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ed. note: The following is a guest post by SITAWI's Rob Packer who was a guest in NFF's National headquarters in New York in the Fall of 2012.
In 2009, The Economist memorably described Brazil as like the United States but in “one of those novels with alternative endings”: Both have histories as colonies of European powers, marked by vast unexplored wilderness and waves of immigration. I worked for a number of years with a US corporation and am now with SITAWI, a social-sector organization based in Rio de Janeiro. This fall I spent several weeks onsite with Nonprofit Finance Fund in New York and, while there, I was struck once again by the similarities and differences not just between the two countries, but between their nonprofit (or social) sectors. At the heart of both NFF and SITAWI is a need for quality services to provide financing to the nonprofit sector in the form of loans or equity.
In the Brazilian case, SITAWI launched in 2007 after our founder, Leonardo Letelier, saw a need to resolve a number of problems that the country’s nonprofits were facing. First, they were excluded from the traditional financial system. Our first client was a case in point: Solidarium had signed a contract with Walmart in Brazil to produce recycled plastic bags using low-income labor, but, despite having a signed contract, they were unable to find a bank prepared to loan them the capital to get the business up and running. Many nonprofits in the US have similar stories.
At the same time, Brazilian nonprofits needed advice on how to expand and grow, but Letelier perceived that just advice or just funding wouldn’t be enough: Advice provides the tools but not the resources to implement great ideas, and funding alone could lead to the opposite problem. Central to the resource problem is the size of Brazilian nonprofits: most are very small compared with the US. And they rely on donations from the public, which total R$10 billion a year (around US$5 billion) and average R$25,000 (around US$12,000) per nonprofit. In the United States, a legacy of philanthropy, dating back to Benjamin Franklin and beyond, means individuals alone in the US give US$227 billion, nearly 50 times more than in Brazil. Of course Brazil, which has just a third less population than the US, suffers from much more extreme inequality. Clearly, the current level of Philanthropy is insufficient to create the large-scale transformational programs that Brazil needs.
But these differences in size and scale seem superficial and a sign of two sectors heading in the same direction but at different stages of development. For example, nonprofits in both countries are equally dependent on philanthropic or government funding with the attendant risk of unexpected financing shortfalls. They experience difficulties in attracting and retaining the best people. And making long-term plans is complicated by the fact that funding is only secured for, at best, a limited number of years. Perhaps one of the biggest potential challenges is limiting the damage that a couple of bad eggs can have on the whole sector: Corruption scandals over the past few years in Brazil involving a limited number of nonprofits have damaged Brazilians’ opinion of the vast majority of good eggs.
Nevertheless, in Brazil and around the world, the professionalization of the sector has accelerated in recent years, and this has the potential to attract even more talented individuals and spur innovation. One result has been the growth in social enterprise which takes the best of the nonprofit and for-profit sectors and builds sustainable businesses that make a firm commitment to social impact. This can work equally well in either Brazil or the US, and concepts like impact investing have generated a lot of excitement around the promise of directing more traditional financial resources towards social good.
This fall, Rio hosted the Social Enterprise World Forum sponsored by NESsT (and with a keynote speech from Antony Bugg-Levine, NFF’s CEO). The conference provided an opportunity for actors in the social enterprise sphere around the world—and from Brazil in particular, one of social enterprise’s global hotspots—to learn from the experiences of other countries. The ideas ranged widely across panel discussions and breakout sessions, chronicling a variety of exciting innovations: New financial instruments like social impact bonds are being pioneered in the UK and the US. New institutions like social enterprise incubators and social investment funds are launching. And new relationships are being fostered by grassroots organizations that connect artisans with traditional markets, young people from low-income communities with internships, and remote rural communities with healthcare services. What was most exciting about the forum was the newness and excitement around social enterprise resulting in a global laboratory, where new ideas and concepts are tested, improved and refined.
While the difficult part will be sharing, blending and reimagining these ideas between different countries and regions as they develop, the building blocks are in place for Brazilian nonprofits to learn from the US experience and vice versa, while social sector organizations from all over the world—from Boston to Guangzhou—are newly emboldened to work with their peers to create and innovate new ways to fulfill their missions.
Rob Packer is a Fund Manager at SITAWI - Finance for Good, a Brazilian nonprofit that develops financial products for the social sector. He is from London and has a range of professional experience in banking and microfinance in Europe, Asia and Latin America.
|Brazil, equity, guest post, Loans, nonprofit sector, Rob Packer, Sitawi, social sector|