: Financial inclusion is crucial<br />

to achieve equity in society; in<br />

other words, it can provide equal<br />

opportunity for everyone to access<br />

financial services. In the aftermath<br />

of the 2008 financial crisis, G20 gave<br />

more focus to financial inclusion and<br />

made it an item on its main agenda.<br />

In developed countries, SMEs’<br />

access to financing is limited,<br />

thereby hampering the scale of<br />

their contributions to economic<br />

development. And in both developing<br />

and underdeveloped countries,<br />

not only SMEs but low-income<br />

individuals find it difficult to get<br />

access to adequate financing.<br />

As a result, living standards<br />

cannot be improved and poverty<br />

is not reduced.<br />

Serey Chea, Director General of the<br />

National Bank of Cambodia<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 51

<strong>The</strong>re is yet another obstacle standing in the<br />

way of better financial inclusion: the lack of<br />

affordable rates. Microfinance services are<br />

still expensive compared to bank services,<br />

and this is mainly because the institutions<br />

are operating in remote areas and have<br />

very high overheads.<br />

the Bank. For instance, they are<br />

required to have a certain minimum<br />

capital and to adhere to certain<br />

governance systems. With these<br />

regulations in place, microfinance<br />

in Cambodia has received lots of<br />

funding from foreign investors,<br />

especially those with social<br />

missions, making it one of the most<br />

successful microfinance sectors in<br />

the world.<br />

Microfinance is usually associated<br />

with providing low-income<br />

individuals with access to finance.<br />

<strong>The</strong> United Nations declared 2005<br />

as the Year of Microcredit, while<br />

Cambodia declared 2006 as its Year<br />

of Microfinance. Currently, there<br />

are many institutions working to<br />

push forward the financial inclusion<br />

agenda, including the Consultative<br />

Group to Assist the Poor (CGAP) and<br />

the Alliance for Financial Inclusion<br />

(AFI), among others.<br />

JC: Why do most low-income<br />

individuals have limited access to<br />

financial services?<br />

SC: By and large, banks only want<br />

to finance “bankable people”—those<br />

with a steady income or, if not,<br />

then at least a property that they<br />

can pledge with the bank. Lowincome<br />

individuals are not bankable<br />

because they have very little: they<br />

generally cannot afford a large loan,<br />

and they usually live in a remote<br />

area that is far removed from any<br />

conventional banking branch.<br />

As such, there is a need for the<br />

likes of what we call microfinance<br />

institutions (MFIs). Although there<br />

is no conventional definition of<br />

MFIs, they set themselves apart<br />

from typical profit-making finance<br />

companies by offering small loans,<br />

and being attached to particular<br />

social missions.<br />

JC: In your role at the National<br />

Bank of Cambodia, what steps<br />

are you taking to ensure financial<br />

inclusivity?<br />

SC: Presently, the Bank has been<br />

very successful in the introduction<br />

and implementation of microfinance<br />

in Cambodia—in fact, we are among<br />

the first countries in the world to<br />

regulate microfinance. <strong>The</strong>re have<br />

been prevailing global sentiments<br />

that central banks should look after<br />

the nation’s financial stability instead<br />

of devoting so much attention<br />

and resources to supervising and<br />

regulating microfinance. However,<br />

this has been our approach when<br />

it comes to financial stability: how<br />

much will it impact Cambodian<br />

society as a whole versus just the<br />

financial system? Even though the<br />

success or failure of microfinance<br />

won’t have a significant impact<br />

on the functioning of Cambodia’s<br />

financial system as a whole,<br />

microfinance does serve a large<br />

customer base here. That is to say,<br />

if it does not succeed, there is the<br />

potential for social instability—<br />

and that is something which we<br />

take seriously and want to avoid.<br />

<strong>The</strong> Bank’s practice of regulated<br />

microfinance has also worked very<br />

well in terms of boosting investor<br />

confidence in what can otherwise<br />

be seen as a risky sector involving<br />

lending money to people of low<br />

income.<br />

Unlike in other countries, where the<br />

microfinance industry comprises<br />

small organisations that operate<br />

independently, in Cambodia these<br />

companies (MFIs) are regulated by<br />

JC: Do you consider empowering<br />

women-owned enterprises as<br />

a form of financial inclusion?<br />

SC: Yes. Supporting women-owned<br />

enterprises is already on our agenda,<br />

though interestingly there’s not<br />

much work to do in this area. As it<br />

stands, in terms of the borrowers<br />

in Cambodia’s microfinance sector,<br />

80 per cent consists of women.<br />

Moreover, it is usually women who<br />

dominate the small businesses<br />

here: in a typical Cambodian family,<br />

the ladies are the ones who go<br />

out and borrow money, and who<br />

manage the finances and overall<br />

business. However, the challenge,<br />

for them, is how to graduate from<br />

what we call a “survival business”<br />

to one that is profit-making. I don’t<br />

have any specific statistics on this,<br />

but from what I have observed in<br />

general, the women operate well<br />

in “survival mode”—when they’re<br />

earning just enough to cover their<br />

daily expenses—and relatively few of<br />

them want to or have been able to<br />

grow their businesses to SME size<br />

and beyond.<br />

JC: Do you feel like there’s still<br />

more that can be done to increase<br />

financial inclusion?<br />

SC: Definitely. It’s an ongoing effort,<br />

but there are certain challenges<br />

ahead. <strong>The</strong> microfinance sector has<br />

become so large, but customers<br />

have not yet caught up in terms<br />

of financial literacy, and may not<br />

always know what they’re getting<br />

into. Moreover, new microfinance<br />

companies, especially those that do<br />

not necessarily have social missions<br />

in mind, have also entered the sector.<br />

In the past, NGOs would transform<br />

52 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


themselves into MFIs with social<br />

missions. More recently, however,<br />

microfinance companies are<br />

increasingly profit- rather than<br />

socially driven, and have private<br />

shareholders. <strong>The</strong>re are also<br />

predatory organisations out there<br />

claiming to be NGOs, and they offer<br />

easy loans without much requirement<br />

on the borrowers’ part, albeit at very<br />

high interest rates.<br />

<strong>The</strong> Bank is now preparing a<br />

national strategy, involving the<br />

government agencies, on financial<br />

inclusion. For instance, we are<br />

working with the Ministry of<br />

Education to promote financial<br />

literacy among the people through<br />

formal education. Additionally, we<br />

are running a free camp aign called<br />

Consumer Financial Capability<br />

Development, which teaches people<br />

how to negotiate, choose, use, and<br />

communicate if they are in doubt<br />

about finance-related issues.<br />

Ultimately, we want people to know<br />

that they should not borrow if they<br />

don’t have a proper or fixed source<br />

of income, and that they should not<br />

use financial services recklessly.<br />

Finally, this campaign will drive<br />

home the message that when it<br />

comes to their finances, people<br />

should not be passive, but actively<br />

communicate with both financial<br />

service providers as well as the<br />

authorities in charge.<br />

JC: Let’s switch gears for<br />

a moment. If you look through<br />

the policy lens, what are some of<br />

the challenges faced when it comes<br />

to pushing the financial inclusion<br />

agenda further?<br />

SC: Regulations-wise, most of<br />

what is needed is in place. <strong>The</strong><br />

microfinance sector currently<br />

constitutes about 20 per cent of<br />

Cambodia’s whole financial system,<br />

so we are definitely looking at it more<br />

seriously than we used to in terms of<br />

its impact on overall financial stability.<br />

Microfinance was previously a small<br />

sector in terms of the value, but today<br />

it is increasing rapidly. We now have<br />

to watch our financial regulations<br />

closely, and we routinely supervise<br />

these MFIs, though we are careful not<br />

to overburden them with regulations.<br />

Ultimately, we see them as important<br />

vis-à-vis the whole financial system,<br />

and want them to be able to continue<br />

doing what they are doing, but in a<br />

safer manner, considering that their<br />

failure can have implications for the<br />

overall financial system.<br />

Demand and supply factors are also<br />

at play here. While microfinance<br />

companies can set up operations in<br />

different places, they do not always<br />

consider the demand for their<br />

financial services—and the level of<br />

financial literacy among the people.<br />

People from rural areas are usually<br />

very intimidated by formally dressed<br />

office workers in professional<br />

business settings. As such, they<br />

might refrain from asking too many<br />

questions. However, as mentioned<br />

earlier, the Bank wants to stress to<br />

the people the importance of asking<br />

questions—e.g. to better understand<br />

the terms and conditions of a loan,<br />

or to see how different interest<br />

rates compare—and that it is the<br />

institution’s responsibility to address<br />

their queries.<br />

<strong>The</strong> Credit Bureau of Cambodia<br />

(CBC), of which I am chairwoman,<br />

was set up to reduce credit risks<br />

