Instead of giving grants to entrepreneurs to seed financial viability, foundations should think about leveraging their grant money to guarantee low-cost debt to SMEs or social enterprises. Not only will your philanthropic dollars address a vital unmet need, but these dollars will stimulate an institutional shift where the banking sector can increase its risk tolerance for SME finance. That’s the takeaway in a long and well documented story on Next Billion about the working capital gap by Global Easy Water Products, an Indian social enterprise.
Foundations: guarantee debt, don't grant
SOCAP Global June 28, 2009