PATIENT CAPITAL: How Donors Can Drive Economic Growth and Development in Africa Through a New Model of Philanthropy

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In the affairs of conducting business – whether it is a single, family-owned venture or a large multinational conglomerate – capital is at the crux of the undertaking.  In this edition, The Exchange brings to you Part 2 of a two-part series on Patient Capital and how Africa can reap the tremendous value of philanthropy in business.  Patient Capital: An Instrument for Financing Development  Over the last decade, a new breed of investors focused on financial returns with a strong social and environmental value proposition have emerged in Africa. These “impact investors'' seek to consolidate financial returns with social impact by utilizing the apparatus of venture capital to make principal investments in private, high-growth companies/organizations that have the potential to deliver some quantifiable social or environmental benefits.  Patient capital is an emerging investment instrument that generally falls under a broad category of vehicles for financing social change and economic growth at the same time called Impact Investments. This is changing the way philanthropy views business and the way businesses view social development.  Patient capital does not have a specific definition, but generally refers to 'investment' characterized by its ability to provide seed and growth capital that can wait a considerable amount of time before desiring anticipated yield on investment returns. Financial return is not the sole motivation driving the patient capitalist; rather, delivering social impact with financial return as a bonus incentive over the long term is the most important investment determinant.  Patient capital, allows the investor to forgo an immediate financial return in anticipation of more social and economic gains in the long run. It possesses hybrid characteristics of philanthropic grants and conventional investment vehicles. When compared to grants, there is an expectation of financial return on investment while when compared to typical investment instruments, it delivers both social and financial

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