Combining philanthropy and business for a win-win outcome

There is no reason why a social project cannot also be a profitable one.

KARACHI: In Pakistan, many education, health and poverty alleviation projects are financed by philanthropic contributions. One of the key challenges currently faced by the social sector locally and the world-over is the question of the sustainability and scaling of similar efforts.

The Monitor Group recently published an insightful study titled ‘From Blueprint to Scale’, in which they reviewed hundreds of examples of social sector inclusive businesses in Africa and Asia to answer the critical question on the role of philanthropy and impact investment in addressing social development challenges in developing and third world countries.

One of the challenges identified was finding a way to attract new entrepreneurs into the social sector; which has historically been dominated by private philanthropists and aid donors. The question asked was: if market-based inclusive business solutions hold some promise for wider social impact, then what is the ‘right design’ and ‘roles’ of various players to scale the solution and bring everlasting change?

According to Monitor’s study, there are clear and specific roles that philanthropists and impact investors can play in their efforts to alleviate poverty and bringing about sustainable change.

Monitor, in their aforementioned study, identified four distinct stages to help establish a sustainable market development model for impact investors. The stages are ‘Blueprint’, ‘Validate’, ‘Prepare’ and ‘Scale’.  The process starts with a philanthropist creating a ‘blueprint’ of an idea or design which delivers an efficient solution to meet specific needs of the impoverished. It is critical to connect the innovative idea with the needs of customers as well as suppliers in poverty-stricken areas. Next, the pioneer needs to ‘validate’ the business model in terms of financial viability and scalability. This is an iterative process which requires running market trials and testing various assumptions to fine-tune the business model. Many ambitious ideas die at this stage as either the consumer is ill-informed about the benefit of the idea, or is unwilling to part with their meagre yet hard earned incomes.

The final two stages require the social entrepreneur to ‘prepare’ proper conditions in the market and run an awareness program to enhance demand in order to support sustainability. This is vital if a new market or a new product is being created. Once the first 3 stages are delivered, the time is ripe for ‘scaling’.  At this stage, in order to enhance the footprint of the social project, impact investors step in and take over from philanthropists to help fund longer-term investments. The key challenges to the enterprise now remain controlling costs, exploiting efficiencies, and attracting additional impact investors and stakeholders to the novel idea.

We in Pakistan need our non-governmental organisations and philanthropists to learn from this model and focus on identifying new ideas, as well as converting many of the existing models into scalable for-profit models. This should be done before the capacity of philanthropists to give caps out, or donor fatigue settles in.

THE WRITER WORKS IN THE CORPORATE SECTOR AND IS ACTIVE ON VARIOUS BUSINESS FORUMS AND TRADE BODIES.

Published in The Express Tribune, June 11^th, 2012.