"Investing" and Philanthropy: Is it possible to invest in Wokai?

Leslie Forman

Leslie recently moved from San Francisco to Beijing to serve as Wokai's Marketing Director.

Over the past few days I've had a very interesting exchange with Sean Stannard-Stockton, a wealth manager who writes the blog Tactical Philanthropy.  He defines tactical philanthropy as "the practice of transforming philanthropic strategy into reality" and he poses many interesting questions about the "the people, trends, technologies, strategies and tactics that are shaping the new definition of philanthropy." 

I have been particularly intrigued by his use of the word "invest" when referring to philanthropy, and I asked the following question on his blog: 

I really appreciate the way you use the language of investment to talk about philanthropy, and I think the long-term outlook is very important, but I have a question about messaging.

Whenever I use the word “invest” when talking about Wokai, the China microfinance non-profit with which I work, the person’s next question is always, “So, what’s the return?” I’ve answered this question several ways:

1. Highlighting the long-term impact on China’s society

2. Explaining the way in which contributions made to fund loans for entrepreneurs in rural China can be recycled (once the original borrower repays the loan)

These answers rarely seem to satisfy the person I’m speaking with. I think it’s because many of these people either work in finance or are active investors, and the word “invest” activates a completely different part of the brain than a word like “donate” or “contribute.”

I’m wondering if you have experienced a similar cycle of questions in your own work, and how you have approached them. One of my favorite posts of yours was the one about the distinction between spending and investing, but I’m starting to think that this language might be more prevalent among people who talk about philanthropy every day than among the wider population of potential contributors.

He wrote a full blog post in response, explaining his definition of the word "invest."  Here's an excerpt from it:

The word “investing” is correctly used in philanthropy if a donation is designed to build an organization. It is also appropriate if it is structured as a loan or donation to an individual that is expected create future benefits. Wokai’s donor/investors are making an investment. But the “return” is accruing to the people receiving the loans.

There's also a great comment on this post from Jeff Trexler, a professor of social entrepreneurship at Pace University, who says:

This is an important discussion. As we see with the way Obama and others have framed government expenditures on infrastructure, the investment metaphor can be an effective rhetorical tool for building support for public benefit activities. The same goes for what Sean describes in his answer to Leslie’s question.

However, handled less adeptly the language of investment can actually be self-defeating. One conspicuous example of this is the recent trend toward re-framing donor appeals as IPOs. Read certain “prospectuses” and you’ll find ROI variably described as self-esteem, smiles, feeling good and so forth.

This may seem clever, but if you’re trying to impress someone with a substantive background in securities it’s not a good way to go. It makes the IPO-and the charity–seem glib and superficial, more like children playing Wall Street than a serious engagement with social investment.

Personally I sometimes feel a bit like a child playing Wall Street, as my background isn't in finance and investing.  I think it would be silly to call our fundraising campaign (which is 75% of the way to our end-of-year goal!) an IPO.  However, I do think that a long-term commitment to Wokai -- of time, money, or expertise -- definitely can be called an investment.  And we definitely could be more specific about our ROI, not by describing smiles and self-esteem, but by measuring the changes generated throughout the communities in which we work. 

What do you think about this?  Do you consider your philanthropic efforts to be spending, donating, or investing?  I'm really interested in hearing your feedback. 

Comments

[Jake de Grazia]

I think Sean is right to think of a Wokai investor-contributor-lender's return accruing to microentrepreneurs and growing MFIs, but I also think Wokai has the potential to offer valuable (though non-financial) return to investors.

Wokai can offer investors connection to a faraway place and its people, education about a faraway (but worldwide applicable) poverty alleviation tool, real stories about real changes in real lives, and proof that everyone can (USD 50 at a time) help make meaningful change.

Makes me think of Jack Nicholson, Stacey Monk, Epic Change, and Ndugu...

http://www.moreperfectmarket.com/2008/05/ndugu.html.

[Crossroads]

Leslie.

My view has always been that a donation in an NGO's progam is an investment in the community, and that the key to an NGO successfully raising money is being able to show that an investment in you will have a wider impact on society/ issue than were they to invest in another group/ program.

R
www.china-crossroads.com

[Leslie Forman]

Thanks Jake and Rich for your insightful comments!

Jake,
I like your emphasis on the qualitative returns that Wokai can deliver to investors. I think we need to emphasize these benefits more, along with the value of including people in a dynamic international community focused on empowering people in China to lift themselves from poverty.

Rich,
I think that this logic makes a lot of sense if the prospective donor/investor has already stated a desire to invest in the issue. This seems to be the case in CSR programs in China, but it might be a harder sell to our contacts in the US whose connections to China are less formally established. Hope to see you soon!

[Crossroads]

Leslie,

I will agree that asking donors in the US to invest in a China program may be difficult, but in general this is the terminology I prefer to use for many reasons... one of which being donation and investment have very different meanings, and while many feel a donation brings little in return (and there are lot of questions about that), an investment (unless it is in US bank) should. Selling point.

I will probably have some BJ time coming up soon on Hands On/ Crossroads business. Send me email with your current details.

R