The City’s new boom market: philanthropy

18 November 2006

So what’s our modern philanthropist to do with his groaning wallet and aching conscience? How can he give away his money without causing offence or duplicating the work of government? The answer is to do what these people do best: take risks. Banks and governments are hopeless at funding risky untested projects. Philanthropists aren’t accountable to anyone so it’s easier for them to back radical new ideas; they can supply ‘social risk capital’, says Harris, to fund pilot projects which cannot otherwise find backing.

And that’s what the most effective new philanthropists are doing. The Prince of Wales has been doing it for years through the Prince’s Trust. Bridges Community Ventures, which also provides venture capital to entrepreneurs in deprived areas, recently turned one £120,000 investment into a stake worth £22 million in four years. Bill Gates funds blue-sky research into diseases such as malaria that drugs companies ignore. Philanthropists have pioneered the provision of microfinance for those too poor to get credit, leading the way for a new commercial microfinance market. These donors are blurring the boundaries between charity, the private sector and the state. Philanthropy that pays its way: now there’s a thought to warm the hearts of children of billionaires everywhere.

Simon Nixon is executive editor of breakingviews.