In the case of the Tomsk Regional initiative and subsequent activity, surplus revenue rather than being distributed to shareholders in dividend is invested in efforts to leverage further social investment. This so far has been from government but we know from the example of Kiva that many are content to be returned their capital without interest.

The R&D for Tomsk was paid back with a consultancy fee, the investment of $6 million dollars repaid as is typical with the moral collateral loan circle approach to leverage around 10,000 businesses with 99% surviving a year or longer.

SOCAP10 is currently asking for ideas for investing in social purpose, since it’s recently been discovered that as much as $120 billion of US private equity is ready for social investment.

My suggestion was that the kind of business both Yunus and P-CED advocate, the non-loss non dividend social business can create wealth flows where disenfranchised communities have been deprived of them, in local communities on a global basis. It could help place disenfranchised children in families, fund ‘soft power’ action against terror and enhance wealth and democracy by investing in affordable broadband, clean water and land access as enlightened self interest.

With our model for example, employees are paid living wages according to local conditions and share in 10% of profit whereas at least 50% is invested in the community and the remainder retained for growth.

There are a very large number of people in the world not motivated by the highest return and would readily invest for a low or no interest return when motivated by compassion, a currency which is universally recognised.

If I may be so blunt…

Excuse my language, but this downright chaps my ASS!

How can anyone consider profiting from the poor? This is a disgusting, reprehensible and repulsive idea. Capitalism has reached an ultimate low here.

To actually “Make Money” off the misfortunes of others has to be the lowest despicable plan ever devised.

What the author fails to consider here is what if there was a major catastrophic event, which shut your precious greedy money making market down for longer than a week? How about a Month? Six months? Longer?
How will this company fair if and when the market reopens? Where’s the supposed invested money for the poor going to be then? Will the short sellers hope for its’ demise? Will the rich step up to the plate and invest in the company supposedly supporting the poor? I seriously DOUBT IT!

Let’s not mince words here, but there is no way that the proceeds, profits, call it what you will, will help the poor. Someone will ALWAYS pick the pot clean and come up with some bogus excuse to make it appear legal and legit. Count on it. Call it creative book keeping.

A related social policy issue is the extent to which board members and nonprofits must avoid or publicly disclose these entanglements. If I am raising charitable donations that will benefit an enterprise in which I am also an equity investor, folks may want to know that.

The more immediately relevant question for nonprofit social enterprises is what this may do to fund raising. As a donor, why should I ever again donate to a microfinance support organization? Is my donation being used as non-dilutive capital to boost returns for private equity funds?

The many nonprofits still raising funds to build MFI capacity will have tough questions to answer. (NB: Lucky for Kiva, SKS was not one of their partners.)

I think you raised a valid point that for-profit model could deliver great potential, and it’s vital not to be drawn into idealogical battle of whether social business/ for-profit is the only way to go. It’s way too early to place accusation of mission drift. Social finance is still characterized by innovative experimentation, we just need to be more tolerant of such development and evidence-based assessment will be more important than ever to identify the effective model.

Jude

To whit: SKS received a lot of charitable money from Unitus. SKS received a great deal of benefit from its original nonprofit tax status.

So who should reap the benefits of the IPO and in what amount?

For more, see my latest post: Why every social entrepreneur should be paying attention to SKS and Unitus http://bit.ly/9qw8MH