Ecosystem Players Need Innovative Payment Schemes


In order for the social capital markets to grow and for capital to flow efficiently to SEs, a broad ‘ecosystem’ of intermediaries across the region needs to participate.  This ecosystem needs to mirror what exists in the traditional capital markets and will include transaction advisors – such as financial advisors, legal advisors, accounting advisors and social advisors – rating agencies, government/regulatory bodies, research firms and academic institutions. While SEs must comply with numerous rules and regulations, the affordability of ecosystem partners may be a particular challenge, and there has been considerable growth of market intermediaries who focus exclusively on SEs. 

A lack of funds pushes SEs towards pro bono or inexpensive service providers. However, pro bono offers can sometimes be counter-productive. Choosing a service based on affordability alone often leads SEs to chose providers that are lower in quality or less appropriate to their needs. Once SEs select ecosystem partners, they may be less likely to participate fully when they have not been required to invest in the process. In certain cases, entrepreneurs have felt less bound to listen to pro bono service providers.

Innovative payment methods will be required to help mitigate the risks that arise from low-cost or pro bono providers. Emerging methods include relating payments to performance or combining cash and equity as remittance. Assessment of each client’s affordability is another option, as is urging very small businesses to form co-operatives or societies to combine their talent as well as reduce the number of time that the same questions was asked of their service provider. Solutions must combine the needs of both parties in an affordable and package that properly aligns the incentives of all relevant stakeholders.