for businesses and to improve<br />

customers’ access to credit. It<br />

is the world’s first credit bureau<br />

that services both the banking<br />

and microfinance sectors: besides<br />

designing an internal price structure<br />

that is fair to all parties (both<br />

high- and low-income groups), the<br />

Bureau also assesses customers,<br />

their credit histories and behaviors,<br />

etc., for the benefit of businesses.<br />

To this end, it is presently developing<br />

a K-Score (or Khmer Score)—a client<br />

with a very high K-Score can use<br />

it as leverage to bargain for a<br />

cheaper loan, and similarly,<br />

companies can use the K-Score to<br />

more readily identify clients with a<br />

good track record of repaying their<br />

loans on time, and so on.<br />

<strong>The</strong>re is yet another obstacle<br />

standing in the way of better<br />

financial inclusion: the lack of<br />

affordable rates. Microfinance<br />

services are still expensive<br />

compared to bank services, and this<br />

is mainly because the institutions are<br />

operating in remote areas and have<br />

very high overheads. For instance,<br />

MFIs have to invest more heavily<br />

in staff who are willing to travel to<br />

rural villages and understand the<br />

people’s needs, on top of managing<br />

the business side of things. In the<br />

near future, technology may be able<br />

to alleviate some of the institutions’<br />

high operational costs, and give rise<br />

to more affordable financial services.<br />

But for now, we’ll just have to wait<br />

and see.<br />

Jonathan Chang is Executive<br />

Director of the Lien Centre for<br />

<strong>Social</strong> Innovation. He is also<br />

the Harvard Kennedy School<br />

Ambassador to Singapore, and<br />

a member of the HKS Alumni<br />

Board of Directors. Prior to<br />

moving to Singapore, Jonathan founded and<br />

co-founded four start-ups across multiple<br />

industries, including a Y-Combinator incubated<br />

social venture, in Silicon Valley and Manhattan.<br />

As a Fellow at the Earth Institute of Columbia<br />

University, Jonathan taught and conducted<br />

research on entrepreneurship as a tool for<br />

social change in Rwanda. His other research<br />

includes case studies on an impact-investing<br />

fund in India for Stanford, a social enterprise<br />

in Bali for SMU, and a book on government<br />

and innovation with Esko Aho, former Prime<br />

Minister of Finland. Jonathan also gave a TEDx<br />

talk at Harvard about the importance of a<br />

mission-driven life. He earned his degrees from<br />

UC Berkeley, Stanford, and Harvard. He can be<br />

reached at jonathan@smu.edu.sg<br />

This article is adapted from the November<br />

<strong>2016</strong> edition of Asian Management Insights<br />

magazine.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 53



A Perspective on <strong>Social</strong> Impact Bonds<br />

By Rashika Ranchan<br />

C o m m i s s i o n e r<br />

Typically a government agency, foundation or relevant entity;<br />

individually or as a partnership<br />

Establish outcomes/<br />

service contract<br />

initially<br />

Pay for successful<br />

outcomes<br />

Savings to the<br />

government from<br />

the intervention<br />

I n t e r m e d i a r y<br />

Manages the arrangement, funds, service<br />

providers, and provides advisory services<br />

Services contracts and<br />

gives operating funds<br />

Capital provision<br />

Repayment of<br />

capital plus<br />

returns based<br />

on successful<br />

outcomes<br />

I n v e s t o r<br />

S e r v i c e p r o v i d e r<br />

<strong>Social</strong> sector organisations, charities or<br />

social enterprises<br />

Runs intervention<br />

for meeting social<br />

outcomes<br />

Service users,<br />

beneficiaries<br />

54 54 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


In a landscape of rising social needs,<br />

coupled with an uncertain economic<br />

climate, <strong>Social</strong> Impact Bonds (SIBs)<br />

offer an exciting opportunity to test<br />

innovative models of impact within<br />

social service provision. With the<br />

shrinking of global public spending,<br />

SIBs enable the public sector to<br />

commission preventative services,<br />

and help tackle deep-rooted social<br />

problems.<br />

SIBs bring together a partnership of<br />

commissioners, investors and service<br />

providers to resolve intractable social<br />

issues. In this financial mechanism,<br />

investors pay for an intervention<br />

at the beginning to improve social<br />

outcomes. <strong>The</strong>se social outcomes are<br />

pre-defined, and the intervention—if<br />

effective—should result in public<br />

sector savings and wider benefits to<br />

society. <strong>The</strong> commissioner makes<br />

returns to investors only when the<br />

specified outcomes are achieved.<br />

When the world’s first SIB—the<br />

Peterborough <strong>Social</strong> Impact Bond—<br />

launched in the UK in 2010, it was<br />

heralded as a groundbreaking<br />

intervention. It funded rehabilitation<br />

services for short-sentence<br />

prisoners released from prison, with<br />

the aim of reducing post-release<br />

re-offences. <strong>The</strong> UK Ministry of<br />

Justice, supported by the Big<br />

Lottery Fund, entered into an<br />

agreement to pay a return to<br />

investors if targets for reducing<br />

reconvictions were achieved. 1<br />

<strong>The</strong> space for social investment,<br />

which blends social and financial<br />

returns, has grown over the past<br />

few years: it supports investment<br />

in charities and social enterprises<br />

to tackle social issues—and is also<br />

significant in promoting models<br />

like SIBs. <strong>The</strong> launch of Big Society<br />

Capital in UK in 2012, as the<br />

first-of-its-kind social investment<br />

wholesaler in the world, brought<br />

about greater momentum to this<br />

impact investing space.<br />

By blending entrepreneurship, social<br />

investment and public funding, SIBs<br />

are a pioneering way to achieve<br />

social impact. <strong>The</strong>y illustrate the<br />

impetus to rethink public service<br />

delivery through innovative financial<br />

mechanisms. Now more than<br />

six years after the launch of the<br />

Peterborough SIB, social impact<br />

bonds continue to garner the interest<br />

of many policymakers, academics<br />

and practitioners worldwide.<br />

Globally, there are over 50 SIBs<br />

that have been developed, with the<br />

UK accounting for around half of<br />

these, followed by the US. 2 Many<br />

commissioners and investors across<br />

various countries have shown<br />

interest in the potential of SIBs,<br />

including the Netherlands, South<br />

Korea and Australia. To date, SIBs<br />

aim to improve services that focus<br />

on various social issues, including:<br />

children in care, young people not in<br />

education, employment or training,<br />

adoption, homelessness, and<br />

reoffending.<br />

Presently, there is interest to find<br />

out if SIBs are really working.<br />

However, it is still early days for their<br />

evaluation, and most SIBs do not<br />

yet have a proven “track record” to<br />

speak of. However, while there has<br />

been some scepticism over what<br />

really “works”, some early successes<br />

or progress have been reported.<br />

For instance, one of the initial SIBs<br />

to tackle youth unemployment,<br />

delivered by the London-based youth<br />

charity ThinkForward, has reported<br />

generating a return for investors. 3<br />

It has demonstrated that engaging<br />

early with disadvantaged young<br />

people can both improve the lives<br />

and opportunities of these youth, and<br />

provide savings to the public purse.<br />

Implications for<br />

Southeast Asia<br />

In Southeast Asia, too, there is<br />

growing recognition of the need to<br />

look at models beyond traditional<br />

grantmaking. A stronger social<br />

enterprise and impact investment<br />

space will harness greater<br />

innovation, thereby encouraging<br />

the emergence of new models like<br />

SIBs. Although this space within<br />

the region is relatively nascent, the<br />

Innovation is<br />

inherently risky: even<br />

if not all interventions<br />

work, social impact<br />

bonds can help to<br />

accelerate the rate of<br />

learning about which<br />

approaches work<br />

better than others.<br />

appetite is on the rise. For example,<br />

in Singapore, support for the social<br />

enterprise sector has been stepped<br />

up over the past few years. In 2015,<br />

raiSE (Singapore Centre for <strong>Social</strong><br />

Enterprise) was set up as a one-stop<br />

centre—supported by the Ministry<br />

of <strong>Social</strong> and Family Development,<br />

Tote Board, National Council of<br />

<strong>Social</strong> Service and <strong>Social</strong> Enterprise<br />

Association—to increase support for<br />

and promote awareness of social<br />

enterprises in Singapore.<br />

However, although the social sector<br />

is getting more experimental, it is<br />

fragmented and diverse. Raising<br />

funds for innovation thus remains<br />

a challenge. Additionally, services<br />

that are centred on prevention are<br />

harder to fund. Even if budgets<br />

were available, public services are<br />

typically designed to meet more<br />

remedial rather than preventative<br />

needs. A thin evidence base can<br />

lead to significant delivery risk for<br />

preventative programmes. SIBs can<br />

therefore create pathways to harness<br />

private or non-governmental capital<br />

for innovation and preventative<br />

services.<br />

Alongside the social policy<br />

domains like juvenile delinquency,<br />

homelessness and workforce<br />

development, SIBs can also be<br />

considered for social issues that<br />

are on the rise, including ageing<br />

and mental health. In developing<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 55

