Social Impact Investment in Latin America — Lessons From Colombia

This article was originally published by The Huffington Post on 10 July 2014. The original article can be found here.

By Gabriel Sanchez Zinny

Philanthropy is on the rise in Latin America. And, increasingly, corporate foundations, wealthy families, and high net worth individuals are getting involved in social impact investing. In a region where the government is still the default for social programs and overall philanthropy remains low, especially compared with the U.S., this is a welcome development.

Colombia, one of the region’s economic stars, may be Latin America’s best example of this growing culture of venture philanthropy. The business community has thrown itself into philanthropy work more than in any other country, perhaps due to the history of Colombia’s long years of conflict. During the drawn out guerrilla war and the interrelated drug conflict, the reach of the state was severely limited. The business community has had to step up to fill the vacuum, providing and financing social services, including health and education.

One such organization is Fundacion Luker, the philanthropic arm of Casa Luker, a family-owned chocolate conglomerate. And as Pablo Jaramillo, the Luker Foundation’s managing director, explained at a recent presentation at the Atlantic Council in Washington, DC, “the foundations in Colombia are primarily local, not national, focusing on providing services that the government has not been able to deliver.”

Carolina Suarez, the Executive Director of Colombia’s business foundations association—the Asociación de Fundaciones Empresariales or AFE—agrees. “Out of the 56 foundations affiliated with AFE, 43 are working in education. Education is a priority for almost all business foundations here—this pattern started decades ago and is expanding every year, across the country, continually bringing innovation to the sector.”

Indeed, according to the most recent poll by Colombia’s national business council, the Asociacion Nacional de Empresarios (ANDI), surveying nearly three hundred company presidents, “achieving universal primary education” was the priority for 40 percent of them. Other highly valued areas included poverty alleviation and environmental protection.

Other leading Colombian charitable groups include the Fundacion Corona (Corona Foundation) and Dividendo Por Colombia (Dividends for Colombia), and Fundacion Carvajal (Carvajal Foundation).

Dividendos, led by Executive Director Maria Teresa Mojica, marked its fifteenth year of operation in 2013. The organization focuses particularly on improving education outcomes for Colombia’s most vulnerable children—those in isolated rural “multigrade” schools, those displaced by war, and those afflicted by poverty. Their efforts to train teachers with participatory, student-centered methods of teaching now reach over 100,000 pupils each year—and growing.

Even so, there is the question of how much impact such foundations have. As former New York mayor, and billionaire, Michael Bloomberg recently said, “All the billionaires added together are, as they’d say, bupkis compared to the amount of money that government spends.” Thus, the challenge lies in how governments can work with private philanthropists to scale up successful projects.

Dividendo Por Colombia’s leadership, for instance, is seeking to apply the success of its innovative model to a broader range of students. Executive Director Mojica is very clear about the mission: “We want to pursue more pilot projects, that could then be expanded into national programs and impact students on a massive scale,” she says. The challenge is to put Dividendo’s resources to use in the most efficient way—using small scale projects to demonstrate the effectiveness of their approach for a specific population and then working with the provincial and national governments to expand it more broadly.

These are good starts. On a larger scale, however, there is an unfortunate hesitance on the part of the bulk of many philanthropic foundations to invest their portfolios in innovative education-related ventures. That is subject of a recent paper by US education experts Tom Vander Ark and Matt Greenfield, titled “Boosting Impact: Why Foundations Should Invest in Education Venture Funds.”

Their report focuses on the tremendous potential that charitable foundations possess for supporting new education ventures – yet it is a potential that is going largely untapped. They point out that “95 percent [of a foundation’s asset base] is typically invested in the market and rarely invested in anything related to the mission of the organization”—a huge missed opportunity.

As Vander Ark and Greenfield argue, foundations are not the best suited to make education investments themselves, given that they lack professional asset management experience and generally entrust their capital to investment firms.

The Bill and Melinda Gates Foundation, for instance, devoted $12 million to supporting the New Schools Venture Fund, which invests in education entrepreneurs. In 2013, Kellogg along with Lumina, Prudential, and several other foundations invested in Rethink Education, another education venture fund.

This type of investment is more expected in the United States—but the case of Colombia demonstrates the potential for true impact when private funds and philanthropists work to develop innovative models in a developing country context.

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