An introduction to social finance and its facets

  ella watson    February 26, 2021    132

 

The finance industry is usually taken as self-centred because it normally focuses on creating more and more benefits and nothing beyond that. But we humans have also developed the moral sides of finance besides the materialistic ones. Social finance is one such side that works for the well-being of humans. To understand, have a detailed look at it.

What is social finance?

Social finance is a stream of finance that uses private capital for social and environmental concerns. This stream exists for decades, but it became popular after the global crisis of 2008.

Examples of social finance

Here are some examples of social finance that can help you understand the concept better and move in the right direction if you have any plans in this stream.

  • Investment in renewable, eco-friendly energy
  • Using money to educate children in remote areas
  • Connecting people through internet communities
  • Establishment of the eco laundry rooms

A recent example can be the measures taken to prevent people from debt burden after covid-19 chaos. The Social Finance Foundation in Ireland will provide access to organisations to easy social finance loans. The organizations that fail to qualify for the private loan agencies in Ireland due to extremely poor financial conditions can expect help from here. This initiative was taken in 2020.

 

How does social finance help in social innovation?

Social finance and social innovation are the two sides of a coin, and they both are destined for one common aim social + economic well-being.

  • With the help of money investment in areas constructive for society, many progressive things can be done. It can be tagged as social innovation because it breeds a new and better version of society.

 

  • Social Finance partners work in coordination with government, foundation, nonprofit organizations, financial institutions to create a better tomorrow for society and the environment. They drive the attention of the investors to invest resources for the creation of a better social environment.

 

  • This stream of finance works in all sectors while creating mutual coordination to get faster outcomes and better growth in the coming tomorrow. This is certainly not an easy task. Still, people worldwide are working through social finance initiatives.

 

  • People are at the centre of all the efforts in social finance. The investments and efforts are result-driven as social science work for the actual change. It has nothing to do with the theory. It is basically the tool to make this world a better place to live.

 

2 Prime sources of money for social finance

Social finance seeks help from investors and also has its own ways to obtain funds. With time, the new forms are sure to get into the light, but there are currently two primary sources.

  1. Borrowing money (debt) for a social cause

The social finance partner borrows money from an investor and pays it back to it with interest. However, a fee is also included. If you think they are as easy to obtain as the small 24 hour loans in Ireland without fee, then you are wrong. However, it is on the investor to give the maximum stability.

  1. Sell Shares (Equity)

By selling the shares to an investor, the funds are obtained for the purposes of social well-being. The investor who buys the shares gets a share in the profit earned by the organizations. Besides the shares, he can also talk about the decisions to run the organization better.

The basic introduction to social finance above is sufficient to help you understand the concept and start working if you have any plans. No doubt, social finance is the finance of the future, and it has so much to offer in the name of possibilities. When the world and its natives are getting more and more materialistic, social finance can change through a progressive transformation.


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