economies, areas such as<br />

education, health and poverty<br />

alleviation are expected to become<br />

more prominent. SIBs can thus be<br />

developed for specific social needs<br />

according to the country’s focus.<br />

A key impetus in developing SIBs<br />

is the progress towards social<br />

outcomes. Rather than focusing on<br />

inputs or outputs, SIBs are based on<br />

achieving social outcomes to better<br />

support the most vulnerable sections<br />

of society.<br />

A key impetus in developing SIBs is the<br />

progress towards social outcomes. Rather<br />

than focusing on inputs or outputs, social<br />

impact bonds are based on achieving<br />

social outcomes to better support the most<br />

vulnerable sections of society.<br />

Although many grantmakers are<br />

moving towards outcomes-based<br />

funding, non-profits still struggle<br />

to embed an outcomes approach<br />

fully within their services. Further,<br />

traditional funding continues to rely<br />

on delivering a set of services and<br />

outputs rather than demonstrating<br />

measurable outcomes. This means<br />

that there is limited incentive<br />

to innovate. SIBs contrast with<br />

traditional funding in this regard.<br />

<strong>The</strong> focus on outcomes supports<br />

greater accountability and<br />

transparency of public funds.<br />

Greater rigour in performance<br />

management and evaluation also<br />

contribute towards building a broader<br />

evidence base for what works. In<br />

addition to savings to the public<br />

purse, the real cost of a social<br />

problem can be better analysed<br />

and a stronger case can be made<br />

for mainstreaming the intervention.<br />

Through models like SIBs, the<br />

capability of the social sector within<br />

the area of impact measurement can<br />

be built over time.<br />

Another fascinating aspect of SIBs<br />

is “collaboration”. For the region<br />

of Southeast Asia, SIBs will help<br />

build a “new social compact”<br />

between public-sector funders,<br />

service providers, investors and<br />

philanthropists. It can, indeed, be a<br />

win-win for all parties involved: for<br />

public sector commissioners, SIBs<br />

enable the influx of private capital to<br />

fund preventative action on complex<br />

and expensive social problems;<br />

for the non-profit sector, they offer<br />

additional and diversified sources<br />

of funding to innovate; and for the<br />

investors, SIBs provide both financial<br />

and social returns.<br />

This potential to create a multiplier<br />

effect by a shared value to the<br />

“public, private and people” sectors<br />

is compelling. <strong>The</strong> Essex SIB in the<br />

UK—an intervention to prevent youth<br />

aged between 11 and 17 years from<br />

entering care or custody, and safely<br />

remain with their families—is one<br />

such partnership that brings together<br />

a range parties: investors (Big Society<br />

Capital, Bridges Ventures <strong>Social</strong><br />

Entrepreneurs Fund, King Baudouin<br />

Foundation, <strong>The</strong> Tudor Trust, Barrow<br />

Cadbury Trust, Esmée Fairbairn<br />

Foundation and Ananda Ventures<br />

[<strong>Social</strong> Venture Fund]); outcome<br />

payer (Essex County Council); delivery<br />

organisation (Action for Children); and<br />

manager (<strong>Social</strong> <strong>Finance</strong> Ltd). 4<br />

While there are clear benefits to SIBs,<br />

there is still much to learn about<br />

how best to structure them and their<br />

added value as opposed to a simple<br />

funding arrangement. Some issues<br />

need to be considered carefully<br />

before developing a SIB. First, SIBs<br />

are not relevant for all types of social<br />

projects. It can be successful only<br />

in areas where outcomes can be<br />

measured and where it is possible<br />

to monetise savings from a social<br />

intervention. <strong>The</strong> cashable savings<br />

must outweigh the higher cost<br />

of capital and the considerable<br />

set-up costs. Further, there is a<br />

strong need to understand the<br />

dynamics of the market, including:<br />

identifying the right issue, beneficiary<br />

group, bringing rigour in data, and<br />

monetising it. At present, many social<br />

projects continue to require more<br />

traditional forms of funding.<br />

Second, SIBs have complex financial<br />

and contractual mechanisms, which<br />

are costly to design and implement.<br />

Expenditure on evaluation is<br />

also higher, as making a case for<br />

attribution of an outcome to the<br />

intervention calls for sophisticated<br />

evaluation techniques. However, over<br />

time, models of replication can bring<br />

some of these costs down.<br />

Finally, there is the added complexity<br />

of structuring a project that involves<br />

up to five different stakeholders,<br />

typically: i) the government, ii)<br />

investors, iii) non-profits, iv)<br />

intermediaries, and v) an evaluator.<br />

<strong>The</strong>re is also usually an intermediary<br />

to support this partnership, help<br />

raise capital, and manage the<br />

performance of service providers on<br />

behalf of the investors.<br />

Overall, the new opportunities<br />

that SIBs offer—co-designed and<br />

outcome-focused preventative<br />

services—outweigh the challenges<br />

involved. Innovation is inherently<br />

risky: even if not all interventions<br />

work, SIBs can help to accelerate<br />

the rate of learning about which<br />

approaches work better than others.<br />

As countries across the world<br />

develop their pipeline of projects, it<br />

will support a better understanding<br />

of SIBs’ risk–return profile, and in<br />

turn help to build the market.<br />

56 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


Ecosystem Building<br />

For markets new to this area, the<br />

creation of a stronger ecosystem<br />

can facilitate the emergence of<br />

SIBs. A more favourable social<br />

investment policy environment will<br />

help to catalyse the market for<br />

impact investing and new innovative<br />

financing models.<br />

More support is also needed for<br />

capacity-building and investment<br />

readiness. Policymakers, publicsector<br />

funders and foundations play<br />

a key role in driving this agenda<br />

forward. For instance, in the UK, the<br />

Office for Civil Society introduced<br />

the Investment and Contract<br />

Readiness Fund in 2012, and<br />

supported social ventures’ efforts<br />

at capacity-building, to enable them<br />

to receive social investment or bid<br />

for public service contracts. 5 An<br />

example of support for SIBs is the<br />

Big Lottery Fund’s “Commissioning<br />

Better Outcomes” to encourage the<br />

development of more innovative<br />

approaches to improving social<br />

outcomes. 6 <strong>The</strong> early stage of<br />

SIBs also requires some financial<br />

backing in the form of grants<br />

to support the cost of feasibility<br />

studies and evaluation.<br />

In Singapore, capacity and capabilitybuilding<br />

initiatives are increasingly<br />

being rolled out (supported by<br />

funders such as the Tote Board)<br />

to strengthen the non-profit and<br />

social enterprise sectors. Through<br />

training, knowledge-sharing,<br />

impact measurement, skills-based<br />

volunteering and social enterprise<br />

accelerator programmes, a more<br />

fertile ground for learning can be<br />

nurtured alongside the development<br />

of innovative financing tools.<br />

For social impact bonds to emerge<br />

in Southeast Asia, the dialogue<br />

between various stakeholders<br />

needs to be accelerated, alongside<br />

awareness-building efforts.<br />

A stronger ecosystem can be<br />

supported by the development<br />

of intermediary organisations<br />

providing support to the sector.<br />

And greater buy-in can be sought<br />

from investors through risk-sharing<br />

among investors, commissioners<br />

and service providers; and investor<br />

return profiles that are proportionate<br />

to the outcome improvement.<br />

In conclusion, there is no onesize-fits-all<br />

approach when it<br />

comes to SIBs. While the core<br />

principles of SIBs remain consistent<br />

across geographies, different<br />

commissioning practices and<br />

structuring can be adopted to<br />

suit a country’s local needs. SIBs<br />

can be piloted for a certain social<br />

issue, to better understand the<br />

impact before scale-up and wider<br />

implementation. As we move<br />

towards embracing more innovation<br />

and entrepreneurship, there is scope<br />

for replication of good practices<br />

across the region.<br />

With funders looking to achieve<br />

greater impact from their funding,<br />

this can be done through strategic<br />

grantmaking that builds into the mix<br />

evidence-based funding, outcomes,<br />

impact measurement and capacitybuilding,<br />

or—where appropriate—<br />

through experimentation with<br />

various funding models like SIBs.<br />

It is also possible to adapt models<br />

like SIBs and venture philanthropy<br />

to create new and hybrid models of<br />

philanthropy and finance, based on<br />

the needs of a sector and relevant to<br />

a local context.<br />

Notes<br />

Rashika Ranchan is<br />

Head of Funding and<br />

Partnerships (<strong>Social</strong>) at the<br />

Singapore Totalisator Board<br />

(Tote Board), where she<br />

helms the social and health<br />

funding portfolio. With<br />

global experience in both<br />

social investment and grant management,<br />

such as with organisations like Big Lottery<br />

Fund and Big Society Capital in the UK, she<br />

has pioneered several new and strategic<br />

programmes, policy initiatives, innovative<br />

impact investments and multi-sector<br />

collaborations—in addition to developing<br />

capacity-building initiatives for the<br />

non-profit and social enterprise sectors.<br />

She can be reached at Rashika_RANCHAN@<br />

toteboard.gov.sg<br />

Models like SIBs have the potential<br />

to transform public sector delivery.<br />

Depending on the social needs of<br />

each country, governments can<br />

invest in the most appropriate<br />

and cost-effective preventative<br />

programmes to meaningfully solve<br />

or reduce social issues, as well as<br />

reap potentially large cost savings to<br />

the public purse.<br />

Ultimately, different models of<br />

“innovation and impact” are needed<br />

to address diverse and complex<br />

social problems. By exploring new<br />

and more powerful ways to address<br />

these social challenges effectively,<br />

positive and lasting social change<br />

can be created, and the lives of<br />

many can be improved.<br />

1<br />

RAND Corporation, “Evaluating the World's First <strong>Social</strong> Impact Bond”, at<br />

http://www.rand.org/randeurope/research/projects/social-impact-bonds.html<br />

2<br />

Instiglio database, <strong>2016</strong>, at http://www.instiglio.org/en/sibsworldwide<br />

3<br />

City Philanthropy, “<strong>Social</strong> Impact Bond Delivers Financially for Investors and <strong>Social</strong>ly<br />

for NEETS”, 29 October 2015, at http://www.cityphilanthropy.org.uk/news/social-impactbond-delivers-financially-investors-and-socially-neets<br />

4<br />

Big Society Capital, “Our Investments”, at https://www.bigsocietycapital.com/what-wedo/investor/investments<br />

5<br />

<strong>Social</strong> Investment Business, “Investment and Contract Readiness Fund”, at<br />

http://www.sibgroup.org.uk/beinvestmentready<br />

6<br />

https://www.gov.uk/guidance/social-impact-bonds<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 57




