Obsessive Compulsive Metric Disorder

While my writings in the past have strongly pushed for the establishment of better metrics in quantifying social impact, the reliance on such metrics is not immune to negative outcomes. One such negative outcome is when social investors become so concerned with their own metrics that they lose sight of the larger picture — the common goal to provide as much of a difference as possible. The danger of this materialized for writer Kevin Jones of Xigi.net during a conversation he had with an investor at the Skoll World Forum.

The worst news from the Skoll World Forum was from another investor. They were trying to co-invest with a venture philanthropy fund, but found two significant barriers; one that fund does not co-invest, nor release its due diligence reports to even other like-minded institutional funders.

Worse was that this fund had made the social enterprise sign an exclusive deal; they would not take funding from another fund. The reason, it seems, is metrics run amok; they only way to make sure they can measure their impact is to try to restrict other impacts on the enterprises. So less good gets done, less growth of the mission and the company happens in the name of being able to accurately measure and report.

Metrics are important, but they are only as good as the issue they hope to measure. Once the metrics reach a point of control over the analysis where decisions are made solely to feed those metrics, it forms a vicious cycle where organizations become more obsessed with these abstract values than the focusing on actually making a difference.

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Over the weight limit …

Anyone who has flown recently can relate to the frantic attempt to remove clothing, shoes and other packed items from your suitcase in order to meet the weight requirement that is draconiously enforced upon unsuspecting passengers. In a similar fashion, here are some additional articles that may be of interest that I could not fit into my op-ed below.

  • Nextbillion.net’s Francisco Noguerra wrote about how existing corporate knowhow can strategically benefit BoP buisnesses scale up to the next level.
  • From Nextbillion as well, a discussion over how to form one’s social venture and the decision of becoming a for-profit, non-profit or both
  • Not content with simple indexes, one visionary is trying to build a social stock exchange. Source: Xigi.net

Op-Ed: Microfinance revisited and its role in reaching the missing middle

Two weeks ago I wrote about James Surowiecki’s article in the New Yorker that brought forward the inherent limitations of microfinance to actually generate a substantial number of jobs in a developing country. Since then it seems as if I was not the only one (surprise surprise) to take notice of Surowieki’s conclusions and it has even brought pioneers like Acumen Fund‘s CEO

Novogratz gave some credit to Surowiecki’s argument that not everyone in society is an entrepreneur and that in fact most people simply want a predictable, stable job with defined roles. Novogratz, however, distinguished her stance through her anectdotal experience with women’s access to credit and how throughout her experience they have overwhelmingly been favorable towards it. She says that this desire for credit provides the rest of us with critical lessons on how to address poverty.

However, the desire for credit on its own in no way makes someone an entrepreneur. Every teenager in America has an affinity for credit, but just because they are willing to spend that money somewhere does not make them some sort of innovator. Likewise, Surowieki’s argument highlights that for the most part microloans are not utilized for business expansion, but rather they help tide businesses over during rougher times, a la a bridge financing round. These funds like simple credit cards are used to cover funds that someone has already spent before — not towards future capital investments. It is that ability to reinvest ones funds towards scalability and expansion that is truly entrepreneurial.

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Social Capital Index Unveiled by Xigi.net

The other day, we posted an article by PSD Blog suggesting that the new development paradigm still suffers from the same shortcomings of the old guard. Today, we have come across one initiative to help address those concerns, as Xigi.net has released a new Social Capital Index that intends to be a tracking tool for investors to monitor and compare various blended value investments.

We have launched the Social Capital Index, a timely tracking of investments in the social capital market, including social enterprise, (health, education and workforce development) fair trade, digital inclusion, and some clean tech and microfinance investments. Over time we will be able to size the Social Capital market and its growth trajectory in each sector

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