Investing for public good

The rapidly increasing world population and the growing numbers living in poverty are, perhaps, the biggest challenges of this century. In modern times, many models have been tested to alleviate deprivation, build an economically equitable system and end poverty. The notion of philanthropy, which predates ancient civilisation, is derived from the myth of Prometheus who endowed humanity with two gifts: the gift of fire as a source of human creativity and potential, and the gift of optimism and hope. Therefore, philanthropy can be seen as a way of harnessing human potential to resolve insurmountable challenges. In other words, charity and altruism are rooted in the basic concern for the welfare of others, while Islam added to it the notion of justice through zakat, which is seen as a way of building a just and equitable society. Today, philanthropy is seen as private giving or voluntary action for public good.

Dr Muhammad Yunus writes in his book Creating a World Without Poverty that “Charity is a form of trickle-down economics; if the trickle stops, so does help for the needy”. In other words, using the metaphor of fire, we need alternative ways of using our financial resources in order to help meet goals for human well-being and at the same time, embed the notions of welfare, altruism and justice within the approach. The concept of impact investing is a hybrid of philanthropy and equity, where measurable social goals are twined with economic returns. In an economic context, businesses that generate returns for private gains will attract sources of capital that are seeking such financial returns. In a social context, where the problems of humanity continue to grow exponentially, the ability of individuals to give or donate will limit the flow of resources to resolve such problems. However, by establishing businesses that have a social purpose, there is a possibility of addressing social and economic problems simultaneously.

Let us simplify this debate and take it to the level of Shaheen, who resides in a low-income community in Bahawalnagar. Shaheen is skilled at making paper flowers and has been working as a piece rate worker for over a decade. The returns she gets for her hard labour is a pittance but it supplements the family income every month. Recently, her husband took a second wife and no longer contributes towards meeting the needs of Shaheen and her four children. Shaheen’s own income cannot address her needs and those of her children anymore. We have two options before us. We can consider her a worthy recipient of charity and provide her a donation to fulfill her needs. We can, perhaps, at best, support her for a few months but what happens when our charity dries up? The second option is to provide Shaheen with a small loan, which she can invest in her flower-making business that will help her generate revenue, which in turn can feed her family and also help pay back the loan. In this case, we have provided her a sustainable choice — a choice to be economically active and rebuild her dignity step by step. Here, microfinance has become the glue that binds the notion of welfare with economics, where both business and social returns reside comfortably. As individuals, we can choose to make Shaheen dependent on our charity or we can contribute towards making her an independent economic agent.

I work in this field because I believe in the unlimited beauty and scale of human potential. It would be wrong for us to limit the notion of  ‘giving’ and welfare to just one financial form. We need to broaden our imagination and look at ways for sustainable giving. In the long run, such a notion will magnify the tools we have in our development handbook and broaden the envelope for us to achieve our mutual human goals.

Khaled Ahmed’s regular column will appear in tomorrow’s issue.

Published in The Express Tribune, July 22^nd, 2012.