AVPN Country Session 1- China (Presentation)

Social Investment in China

presented by China Social Enterprise and Social Investment Forum (CSESIF)

JIAWEI ZHANG Secretary Team of CSESIF

AVPN Conference

April 20

1Why CSESIF was founded

Policy

Enhanced role

of social

Development

Transformation

of government

function

Government

procurement

becomes more

systematic

Some local

governments

start to support

SE

Talent

Along with

British Council

training

programs, more

programs for SE

is emerging

SE courses are

emerging in

university

Community of

Social

entrepreneurs is

forming

Capital

Oversea Social

Investors are

looking for

projects in

China

Local Social

Investors are

emerging

Banks,

Investment

Banks etc are

interested in

impact

investment

Support

Like NPI ,more

grassroots or

government

incubators for

SE are emerging

SE can access to

various service

by three party

Impact

Investment

Advisory are

emerging

More global

communication

Awareness

SE and Social

Investment are

reported by

more key media

Universities and

Research

Institutions are

conducting SE

study & report

More events on

Social Enterprise

and Social

Investment are

held

Development of Social Enterprise and Social Investment is in the market construction phase in China

1 Why CSESIF was founded

China Social Enterprise and Social Investment Forum (CSESIFjointly initiated by Mr Xu Yongguang , President of Narada Foundation and Mr Zheng Weining, President of Canyou Group was founded as a member network by a group of organizations dedicated to the development of social enterprise and social investment in China

CSESIF

Annual

Forum

Research

Advocacy

Member

Service

Platform

Goals Facilitate the Cross-border communication and collaboration Promote the growth of SE and SI industry Build up favorable external environment for the industry

Working Areas

CSESIF Founding Member

JACK MA Foundation

2About 2015 Annual Forum

CSESIF will hold a large annual forum every June, which will become the most prestigious social enterprise and social investment event in China

Number of Participants More than 500 guests from China and overseas

DateJune 18-19 2015

Venue Intercontinental Hotel Shenzhen, China

3Highlights of 2015 Forum

Biggest Highest-level Social Enterprise and Social Investment event in China

Famous Entrepreneur Speaking on Social Innovation

Open and Cross-border breakout sessions on 5 themes

Special arrangements on networking and exhibition

Overseas Study and Workshops after the forum

CSESIF Launch Event CSESIF Press Conference

Mr Zhang JIAWEI TEL86 13801998858 [email protected]; [email protected] Wechat: 13801998858 Websitewww.csesif.org

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Social Enterprise Sector in China: Fragmentary Innovation Stage

Features of each stage

Stage3 Stage2 Stage1 Insufficient Data

Overview of global social enterprise development stage

Stage1

Fragmentary Innovation Stage

Quite few SE cases showed up here and there, and without a supporting environment

China, African countries

Industry Emerging Stage

Number of SEs grow rapidly

Growing policy support, capital, talents, and research in the sector

India, Japan, Korea

Maturity Stage

Clusters of SEs in different fields

Policy and regulations, social investors and impact assessments standards are gradually matured

US, UK

Stage2

Stage3


3

3

China: From Fragmentary Innovation to Industry Emerging Stage

Total number of SEs < 1000

54% of the SEs < 3 years old

No supporting environment: A few social investors with insufficient and unsustainable funds

Central and local government show supportive attitude to social innovation

Increasing intermediary organizations

Increasing patient capital go into the market

Leading foundations like Narada Foundation transiting from operating to grant-making


4

4

Social Investment in China

Limited number of appropriate investment targetsVery few social enterprise is mature enough or ready to take the investment

Most of the investees are in the early stage: A lot of social investors were involved in the incubation, capacity building and consulting process before investment.

Emergence of players along investment chainCapacity building, intermediary and financial services provider for SEsBritish Council, NPI, Avantage Ventures, DBS Bank Limited


5

5

Social Investors in China

Social Investors

LGT Venture

Philanthropy

4 investees with investment less than $1million, two of them are

grants

Chuangqi99 Investing 3 social enterprises with total investment of $700,000

Transit Investing 7 tech social enterprises with total investment of $500,000

Avantage Ventures Investing 3 social enterprises with one failure case

Yu Venture

Philanthropy

Investing 3 social enterprises with total investment of $1,200,000

China Impact Fund Unknown

Zengai Foundation Investing 1 social enterprise with total investment of $80,000

Leping Foundation Investing/nurturing 5 social enterprises since 2002, with total

investment of $17 million


6

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Challenges: Incomplete Eco-systems

Lack of government and policy support

Lack of intermediary organizations

Lack of patient capital, most of the foundations are operating foundations

Underdevelopment of impact assessment


7

7

Leping Foundation: SE Investor-Turned Manager

Since 2002, 17m USD investment + main shareholder in 5 SEs

2 micro-credit companies servicing farmers

1 professional training school for farmer laborers looking for jobs in cities

1 R&D company aimed at improving education in rural kindergartens

1 eco-agriculture company to save Chinese farmland from massive use of chemicals


8

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As a SE Investor-Turned Manager: Our Challenges

Capital:

Considerable time spent on networking/exchange with investors

Human Capital:

Significant difficulty in locating SE management

High turnover rate for certain key positions

Insufficient professional capabilities of team

Shared service hard to pool

Insufficient internal resources

Scarce external resources


9

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As a SE Investor-Turned Manager: Our Takeaways

Capital: growing number of investors seeking innovative ways to support social innovation

Human Capital: more capable business professionals turn to philanthropy

More faith in our own value:

Provide kick-start capital

Provide continuous flow of operating cash

Proper governance ensures value on track

Internal shared service: a must-have

Impact Assessment: trial in micro-credit company


10

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From Investor-turned Manager to Venture Philanthropist

Trend, albeit not in a year or two

Launching SE Venture Capital Fund

Carry forward innovations that can unleash social strengths

Financial tools to prompt investors interest

Encouraging SE entrepreneurship, esp youth

Giving circle vs. SEs (eg SVP China)

Shared service circle

Volunteerism


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11

Thank You

Chinas Social Investment Environment and Innovation

Mechanism

Wang Zhenyao

China Philanthropy Research Institute

of Beijing Normal University

2

Outline

Four significant elements of Chinas social investment

The internal logic of Chinas social innovation

The future of Chinas social investment

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Four Significant Plates of Chinas Social Investment

4

1. Government-Led Poverty Alleviation SystemSince 1986

The amount of expedition on poverty alleviation is more than 70 billion RMB per year.