By Martina Mettgenberg-Lemière and Kevin Teo<br />

Grantmakers and social investors<br />

(funders) are successful only to<br />

the extent whereby their grantee<br />

or investee organisations—<br />

collectively known as social<br />

purpose organisations (SPOs)—<br />

achieve sustainable social impact.<br />

More often than not, we hear of<br />

SPOs caught in the daily grind of<br />

responding to urgent beneficiary<br />

needs, and not having the<br />

opportunity to introduce more<br />

effective practices. <strong>The</strong> foundation<br />

for sustainable social impact<br />

arises through engagement from<br />

grantmakers and social investors<br />

in capacity-building and impact<br />

assessment of the SPOs.<br />

Capacity-building and impact<br />

assessment are two key venture<br />

philanthropy (VP) practices. In<br />

the last year, the Asian Venture<br />

Philanthropy Network (AVPN)<br />

documented trends in these<br />

two areas, with the objectives<br />

of helping novices acquire best<br />

practices in a shorter time, and<br />

enabling seasoned practitioners to<br />

share their knowledge and develop<br />

new insights.<br />

58 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


Building Capacity of SPOs<br />

to Increase Effectiveness<br />

Making capacity-building effective<br />

involves a few steps. First, it is<br />

critical to understand what is truly<br />

required for the SPO to build its<br />

sustainable social impact.<br />

After funders understand the<br />

needs of the SPO, the second step<br />

is to delineate how support can be<br />

organised. For some funders, such<br />

as <strong>Social</strong> Ventures Hong Kong,<br />

they do this with in-house teams.<br />

Others bring in external service<br />

providers—paid, pro-bono, or skillsbased<br />

volunteers. When funders<br />

work with skills-based volunteers,<br />

they also often bring in an external<br />

provider to help them manage these,<br />

e.g. the Singaporean intermediary<br />

Empact or the Indian organisation<br />

Toolbox Foundation. As can be seen<br />

from most case studies in AVPN’s<br />

collection, the main trend is to<br />

manage service provision in-house<br />

with skills-based volunteers, rather<br />

than developing in-house teams or<br />

working with service providers.<br />

A final core step to capacity-building<br />

is assessing whether it has made<br />

a difference to the investee. This<br />

remains in the early stages with<br />

some efforts having been made by<br />

private entities offering their system<br />

for a fee. <strong>The</strong> impact assessment<br />

is similar to organisational impact<br />

assessment insofar as the funder<br />

Capacity-Building Services Access to Networks<br />

Coaching and Mentoring of<br />

Management<br />

Fundraising or Revenue Strategy<br />

Financial Management and<br />

Accounting<br />

Other<br />

Strategy Consulting<br />

Marketing and Communication<br />

Human Resources<br />

Operational Management<br />

Legal Support<br />

Use of Facilities<br />

Information Technology<br />

Source: AVPN<br />

has to develop a theory of change,<br />

and collect and analyse the data<br />

they think they need. From our case<br />

studies, funders tend to employ three<br />

methods to this end: i) measuring<br />

the organisation’s progress in total<br />

and seeing the entire impact as an<br />

outcome of the capacity-building;<br />

ii) measuring what is supposed<br />

be changed before and after; and<br />

iii) measuring the extent to which<br />

the organisation has built critical<br />

capabilities.<br />

With assessing impact of the<br />

capacity-building, most funders<br />

close the loop to understand what<br />

works and adjust their offerings.<br />

In a recent AVPN membership<br />

survey of 111 members on venture<br />

philanthropy practices, the capacitybuilding<br />

services offered most<br />

often included access to networks,<br />

coaching and mentoring, fundraising<br />

and revenue strategy, and financial<br />

management and accounting.<br />

Assessing Impact: Another<br />

Core Venture Philanthropy<br />

Practice<br />

In that same survey, 72 per cent of<br />

the 111 AVPN members measured<br />

impact at various intervals through<br />

the engagement.<br />

<strong>The</strong>re are now many methodologies<br />

in impact assessment ranging in<br />

complexity and robustness. Next<br />

<strong>The</strong>re are now many<br />

methodologies in<br />

impact assessment<br />

ranging in complexity<br />

and robustness.<br />

to offering an analysis of the major<br />

approaches in which framework to<br />

choose, how to get started, how to<br />

implement and finally how to present<br />

the findings, we recently interviewed<br />

13 leading practitioners in Asia about<br />

their approach for our Effective<br />

Guide to Impact Assessment. Two<br />

major trends from the literature<br />

review and practitioner portraits<br />

are: standardisation, customisation<br />

and comparability; and usage for<br />

performance management and<br />

external presentation.<br />

Comparability of solutions can be the<br />

stated aim of impact assessment.<br />

However, most of the organisations<br />

in our sample felt they were unable<br />

to compare organisations’ results<br />

as each had a different business<br />

model to address social issues and<br />

therefore had different indicators and<br />

outcomes. Even within the portfolio<br />

of one social investor, standardising<br />

measurement and indicators was<br />

often impossible, and every social<br />

organisation was measured in a<br />

highly customised way and on its<br />

own merit. Some social investors,<br />

such as Nexus for Development,<br />

Microsoft Japan and Epic Foundation,<br />

were able to standardise and<br />

compare for a few reasons.<br />

Nexus for Development requires<br />

the measurement of carbon<br />

efficiency and applies international<br />

standards. Microsoft Japan<br />

fine-tuned its <strong>Social</strong> Return on<br />

Investment (SROI) approach over<br />

a number of years and is now able<br />

to compare different interventions<br />

in the same field. Epic Foundation<br />

already selects organisations in<br />

the due diligence phase according<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 59

