Social Entrepreneurs Need Two Improvements to Their Financing Access

Two ideas emerged to improve access for social startups when Siemens Stiftung convened a round table of experts on financing in Cairo, Egypt, this year. One is the need for partially automated data generation systems that would collect relevant data for financing. The other is tailored matchmaking that would pool different sources and types of capital.

The foundation published those and other conclusions about financing solutions discussed at the meeting in a report called ‘Innovative Financing for Social Entrepreneurs.

Social entrepreneurs can struggle to scale their businesses, especially when they eschew grants and donations, Carola Schwank at Siemens Stiftung writes.

“In a lot of cases, this is because of difficulties accessing tailor-made capital and in finding the “right” investors. It is an experience that we share through our work with the entrepreneurs in our empowering people. Network,” Ms. Schwank says.

To address the issues, the foundation gathered 40 social entrepreneurs from around the world to meet and find financing solutions.

One of four groups that focused on different aspects of financing solutions at the round table in Cairo, participants at Table 1 discussed the roles of technologies in supporting finance for social entrepreneurship.

Automated data generation and new financing vehicles

The two themes that emerged appeared to have the best chance of supporting startups as they scale up. As Ms. Schwank writes:

Partly-automated data generation mechanisms would allow for urgently-needed smaller ticket sizes (financial requests/investment) that fill the finance gap for early-stage social entrepreneurs. Here, solutions would not only support social entrepreneurs in finding the right funding partners and vice versa, but also make the due diligence process for investors more cost-efficient and effective.

Additionally, financing vehicles that pool different sources of capital could enable more foundations and philanthropic organizations to become direct funders of social enterprises. Often, one-size-fits-all financing approaches fail to meet the individual needs of social entrepreneurs, while the combination of different types of money and repayment mechanisms could provide more flexibility and tailored solutions. It is clear that these alternative funding models now require further examination, in particular with respect to necessary standardization.

The foundation will follow up on these and other conclusions discussed at the round table with an online meeting in November, followed by a planned working committee of expert partners who may continue the effort to identify and deliver financing solutions. The work will require input from the social entrepreneurship sector at large. Ms. Schwank says:

We invite all players to join forces to continue building better, more sustainable financing methods for social development projects. Day in and day out, we are impressed by the noticeable impact social entrepreneurs’ work has on improving living conditions, creating new jobs and income opportunities, and offering new perspectives for many people around the world. But they need the financial means to get stable and grow their businesses. Accessible finance is one the most important preconditions for them. Therefore we look forward to work on next steps with our partners as we build upon innovative ideas from the round table and beyond.

Interested in supporting the work? Siemens Stiftung invites the Engineering for Change community to contact the coordinators of this effort and lend your expertise.

Contact Ms. Schwank here: carola.schwank@siemens-stiftung.org / +491741559523