By Lucy-Claire Saunders
22 December 2008 [MEDIAGLOBAL]: As the global economy slows down, a less orthodox type of capitalism is flourishing. Innovative, market-based mechanisms designed to facilitate South-South partnerships are being unleashed as an alternative way for developing countries to encourage social investments aimed to alleviate world poverty.
Projects presented during the first day of 2008 Global South-South Development Expo at United Nations headquarters in New York are “approaches that advance financial sustainability but also sustainability in the broadest sense, that is social, environmental and development goals,” said Gavin Power, deputy director of UN Global Compact
“Stock exchanges and related markets are surely a vanguard area with huge potential to translate the power of markets in the sustainable development agenda,” he added. “Developing countries are in fact leading the way with the creation of development and social exchanges so now we hear terms such as social dividends and social return of investments and social credits. It’s quite exciting. The challenge and the opportunity are to scale up these unique efforts and model them to countries and markets around the world.”
Alleviating poverty is one of the most critical challenges addressed in the Millennium Development Goals, a set of development goals enacted by the United Nations with the intent of halving world poverty by 2015. Historically, Southern countries have relied on the North to lead the way. Not anymore. Instead of a transfusion of knowledge and wealth from North to South, the South is facilitating its own development.
“Poor people might have access to donations or to NGOs but they need more than donations,” Celso Grecco, founder of Brazil’s Social and Environmental Stock Exchange, said at the Expo. “They need co-investors.”
The BSESE, a “social stock exchange” was launched by the São Paulo Stock Exchange in 2003 as a place where social investors could go online to find information about different projects in need of funding.
In a world with so many different organizations and projects in need of funding, civil society organizations need help listing their projects and soliciting donations. Since it opened, the São Paulo social stock exchange has received more than $5.5 million online pledges to 71 philanthropic organizations and is now expanding to environmental projects.
But Grecco sees his social stock exchange as something larger. By replacing ‘donations’ with ‘investments,’ the market-based initiative removes the chance for anonymity and encourages individuals to be active participants of social change.
“By encouraging investments, we are engaging people,” he told MediaGlobal. “Shareholders are more likely to be involved and create larger networks.”
And if the investment goes belly-up, the donor hasn’t lost anything, as he would have used that money as a donation anyway, added Grecco.
Building on the success of the past few years, this year BSESE will partner with two other Social Stock Exchanges, Genesis Institute and GEXSI. Grecco hopes this will facilitate cooperation by increasing players on the market and developing new and faster access to development in other parts of the world.
Meanwhile in the same hemisphere but on the other side of the word, an innovative website is ballooning into a new way the social sector operates. GiveIndia, a not-for-profit company based in Mumbai, currently lists 150 non-profits working to alleviate poverty.
“By listing not-for-profit companies, we help raise money to alleviate poverty,” Ujwal Thakar, CEO of GiveIndia told MediaGlobal. “We don’t actually raise the money but we facilitate the investment.”
By acting as a third party to the donation process, GiveIndia legitimizes the not-for-profit company and the work it does. Social work is dependent on accountability and transparency, especially in a country like India where the public is distrustful of the social sector, according to Thakar. Every donor who goes through GiveIndia receives a feedback report after four to six months, informing them on how their money was utilized.
And on the flip side, NGOs that do not have the capacity to send their donors frequent updates can use GiveIndia as a platform to maintain credibility and accountability.
“Since we began eight years ago, we have grown tremendously,” Dhaval Udani, CIO for GiveIndia told MediaGlobal. “Our operations have grown by 50 per cent every year.”
Perhaps the most innovative aspect of GiveIndia is its payroll option – a relatively new program that allows employees in a company to set aside a percentage of their paycheck to the charity of their choice. Currently, GiveIndia has signed up more than 60 companies with 25,000 employees contributing a total of $1.2 million.
Thakar says in a country where only .04 percent of India’s individuals and corporations give to charity, there is room for improvement, especially as India’s middle class continues to grow.
And then there is the method of building on what has already proven to be successful. eBay, an international person to person auction site with more than 85 million users in 39 countries, recently launched eBay GivingWorks – a charity listings where users can auction off an item, pledging the proceeds to their chosen charity or where they can bid on items that are being sold to benefit a charity.
“We are an illustration of what is possible,” Clam Lorenzo, Vice-President of Mission Fish, which manages eBay’s GivingWorks, told MediaGlobal. “Anyone who is interested in giving support can. They can give as much as they want – even just $5.”
Lorenzo hopes eBay GivingWorks will eventually abandon the required minimum donation because “.85 cents times a million is still a lot of money.”
Since 2000, more than $166 million has been raised for charity. eBay GivingWorks is open to any organization that is tax deductible and any eBay member can make a donation
“That’s where the power comes from,” Lorenzo said at the Expo, “making donations to large organizations or something in your home town. It perfects the micro and maximizes the macro.”
Whether eBay GivingWorks has “perfected the micro,” is still up for debate. Lately it has been criticized for charging a fee on certain transactions but Lorenzo explained that the fees are used to pay overhead costs such as credit card transaction fees or technology maintenance.
Sitting side by side at the Expo along with several other panelists, each person expressed the desire to put power back in the individual’s hands. Despite their different approaches, each project has the potential to adapt to any Southern region.