In 2015, the European Commission through the European Investment Fund announced a €92m investment facility for social entrepreneurs. It is one of the largest public sector commitments ever in this field. Bigger than Obama’s initialSocial Innovation Fund. Bigger than anything that has come out of the G8 Social Impact Investing Task Force. It took almost five years of lobbying to make it happen.
Curiously, even six months later, nobody seems to have noticed.
Perhaps this is because the new program does not offer one of the two familiar types of financing for social innovation, and therefore sits outside the established silos (or planets, as I argued years ago). It neither offers traditional grants nor traditional investments but rather something in between: A guarantee. This guarantee allows investors to reduce their risk when investing in social innovations that are hard to fund in Europe’s still misaligned impact investing market today. It will lose money over time but in the smartest possible way – by allowing others to engage in types and sizes of deals previously impossible.
This is hugely significant. Perhaps even revolutionary. It will help establish what we have called hybrid finance. It may finally tackle the second biggest problem in our field: The lack of a pipeline of investable social entrepreneurs. And this in turn will help fix the biggest challenge in our field: The persisting mental (and very real) disconnect between the world of charity and the world of business.
Read the whole story on this link.