In September 2018, the British Asian Trust and an extensive coalition of partners launched an $11m (£8.6m) Education Development Impact Bond. Its plan is to invest the funds raised by the bond to reduce the high drop-out rates across India’s primary, secondary and tertiary education system.
If successful, the programme will not only transform the lives of those who would otherwise have dropped out, it will provide a tangible economic benefit for the country. At the DIB’s launch, the social finance champion Sir Ronald Cohen emphasised the potential that can be unlocked when "you can link a social improvement to a financial return".
If evidence for the statement were needed, the following month the Grameen Bank lent $279m (£219m) to the poorest of the poor in neighbouring Bangladesh, mostly through community groups, more than 95 per cent of which were made up of women.
In the same month, it received the exact same amount, $279m, in repayments from existing loans. Over its 40-year history, it has lent a cumulative total of more than $26bn (£20bn), mostly with interest, always without collateral, entirely based on trust. As a model, it’s had enormous social impact, generates a decent financial return and won the Nobel Peace Prize in 2006.
This is a far cry from the Band Aid images that filled our screens 34 Christmases ago, images that still shape much of the public perception about what international charities do. Over those three decades, most international development organisations have transformed their approach, building livelihoods, employment and education into long-term programmes.
By creating and harnessing markets and entrepreneurs, lending and investing instead of simply giving, they have unlocked ways to enable permanent change, creating agency, financial security and self-determination.
It’s no longer about metaphorically giving someone a fish, nor is it even about giving them fishing rods. It’s about helping to develop a vibrant, profitable and sustainable marine-based economy. It’s less about giving food parcels, more about giving start-up loans and marketing advice. These are different skills for different times, but critical skills nonetheless for modern charities.
A few years ago, I was at a reception for the fundraising industry. Although I can’t vouch for the veracity of what he said, the speaker was a high-profile, well-respected fundraiser of many years standing.
During his talk, he explained that the best way to grow rice was not to grow it in water, but to plant the rice seed in dry earth and to soak it on a regular, but infrequent basis. Apparently, by using this technique, rice yields can be increased six-fold, transforming the lives of rice-farming communities, enabling them to escape abject poverty and achieve relative prosperity. I was captivated – until the conclusion.
His conclusion was that that it cost £12 for a trained expert to spend time with a family and teach these techniques to the women and children: "The more we can engage donors with these stories, the more communities we can transform." And that’s true, but the constraint was obvious, at least to me: it would take an inordinate amount of banquets, soirées and auctions to transform agricultural practices across half a continent.
My mind filled with questions. What if a small commission on that extra yield paid for a local recruit to spread the training, multiplying the impact? Is there a micro-finance model that could increase the reach and pace exponentially without waiting for more donors? I suspect there is, and I’d be saddened if, five years on from hearing that presentation, one hadn’t emerged and dramatically accelerated that change.
We’ve lived in a capitalist world, shaped largely by business, for centuries, and that’s not changing any time soon. Charities have long decried businesses for creating injustice and inequality, destroying lives and environments – and in many cases rightly so. But now we’re witnessing charities that recognise the power business can also have, in the right hands, to redress those outcomes, to shift that direction of travel. From fair trade to the Forest Stewardship Council, and from social enterprise to social investment, commercial markets can be a powerful force for good.
The question is this: is the wider charity world ready to embrace those tools?
Ask yourself this: what portion of your people, on the front line or in fundraising, in accounting or external affairs, genuinely understand the world of business? Can they read a profit-and-loss statement and recognise a market opportunity? Can they talk fluently and comfortably in the language of entrepreneurs and corporations? These are the social-change skills of tomorrow, and charities need to be investing in them today.
Martyn Drake is founder of the management consultancy firm Binley Drake Consulting