The world of social impact is changing. Where there used to be clear divides between ‘non-profit’ charities, ‘profit-for-purpose’ social enterprise and the ‘for-profit’ commercial sector, we are seeing the blurring of lines between these entities and the focus has shifted from money that works only to provide a financial return, to one that also ensures social impact.
This shift in the landscape is most visible in the re-emerging regions of the world like Asia, with some of the most innovative social impact entities and funding models being adapted, incubated and scaled here. Some factors instigating these changes in Asia include,
- Outdated current funding models: May of the funding practices do not address the urgent need for continuous investment in improvement and innovations to address the large-scale needs of the communities and countries. Grants and contracts from traditional institutional donors depends on project expenditures or capital-funding mechanisms that are based on an ‘charity buying’ model. Such models don’t provide the stability or flexibility needed for social impact in a fast-changing environment of Asia, while at the same time it restricts spending on capability development, operations, technology and outreach. Additionally, the grants based models carry the companion need for attracting and retaining professionals focused on monitoring, evaluation and communications with the grant makers, which are not necessarily funded by the grant making entities.
- Growth of the digital space: The economies are vastly different across Asia -between Japan, Korea, Singapore versus China, Indonesia or India, however the similar and exceptional digital growth makes it the hottest region in the world for e-commerce, search, social networking, the algorithm driven digitised economy, just to name a few. The smart-city program of Singapore has turned the island into a “living laboratory”, testing smart solutions to address urban issues through collaborations with the private and public sectors. To get a feel of what this means, think of where we were with the Internet and mobile technology around year 2000, and where we got to in less than a decade. The algorithm-driven way of life and the disruption by it, in the social impact arena is coming out of Asia, sooner than we think.
- Demographics: Asian Millennials are leading the global consumer market with the highest growth in numbers and wage increase. 63% of Asian Millennials in their twenties live with their parents and on an average, save 20% of their income which is used for building assets for when they start their own families. These Millennials are keen to promote the greater good of society, instead of merely generating private profit just for a few. Additionally, their brand loyalty lasts only as long as a brand delivers value. In the case of fundraising – it lasts as long as the charity responds to expectations, perceptions & behaviours of the supporters.
- The rise of ‘collectives’: Fuelled by the success of the start-up sector in Asia especially in China, India and South-East Asia and teeming with soon to be unicorns (private billion-dollar start-ups) many of the venture builders, incubators and accelerators (both local and foreign) as well as corporate and private venture capital providers are turning their attention to social impact offerings. Bengaluru-based N/Core (India) have set out to get the best minds in India to join the social impact sector, who in the past may have been put off by the dismal salaries in the NGO sector, limited grant-based funding and outdated leadership styles at board and management level. The ‘collective’ includes CEOs of top foundations, leaders in the non-profit sector, founders of unicorns, authors and researchers. Their mission is to provide an ecosystem similar to what the for-profit start-ups enjoy. Thus, building social impact organisations which solve large-scale issues. In the next five years, it aims to incubate around 100 non-profits committed to poverty alleviation.
- History of innovative financing to reach the base of the pyramid: Many Asian countries haven’t built the banking infrastructure, so they have leapfroged to go online and adopt new forms of financing. Gaining momentum since the early 2000’s, financial inclusion has been recognized as a vital tool in addressing the financial needs of poor clients through reasonable costs for financial services (e.g. savings, insurance and payment transfers). Asia is considered the most developed continent in the world in terms of volume of activities by microfinance institutions (MFIs). East Asia is particularly well served by MFIs. Bangladesh, Indonesia, Thailand and Vietnam have the highest loan volume. Likewise presently, fintech start-ups have come up with alternative credit systems to allow customers to bypass traditional financial intermediaries.
Linking social value to social financing
Here is a quick mapping of the funding landscape in Asia as I see it, and the diverse possibilities that can be leveraged for funding and financing social good.
The way forward
The knowledge and understanding of these funding sources, social investment models and the changing fundraising landscape described above, is one of the key barriers that needs to be overcome if social investment is going to be leveraged by nonprofit sector leaders to become a meaningful part of resourcing their mission.
In the 1980s and 90s the nonprofits in Asia learned the skills for grant-writing and seeking funding from Bilateral and Multilateral agencies, OECD/ODA grants, INGO support. With the turn of the century and the profound demographic, economic and technological changes that have reshaped Asia, non-profit leaders restructured their entities to include fundraisers with new skills for raising local individual donations, engage in corporate partnerships, leverage on local government schemes and build their online presence.
Into 2020, Asian social impact leaders and entities need to be educated and aware of the new models in fundraising and financing that has taken root and are growing rapidly in Asia.
Likewise, the INGOs operating in Asia need to re-evaluate their financing models, with funding support from their country of origin reducing or limited to select countries in Asia. However, the management, issue area knowledge, financial and organizational implementation expertise that INGOs bring is still valuable, if adapted to the current realities in Asia. INGOs could have a tremendous role to play in getting Asian social impact leaders and entities to become ‘future ready’ by conducting systems mapping, gap analysis, and bringing in other players – companies, local NGOs, other INGOs, government agencies – as needed to address the gaps. Simply becoming better versions of their current models will probably not be enough for INGOs to survive the disruptions. INOS will have a vital role to play in this changing landscape it they adopt more efficient and effective practices in order to compete in increasingly sophisticated Asian market.
While there are platforms focused on supporting the supply side of the social financing equation, through entities supporting social entrepreneurs and enterprise funding, venture philanthropists, donor advisories, CSR and sustainability needs, to name a few, there is not much focus on up-skilling the leaders and entities delivering the social good. They can be a tremendous force that the suppliers of financing can leverage to get the best outcomes for their philanthropic, venture or enterprise financing models.
“May the changemakers and the entities they lead have a realization of the revolution, so that the social impact sector as a whole, can mature to benefit from the various funding, financing and resource mobilisation models.”- Usha Menon
