Sustainablog

This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.

9.9.04

Finding capital for sustainable livelihoods businesses

Finding capital for sustainable livelihoods businesses
Sustainable livelihoods (SL) business is doing business with the poor in
ways that simultaneously benefit disadvantaged communities and benefit the
company. One of the greatest challenges around sustainable livelihoods
business is to orchestrate a mindset shift ? a fundamental need to embrace
new ways of thinking about how business could be done. This core challenge
also applies to the financing of these ventures: to make the most of
available resources, companies need to redefine how, from whom and for
whom they raise capital.
This guide focuses on how to source funding for a sustainable livelihoods
business. It aims to provide a blueprint for action. It will help managers
decide when to raise capital in-house and when to seek external funds. It
explores public ? private partnerships, how to raise capital for local
operational partners, and why securing this funding may be core to the
company?s success. It also suggests that sometimes the cheapest, most
readily accessible, capital is not the best source of funding.
Finding capital for sustainable livelihoods businesses highlights several
key concepts:
Patient capital is investment characterized by a long-term horizon and
particularly motivated by positive social and environmental impacts.
A distributed capital strategy allows companies to tap into external
capital resources to which they would not otherwise have access.
Project capital refers to the capital channeled towards financing the
business itself. It can be either financial or non-financial capital.
Raising partner capital involves securing the necessary funding for
organizations that surround and support the SL business.
Doing business in low-income communities often requires grants or low-cost
financing, at least at the outset. One vital message is that there is a
lot of money and interest from many different quarters around this type of
business.
However, there are currently few clearly defined procedures for turning
this strong interest into actual cash. Managers raising capital for SL
businesses have many promising places to look but need to be creative and
persistent in seeking this funding out.
Development agencies are becoming increasingly interested in working with
companies and some private foundations are beginning to support
for-profits whose goals mesh with their own program objectives. Many of
these organizations have billions of dollars at their disposal. However to
benefit from this public purpose money SL businesses need to demonstrate
tangible social benefits. In addition, managers are probably going to need
to learn the language and goals of non-business organizations.
Funding sources encompass:
Multilateral financial institutions
Bilateral development agencies
Private foundations
Social loan and venture funds
Microfinance institutions
Creating sustainable livelihoods requires companies to explore different
ways of doing business so this guide also underscores some of the
potential pitfalls, risks and constraints involved. Many companies believe
these ventures can indeed be profitable. Yet well documented success
stories are still in short supply. Nevertheless, market pioneers have
gained a foothold in fledgling markets and have created innovative
financing strategies for doing business in poor communities.
This guide profiles financing strategies for ten different projects.
Whilst each business initiative is location and industry specific, the
lessons apply across multiple sectors. These profiles tap into key
insights provided by companies actively involved in accessing patient
capital resources and creating effective business partnerships around
sustainable livelihoods.
Through Finding capital for sustainable livelihoods businesses ( 560 kb),
managers will gain a strong sense of the potential funding universe and an
informed starting point for getting their own cutting-edge business
initiative off the ground.
Download "Finding capital for sustainable livelihoods businesses"
English ( 560 kb)
Spanish ( 560 kb)
Download: Doing business with the poor - a field guide ( 1.5 MB)