At a recent roundtable discussion, key players in philanthropy discussed the direction of the sector. We asked four delegates if there is a need for a more effective use of philanthropic capital? And what is the evidence base for that?
Vineet Bewtra - director of investments, Omidyar Network
What we've see through our work is that there is a need to take greater risk on things that are unproven, earlier in the life cycle of an organisation. We are deliberately focused on early-stage opportunities where there is a tonne of risk involved. We're not afraid of failure, we're afraid of not learning from the failure. Do we think it's a good team? Do we think it's potentially a good idea? Then we'll say fine, let's help these organisations. Some may work, some may not.
One example is a company called d.light which does low-cost solar lanterns. We invested quite early. They were fine-tuning because they found that even though they were selling low-cost lanterns they were still pretty expensive comparatively speaking for the people that they were really trying to reach. So they innovated and started using sim cards and a pay-as-you-go model. That company is now selling over 400,000 a month across south Asia and east and west Africa. But, if you looked at it through a traditional lens people would say there's too much risk involved.
Laura Kelly - private sector department, Department for International Development, UK
The philanthropic community needs to learn from donors and what NGOs have been doing. The OECD has a network around philanthropy and does a lot on measuring impact and effectiveness.
Another aspect of it is working with the private sector, who are also thinking about what kind of impact their activities are having in developing countries. If we're all trying to grapple with the issue of impact and results, how can we share our findings? How can we learn from each other?
One thing that DfID is engaged with is the impact programme, which is an initiative where we're providing funding through CDC - the wholly owned investment arm of the UK's governments development work - around impact funding.
The bit that is added from DfID doing it rather than a foundation or a private investor is standardising the metrics for measuring impact, developing that information and sharing it so that others can learn from that. It's wanting to have an impact but also learning about the experience of doing it: what worked, what didn't.
Richard Graham, head of international grants, Comic Relief
One of the things that's already happening but needs to be accelerated is greater collaboration. Not just between philanthropists but between philanthropy and other sectors: governments, the private sector, the research sector. To tackle the big systemic development challenges, we we have to do work with others because each of us have different roles to play.
Those who are the early adopters of greater collaboration need to really invest in the evidence base about what has worked and what hasn't worked. If we share that we can shortcut mistakes others have made in the early days.
There's an element of risk in collaboration. You have to work with other organisations and you may be working with sectors that have a very different culture from your own. So in order to get some of that experience well documented, it would help to show people that are more risk-averse that it can be done and you can achieve great things.
Ambika Sampat, business development associate, Acumen
There most definitely is a need for more effective use of philanthropy. A 2012 report called 'From Blueprint to Scale' identified a critical funding gap in innovative business solutions directly targeting poverty, coined as the 'pioneer gap'.
We have seen that philanthropy invested as patient capital helps to de-risk early-stage high-risk enterprises that provide critical goods and services to rural communities in developing economies - where governments often refuse to go and market capital has failed. Philanthropy-backed patient capital at this critical stage allows these companies to scale and attract more traditional types of capital better suited for market expansion.
As an example, Water Health International (WHI), one of Acumen's investee companies since 2004, set up water purification plants to tackle the lack of clean, safe and affordable water that 1.5 billion people face around the world, of which 400 million are based in rural India. While traditional grant-funding suffices in supporting initiatives in their blueprint stage, for scalability and sustainability of long-term social impact solutions a different type of capital is necessary.
With WHI, philanthropic patient capital enabled the company to scale to 500 plants across five countries. WHI catalyzed an entire water purification industry attracting follow-on investments from the Coca-Cola Africa Foundation, Diageo, and the International Finance Corporation. Such partnerships between public and private institutions allow philanthropy to be more effective, and capitalism to be more inclusive.
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