Fighting Poverty Through Enterprise: The case for Social Venture Capital

by Brian Griffiths, Kim Tan

Nearly 50% of the world's population - almost 3 billion people - live on less than $2 a day. 10 million children die every year from easily preventable diseases. AIDS kills 3 million people every year and 1 billion people lack access to sanitation. About one-quarter of children in poor countries do not nish primary school and some 1 billion adults are illiterate. To date, the debate on tackling global poverty has been dominated by the case for providing more aid. The authors of this booklet certainly believe that foreign aid has a role to play in facing this challenge. However, here they voice the need for greater emphasis to be given to the part that business and enterprise can play in reducing poverty. In recent years China and India have proved dramatic examples of countries which have reformed their economies, opened up to trade and investment, embraced an enterprise culture, and lifted millions of their citizens out of poverty. Grif ths and Tan believe Africa has the same potential as Asia. Micro-credit has been a crucial rst step in directly helping the poor escape poverty. Using case studies they argue that social venture capital has the potential to become a new asset class and a critical second step to support the growth of small and medium sized enterprises in developing countries, so creating jobs and reducing poverty.

48 pages, Paperback

First published April 9, 2007

Reviews

[Matt]

Short and packs a punch. They open by talking about international aid, and that some is good (0.7%), but point out that increasing aid actually prevents economic development in countries which receive it. They also turn the scree on the metrics that have been used and celebrated. Amount of aid given is a poor metric. Rather the benefit (of lack thereof) should be being measured.

They turn the focus onto micro enterprise developments as an effective tool to lift people out of abject poverty, but it seems it has a roof, and is not effective at taking people further. It is a good first step nonetheless. Starting to address some of the underlying issues along with lack of capital, lack of agency and dignity and belief that things can change.

Lastly they cover social venture capital and argue that this is an effective method for tapping into the latent entrepreneurial talent in developing countries. But there's a catch 22. The political and social environment in which SVC works best (stable, transparent, little corruption), is exactly not what you get in poor developing nations.

So they argue that international aid money should be channeled into SVC, but with various conditions and stipulations to encourage fair and effective use of the funds.

This paragraph was particularly striking:

One of the problems with aid is the need to keep asking donors for repeated support. In many cases donor fatigue eventually sets in. With social venture capital, funds can be provided either as equity investment or loan. Donors become investors. And we all know that investors are more likely to take an interest in their investments than donors will be in following up their gifts.

The challenge though as a reader is knowing what to do with this perspective and knowledge. Other than encourage government ministers to read it and check out the resources in the bibliography, what steps can I as a reader take? It would have been good to have a page or two on that.

[Yohanes Febriwijaya]

Simple and well articulated, but of little significance of someone not already having resources to do so.



















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