We have 3 investment portfolios:
We’ve produced our new introduction clip! Watch this to know more about the philosophy and questions that drive us at Panahpur.
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It is rare for us to reproduce someone else’s blog in full. But in this blog first published a couple of weeks ago on the Oxfam blog, Pamela Hartigan, Director of the Skoll Centre for Social Entrepreneurship at Oxford’s Saïd Business School, elegantly says what we have been trying to say here.
“The first time I heard the term “social entrepreneur” I thought it referred to business people who liked to party. That was about twenty years ago, when the term was just beginning to surface, said to have been coined by Bill Drayton, founder of Ashoka. Ashoka was the first entity that identified and supported such individuals – innovators with a “bold idea” aimed at changing a system that was at the root of a major social or environmental problem.
Twenty years ago I fell in love with “social entrepreneurship”, its promise, and most of all, the stories of the champions that practiced this approach. They didn’t take “it can’t be done” as a deterrent – in fact, as one of them described to me, “’it’s impossible’ is our clarion call to action”. As the first Managing Director of the Schwab Foundation for Social Entrepreneurship, an entity supported by World Economic Forum’s founder Klaus Schwab and his wife, Hilde, I spent eight years identifying, celebrating and supporting such individuals, providing them with opportunities to enter the coveted corporate enclave that is the annual meeting of the WEF at Davos – which in turn gave them access to networks of power they had never been able to tap. Many of these social entrepreneurs formed strong and lasting relationships with members of the corporate C suite, heads of philanthropic foundations and the media leaders that attend Davos. It was difficult not to become infected with the bug of “social entrepreneurship”.
The Schwab Foundation certainly was not the only social entrepreneurship organization on the scene. A host of other organizations were created at around the same time, including Echoing Green, the Skoll Foundation, the Omidyar Network, Acumen, Mulago, to name just a few. These were primarily based in the USA, but the UK quickly followed suit along with countries on the European continent, Asia, Latin America, Africa and Australia. Governments, led by the UK, embraced “social enterprise” as the “third way” – income-generating charities that did not depend wholly on public coffers but dealt with the increasing number of social problems that defied government solutions.
My main concern about this viewpoint is that it stripped the notion of innovation and systems change – the essence of social entrepreneurial endeavour – right out of the approach. In the UK and those countries that have followed, social enterprises have become part of the “social enterprise industrial complex”, sub-contractors to government and feeding into a dysfunctional system. But that is for another blog.
The point is, all of a sudden, social entrepreneurship was everywhere and everyone wanted to be one. But there was one question that was raised at every national and international gathering of social entrepreneurs. As former President Bill Clinton noted in a speech about the challenge of school reform “Nearly every problem has been solved by someone somewhere. The frustration is that we can’t seem to replicate [those solutions] anywhere else.” Why is it that the only system-changing approach that has managed to go to scale is microfinance? Yet we forget that it took 30 years and an estimated US$20 billion in subsidies from major foundations and individual philanthropists to transform microfinance from an undefined effort sitting between philanthropy, aid and the market, to something much closer to mainstream investing.
This begs the question as to whether the only way social entrepreneurship will scale is by becoming part of the mainstream market system. As someone who is now working in a business school environment, this idea carries significant weight.
I do believe that transformational systems change will never be achieved on a massive scale by non-profit organizations or even by well-meaning “hybrids”. I very much
Which needs fixing first?
believe that the way forward is through business. And so I have come to feel increasingly uncomfortable with the term “social entrepreneurship” and its main actor, the “social entrepreneur”.
But the reason is not because I have bought into the notion that capitalism as we now practice it is the solution – but because I firmly believe that every entrepreneur has to be a “social entrepreneur”. The way business has operated in the last 50 years must be disrupted because we will not survive as a society or a planet if we do not tear down the walls that compartmentalise economic, social and environmental activity. That is why I am now working in business schools. The way we approach business education has to change.
There is no doubt that the term “social entrepreneurship” served its purpose at one point in time, mainly because we needed to highlight what type of entrepreneurial practice we were referring to – but today it only serves to further dichotomise entrepreneurial practice into the “social” and the “commercial” (“non-social”?). It creates a false separation between “this is where we make money, and this is where we do good”. And that is EXACTLY what is wrong with capitalism today.
It is hard for us who have been born and raised under capitalism and the large corporation to reflect on the fact that it was only relatively recently – not many centuries ago – that humankind finally began to achieve a surplus, something more than the necessities for survival.
The central precept of all early corporations that began to take shape around the 16th century was that even though they were chartered as private entities and possessed special privileges and monopoly rights, they were still expected to carry out activities with a public purpose. That has changed and needs to be revisited if the world is to advance.