… many social investors use impact assessment<br />

mostly for performance management and<br />

only some data for external presentation and<br />

reporting to funders, such as public donors<br />

or investors into their funds. This is perhaps<br />

unsurprising, but worth highlighting as impact<br />

assessment data can be seen as a marketing<br />

tool or “vanity metrics” and, like financial data,<br />

can therefore be a victim of manipulation.<br />

Pre-engagement<br />

to 15 parameters and continues<br />

monitoring these as impact.<br />

<strong>The</strong>se three approaches allow<br />

comparability.<br />

Interestingly, we also found that<br />

many social investors use impact<br />

assessment mostly for performance<br />

management and only some data for<br />

external presentation and reporting<br />

to funders, such as public donors<br />

or investors into their funds. This is<br />

perhaps unsurprising, but worth<br />

highlighting as impact assessment<br />

data can be seen as a marketing<br />

tool or “vanity metrics” and, like<br />

financial data, can therefore be a<br />

victim of manipulation. Using it<br />

as performance metrics indicates<br />

that organisations rely on it behind<br />

closed doors, which suggests that<br />

they are interested to learn about<br />

what works and what does not.<br />

While we may be impatient to see<br />

results and compare, this curiosity<br />

is one of the strongest findings in<br />

our research on impact assessment<br />

and certainly one of the core areas of<br />

venture philanthropy.<br />

Capacity-Building and<br />

Impact Assessment: Two Out<br />

of Five Core Practices in<br />

Venture Philanthropy<br />

Venture philanthropy’s main focus<br />

is that of an engaged relationship.<br />

On the spectrum between investing<br />

and donating, VP occupies both,<br />

as well as the entire middle ground<br />

of convertible finance options,<br />

grants with capacity-building<br />

support, and wealth allocations in<br />

terms of investment.<br />

Venture Philanthropy Organisations<br />

(VPOs) range from foundations,<br />

overfunds, family offices and angel<br />

investors, to corporations and<br />

governmental sovereign wealth<br />

funds. Similarly in terms of target<br />

of investment, there is great<br />

flexibility. VPOs can invest in any<br />

business model from non-profit<br />

and donations-based over revenuebased<br />

to supply chain corporates.<br />

For instance, a quick look at AVPN’s<br />

membership reveals the diversity<br />

of resource providers and their<br />

funding targets. At the same time,<br />

not all funders are VPOs, nor would<br />

they consider their activities to be<br />

venture philanthropy.<br />

AVPN considers a VPO as one that<br />

practises capacity-building and<br />

impact assessment, as well as<br />

pre-engagement, portfolio<br />

management and multi-sector<br />

collaboration. VPOs are different<br />

from other funders in that they<br />

are engaged for the long term and<br />

emphasise the partnership with<br />

SPOs in creating impact. This is<br />

different from writing a cheque or<br />

investing, agreeing on the term<br />

sheet, and then sitting in quarterly<br />

board meetings. Both of these<br />

modes are fine, but we found that<br />

it is more effective, when creating<br />

sustainable social impact, to<br />

co-create social impact closely<br />

with the SPO.<br />

Capacity-Building<br />

of SPOCs<br />

Impact<br />

Assessment<br />

Portfolio<br />

Management<br />

Multi-Sector<br />

Collaboration<br />

Source: AVPN<br />

60 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


In the pre-engagement phase,<br />

funders develop their mission,<br />

strategy and a potential deal<br />

pipeline. <strong>The</strong>y then use this to raise<br />

funds from other funders as well as<br />

to shortlist organisations according<br />

to this. After investing, they work<br />

closely with the organisation to help<br />

them make the most of the finances<br />

disbursed, as well as increase the<br />

organisation’s skill level in meeting<br />

its social mission.<br />

<strong>The</strong> impact assessment practice<br />

already starts in the pre-engagement<br />

phase, where the social investor and<br />

the investee negotiate their vision for<br />

impact and what can be achieved.<br />

Fundamentally this carries through<br />

during the engagement, and also<br />

allows the investee organisation<br />

to benefit and learn from it in the<br />

long run, even after this investment<br />

period has ended.<br />

Portfolio management is<br />

predominantly done on the side<br />

of the funder, but builds on the<br />

areas of impact assessment and<br />

influences pre-engagement,<br />

capacity-building and multi-sector<br />

collaboration. Beyond risk and<br />

return equations in the financial<br />

realm of portfolio management,<br />

VP portfolio management needs<br />

to account for social mission<br />

achievement, and different funders<br />

have different strategies.<br />

Finally, multi-sector collaboration<br />

acknowledges that most funders<br />

have to work across sectors and<br />

with many different stakeholders to<br />

see their solutions come to fruition<br />

and carried by more people than<br />

themselves. Together, these five<br />

practices span the entire arc of<br />

social investing—the most central<br />

of which are capacity-building and<br />

impact assessment.<br />

Pulling Together Various<br />

Silos to Build Up Expertise<br />

around the Capability<br />

Development Model (CDM)<br />

To increase the efficiency of AVPN<br />

members' efforts to build social<br />

impact, AVPN is holding a number of<br />

events, workshops and learning labs,<br />

the largest of which being the AVPN<br />

Conference. Attended in <strong>2016</strong> by 650<br />

participants in Hong Kong, it brought<br />

together government officials,<br />

funders from impact investing<br />

funds, foundations, VP funds and<br />

others, corporates and multilaterals<br />

and non-VP funders to discuss the<br />

trends in social investing. Spread<br />

over 24 sessions, the talks covered<br />

all five areas of VP, as well as sector<br />

and country focus or hot topics<br />

including faith-based philanthropy,<br />

philanthropy and sustainable<br />

development goals (SDGs), and<br />

human capital in social investing.<br />

Other initiatives, e.g. the Asia Policy<br />

Dialogue and workshops in capacitybuilding,<br />

are more focused on<br />

sharing specific knowledge in such<br />

areas as how to foster the social<br />

economy through policy or to discuss<br />

with experts and peers selected best<br />

practices of capacity-building. <strong>The</strong>se<br />

are offered throughout the year and<br />

provide a platform for engaging all<br />

stakeholders within the ecosystem of<br />

social investing.<br />

As social issues across the globe<br />

become increasingly complex and<br />

multifaceted, and faced with limited<br />

resources, funders have little choice<br />

but to increase the effectiveness<br />

of SPOs to address these issues.<br />

Focusing on capacity-building and<br />

impact assessment are two key<br />

areas that can provide significant<br />

gains on effectiveness. Across Asia,<br />

AVPN is witnessing a burgeoning<br />

community of practitioners who are<br />

embracing this mindset and working<br />

collaboratively to deliver sustainable<br />

social impact.<br />

650<br />

participants attended the<br />

<strong>2016</strong> AVPN Conference in<br />

Hong Kong<br />

<strong>2016</strong><br />

Dr Martina Mettgenberg-<br />

Lemière is Head of Insights and<br />

Capacity-Building at the Asian<br />

Venture Philanthropy Network<br />

(AVPN). She builds on a decade<br />

of experience in leading applied<br />

research for businesses and<br />

non-profits with a focus on human capital,<br />

education and impact. Most recently in<br />

Singapore, she led projects at INSEAD and<br />

the Human Capital Leadership Institute,<br />

and mentored students at the micro-business<br />

school Aidha. Previously, she worked in<br />

business research and consulting in India,<br />

and taught at the Universities of Manchester<br />

and Sussex. She can be reached at<br />

martina@avpn.asia<br />

Kevin Teo is Managing Director<br />

of AVPN’s Knowledge Centre.<br />

His previous appointments<br />

include: Co-Founder of Volans,<br />

a <strong>Social</strong> Innovation company<br />

with offices in London and<br />

Singapore; Head of East and<br />

Southeast Asia at the Schwab Foundation<br />

of <strong>Social</strong> Entrepreneurship; and Global<br />

Leadership Fellow at the World Economic<br />

Forum. Kevin is a Trustee of the Southeast<br />

Asian Service Leadership Network (SEALNet),<br />

a non-profit he co-founded in 2004, and sits<br />

on the evaluation panel of the Ministry of<br />

<strong>Social</strong> and Family Development’s ComCare<br />

<strong>Social</strong> Enterprise fund. He can be reached<br />

at kevin@avpn.asia<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 61


a private partner, but this can<br />

often be impossible for developing<br />

countries with restricted finances.<br />

In such cases, the government can<br />

use its legal framework to provide<br />

social enterprises with easier access<br />

to private, low-cost capital.<br />

Increasing Energy<br />

Access in Southeast<br />

Asia through<br />

<strong>Social</strong> Enterprises<br />

By Haneol Jeong<br />

<strong>The</strong> 21st century has seen cars go<br />

driverless and virtual reality become<br />

a reality—yet one fact remains: one<br />

in seven people still do not have<br />

access to electricity. 1 In an age<br />

where more people have access to<br />

mobile phones than toilets, 2 electricity<br />

has become as vital a necessity as<br />

clean water. To address this issue,<br />

social enterprises such as M-KOPA<br />

and Sunlabob have pioneered efforts<br />

to provide renewable energy for<br />

off-grid communities, and yielded<br />

innovative energy alternatives and<br />

financing solutions. Southeast Asia,<br />

however, remains a largely untapped<br />

market, with approximately 19 per cent<br />

of its population still without access<br />

to consistent electricity. 3<br />

For the social enterprises focusing<br />

on energy access, securing earlystage<br />

financing to cover the initial<br />

costs of product development,<br />

manufacturing and delivery<br />

determines the future of the<br />

company. However, the current<br />

financial marketplace in Southeast<br />

Asia lacks patient, early-stage<br />

capital to support such social<br />

enterprises. In order to translate<br />

the projects into self-sustaining,<br />

profitable companies, it is crucial<br />

that public and private sectors<br />

collaborate to create an ecosystem<br />

with a low barrier to entry and<br />

financial support for social<br />

entrepreneurs with innovative<br />

ideas for energy access.<br />

Support from the public sector can<br />

come in the form of early-stage<br />

development capital, low-cost debt,<br />

or subsidised offtake agreements.<br />

Governments can directly provide<br />

development capital for the<br />

social enterprises by forming a<br />

collaborative venture capital with<br />

Developed countries with active<br />

impact investments, such as the<br />

UK or US, have specific business<br />

categories in place for social<br />

enterprises to provide protection<br />

and allow easier access to capital<br />

than for non-profit organisations,<br />

while requiring of them transparency<br />

in their processes and delivery<br />

of their social mission. <strong>The</strong>se<br />

categories—known as Community<br />

Interest Company (CIC) in the UK,<br />

and Low-Profit Limited Liability<br />

Company (L3C) in the US—allow<br />

social enterprises to register<br />

inexpensively and enjoy the flexibility<br />

of a traditional LLC to a certain<br />

extent, as well as the benefits of<br />

non-profits. Additionally, subsidised<br />

offtake agreements will ensure<br />

that the social enterprises are<br />

profitable in the short term and<br />

stay self-sufficient in the long term.<br />

While the government will have to<br />

work with limited resources and<br />

potentially lower revenues, attracting<br />

more private capital to provide<br />

initial funding for social enterprises<br />

at a low cost and creating an<br />

environment that can ensure their<br />

survival will have lasting impacts<br />

on a country’s economy. <strong>The</strong> funding,<br />

however, is only successful when<br />

supply can meet the market demand,<br />

the latter of which is limited due<br />

to the low-income nature of<br />

a population without energy access.<br />

<strong>The</strong> target market for energy<br />

access is often not able to afford<br />

hi-tech renewable energy solutions.<br />

Traditionally, non-profit organisations<br />

and charities have aimed to mitigate<br />

this problem by supplying the<br />

technology free of charge. Although<br />

feasible in theory, supplying free<br />

energy has led to certain problems,<br />

most notably the decrease in<br />

quality of the electricity. As such,<br />

off-grid communities no longer<br />

want free, inconsistent electricity<br />

62 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

Increasing Energy Access in Southeast Asia through <strong>Social</strong> Enterprises<br />

