Traditional financial intermediaries evaluate projects, manage risk, facilitate transactions, and mobilize savings through economies of scale.
In the Canadian social finance marketplace, intermediaries play a key role in the transfer of funds from the investors to the investees. Social finance intermediaries include foundations, credit unions, and community investment organizations.
The innovative nature of social enterprise calls for matching financial innovation and for a customized financial sector that stands apart from traditional financial products and instruments.
In this new social finance marketplace, deals are typically smaller in size, resulting in higher overhead costs as a percentage of financial returns. As a result, for social finance intermediaries to succeed, they cannot rely exclusively on market forces and may require financial support to get underway. The logic here is that the social returns reaped from these deals far outweigh the costs of supporting them.
An example of a new financial intermediary for Ontario's social finance marketplace is the SVX. The SVX is a local, impact first market connecting social ventures, impact funds, and impact investors in order to catalyze new debt and equity investment capital for local ventures that have demonstrable social and/or environmental impact, including nonprofits, co-operatives and for-profit corporations. The project is an initiative of SiG@MaRS, in collaboration with TMX Group Inc., and supported by the Government of Ontario, Torys LLP, Causeway Social Finance, Imagine Canada, and many other partners.
The SVX provides an online market platform with venture listings, fund listings, service provider listings, and a resource centre to facilitate effective impact investments; allow investors to share due diligence, collaborate on deals, identify high quality investment opportunities, and access screened investment opportunities and ventures with detailed information reducing the burden of due diligence; and provide ventures with increased access to capital and financial expertise.
Adapted from ‘The Quest for Blended Value Returns: Investor Perspectives on Social Financial in Canada’. Harji and Hebb, 2009.
Adapted from SVX.
THE WHAT, WHY, WHO, AND MOST IMPORTANTLY, THE HOW OF SOCIAL FINANCE IN CANADA.
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The contents of Your Guide to Social Finance is general in nature, current only as of the date of publication and is provided for informational purposes only. It is not intended to provide professional investment or financing advice. Please consult a certified professional before making any decision regarding your investments and financing.