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Giving Compass' Take:
• L Michelle explains that innovation in philanthropy can come in the form of partnerships between different stakeholders in the social sector. For example, providing development organizations with capital or entrepreneurs with advisory support will help strengthen social change initiatives and economic development within the sector.
• Newer ideas in philanthropy such as impact investing and venture philanthropy are becoming hybrids of financial capital and social return on investment. Will these trends eventually take over what we know as traditional philanthropy?
• Read and understand more about the trajectory of venture philanthropy.
Philanthropy has an important place in this mix and is beginning to adapt to this new environment by leveraging capital as well as talent and expertise in support of these innovative global development approaches.
While challenges to the lack of business capital are being addressed through innovative financing models, led by organizations such as Ashoka and Grameen Bank, the lack of training in business management is an equal challenge. Providing a loan or equity funding to someone who does not possess the skills to run a business makes no sense, while an entrepreneur with good business skills who lacks adequate funds will not be able to grow or thrive either. We need to support both.
Development organizations seeking to support entrepreneurs also need to make an effort to understand the problems and needs entrepreneurs face in the specific country or region they are in. This requires on-the-ground research, talking to small business owners, and analyzing the local business environment.
Private philanthropic organizations can come alongside NGOs and government programs to raise capital that directly supports the cost of on-the-ground research and ongoing business mentoring as well as funding business incubators in remote locations.
One example is Seattle-based Social Venture Partners International that runs an affiliate Purpose Investor Network built on the venture philanthropy or a venture capital model. The innovative idea in this model is that the partners involved not only give their money, but also time and talent.
In essence, the effectiveness of philanthropy is multiplied exponentially when it provides a foundation for successful business and enterprise.
Read the full article about philanthropy and economic development by L Michelle at Medium.