from cheap equipment; they instead<br />

demand a safe, consistent supply of<br />

electricity with proper maintenance<br />

and updates, even if at a cost.<br />

<strong>The</strong>refore, the challenge for social<br />

enterprises is ensuring that the<br />

high-quality equipment is affordable<br />

to even the most financially isolated<br />

communities. Certain social<br />

enterprises, including M-KOPA, have<br />

overcome this challenge through<br />

innovative asset financing structures.<br />

M-KOPA, a social enterprise based<br />

in Kenya that provides portable<br />

solar panels to off-grid households,<br />

successfully adapted asset financing<br />

to their business model. It requires<br />

its customers to pay an upfront<br />

deposit and then the remaining cost<br />

of equipment over a year at a flexible<br />

schedule. Once the deposit is paid,<br />

customers top up their account<br />

through a mobile transaction service,<br />

M-PESA, and enjoy a consistent<br />

supply of electricity at US$0.49 per<br />

24 hours. Each device is remotely<br />

controlled by the centralised<br />

computer system, and automatically<br />

shuts off if the account is empty.<br />

This type of asset financing differs<br />

from conventional microfinancing<br />

in that it does not enforce a strict<br />

payment schedule or amount. This<br />

flexibility ensures that the widest<br />

socio-economic range of target<br />

markets is reached, while the<br />

company still remains profitable.<br />

Although M-KOPA’s system works<br />

because of its centralised, remotecontrolling<br />

computer system<br />

and the existence of the mobile<br />

transaction company M-PESA, its<br />

asset financing structure is one<br />

that can be adapted to the context<br />

of Southeast Asia. Instead of<br />

controlling each device remotely,<br />

social enterprises providing a<br />

similar energy solution can set<br />

up regional service centres with<br />

sales and customer service<br />

representatives integrated in each<br />

community to monitor repayments<br />

and provide regular maintenance<br />

service. This method has proved<br />

to be successful by Sunlabob,<br />

an off-grid renewable energy<br />

provider in Laos. When launching<br />

Off-grid communities no longer want<br />

free, inconsistent electricity from cheap<br />

equipment; they instead demand a safe,<br />

consistent supply of electricity with proper<br />

maintenance and updates, even<br />

if at a cost.<br />

its operations, Sunlabob invited 70<br />

people from various ethnic groups<br />

to receive technical and business<br />

operations training. 4 <strong>The</strong> trainees<br />

then returned to their respective<br />

off-grid communities with rented<br />

equipment from Sunlabob to<br />

establish micro-enterprises to<br />

manage maintenance and payment<br />

collection. Although Sunlabob<br />

later expanded to large-scale<br />

projects with government offtake<br />

agreements for financial reasons,<br />

the initial approach tailored to the<br />

market was effective in reaching the<br />

target customers.<br />

In conclusion, securing early-stage<br />

funding for energy-focused social<br />

enterprises is not possible without<br />

proper support from the public<br />

sector. Whether in the form of<br />

venture capital through a public–<br />

private partnership or a change in<br />

regulations, the public sector must<br />

fill the gaps in order to translate<br />

projects into sustainable businesses<br />

that are scalable in the long run.<br />

Additionally, in order to ensure that<br />

the low-income target market can<br />

afford the high-quality products and<br />

Notes<br />

services, social enterprises could<br />

implement innovative financing<br />

instruments, such as asset<br />

financing tailored to the regional<br />

and cultural characteristics. Such<br />

a financing structure, accompanied<br />

by a proper support system and<br />

new technologies that can bolster<br />

economic activities, will allow<br />

the financially isolated off-grid<br />

communities to become<br />

a self-sustaining and expanding<br />

participant of the global economy.<br />

Originally from Seoul, South<br />

Korea, Haneol Jeong is<br />

a student at the Wharton<br />

School of the University of<br />

Pennsylvania, and a member<br />

of the Joseph Wharton scholars<br />

programme. He was a Summer<br />

Research Associate at the Lien Centre for<br />

<strong>Social</strong> Innovation, where he conducted<br />

an independent research project on increasing<br />

energy access in Southeast Asia through<br />

investment in social enterprises. He has<br />

previously worked as a renewable energy<br />

project research assistant in Bangkok, and<br />

as a private equity summer analyst in Seoul.<br />

Haneol’s primary research interests include<br />

renewable energy, impact investing and<br />

development banking. He can be reached<br />

at haneolj@wharton.upenn.edu<br />

1<br />

World Bank and International Energy Agency, “Sustainable Energy for All 2015:<br />

Progress Toward Sustainable Energy”, at https://openknowledge.worldbank.org/<br />

handle/10986/22148<br />

2<br />

Yue Wang, “NewsFeed: More People Have Cell Phones Than Toilets UN Study Shows”,<br />

Time, 25 March 2013, at http://newsfeed.time.com/2013/03/25/more-people-have-cellphones-than-toilets-u-n-study-shows<br />

3<br />

Rexel Foundation, “Study on Access to Efficient Energy in South-East Asia”, at<br />

http://www.rexelfoundation.com/en/platform-social-entrepreneurs/connaissances-etsavoirs/study-access-efficient-energy-south-east-as-0<br />

4<br />

Ravi Chidambaram, “Sunlabob Case Study: From Lights Out to Lights On”, Asian<br />

Management Insights 3, 1 (<strong>2016</strong>): 50–5<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 63


By Mitchell Laferriere<br />


Investment Banks as the Next Step for Impact Investing<br />

Investment banks are in a unique<br />

position to lead in impact investing<br />

and resolve some of the biggest<br />

challenges facing the space today,<br />

due not least to their vast reserves<br />

of capital and clout. Chief among<br />

these challenges are: 1) a drought of<br />

growth capital for social enterprises;<br />

and 2) the lack of a consistent<br />

impact measurement system for<br />

use by investors. Investment banks<br />

are in a position to solve these<br />

challenges by both consolidating<br />

impact accounting standards and<br />

mobilising significantly more capital<br />

in investments that seek social,<br />

environmental and financial returns.<br />

Though the practice of impact<br />

investing began nearly two decades<br />

ago, it was not until recent years<br />

that it gained prominence. Advances<br />

in digital technology and increased<br />

interconnectivity have given rise<br />

to a generation of socially aware<br />

individuals. 1 With social and<br />

environmental issues constantly<br />

amplified by mainstream news,<br />

global movements have arisen<br />

to address these problems—<br />

movements often led by what are<br />

known as social entrepreneurs.<br />

Sometimes, they establish social<br />

enterprises (SEs), understood<br />

broadly as businesses that produce<br />

positive social and environmental<br />

outcomes. <strong>The</strong> growth of SEs in<br />

recent years has led to a demand<br />

for purpose-driven investment<br />

capital focused on achieving social<br />

or environmental impact alongside<br />

financial returns.<br />

For their size, investment banks<br />

have comparatively little to do<br />

with the rising practice of impact<br />

investing. <strong>The</strong>y make up only<br />

nine per cent of all assets under<br />

management (AUM) in the impact<br />

investment industry. 2 That totals<br />

about US$1 trillion in investments<br />

in an US$11 trillion market. 3<br />

For the most part, the world of<br />

impact investing is managed by<br />

individual fund managers and<br />

diversified financial institutions<br />

(DFI), but investment banks have<br />

the capacity to repair some of the<br />

biggest challenges in the impact<br />

investing industry. Investment banks<br />

in particular have an unparalleled<br />

opportunity to supply much-needed<br />

capital while instilling proper<br />

structure in terms of impact<br />

measurement.<br />

For the last three years, investors<br />

and business owners have named<br />

For their size,<br />

investment banks<br />

have comparatively<br />

little to do with the<br />

rising practice of<br />

impact investing:<br />

<strong>The</strong>y make up only<br />

nine per cent of all<br />

the assets under<br />

management (AUM) in<br />

the impact investment<br />

industry. That totals<br />

about US$1 trillion<br />

in investments in an<br />

US$11 trillion market.<br />

64 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


insufficient capital as the number one<br />

problem facing SEs. 4 Like any startup,<br />

SEs require capital to scale up.<br />

In most cases, angel impact<br />

investors—affluent individuals who<br />

provide start-up funding, usually<br />

in the form of grants, convertible<br />

debt or ownership equity—have<br />

the seed and early-stage capital<br />

support covered. However, what<br />

SEs need after this point is capital<br />

from non-concessionary investors,<br />

i.e. those who are not willing to lose<br />

returns for impact. <strong>The</strong>se investors<br />

generally provide the required capital<br />

for investment at the scale and<br />

growth stages of a start-up, when the<br />

business is about to be profitable. 5<br />

And just like any business, SEs need<br />

to appeal to these non-concessionary<br />

investors in order to tap into their<br />

large pools of growth-stage capital.<br />

Put simply, investment banks have<br />

funds that could be used to scale<br />

social enterprises. Of course, investing<br />

for social and environmental impact<br />

can and does produce a financial<br />

return on investment at or above<br />

market rates. 6 More importantly,<br />

the scaling of SEs can catalyse an<br />

entire market environment through<br />

the opening up of new supply chains<br />

and consumer markets, creating<br />

positive spillover effects for other<br />

enterprises. 7 Beyond attaining<br />

financial returns from the SEs that<br />

scale up and become profitable,<br />

investment banks can catalyse the<br />

growth of entire markets by injecting<br />

strategic capital and refining impact<br />

investing processes.<br />

Currently, the impact investment<br />

market is having some difficulty<br />

measuring and analysing social and<br />

environmental impact. This problem<br />

stems from impact’s varying nature.<br />

When impact spans so many different<br />

sectors—education, housing, energy,<br />

clean water, poverty, and many<br />

others—there are therefore widely<br />

differing measurements for success.<br />

And while some business solutions<br />

can help to catalyse a market, the<br />

question remains: how can its<br />

market- or sector-wide impact be<br />

measured? Moreover, with many<br />

different bodies vying for the authority<br />

to create an all-encompassing system<br />

to measure impact, 8 this has led to<br />

non-consolidation of measurement<br />

systems among impact investors<br />

in general.<br />

Investment banks can solve this<br />

problem by voting with their capital.<br />

Useful evaluations of risk, return<br />

and impact demand consistency, 9<br />

so the banks will require a set of<br />

level metrics to evaluate these<br />

businesses. If one consistent set<br />

of standards and procedures, like<br />

the Generally Accepted Accounting<br />

Principles (GAAP), can be used<br />

to record and report social and<br />

environmental impact across all<br />

social enterprises, then that impact<br />

can be communicated and compared<br />

across businesses and investors.<br />

This is a critical precondition of any<br />

investment market that can source<br />

and allocate capital with efficiency<br />

and transparency. 10 Investment<br />

banks are in a unique position to lead<br />

by using their field-wide influence<br />

to establish one set of level metrics,<br />

Notes<br />

consolidate the field, and streamline<br />

the process of impact investing.<br />

I believe that impact investing—<br />

financial investing that incorporates<br />

people and planet—is truly the<br />

way of the future. For investment<br />

banks to remain competitive, they<br />

will need to change the way they<br />

view investing. <strong>The</strong>y can do so by<br />

seizing this unique opportunity to<br />

play a leadership role in the impact<br />

investing space.<br />

Mitchell Laferriere was<br />

a Summer Research Associate<br />

at the Lien Centre for <strong>Social</strong><br />

Innovation. During this time,<br />

he studied the theory, strategy<br />

and developmental curriculum<br />

for the teaching of impact<br />

investing to university students. His primary<br />

research interests cover impact investing,<br />

sustainable finance, social entrepreneurship<br />

and social innovation. Presently an<br />

undergraduate at Gabelli Business School at<br />

Fordham University, Mitchell is originally<br />

from Londonderry, New Hampshire, where he<br />

attended Boston College High School. He can<br />

be reached at Mlaferriere1@fordham.edu<br />

1<br />

Nielsen Press Room, "Global Consumers Are Willing to Put <strong>The</strong>ir Money Where <strong>The</strong>ir<br />

Heart Is When It Comes to Goods and Services from Companies Committed to <strong>Social</strong><br />

Responsibility", Nielsen Market Research, 17 June 2014, at http://www.nielsen.com/<br />

us/en/press-room/2014/global-consumers-are-willing-to-put-their-money-where-theirheart-is.html<br />

2<br />

Abhilash Mudaliar, Hannah Schiff and Rachel Bass, “Annual Impact Investor Survey”,<br />

