Arthur Wood is the Einstein of social finance. He knows the secrets of how the universe's money works! He is brilliant and full of insights and well worth paying attention to. Previously Global Head Social Finance Services for Ashoka he is Founding Partner of Total Impact Advisors. Vancouver is playing host to a Social Innovation and Finance Study Tour and associated public events beginning January 17th. I can't think of a better way to launch a Global Social Innovation and Finance week than offering Arthur's reflections on: What would you like to become more visible in 2011? You can also Download Becoming Visible - the complete collection of 58 essays.
Eleven Global Social Finance Trends
Eleven, eleven is generally remembered as the time and date the first world war came to a close. The certainties of the Victorian age were over. 2011 could mark a similar watershed in how development and social finance are seen. Here is a shot at eleven trends to look out for – Eleven for Eleven:
1. Money will grow increasingly tight – watch for the pain – with
Governments retrenching from traditional aid and grant models.
International development aid will be somewhat sheltered as hard military power becomes an increasingly ineffective tool. The outstanding question: whether innovation will be allowed to empower communities or whether the traditional (and sometimes corrupt) top down status quo grant and aid models will prevail
2. Increased focus on new innovative development roles of the Sovereign Wealth Funds – specifically the Norwegians and Singaporeans
3. The Big Society (in the UK) will get off to a better than expected start, however it will face major scaling problems unless a facilitating finance and legal structure is put in place. The Charity Commissions report due in Q2 will be a critical turning point, with "charitisation" and hybrid structures potentially becoming a driving force. The social experiment in the UK is more radical than people think
4. Globally look for innovative finance solutions designed to leverage capital to come to the fore. Examples include Insurance / Credit Guarantee structures as well as mechanisms such as the new Social Impact Bond that allow the capture of future cash flow
5. Systemically these innovations will be crystallised in the first tentative steps to full outcome based models – encouraging collaboration. However watch for a developing political debate with the status quo arguing that the funds should go directly to them. This would be wrong, as it would ensure the forces of creative destruction are not at play in the social sector. Innovation and private capital will be denied its potentially pivotal role.
6. In the US as budgets finally get pared backward, Foundations face the risk of being criticised for how they allocate funds. The flash points may potentially be the Race, the Rural and Education agendas. Will a closed Investment trust framework be enough – or should we also apply modern capital and fiduciary tools to these social endeavours?
7. In the US, ironically given Federal Obama care, look for local back door health care privatisation driven by local state and municipal governments being short of money and having to sell off assets.
8. All the above will further drive the metrics debate, as well as the need for new hybrid legal vehicles. These will redefine a new social contract. Will the voluntary not-for-profit sector accept the challenge to define its own terms of engagement with the for-profit world? Or will its own obsession with silver bullets allow the corporate sector to define the agenda?
9. Look for the continued growth of new intermediaries who act as the agents of local social entrepreneurs and social enterprises ensuring that the community and local innovation receives a fairer deal
10. The Banks and Corporations will face further pressure to engage in the Impact Investing field, and will respond. They will see it as a ʻbottom of the marketʼ opportunity, but will need new intermediaries to aggregate supply and the different sources of capital.
11. Watch for a money laundering scandal. Philanthropy along with money launderers are the only two global players who happily make a loss and where money in philanthropy's case is being passed from two largely unregulated markets – in open architecture models.
More and more social finance is being referred to as impact investing. This is a move to integrate social and business rather than to segregate social investment from business investment.
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