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Business Case for Social Sector Finance TBLI CONFERENCE - THAILAND Arthur Wood – awood@ashoka.org Ashoka - Social Financia...
The backdrop <ul><li>Current system of financing social sectors is unsustainable </li></ul><ul><li>Government resources be...
“ Population aging is a worldwide phenomenon that will affect all G-7 countries”
“ The projected decline in the employment-to-population ratio will gradually become a hindrance to growth in living standa...
“ Population aging will be a key challenge facing the Canadian economy over the coming decades”
Social capital market - the demand side (1 of 2) <ul><li>Huge and fragmented  </li></ul><ul><ul><li>Estimated size in US a...
<ul><li>Growing at a rapid pace </li></ul><ul><ul><li>‘Citizens sector’ growth 3x the rate of the rest of the economy in O...
THE SAME HISTORICAL FORCES ARE AT WORK  EVEN INTHE GERMAN HEART OF EUROPE Source: McKinsey analysis of data from Johns Hop...
Sources: BLS Monthly6 Labor Review, (September 2005,)statistics from  all sectors responding ) GROWTH IN EMPLOYMENT  1997-...
Social capital market - the supply side <ul><li>Capital available for social sectors exploding as we approach the largest ...
A market-based solution: opportunity for financial institutions <ul><li>Financial institutions with asset & wealth managem...
Current scope of commercial financing of social sectors <ul><li>Microfinance </li></ul><ul><ul><li>Foreign investment boom...
Capital markets solutions for social sectors <ul><li>Microfinance securitizations $500 mm+ so far </li></ul><ul><ul><li>Ci...
Key requirements for more efficient social sector financing system <ul><li>Information management & transparency </li></ul...
Potential benefits to Entrants <ul><li>Branding and reputation as a leader in systems change in social sector financing </...
Ashoka -  www.ashoka.org   <ul><li>The world’s leading supporter of social entrepreneurs since 1981 </li></ul><ul><ul><li>...
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Presentation by Arthur Wood at TBLI CONFERENCE ASIA 2007.

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Arthur Wood, Alternative Financial Services Director - Ashoka: Innovators For The Public - United States.

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Presentation by Arthur Wood at TBLI CONFERENCE ASIA 2007.