<strong>2016</strong> GIIN Annaul Impact Investor Survey, May <strong>2016</strong>, at https://thegiin.org/assets/<strong>2016</strong><br />

GIIN Annual Impact Investor Survey_Web.pdf, p. 33.<br />

3<br />

Global Impact Investing Network, “What You Need to Know About Impact Investing”,<br />

at https://thegiin.org/impact-investing/need-to-know/#s1<br />

4<br />

Mudaliar, Schiff and Bass, “Annual Impact Investor Survey”, p. 33.<br />

5<br />

Paul Brest and Kelly Born, “Unpacking the Impact in Impact Investing”, Stanford <strong>Social</strong><br />

Innovation Review, 14 August 2013, at http://ssir.org/articles/entry/unpacking_the_<br />

impact_in_impact_investing<br />

6<br />

Cambridge Associates and <strong>The</strong> Global Impact Investing Network, Introducing the Impact<br />

Investment Benchmark (Boston, MA: Cambridge Associates, 2015), at https://thegiin.org/<br />

assets/documents/pub/Introducing_the_Impact_Investing_Benchmark.pdf<br />

7<br />

Ibid<br />

8<br />

Mark Florman, Robyn Klingler-Vidra and Martim Jacinto Facada, “A Critical Evaluation<br />

of <strong>Social</strong> Impact Assessment Methodologies and a Call to Measure Economic<br />

and <strong>Social</strong> Impact Holistically through the External Rate of Return Platform”,<br />

LSE Enterprise Working Paper #1602 (February <strong>2016</strong>), at http://www.lse.ac.uk/<br />

businessAndConsultancy/LSEConsulting/pdf/Assessing-social-impact-assessmentmethods-report.pdf<br />

9<br />

Yasemin Saltuk and Ali Idrissi, “A Portfolio Approach to Impact Investment: A Practical<br />

Guide to Building, Analyzing and Managing a Portfolio of Impact Investments”, Global<br />

<strong>Social</strong> <strong>Finance</strong> (1 October 2012).<br />

10<br />

Clay Shirky, “How Priceline Became a Real Business,” Wall Street Journal, 13 August 2001,<br />

