Wednesday, October 29, 2008

Canadian Nonprofits Exploring Social Finance

     In a recent article, at Charityvillage.ca, a news archive for Canadian charities, discusses the increasing awareness of, and preference for, social finance strategies as a funding tool by Canadian charities.  The need for an interest in such strategies was highlighted in a survey.  The survey canvassed over 200 nonprofit professionals in Canada.  The survey was published as a report entitled, Strengthening Organizational Capacity. Among the issues brought to light by the survey and report was the lack of awareness on the part of Canadian charities of "social finance."

     The article's reporter, Elisa Birnbaum, describes "social finance as 'a sustainable approach to managing money that delivers social, environmental and economic benefits.'  More than just a financial bottom line, it promotes double or triple bottom lines. It comprises that 'space on the financial continuum between traditional financial investment with no social returns, and no economic value but high social returns,' she further explains. Products range from insured and uninsured deposits, real estate mortgages and loan guarantees to fixed income securities, stock purchases, and private equity. And the arena covers areas like community investing, social enterprise finance, micro-lending, sustainable business, and philanthropic program-related investments."

     In growing uncertain economic times, many nonprofits, Canadian and others, are looking for more creative ways to sustain themselves.  The article suggests that UK-based charities, followed by US-based charities are a few steps ahead of Canada in this area.  Below is a brief excerpt of the article:

While the approach[, social finance,] is becoming popular in Europe and is beginning to stake its ground in the Unites States, Canada seems to be lagging behind, says van Bentum. The reasons are complex but some of it comes down to legislative efforts on the part of the UK and US governments, efforts lacking in Canada. In the US, for example, the Community Reinvestment Act led to the evolution of a number of organizations that provide easy vehicles for people to invest in social finance. Meanwhile, in the UK, the focus on social finance stems from varied initiatives to create a level playing field for social entrepreneurs in their competition for dollars.

But Canada hasn’t yet taken such proactive steps. Some blame Canada Revenue Agency (CRA) rules and the fact that tax breaks are limited to entities defined strictly as charitable organizations. van Bentum and others are hopeful tax incentives similar to those enjoyed by the movie industry will soon be implemented. In fact, her survey found that 78% of respondents agreed or strongly agreed that the government will enable social finance through tax incentives or will remain completely marginal if it doesn’t. Others place responsibility for the lag on public policy, legislation or a conventional nonprofit mindset. “We haven’t created an enabling environment for this to happen,” says Draimin.

The undeveloped social entrepreneurial framework doesn’t help. 'The focus on entrepreneurship hasn’t been a really prominent plank in the nonprofit communities’ self-identified value set,' he adds. Though it’s become more prominent recently, social entrepreneurship still barely compares to other places where the mindset has much deeper roots. But with the continued pressures on government and evolving societal needs, this may have to change. 'The nonprofit looking forward will have to realize that the pattern of financing will continue to evolve and that exploring what social finance might mean to them will be important,' Draimin asserts.

See article for full story, please click here - Charityvillage.ca.

AMT

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