Yep, maybe it is
There is no doubt that the modern corporation as we know it today has empowered individual genius and bestowed great social benefits. Yet it has also done social harm. Many of the ills of modern life – non-sustainable levels of personal and institutional debt, toxic air and water, workplace injury, loss of livelihoods for communities, political bribery – can be traced to corporate lack of responsibility to one or more constituencies. This is not intentional. No one wants to cause poverty, pollution, disease, unemployment and corruption. Rather, they want to make profits. But in that pursuit, they may find anti-social behaviour pays. To achieve profits in the short term, corporations exact a “social and environmental price” and that price is high and rising.
The key to sustainable capitalism is reasonable profits as opposed to maximizing profits. In the current system, a segment of society is trying to maximize profits without concern for the impact on the well being of the society as a whole, while another segment of social organizations have to deal with the fall out. The system is not working.
Fortunately, there are a growing number of people, particularly among the young, who embrace the notion of “entrepreneurship for society” rather than commercial or social entrepreneurship. They are not waiting until they are 50 years old when they have “made their money” and can “give back”. I am optimistic that through the new breed young professionals, we can go back to the future and base our economies on activities that uphold social and environmental goals without eschewing financial sustainability”.
- Pamela Hartigan
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There were two goals to the Peterborough Social Impact Bond, launched in 2010 by Social Finance:
- To address the failure of the system to intervene with short sentence male offenders other than by imprisoning them – by seeking to rehabilitate them.
- To test a pioneering new way to divert taxpayers money to civil society organisations able to solve social problems that would otherwise go unsolved, and in the process deliver savings.
Since then, the idea has captured the imaginations of policy makers across the world and stimulated a global arms race to explore its potential. This is not surprising when one thinks it through. If successful, it promises not only to create value for taxpayers, but also for citizens who would otherwise have been victims of the unaddressed social problem; for charities and social enterprises by lowering their cost of capital and enabling them to scale their activities as businesses can; for investors who can make money by solving social problems. The applications of the idea are not restricted to criminal justice, but extend to all areas of social need. The implications could be huge.
Today, the initial results are announced. So, how did it go?
The headline outcome is that the One Service, the implementation vehicle for the Peterborough Social Impact Bond investors, has successfully delivered an 8.4% reduction in re-offending versus the control group. This is in line to beat the minimum hurdle of 7.5% to trigger the repayment of investor capital, along with a modest return.
A more detailed look at the numbers reveals an even more positive story – that outcomes achieved are getting progressively better, as the One Service gets better at co-ordinating the local interventions and services to greater effect. Should current momentum be maintained, investors can expect to make a significant return.
So the charities, government agencies and social enterprises that have combined to solve a social problem under the co-ordination of the One Service have proved they can deliver. Tangibly deliver, for all of those stakeholders. A favourable verdict, then.
There are a number of key design points underpinning this success. The discipline of a well-structured outcomes-focussed contract with government; the social purpose of the legal structure that investors invested in; the social purpose of the intermediary that structured it; the combined social and financial track record of both the investors and the intermediary. For both the investors and the intermediary, the verdict is also favourable.
But returning to the strategic goals for the project, can it be judged a success?
Versus strategic goal (1), the jury is out but it looks like unless something changes then a fail verdict will be returned. The Ministry of Justice’s Transforming Rehabilitation (TR) reforms have led to the Peterborough SIB being prematurely discontinued, unavoidable given that it’s a national reform program. But in their current form, the TR contracts for do not provide for the investment in short sentence male offenders, in the aligned contract structure, that would result in meaningful outcomes such as those achieved in Peterborough.
Versus strategic goal (2), the jury remains out. Something important has been proven. The global momentum for this idea will continue to be built. But the idea is only any good if governments can act as a rational counter-party. And this is where the wheels look like they might fall off.
Imagine if investors invested in a start-up business in Peterborough. Imagine that it demonstrated a brand new approach that delivers materially superior results to the traditional market. Imagine that by being rolled out nationally it could transform that market and create massive financial and social value in the process. Imagine that this business continues to deepen relationships and refine its new approach, and as a result can demonstrate ever better results from its already high base. Imagine then that the investors decided to shut it down.
And then imagine no more, because this is precisely what the UK government have decided to do with the One Service – albeit that they are going to continue to fund it until the implementation of the Transforming Rehabilitation reforms, with their (currently) inadequate incentives for its value-creative activities.
So what we know today is that civil society organisations, charities & social enterprises have demonstrated that, under the right structures, they can deliver material value for society which may warrant the taxpayer making unlimited capital available to them, so that they can deliver that material value by solving social problems.
What remains to be seen is whether the representatives elected by the taxpayer are capable of claiming this potentially remarkable victory.