The End of Charity: How to Fix the Nonprofit Sector Through Effective Social Investing

by David E. K. Hunter, Philadelphia Social Innovations Journal; October 2009.

This author lights a fire under funders to promote social impact measurement through social investing. His claim is clear: “Social investing, if widely adopted, will help channel funding streams that are directed by measurable performance rather than feel-good stories, habits of giving and rank sentimentality. And social investing has the potential (yet to be realised) to advance a selection process that either forces poor performers to evolve and improve, or weeds them out.”
This argument is based on three ‘unpleasant truths’ he has observed across the sector. First, there is no evidence that most nonprofit organisations actually create social value. Second, few, if any, social service nonprofits want to calculate their social impact. Third, most nonprofits are funder-driven; they do what their funders tell them to do. Hunter then provides examples of nonprofits which have created more harm than good: abstinence only teen pregnancy prevention programs, a drug prevention program called D.A.R.E., and an after-school program called 21st Century Community Learning Centre. Rigorous impact evaluations have shown that these programs not only failed to deliver on their promised social impact, but also had negative ancillary consequences. To avoid wasting precious social funding, the author describes a path towards effective social investing. It begins with selection criteria. Funders must insist on making nonprofits examine their long term social impact. For example they can ask themselves whether there is an empirical basis for believing they are achieving what they set out to do. If a nonprofit cannot answer basic questions like these related to their core mission, then the author believes social investors should put their money elsewhere.
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