Role of Impact Investment and Philanthropy in Development

The Monitor Group, a leading social organization that works with global corporations, governments and social enterprises to help them achieve their growth goals, recently published an insightful report called "From Blueprint to Scale." The report includes insightful reviews of hundreds of social enterprises in Asia and Africa to address the critical question on the role of impact investment and philanthropy in solving social problems in the developing world.

The report identifies one of the key challenges for social development in the third world as how to find a way to attract new entrepreneurs into the social sector. Historically, aid donors and private philanthropists have dominated the social area. However, social entrepreneurs can make a more sustainable impact to promote development in the long run.

The Monitor study attempts to answer a key question: if market-based, socially inclusive solutions can make a wider social impact, then what are the 'roles' and what is the 'right design' of various involved parties to scale the solution and achieve permanent change? The study notes that there are clear and specific roles that impact investors as well as philanthropists can play in their efforts to reduce poverty and facilitating sustainable change.

Monitor study identifies four distinct stages to help create a sustainable model of market development for impact investors. These stages include Blueprint, Validate, Prepare and Scale. The process begins with a philanthropist developing a blueprint of an idea or design which leads to an effective solution to meet specific needs of the economically disadvantaged people. It is important to ensure that the innovative solution meets the needs of consumers as well as producers in an impoverished region.

The next stage requires the pioneer to validate the business model in terms of scalability and financial viability. The last two stages require the social entrepreneur to prepare appropriate conditions in the market and carry out an awareness program to generate demand in order to support sustainability. This is critical to creation of a new product or a new market. Once the first three stages are accomplished, the final stage of scaling takes over. Impact investors step in at this stage to take over from philanthropists to help fund larger investments.

Source: Tribune.com.pk

Photo Credit: Duchesssa