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The lack of financial infrastructure in some of the world’s poorest regions — sub-Saharan Africa and parts of South and Southeast Asia, Latin America and the Middle East — is a contributing factor to the destitution that hundreds of millions of people endure. In the past decade, digital banking and mobile phone technology have started to reverse this, allowing mobile payments systems, small loans and wealth management services to blossom in many of these regions.
But larger seed or enterprise funding remains the preserve of conservative, brick-and-mortar banks that are often compromised by endemic corruption, tribal or ethnic loyalties, or religious conflict. Even owning a major agricultural or mineral asset can mean retaining just 10% or less equity as the majority owners siphon off revenue.
Enter Blueprints.org. The brain child of CEO and former investment banker David Solomon and author and North African feminist leader Tamara Lakomy, Blueprints practices what it calls a 50/50 economic model, underwriting development in exchange for a 50% stake that leaves important incentives and equity ownership in the hands of African owners. The target might be forestry, a new water purification plant or a solar energy project. Blueprints applies a simple principle it calls ABC for “Asset, Blueprint, Capital,” with projects intended to be sustainable environmentally as well as financially.
“When you look at rural and indigenous people, it is impossible for them to access funding or to access the markets without some level of support,” Solomon says. “That’s where we come in.” He spoke with Karma Contributing Editor Michael Moran.
Michael Moran: Is impact investing actually a solid investment or does it leave money on the table?
David Solomon: So when it comes to the question of whether investment and doing good — whether investing in ESG or impact investing — leaves money on the table, this is a question that actually relates to scale.
It relates to understanding the historical context, and it also relates to understanding really what it is that the indigenous people have in terms of their assets.
When we first went into East Africa, we encountered vast assets, millions of hectares of forestry and land, where the people were being given a deal, which was pretty much whatever was put on the table — whether it was 2%, 5% or 10% or nothing in many cases.
And we essentially asked ourselves, “Where are the scales going to balance? How are we going to establish a model that will be equitable and that will enable people to know ahead of time what they’re going to get?”
We call this model 50/50 Economic Development, and it is a model that allows us to achieve social good and investment returns at scale. It allows those two things to be correlated.
In order to understand this, you really have to understand the scale of the market that we’re looking at.
The GDP of emerging and developing countries was $33.52 trillion last year, according to the IMF.
What’s happening in the case of most of these countries is they have historically been left in a situation of aid, and that situation of aid creates dependency.
For a long time, we have determined that the best way to solve social challenges was to give money away, and now we’re talking about impact investing, which in some ways is still social garments upon capitalism.
So the question arises, how do you balance the scales fairly between businesses and communities?
So what we have looked at — and we looked at many economic models over the past years. We’ve advised heads of state. We’ve advised governments, tribal elders, and we’ve been entrusted with their assets. They essentially looked at the Norwegian model when it comes to resources and how they set 50% aside to set up a sovereign wealth fund that essentially established a $1 trillion fund for the people and for their future.
You ask yourself, why with resources is this not being done in other countries? Why is this not happening?
Quite simply, when you look at rural and indigenous people, it is impossible for them to access funding or to access the markets without some level of support.
The financial markets are so complex. They have such high levels of compliance, so they are dependent in many ways on honest intermediaries, brokers, and organizations.
With the 50/50 reinvestment model, what this does, it creates a regenerative cycle, and what we start to do is our simple approach of ABC: Asset, Blueprint, Capital. It’s able to replicate and multiply itself.
Every asset, whether it is a forestry asset, an agriculture project, there’s a group out there who has a track record in developing risk-adjusted returns for that asset.
That’s what we call a “Blueprint.”
We bring that group in, and the promise of achieving that at scale also means that the indigenous and rural groups offer us very large assets to develop.
Once you have the Asset and the Blueprint married, the Capital is easily attracted because it’s de-risked.
So essentially what we’re looking to do over the course of the coming years is to scale this model as a benchmark. So that rural and indigenous people will be drawing a line in the sand that they will no longer be willing to accept less than 50% reinvestment into — not giving — but into commercial ventures that create a regenerative economic cycle.