Social Capital Marketplace Requirements (Part 2)

So just what are the requirements of a social capital market that would start to efficiently bring together both the sources (donors, foundations, government, etc.) and uses (nonprofits, social entrepreneurs, higher education institutions, etc.) of nonprofit capital? According to a recent article in The Economist, ”The need for philanthropy to become more like the for-profit capital markets is a common theme among the new philanthropists, especially those who have made their fortune in finance. As they see it, three things are needed for such a philanthropic marketplace to work.

First, there must be something for philanthropists to ‘invest’ in—something that, ideally, will be created by ‘social entrepreneurs’, just as in the for-profit world entrepreneurs create companies that end up traded on the stockmarket.

Second, the market requires an infrastructure, the philanthropic equivalent of stockmarkets, investment banks, research houses, management consultants and so on….

Third, philanthropists themselves need to behave more like investors. That means allocating their money to make the greatest possible difference to society's problems: in other words, to maximise their ‘social return’.”

So, effectively, the structure of the social capital market (or any market for that matter) has six (6) components:

1. Sources of capital

2. Uses of capital

3. A market mechanism

4. A marketplace infrastructure

5. Intermediaries

6. Products

More tomorrow.

Carla E. Dearing