Stimulating the Flow of Capital and Social Transformation

by Bruce Arbit

I have spent the majority of my professional career helping organizations of all shapes, sizes, and structures (for-profit, nonprofit and newer hybrids) raise money. That’s why I am particularly interested in the ongoing conversation about growing the sources of financial capital that support initiatives with a social/environmental benefit.

Ceventureneer-capital-marketsrtainly there is a lot of attention on the subject. That is a good thing. However, with all of this activity the proportion of charitable giving has remained pretty much static during the past 40 years. In order to dramatically increase the amount of funding available, I suggest we turn our focus to the “supply-side” of the fundraising equation.

Of course, broadening the way we look at the sources of “giving” as part of a larger “financial social capital marketplace” expands these numbers immediately. By including impact investing, socially responsible investments as well as government funding and earned income we increase the $300 billion in giving dramatically to trillions of dollars in potential financing options.

Most importantly, however, is the need to further understand the dynamics that are moving individuals to mobilize a broader range of their resources to address social/environmental issues. Recognizing that 80% of philanthropic giving is provided by individuals, we need to tap into this spirit with new "products' while at the same time connecting people to a deeper experience that has always been at the heart of socially motivated enterprises. This is particularly important at a time when new ‘blended’ models of social investment, such as impact investing, are opening up new possibilities for revenue generation.

My ongoing work with Contact Fund has provided me with a first-hand understanding of the potential these ventures provide. Since 2005, Contact Fund, a private, for-profit NYC-based community investment loan fund, and its founder, Mark Reed, have raised millions of dollars of private capital from individual investors. But what is it that these investors are buying?

As Mark explains, “I wanted to provide real opportunity for self-sufficiency in my own community and also feel confident enough to inspire others to join me. Using debt that can be recycled once it’s re-paid allows me to tell a story of financial sustainability that helps to attract others. When combined with other sources of funding, flexible loan capital can be the key to making a deal happen. I also like the financial discipline that debt imposes on an organization.”

Ultimately, Contact Fund is a simple, straightforward, and transparent approach to community investing that addresses the specific needs of investors who share these values. Learn more.

Certainly the time is right. The current economic climate and inaction of our most established government and corporate institutions has left a big gap in addressing our most pressing problems. It also has left a void in creating much-needed economic activity for new businesses and emerging entrepreneurs –which is being met by these new sources of capital.

In the end, impact investing and other related approaches are about leveraging a spirit of individual activism. It is this same spirit that has been behind every other major movement in this country, including modern philanthropy. The ability to activate the power of individuals with newer, more meaningful blended-value funding opportunities is the only way we will fully stimulate the flow of financial social capital and realize our true potential.

If you liked this article, you may also like:
Great News: Impact Investing Options Expand Locally
New Models of Philanthropy Will challenge, Enrich Nonprofits
Jewish Grantmaker Experiments with Long-Term Grants, Hands-On Involvement

Bruce Arbit, founder and principal of Melarbit Partners, has 20 years of professional fundraising, marketing and organizational/business development experience resulting in over $100 million dollars raised in support of organizations in healthcare, social/human services, community/economic development and the arts. Recognizing that positive change comes from all sectors, Bruce works with all types of organizations including not-for-profits, social enterprises (for-profit business with a social mission) and for-profit businesses.

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