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Missing Middle

The “Missing Middle” and the Growth of Social Enterprises

Aleem Walji's picture

SOCAP (via amsterdam.wordpress.the-hub.net)Every fall at Social Capital Markets (SOCAP), the who’s who of impact investing and social enterprise convene in San Francisco to network and share stories about topics like market-based solutions to poverty, social stock exchanges, and just how much capital is waiting to be deployed to solve the world’s toughest problems. It’s inspiring to be sure, especially the growth in the number and diversity of participation. It’s no longer the sole domain of Ashoka, Skoll, and Schwab who have paved the way for so many others. Today, mainstream Banks from Europe to Asia, fund managers, and wealth advisors are sending a signal that doing good and doing well is a more enlightened form of capitalism.

But behind all the feel-good energy and promises that impact investing will be a $50 billion industry by 2020, there are gaps in the story line and challenges that we must confront as a community. First, there is no clear definition of an impact investor. The industry brings together those who are primarily driven by a financial bottom line (finance first) with those who are seeking to optimize a social return without making a loss (impact first), and finally grant makers who are aiming to improve the efficiency of philanthropic capital (largely foundations). Their world views are different, their expected returns are different, and how they use the same vocabulary (e.g. impact, viability, and sustainability) varies widely.