Leverage for Good: The New World of Social-Purpose Finance

Leverage for Good: The New World of Social-Purpose Finance

In this article Lester Salamon provides an introduction to the intersection of profit and social good within what he describes as a “new frontier” of philanthropy. He contends that new instruments and institutions have surfaced to finance social-purpose activities, thereby changing the landscape to one that has become more diverse, entrepreneurial, global and collaborative. At the core of this upsurge are four important processes of change:

  • Implementing a variety of new financial tools for promoting social purposes (e.g., loans, loan guarantees, equity-type investments, and social impact bonds);
  • Producing a host of new actors as the institutional structures through which social-purpose finance is proceeding (e.g., capital aggregators, secondary markets, social stock exchanges, and social enterprise brokers);
  • Forming charitable or social-purpose capital pools through the gifts of wealthy individuals, and from the privatization of formerly public or quasi-public assets or the establishment of specialized social-purpose investment funds; and
  • Using new trade arrangements and internet capabilities to facilitate the giving of money, as well as a variety of in-kind forms of assistance (e.g., volunteer time or computer hardware and software).

Salamon offers a roadmap to the range of new developments by providing a comprehensive overview of the new actors and tools transforming philanthropy and social investments. This resource provides a deeper understanding of the benefits and challenges so that nonprofit organizations can better navigate the new frontier of philanthropy.

© EBR Media Ltd, 2015. The definitive, and edited version of this article is published in The World Financial Review November/December, 2014, www.worldfinancialreview.com

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