Teaching a new dog an old trick?

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Online_philanthropy_reportWill online social investment markets replicate the flaws of traditional development models, or will they improve their effectiveness? That's the question raised in a new report that provides some empirical evidence to the so far rather anecdotal argument that we are shifting towards a Development 2.0 paradigm.

In theory, start-ups like MyC4 or GiveIndia begin from a clean slate and therefore need not fall in the same traps that hampered the effectiveness of traditional development players.

However, the analysis of 24 online social markets leads the authors to conclude that, whilst they are "relentless innovators" that succeed in attracting a new donor base, their transformative power is hindered by an all too familiar problem to "old" development players – the lack of reliable performance data and a common reporting framework.

Whilst 83 percent of surveyed markets believed performance data to be important to encourage donations, only 68 percent report on progress of the offerings on a regular basis, and a mere 27 percent provide any kind of formal evaluation. "One searches in vain for well-defined criteria for assessing the performance and impact of the organizations listed in the markets" and "the information available to[...] social investors for making their decisions falls far short of any acceptable standard of systemization." Perhaps even more tellingly, only 14 percent of the reporting presents some form of beneficiary validation – which, arguably, could be one of the greatest advantages of using interactive media vs. more traditional approaches (think about Amazon-style ratings provided by donor recipients).

This is significant, argue the authors, because the innovation introduced by online philanthropy markets is to empower individual donors, like you and me, to adopt a long term, social investor attitude to donations, as opposed to being providers of occasional, "feel-good giving" ("pocketbooks lacking in agency or responsibility"). For that to happen, a reliable framework is needed so that donors can evaluate which recipient organization is performing better (ideally, from the point of view of the beneficiary communities) and reward the highest-achieving ones with "investments." Only in so far as social returns "become a provable, transparent part of the donor's decision making process can we say that there is a genuine market exchange of value," they conclude.

What do you reckon: in a Development 2.0 world, should our aim be to encourage a social investor attitude? And, if so, is the goal to achieve a consistent performance framework to inform social investments achievable?

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