Innovative Financing for Social Enterprise

It can be difficult to put boundaries on what falls within "corporate social responsibility," but a field that is at least closely related is Social Enterprise. It's not corporate, but instead it's another model that "business" can take, and one that puts greater emphasis on values and social change than on profits.

There's a new took for funding individual social enterprise, and Esquire Magazine is calling it "The E-Bay of Loans" (October 2006, p. 207). In particular, two companies (Prosper in the US and Zopa in the UK) are enabling individuals with money to invest to connect with people who need a loan - many of them social entrepreneurs. Investors can take into account the individual's credit rating, requested interest rate, and description of why he or she needs the money.

Also, there's a really neat auction-like feature that basically compiles all the willing lenders who offer money at less than the maximum interest rate that the borrower has set; after the total loan is full and before the bidding period is over, only lower interest rates are accepted - so that in the end, the borrower has the lowest possible rate.

Until now, it has been very difficult for a non-wealthy individual to have a significant amount of discretion over the values that he or she is embracing as an investor - usually all we can do is choose the "social" mutual fund out of the dozen choices we are given. This is a way in which indivuals can choose to invest as little as $20 on a project and a person they truly believe in.