Social Finance and Economic Justice
Economic justice involves the moral principles and values that govern the creation of economic institutional frameworks. Such frameworks affect social order and individuals by determining the rules and norms for how one exchanges goods and services, enters into contracts and earns a living. Consequently, with a solid economic and institutional framework to operate within, an individual is at liberty to seek economic sustenance. Non-profit venture funds, like Acumen Fund, promote and implement concepts and practices that ensure greater economic justice.
In A Theory of Justice (Harvard University Press, 1971), John Rawls identifies two general principles that relate to economic justice. The first is the Principle of Equal Liberty. This principle asserts that each person is to have an equal right to the most extensive liberties (for example, freedom from want and the freedom to engage in collective bargaining). The second principle is the Difference Principle that states that economic and social inequalities are to be arranged in such a way that they are to the greatest benefit of the least advantaged (for example, through empowering the economically vulnerable and raising the living standards of all in the community). These principles should be at the core of the economic institutional framework of all societies.
Non-profit venture funds can have a significant influence in creating a more egalitarian economic institutional framework for the communities in which they invest. Often the core value of such funds is to direct investments towards organizations that provide essential goods and services for the most economically vulnerable. Such services and goods can significantly improve the lives of the poor and can act as a foundation on which they may increase productive economic participation.
In the various countries and communities in which Acumen Fund is active, the impact investor assists with promoting economic justice in several ways.
First, Acumen Fund is building a global community of donors, institutional partners, social entrepreneurs, and professionals (for example, staff). Thus, many of the most challenging problems regarding poverty can be tackled by employing this intellectual, human and financial capital.
Second, the fund supports enterprises to become financially sustainable through scalable equity and debt financing and intensive support. This allows for higher standards in business, finance and economics to be transferred to the communities in which the enterprises are located and serve.
Third, Acumen Fund promotes new standards for measuring the social and financial returns of investments. These successes stimulate the development of more innovative entities. Such entities act as models and inspiration for other firms. This fosters further financial and social thought leadership strategies.
Finally, the fund identifies social enterprises that have innovative approaches in addressing the ability of the world’s poor to meet their basic needs that include: water, education, health, housing, energy, and food security. Once these needs are met, the ability of an individual to be able to concentrate on establishing economic sustenance is significantly increased.
Uganda is an example of a country in which Acumen Fund is assisting with access to economic justice. According to the International Monetary Fund (IMF) between 2008 and 2010 Uganda experienced an average economic growth rate of 7.0%. Notwithstanding this, in Uganda, there is rising inequality and persistent poverty. Approximately 37 % of the population lives below the national poverty line. Thepublic and private sectors often fail to meet the most basic needs of the poorest in the country (for example, the rural poor and other marginalized groups).
Investments of Acumen Fund in Uganda include the Gulu Agricultural Development Company (GADC). Located in the Gulu district of post-conflict Northern Uganda, GADC is the only commercial cotton ginnery in the district. Smallholder farmers, many of who were until recently Internally-Displaced Persons (IDPs), sell their cotton to GADC. Through $ 2.2 million capital made available by Acumen Fund in partnership with Root Capital in 2010, GADC pays premium prices to local cotton farmers and sells cotton lint to foreign buyers at a good profit. Between 2010 and 2011 GADC sourced cotton from over 55,000 smallholder farmers. These farmers were able to move beyond subsistence farming and gain access to an income-generation market.
This example illustrates how non-profit venture funds can develop and implement programs and initiatives that pertain to economic empowerment. This encourages a discourse that addresses the type of fair rules and circumstances required for individuals to attain their economic potential - and thus uphold economic justice.
Note: Toronto for Acumen has partnered with SocialFinance.ca to produce a series of posts following on from the Dignity in Focus photo fundraiser held earlier this month. This series introduces a host of new faces to social finance, placing their thoughts about Dignity in Focus in the context of impact investing.
Photo credit: http://www.flickr.com/photos/gatesfoundation/5791348682/
