Blended Finance
Blended Finance is a development finance model that combines concessionary loans or grants, usually provided by the public sector, with private investment. It aims to alleviate the development funding constraint by de-risking investments into the sector and directing more private capital towards projects or geographies that would otherwise be perceived as too risky for traditional investors.
Business Incubators
Business incubators assist emerging enterprises to survive the start-up phase and to develop into operationally and financially self-sustaining businesses. Business incubators offer access to funding, networking opportunities, business and technical assistance and access to facilities. Business incubation is the vehicle used to ensure that SMMEs develop into competitive and successful businesses, which contributes positively to an emerging economy.
Catalytic Capital
Investment capital that is patient, risk-tolerant, and flexible. It aims to unlock impact and additional investment that would not otherwise be possible, expanding opportunity and economic growth, while laying the groundwork for mainstream investors to participate in transformative investments.
Civil Society Organisations (CSOs)
CSO is a broad term, describing organisations that work to further the purposes and interests of civil society as a whole. The term includes charities, trusts, foundations, advocacy groups, and national and international non-state associations. CSOs are generally non-profit organisations however are now often social enterprises which do generate profits.
Convertible grants
Based on performance and linked to milestones, these convertible grants can be converted to a loan at a later stage or vice versa.
Crowdfunding
Crowdfunding is the practice of funding a project or idea by raising capital from a large number of people, usually through online platforms.
Debt
This is money loaned to an organisation that must be repaid. Just like a normal bank loan made to a business or individual, the investor aims to get their money back plus interest.
Equity
This is providing working capital (ie. funding) to an organisation in exchange for a portion of ownership of the organisation. This can be thought of as shares of the company. The appeal for the investor is that if the company makes a profit, then so too does anyone with a portion of equity. The investor can also sell their shares later for profit.
Grants
This is the traditional donations-style support, where money is simply given to the organisation. The investor doesn’t expect to get it back, they have no expectation of financial return (profit), only expectations of social return (impact).
Impact Investing
Impact investing seeks to generate both social change and a financial return on investment. This is a very broad category that includes various formats of financing, including debt-financing (providing loans, patient capital etc) and equity-financing. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances.
Microfinance
Microfinance is the practice of providing basic financial services, such as savings accounts, money transfer facilities and the lending small loans, to unemployed or low-income individuals who would not normally have access to such services and are not involved in the formal economy.
Patient Capital
This refers to capital lent out for longer periods of time (and sometimes lower rates of repayment) than usual and which seeks to maximize social as opposed to financial return.
Security
A security, which is often presented as a certificate or similar legal document indicating ownership, is an instrument that has some financial value and can be sold or bought by participants in a marketplace. Securities commonly fall into two categories – debt (bonds) and equity (stocks).
Social Economy
This refers to the sector of the economy comprising of not-for-profit institutions, social enterprises, coops and stokvels, but can also include cooperatives, mutual benefit societies, associations and foundations. All of these organisations produce goods and services with the aim of creating both social and economic value.
Social Enterprise
The main aim is to create social value rather than maximise profits and unlike a not-for-profit organisation, a social enterprise produces goods and services to generate revenues and cover its expenditures. It can also generate income via grants and donations.
Social Entrepreneur
A social entrepreneur uses market-based solutions to tackle pressing socioeconomics issues. Their business acumen and social enterprises are the vehicles through which these change agents promote social innovation and disrupt the way markets currently work, with the aim of achieving social objectives.
Social Impact Bond (SIB)
This is a financial mechanism that operates on the basis on paying for outcomes as opposed to inputs. Taking the form of a contract between governments and social service providers, an external investor will provide the upfront capital for the required services to be delivered.
Social Innovation
This is the application of innovation – the creation of novel solutions that are effective, efficient and sustainable – to address key social issues and create value for society as a whole Social Innovators These are the people or entities that drive social innovation forward.
Social Impact Insurance
Social Impact Insurance is an insurance platform, which originated in recognition of the need for potential investors and financial institutions to measure the risk attached to social impact projects or social impact organizations. It aims to provide risk mitigation products and services to address the challenges faced within the social impact industry, which hinders the flow of financing within the social impact value chain.
Sustainable Finance
The process of taking environmental, social, and governance (ESG) considerations into account when making investment decisions in the financial sector, leads to more long-term investments in sustainable economic activities and projects.
Environmental considerations might include climate change mitigation and adaptation, biodiversity conservation, pollution prevention, the circular economy, among others. Social considerations could refer to issues of inequality, inclusiveness, labour relations, investment in human capital and communities, as well as human rights issues. The governance of public and private institutions – including management structures, employee relations, and executive remuneration – highlight governance considerations, which have a fundamental role in ensuring the inclusion of social and environmental considerations in decision-making processes (Source: EU).
Venture Philanthropy
This form of philanthropy provides not only financial support but non-financial support to social organisations. The fundamental objective of venture philanthropy is to achieve high social return, create eco-system change and enable non-profit organisations and social enterprises to become sustainable