A-12.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 65


Just as professional athletes mould their bodies into lean, mean<br />

performance machines, so too is there a need for social entrepreneurs<br />

to get their brains in shape. In fact, research shows that the brain works<br />

like a muscle which grows and gets stronger as you learn—and one of<br />

the best ways to boost one’s brainpower is by reading. So if you’re an<br />

aspiring changemaker, what are some titles to add to your book list?<br />

JAY BOOLKIN reviews the literature and narrows it down to just eleven.<br />

GOOD<br />

READS<br />

Best Books<br />

for <strong>Social</strong><br />

Entrepreneurs and<br />

Changemakers<br />

By Jay Boolkin<br />

<strong>The</strong> Art of <strong>Social</strong> Enterprise:<br />

Business as if People Mattered<br />

By Carl Frankel and Allen Bromberger<br />

Available in paperback via Amazon<br />

“To change something, build<br />

a new model that makes the existing<br />

model obsolete.”<br />

A practical guide that supplies<br />

all you need to know about the<br />

mechanics of social entrepreneurship<br />

including: start-up (envisioning and<br />

manifesting intention); strategic<br />

planning (balancing social and<br />

monetary value); and maintaining<br />

balance (despite the inevitable<br />

challenges associated with being<br />

an entrepreneur). Aimed at both<br />

emerging and established social<br />

entrepreneurs, for-profit leaders<br />

who want to introduce an element<br />

of social responsibility into<br />

their companies, and non-profit<br />

organisations who want to increase<br />

their stability by generating income,<br />

<strong>The</strong> Art of <strong>Social</strong> Enterprise is the<br />

definitive guide to doing well while<br />

doing good.<br />

51 Questions on <strong>Social</strong><br />

Entrepreneurship: <strong>Social</strong> Impact<br />

Through Business, An Actionable<br />

Q&A<br />

By Neetal Parekh<br />

Available in paperback via Amazon<br />

“<strong>The</strong>re is the potential to work beyond<br />

subsets of entrepreneurship and focus<br />

on redefining the future of business<br />

as a whole and to consider impact<br />

as a norm.”<br />

51 Questions on <strong>Social</strong><br />

Entrepreneurship is an actionable<br />

Q&A, written as a story, that takes the<br />

reader from wherever they are at, and<br />

introduces game-changing concepts<br />

around social entrepreneurship<br />

and social innovation. If you have<br />

ever been curious about, or even<br />

overwhelmed by, the options, terms,<br />

possibilities and potential in creating<br />

and scaling social ventures, this book<br />

was designed especially for you.<br />

66 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


<strong>The</strong> Promise of a Pencil:<br />

How an Ordinary Person Can<br />

Create Extraordinary Change<br />

By Adam Braun<br />

Available in paperback via Amazon<br />

“In moments of uncertainty, when<br />

you must choose between two paths,<br />

allowing yourself to be overcome by<br />

either the fear of failure or the dimly lit<br />

light of possibility, immerse yourself in<br />

the life you would be most proud to live.”<br />

<strong>The</strong> Promise of a Pencil chronicles<br />

the author’s quest to find his calling:<br />

each chapter explains one clear step<br />

that anyone can take to turn his/<br />

her biggest ambitions into reality,<br />

even if starting from as little as $25.<br />

Braun’s story takes readers behind<br />

the scenes with business moguls<br />

and village chiefs, world-famous<br />

celebrities and hometown heroes.<br />

Driven by compelling anecdotes and<br />

shareable insights, <strong>The</strong> Promise<br />

of a Pencil is a vivid and inspiring<br />

book that provides readers with the<br />

tools to make their own lives a story<br />

worth telling.<br />

Getting Beyond Better: How<br />

<strong>Social</strong> Entrepreneurship Works<br />

By Roger L. Martin and Sally Osberg<br />

Available in hardcover via Amazon<br />

“<strong>Social</strong> entrepreneurs feel confident<br />

in their understanding of the world<br />

but also recognise that there is much<br />

they don’t know. Rather than being<br />

paralysed by the significant gaps in<br />

their knowledge, they design and run<br />

experiments to fill in these gaps.”<br />

In this compelling book, strategy guru<br />

Roger L. Martin and Skoll Foundation<br />

President and CEO Sally R. Osberg<br />

describe how social entrepreneurs<br />

target systems that exist in a stable<br />

but unjust equilibrium and transform<br />

them into entirely new, superior, and<br />

sustainable equilibria. All of these<br />

leaders—disrupters, visionaries, or<br />

changemakers—develop, build, and<br />

scale their solutions in ways that<br />

bring about the truly revolutionary<br />

change that makes the world a<br />

fairer and better place. Getting<br />

Beyond Better sets forth a bold new<br />

framework, demonstrating how and<br />

why meaningful change actually<br />

happens in the world. It also provides<br />

concrete lessons and a practical<br />

model for businesses, policymakers,<br />

civil society organisations, and<br />

individuals who seek to transform<br />

our world for good.<br />

Systems Thinking for <strong>Social</strong><br />

Change: A Practical Guide<br />

to Solving Complex Problems,<br />

Avoiding Unintended<br />

Consequences, and Achieving<br />

Lasting Results<br />

By David Peter Stroh<br />

Available in paperback via Amazon<br />

“Today’s problems were most likely<br />

yesterday’s solutions.”<br />

How do unintended consequences<br />

come about and how can we avoid<br />

them? By applying conventional<br />

thinking to complex social problems,<br />

we often perpetuate the very<br />

problems we try so hard to<br />

solve, but it is possible to think<br />

differently, and get different results.<br />

Systems Thinking for <strong>Social</strong><br />

Change will enable its readers<br />

to contribute more effectively to<br />

society by understanding what<br />

systems thinking is and why it<br />

is so important. <strong>The</strong> book also<br />

gives concrete guidance on how<br />

to incorporate systems thinking<br />

in areas like problem-solving,<br />

decision-making and strategic<br />

planning, without needing to be<br />

a technical expert.<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 67

Chapter One<br />

By Daniel Flynn<br />

Available at http://chapterone.thankyou.co.<br />

“High five the status quo in the face—<br />

with a chair.”<br />

Chapter One is a story of epic<br />

proportions by Thankyou co-founder<br />

Daniel Flynn, about the journey of<br />

three Australians with zero business<br />

experience—only their shared belief<br />

in the power to “change stuff”. It’s<br />

an entertaining read comprising gutwrenching<br />

decisions, wild mistakes<br />

and daring moves into business,<br />

marketing, social enterprise and<br />

beyond. Chapter One challenges<br />

what one knows, and stresses the<br />

fact that “crazy” ideas can become<br />

a reality. It also invites readers to<br />

seize the opportunity to be a part of<br />

something big, which could perhaps<br />

change the course of history.<br />

Business Model Generation:<br />

A Handbook for Visionaries,<br />

Game Changers, and Challengers<br />

By Alexander Osterwalder and<br />

Yves Pigneur<br />

Available in paperback via Amazon<br />

“We need a business model concept<br />

that everybody understands: one that<br />

facilitates description and discussion.”<br />

Traditional charities are no longer<br />

the only way to effect social change.<br />

With social sector organisations<br />

becoming more business-like,<br />

“profit” has become somewhat<br />

of a dirty word—a mindset which<br />

needs to change. Business<br />

Model Generation is a handbook<br />

for visionaries, game-changers<br />

and challengers striving to defy<br />

outmoded business models and<br />

design tomorrow’s enterprises.<br />

Co-created by 470 “Business<br />

Model Canvas” practitioners from<br />

45 countries, it explains the most<br />

common Business Model patterns,<br />

and helps readers reinterpret them<br />

for their own context. Business<br />

Model Generation is especially<br />

suitable for businesses looking to<br />

adapt to harsh new realities, but<br />

which have yet to develop a strategy.<br />

<strong>The</strong> Future Chasers<br />

By Jan Owen<br />

Available at via https://www.goodspender.com.<br />

au/foundationforyoungaustralians/the-futurechasers<br />

“Our generation doesn’t have to be<br />

trained to be global citizens. We are<br />

global citizens.”<br />

<strong>The</strong> Future Chasers is<br />

a collection of stories featuring<br />

15 extraordinarily talented, inspiring<br />

and hardworking young individuals<br />

from Australia. Turning generational<br />

stereotypes on their heads, these<br />

“agents of change” share how they<br />

achieved amazing feats in fields as<br />

varied as politics, industry, the arts<br />

and technology.<br />

68 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT


How to Change the World:<br />

<strong>Social</strong> Entrepreneurs and<br />

the Power of New Ideas<br />

By David Bornstein<br />

Available in paperback via Amazon<br />

“An idea is like a play. It needs a good<br />

producer and a good promoter even if<br />

it is a masterpiece. Otherwise the play<br />

may never open; or it may open but,<br />

for a lack of an audience, close after<br />

a week. Similarly, an idea will not move<br />

from the fringes to the mainstream<br />

simply because it is good; it must<br />

be skillfully marketed before it will<br />

actually shift people’s perceptions<br />

and behavior.”<br />

Like <strong>The</strong> Future Chasers, How to<br />

Change the World provides vivid<br />

profiles of social entrepreneurs.<br />

This collection of stories highlights<br />

a massive transformation that is<br />

going largely unreported by the<br />

media: around the world, the fastest<br />

growing segment of society is the<br />

non-profit sector. Millions of ordinary<br />

people–social entrepreneurs–are<br />

increasingly stepping in to solve the<br />

problems where governments and<br />

bureaucracies have failed. How to<br />

Change the World shows that with<br />

determination and innovation, even<br />

a single person can make a surprising<br />

difference. For anyone seeking to<br />

make a positive mark on society, this<br />

will be both an inspiring read and<br />

an invaluable handbook, and will<br />

possibly change your view of the world.<br />

<strong>The</strong> Power of Positive Deviance:<br />

How Unlikely Innovators Solve<br />

the World’s Toughest Problems<br />

By Richard Pascale, Jerry Sternin and<br />

Monique Sternin<br />

Available in hardcover via Amazon<br />

“Its easier to act your way into a new<br />

way of thinking, than to think your<br />

way into a new way of acting …<br />

Once positive deviance behaviours<br />

have been discovered, the design must<br />

provide those who seek to learn with<br />

both the opportunity and the means<br />

to practice the new behaviour. A focus<br />

on practice rather than knowledge has<br />

proven to be a key element in bringing<br />

about lasting behavioural change.”<br />

Think of the toughest problems in<br />

your organisation or community.<br />

What if they’d already been solved<br />

and you didn’t even know it?<br />

<strong>The</strong> Power of Positive Deviance<br />

presents a counterintuitive new<br />

approach to problem-solving by<br />

leveraging positive deviants—the<br />

few individuals in a group who<br />

find unique ways to look at, and<br />

overcome, seemingly insoluble<br />

difficulties. By seeing solutions<br />

where others don’t, positive deviants<br />

spread and sustain needed change.<br />

An inspiring and insightful read, <strong>The</strong><br />

Power of Positive Deviance unveils<br />

a potent new way to tackle the<br />

thorniest challenges in any company<br />

and community.<br />

Half the Sky: Turning<br />

Oppression into Opportunity<br />

for Women Worldwide<br />

By Nicholas D. Kristof and Sheryl WuDunn<br />

Available in paperback via Amazon<br />

“A man goes out on the beach and sees<br />

that it is covered with starfish that<br />

have washed up in the tide. A little boy<br />

is walking along, picking them up and<br />

throwing them back into the water.<br />

‘What are you doing, son?’ the man<br />

asks. ‘You see how many starfish there<br />

are? You’ll never make a difference.’<br />

<strong>The</strong> boy paused thoughtfully, and picked<br />

up another starfish and threw<br />

it into the ocean. ‘It sure made<br />

a difference to that one,’ he said.”<br />

Half the Sky is a passionate call<br />

to arms against this era’s most<br />

pervasive human rights violation:<br />

the oppression of women and girls<br />

in the developing world. Drawing<br />

on the breadth of their combined<br />

reporting experience, authors<br />

Kristof and WuDunn depict our<br />

world with anger, sadness, clarity<br />

and, ultimately, hope. This heartfelt,<br />

pragmatic and inspirational book<br />

reveals how a little help can<br />

transform the lives of women and<br />

girls abroad.<br />

Jay Boolkin blogs at <strong>Social</strong> Good Stuff (http://www.socialgoodstuff.com) and is founder of Promise or Pay<br />

(http://www.promiseorpay.com), an online platform that uses small promises to drive real, wide-scale social<br />

change. Promise or Pay won the <strong>Social</strong> Startups MVP Program, a worldwide competition based on social impact<br />

scalability. In mid-November 2014, it won the Deloitte Australia <strong>Social</strong> Innovation Pitch Competition and in early<br />

2015 received funding from <strong>The</strong> Myer Foundation. Contact Jay at jay@socialgoodstuff.com or connect with him<br />

on Twitter @socialgoodstuff and @promiseorpay<br />

<strong>Social</strong> <strong>Space</strong> ISSUE EIGHT 69

POP QUIZ<br />


Saver<br />

Are you a saver<br />

or a spender?<br />

Set up a<br />

lemonade stand<br />

You urgently<br />

need money.<br />

What do you do?<br />

Borrow from<br />

friends and family<br />

It’s your friend’s<br />

birthday. Do you buy<br />

a gift or bake a cake?<br />

Bake<br />

a cake<br />

Do you go for organic<br />

or non-organic food?<br />

Spender<br />

Breakfast: Oatmeal<br />

or Oreo cookies?<br />

Buy a gift<br />

Your friend owes you<br />

a little money. How often<br />

do you remind him or her?<br />

Non-Organic<br />

Oreo cookies<br />

Oatmeal<br />

If you want to renovate<br />

your house, would you<br />

pay an expert or do it<br />

yourself?<br />

Do it<br />

yourself<br />

Organic<br />

You see a beggar<br />

on the street. What<br />

do you give him?<br />

What happens<br />

when you do your<br />

friend a favour?<br />

Always<br />

Sometimes<br />

What is your preferred<br />

social financial<br />

instrument?<br />

Rarely<br />

Pay an<br />

expert<br />

When should a business<br />

start caring about<br />

producing social impact?<br />

A few<br />

coins<br />

Expect a<br />

favour from<br />

them<br />

in return<br />

Help them<br />

unconditionally<br />

You’re lost in a new city.<br />

Do you ask for directions<br />

or use a map?<br />

After its<br />

operations<br />

Before its<br />

operations<br />

Food<br />

Earned<br />

income<br />

Use<br />

a map<br />

Grants<br />

Ask for<br />

directions<br />


One Hope<br />

Reese Fernandez-Ruiz<br />

Rags2Riches<br />


Goonj<br />

Nushelle de Silva<br />

Building Bridges<br />


Bill & Melinda Gates Foundation<br />

Like Jake Kloberdanz, you<br />

certainly possess business<br />

acumen and the business<br />

that you would run operates<br />

independently of its social<br />

mission. To be sure, One<br />

Hope operates like most<br />

other wineries in that it<br />

aims to make a profit. What<br />

makes it different is that<br />

50 per cent of its profit goes<br />

to a specific social cause.<br />

When Reese Fernandez-<br />

Ruiz first founded<br />

Rags2Riches, she wanted<br />

it to be a win-win situation<br />

all around, including for the<br />

environment. Like Reese,<br />

you integrate your social<br />

impact into a sustainable<br />

business model, ensuring<br />

that whatever you do in<br />

your business will benefit<br />

the community and not<br />

compromise environmental<br />

impact.<br />

Anshu Gupta has<br />

revolutionised giving in<br />

India. He founded the nongovernmental<br />

organisation<br />

Goonj, which recycles used<br />

clothing into other products<br />

such as sanitary napkins.<br />

Like Anshu, you also do not<br />

believe that free lunches<br />

exist in this world—Goonj’s<br />

beneficiaries have to work<br />

in exchange for the clothes<br />

provided by Goonj.<br />

Having experienced racism<br />

first-hand, Nushelle de<br />

Silva was inspired to get<br />

involved on the ground. Her<br />

enterprise, Building Bridges,<br />

aims to bring together<br />

ethnically diverse Sri Lankan<br />

youths through free art<br />

workshops. Like Nushelle,<br />

you also believe that people<br />

deserve unconditional<br />

help, regardless of their<br />

circumstances.<br />

As a people’s person,<br />

the organisational form of<br />

a charity suits you the best.<br />

Just like the Bill & Melinda<br />

Gates Foundation, you<br />

value strong interpersonal<br />

connections and use your<br />

social network to approach<br />

challenges.<br />

Image credits: Jake Kloberdanz via One Hope website; Reese Fernandez-Ruiz screen grab from Project<br />

Pagsulong’s Youtube video; Anshu Gupta via Goonj website; Nushelle de Silva screen grab from “OFID at One<br />

Young World 2014” YouTube video; Bill and Melinda Gates via Wikipedia (CC BY-SA 3.0).<br />

70 <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

DD/ MM/ YYYY<br />

m y<br />

s o cia l<br />

spa ce<br />

Things to note

DD/ MM/ YYYY<br />

m y<br />

s o cia l<br />

spa ce<br />

Things to note

IV <strong>Social</strong> <strong>Space</strong> ISSUE EIGHT

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