Community of Practice on Innovative Finance

#5 A new approach to the charity business model

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Join us on September 19 for yet another informative inspiring meeting of our Community of Practice on Innovative Finance for Development. To follow up on a wish expressed by a number of organisations and interested parties, in 2019 The Spindle is organising a series of sessions on how different organisations are working with innovative ways of financing development. Each session will touch upon on one or two innovative financing instruments that are currently being explored, experimented with or implemented. The main goal of these meetings is to exchange on the topic and discuss experiences, success stories, pitfalls and recommendations regarding each financing instrument.

Community of Practice on Innovative Finance #5
During already the 5th CoP on Innovative Finance, Bram Alkema (MSc Economics and Business Model coach) will take us through the philosophy, on how semi-religious viewpoints of usury and charity actually hinder the financing of the common good. A business model is a recipe on how an organisation produces and recaptures value. According to Dan Palotta and মুহাম্মদ ইউনূস (Muhammad Yunus), the charity business model (and therefore the derivative business models of most NGOs) has a couple of flaws. Watch Dan Palotta’s TedTalk on this topic here.

Dan Palotta’s says most organisations “doing good” aren’t supposed to make profits because of historic puritan Christian values. And, therefore the legally required magical maximum of 20% annual overhead, lest you lose charity status, should never be required on a short term basis. That requirement limits the number of available business models to “dumb church-cake-bake-sales” and similar charity type fundraising. His proposed solution is that the 20% overhead should be required over a 10 year period. In short, he wants to enable NGO business models that require investments and reinvesting profits, that cannot be recouped within a year. Fundraising problems for NGO are self-inflicted problems.

Fundraising problems for NGO are self-inflicted problems.

Yunus’ proposal, famous for social business micro-lending schemes, is similar but different. To Yunus externalities of socio-capitalist enterprises (social business) should be harnessed by earmarking dividends for reinvestments in that social business. Commercial newspapers, for instance, have a lot of positive externalities (journalism democratic). Why not look for similar business models in NGOs

Bram Alkema will talk about the flaws mentioned by Palotta and Yunus and about respective proposals for change. The key takeaway point, spoiler alert!, is that we constantly need to check or biases on how to maximise the good we produce per euro spent. To put in bluntly, current NGO business model requirements are optimised for philanthropy, and not for doing good. Thinking about why and how we make the world better helps.

The second topic will be on the opportunities of the Green Climate Fund. What are the goals and how does this fund work? The 6 steps to take, lessons learned and pitfalls to be aware of. Angelika Kessler, agronomist working on topics like: Urban agriculture, decentralisation, Wash, Nutrition, Resilience, Climate-smart livelihoods, Youth employment and empowerment, Cash, Natural Resource management, mainly for and in West and Central Africa will explore with us the possibilities!

Practical details
Date: Thursday, September 19, 2019
Time: 15.00-17.00 (+ networking drinks)
Location: Partos’s offices (Ellermanstraat 18B, Amsterdam-Duivendrecht).

Community of Practice on Innovative Finance #5

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