To help explore the mysteries of Social Return on Investment, we talked to Wendy Gibbs of Inspire2Enterprise. There are many preconceptions about Social Return on Investment (SROI) that make it off-putting. For many smaller organisations for example, it may be the amount of time required by a member of staff to gather and analyse the […]Read More ›
The Brazilian Forum on Social Finance and Impact Business
Re-Designing Social Justice Through Social Finance
As the 2014 FIFA World Cup tournament where Brazil has taken center stage comes to a close, it is equally an important time to reflect on social injustice in Brazil and to consider novel ways to overcome social challenges.
The recent Brazilian Forum on Social Finance & Impact Business from May 6th – 7th, 2014, at Complexo Ohtake Cultural in Sao Paulo, Brazil is a good example of a social finance movement taking root in Brazil, adding to the global conversation on pressing social issues. The INSEAD Business School (France) was a strategic partner for the forum, and I attended as an INSEAD Social Entrepreneurship Program alumnus and as a current graduate student from the Strategic Foresight and Innovation Program at OCAD University.
The forum was organized by three of Brazil’s remarkable social advocate organizations: Artemisia, ICE (Institute for Corporate Citizenship) and VOX Capital. The idea was to create a space to discuss current topics, share cases, identify opportunities and challenges, and to stimulate new ways of thinking about the allocation of capital for social impact in Brazil. The forum’s main themes were:
- The Meaning of Social Finance
- Impact Investment
- Business Model Innovation
- Networks and Connections
What is social finance?
Social finance is the managing of funds for social and environmental good, while creating a financial return for investors. Social Impact Bonds (SIB) is the most recent and notable financial instrument that allows this to happen within the traditional financial market context. It allows the pooling of capital to be generated with “blended returns” for everyone. This is the promising novelty behind SIB. One can see how governments, private sector and social enterprises can benefit through collectively funding social programs (e.g. education, health, housing) that can transform Brazil’s economy promoting better business models and social innovation outcomes.
Indeed, soccer is an important cultural innovation and export of Brazil. But we must also look beneath the hype of the canopy of FIFA World Cup to see the full picture in order to understand Brazil’s pressing social issues and the true demand of its citizens. Despite the recent increase in income distribution, 35% of Brazil’s population (200 million) still lives in poverty. Approximately 19 per cent of the total population, or about 36 million, live in rural areas. This means that Brazil has about 18 million poor rural people, the largest number in the Western Hemisphere – Rural Poverty Portal. Yet small-scale agriculture, which is known as “family agriculture” in Brazil and includes poor small-scale farmers, accounts for about 70% of the country’s food production and a significant share of food export. This is one example of how social finance can be applied to assist family farmers to overcome poverty.
Similarly, many of Brazil’s urban communities lack sufficient education resources and housing infrastructure. 33% of families are homeless or living in poor quality houses, and its favelas (slums) are riddled with gang violence. Although children have access to free education, most of the primary schools are run by the municipality or the state they are located in. However, some states are wealthier than others and have better schools. This means that children from poorer states receive a lower level of education.
Another area that social finance could play a role is with tax reform. In 2008, the International Budget Partnership, in a report by the Institute for Socioeconomic Studies (INESC), stated that the concentration of income in Brazil remains one of the highest in the world. Brazil is one of the 10 largest economies in the world, yet the tax burden is placed more heavily on the poor and the working class with extended tax breaks to the wealthy.
Social finance is not a panacea, but it can play a significant role in solving some of Brazil’s social injustice and the movement has already started. At the end of the forum, a special Brazilian Social Finance Task Force was formed comprising of key global and regional stakeholders and organization partners: J. P. Morgan, BNDES, VOX Capital and many more. Brazil is following in a similar path of previous social finance task forces (UK 2000, Canada 2010, USA 2012, G8 Countries 2013, and Brazil 2014) that is critical to help disseminate knowledge and to help build investment pipeline infrastructures.
Even FIFA must find ways to pass the ball and share its wealth, for example, through new social finance procurement practices. When one team wins, we all must demonstrate how this will help to create a healthy society.
Re-designing our social systems (education, housing, health, unemployment, food) in collaboration, will not only ensure we overcome social injustice to vulnerable communities, it will also require participation at all levels of our society–government, private sector, non-profit and social enterprise.
Editor’s Note: In Canada, the Toronto International Microfinance Summit will take place on Saturday October 4th, 2014. A version of this piece was posted on the Toronto International Microfinance Summit Book Club’s blog. It has been posted here with the author’s permission.