  1. 1. Business Case for Social Sector Finance TBLI CONFERENCE - THAILAND Arthur Wood – awood@ashoka.org Ashoka - Social Financial Services May 2007
  2. 2. The backdrop <ul><li>Current system of financing social sectors is unsustainable </li></ul><ul><li>Government resources becoming increasingly scarce as demographics in developed world create ballooning social security and health care costs </li></ul><ul><li>Foundation system allocates capital at a cost of 20-40%* (10x the commercial system) and in a way that encourages fragmentation over collaboration </li></ul>* Stanford/McKinsey
  3. 3. “ Population aging is a worldwide phenomenon that will affect all G-7 countries”
  4. 4. “ The projected decline in the employment-to-population ratio will gradually become a hindrance to growth in living standards beyond 2010”
  5. 5. “ Population aging will be a key challenge facing the Canadian economy over the coming decades”
  6. 6. Social capital market - the demand side (1 of 2) <ul><li>Huge and fragmented </li></ul><ul><ul><li>Estimated size in US alone is $1.3 trn* with a funding gap of $300 bn </li></ul></ul><ul><ul><li>1.4 million 501c3’s but only 3.8% have revenues over $10 mm </li></ul></ul><ul><ul><li>Heavy focus on fund-raising discourages collaboration and distracts from core missions </li></ul></ul>* Stanford/McKinsey
  7. 7. <ul><li>Growing at a rapid pace </li></ul><ul><ul><li>‘Citizens sector’ growth 3x the rate of the rest of the economy in OECD since the 1980s* </li></ul></ul><ul><ul><li>In the US, no. of non-profits tripled in 10 yrs, reflecting a global trend </li></ul></ul>Social capital market - the demand side (2 of 2) * Johns Hopkins University research
  8. 8. THE SAME HISTORICAL FORCES ARE AT WORK EVEN INTHE GERMAN HEART OF EUROPE Source: McKinsey analysis of data from Johns Hopkins Nonprofit Sector Series German Employment Indexed to 1960
  9. 9. Sources: BLS Monthly6 Labor Review, (September 2005,)statistics from all sectors responding ) GROWTH IN EMPLOYMENT 1997-2002 THE CITIZEN SECTOR IS CREATING JOBS AT THREE TIMES THE RATE OF THE REST OF THE U.S. ECOMONY
  10. 10. Social capital market - the supply side <ul><li>Capital available for social sectors exploding as we approach the largest transfer of wealth in human history </li></ul><ul><ul><li>$41 trillion in the next 50 yrs in US alone* </li></ul></ul><ul><ul><ul><li>1% of the population holds 60% of this wealth </li></ul></ul></ul><ul><ul><li>$2-4 trn of this is estimated to go to social sectors (higher amount the wealthier the client) </li></ul></ul><ul><li>Current choice of investment positions is IRR of -100% (grantee) or +5% for SRI investors </li></ul>* Boston College of Social Research
  11. 11. A market-based solution: opportunity for financial institutions <ul><li>Financial institutions with asset & wealth management and investment banking platform uniquely positioned to intermediate this flow of capital more efficiently and for greater social impact </li></ul><ul><ul><li>Some players willing to accept a negative return (or to trade-off economic, for social, return) </li></ul></ul>
  12. 12. Current scope of commercial financing of social sectors <ul><li>Microfinance </li></ul><ul><ul><li>Foreign investment booming ($4 bn in ‘06*) but highly concentrated in top 10/20 MFIs </li></ul></ul><ul><ul><li>74 investment funds which invest 25% of their assets in top 10 MFIs </li></ul></ul><ul><ul><li>Need to move beyond tier-1 players and need for local currency financing </li></ul></ul><ul><li>Beyond microfinance </li></ul><ul><ul><li>Huge opportunity to provide financing for broader social sectors (health, education, housing) </li></ul></ul>* Consultative Group for Assistance of the Poor (CGAP)
  13. 13. Capital markets solutions for social sectors <ul><li>Microfinance securitizations $500 mm+ so far </li></ul><ul><ul><li>Citibank’s BRAC (Bangladesh) securitization raised $180 mm in local currency (Sept-06) </li></ul></ul><ul><li>Beyond microfinance </li></ul><ul><ul><li>GAVI Immunization Bond $1 bn (and another $3 bn coming): Goldman & Deutsche </li></ul></ul><ul><ul><li>Eye Fund I: Deutsche, Ashoka, and International Assoc for Prevention of Blindness raising $27 mm to finance eye clinics around the world </li></ul></ul><ul><ul><li>=STRUCTURES >> CCC to AA </li></ul></ul>
  14. 14. Key requirements for more efficient social sector financing system <ul><li>Information management & transparency </li></ul><ul><ul><li>Objective 3rd party measurements of social return/performance are in infancy stage </li></ul></ul><ul><li>Aggregation of social sector financing needs to achieve adequate scale for capital markets finance </li></ul><ul><li>Tax and legislative reform to recognize the benefits of social sector investments beyond exclusively non-profit investments </li></ul>
  15. 15. Potential benefits to Entrants <ul><li>Branding and reputation as a leader in systems change in social sector financing </li></ul><ul><li>Competitive positioning of the private bank for clients seeking economic returns, social impact, and family legacy </li></ul><ul><li>Investment & commercial banking opportunities at the “bottom of the pyramid” </li></ul>
  16. 16. Ashoka - www.ashoka.org <ul><li>The world’s leading supporter of social entrepreneurs since 1981 </li></ul><ul><ul><li>Over 1800 Ashoka Fellows around the globe </li></ul></ul><ul><li>Identifies and supports social entrepreneurs; provides a network of Fellows for collaboration, access to finance, and bridges to business & academia </li></ul><ul><li>Ashoka is global and non-sector specific </li></ul><ul><li>Capacity to aggregate social sector demand through its network of Fellows and Open models www.changemakers.net </li></ul>

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