Social Finance: A New Approach
I am interested in social finance because it levers existing and new funds to improve society's ability to tackle social, economic and environmental challenges. Social finance is a creative response to the dominant challenge of the social sector - access to capital - a challenge that will only get worse. Social finance is the financial architecture emerging in Canada and elsewhere to service the financial requirements of social enterprises, social purpose businesses, entrepreneurial non profits; and their granters, investors and lenders. This involves providers of capital as well as intermediary organizations who broker funds; manage risk; measure impact and results; create financial products, services and new pools of capital designed with our financial and mission interests.
PLAN the organization I co-founded 20 years ago does not accept government funding for our operation. That has led me on an exciting journey to discover new approaches to thrive financially. As a social worker it took me a long time to appreciate and learn how money works. I'm glad I did. Social finance uses existing revenue far more efficiently than I ever imagined. It also taps into new sources of capital using methods adapted from the private sector.
One, big picture example of how social finance has helped me think and act differently is the world's first Registered Disability Savings Plan (RDSP) announced one year ago by our Finance Minister Jim Flaherty. We knew families were financially supporting their sons and daughters with disabilities 'under the table'. There was no incentive for families to contribute because it would be clawed back by provincial welfare rules. The RDSP changes that. Contribution to an RDSP is matched by grants from the federal government 3-1; 2-1 and 1-1 depending on income and amounts. Also a $1000 Disability Savings Bond is available for 20 years to everyone who qualifies for the Disability Tax Credit.
We estimate the new RDSP will eventually lever $80 Billion directly to the bank accounts of 800,000 Canadians with disabilities. And in an admirable show of progressive social policy most Provincial and Territorial governments changed their welfare rules to allow the RDSP as an asset regardless of size and they eliminated claw back on RSDP expenditures. This sets a precedent for anti - poverty activists who want welfare reform to focus on asset building.
I have two suggestions to get started on your social finance journey. First take an hour and ask someone from the financial sector to teach you how money works. Then write down unfamiliar terms (they are different but no more jargony than our own!) and develop your own working definitions. Use this website as a resource. You'll be surprised how much you already know and how much differently you will see the world!