Government-led: The State Council established as lead agency for development-oriented poverty alleviation (all related government organs contribute).

A trinity pattern of poverty alleviation: specialized poverty alleviation, poverty alleviation by industry, and poverty alleviation by society, including:

the party, government, military, civil service, industry, commerce and academia all participated in poverty alleviation by contributing funds for industries, technologies and projects, including farmland and irrigation system construction, industries with local advantages, water safety, transportation, education, healthcare and others.

Achievements: The number of impoverished population reduced from 250 million in 1978 to 29 million by the end of 2003.

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Financial arrangements for poverty alleviation funds can be divided into the following parts:

Development fund

Cash-for-work fund

Minority development fund

Three Westspecial subsidies for agricultural construction

State-owned impoverished farm poverty alleviation fund

State-owned impoverished forest farm poverty alleviation fund

Poverty alleviation loan interest subsidy fund

Central Governments Financial Budget

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2013 Central Governments Final Accounts poverty alleviation) unit: 100 million RMB

Budget Actual Cost

725.67 841.00

Administrative Operation 16.31

General Administrative Matters 10.15

Authorities Service 0.76

Rural infrastructure 343.79

Production Development 194.78

Social Development 6.82

Poverty Alleviation Loans and Interest Subsidies 24.81

"Three West" special subsidies for agricultural construction

3.34

Poverty Alleviation Agencies 1.62

Other Cost on Poverty Alleviation 238.62

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Social Poverty Alleviation Mechanism: all organizations participate in poverty action

Social poverty alleviation: collaboration between targeted poverty alleviation by government bodies and east-west poverty alleviation.

In 2002, the central government bodies, enterprises, institutions and social organizations directly invested 850 million RMB in the targeted poverty alleviation units. The amount of the investment in 2012 was 1.9 billion RMB, increasing by 1.2 times with an average annual increase of 8.4%. There were 310 units participating in target poverty alleviation, with a full coverage of 592 key counties.

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2. Social Welfare Enterprises

1978 1982 1987 1992 1997 2002 2007 2013

Units 920 1704 27793 49836 55509 35758 24974 18227

Disabled Personshundred) 350 640 4330 7780 9100 6830 5630 5390

Amount of Profit(million) 80 80 880 3260 6630 14830 16930 10690

0

10000

20000

30000

40000

50000

60000 Peak Value55,509

55,509

Peak Value910,000

Peak Value16.93 billion

Data Sources: 2013 China Civil AffairsStatistical Yearbook

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3. Private Non-enterprises

Private Non-enterprises since 1999

5.901

82.134

124.491

147.637

173.915 190.479

204.388

254.67

0

50

100

150

200

250

300

1999 2001 2003 2005 2007 2009 2011 2013

Data Sources: 2013 China Civil AffairsStatistical Yearbook

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The Category of Chinas Private Non-Enterprises (NGO/NPOs) There are 225 thousand private non-enterprises in China by the end of 2012 with 2.8 million employees and RMB 99 billion in profits. The chart below provides a breakdown of the different categories:

Category Amount Category Amount

Technology and research 13,729 Sports 10,353

Ecology and Environment 377 Legal 511

Education 145,210 Business Service 2,335

Health 21,234 Religion 94

Social Service 36,698 Agriculture and Rural Development

1,617

Culture 11,694 Employment 1,162

Global Affairs 4 Others 9,652

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4. Foundations, Corporations and Academic Institutions

Foundations and Corporations are the important suppliers in the social investment

Academic institutions provide supports such as policy advocacy, evaluation, consulting and capacity building.

CFPA Microfinance: Annual amount of lending is almost 3 billion RMB

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The Internal Logic of Chinas Social Innovation

Starting from government leading the society and to social restructuring

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Government-led Social Innovation

Connected government with the problem of poverty

Developed a mechanism where governmental officials directly intervened in villages to alleviate poverty.

Poverty alleviation by production: encouraged employing the impoverished people, including the disabled people.

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Definition of the private non-enterprises (eg. social organizations engaged in non-profit social services, operators of non-state-owned assets by enterprises, social groups and other social forces, and individuals.

Modern philanthropy has developed since 2005. Social innovation run by a financial support

system.

The Non-governmental Social Innovation

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Increased Social Re-structuring in Depth and Breadth

Social re-structuring has been promoted since 2012 and has led to a split of social affairs from the governmental affairs.

Social organizations under the jurisdiction of the

government become more socialized.

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The Future of Chinas Social Investment space

How does society lead and support the governments reforms

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The Future of Chinas Social Investment

Involved in social service which could make social innovation and social investment more powerful and dynamic

- Social Innovation Fund - Social Impact Bond Link the four plates of social innovation through supporting services - Ratingestablish evaluation system, promote social values and

influential cases - Consultingprovide professional consulting services for investment

organizations and social enterprises/social purpose organizations - Research summarize Chinas current social innovation practices,

develop Chinas own model as well as build the channel for international exchanges

- Trainingfoster innovative model of social entrepreneurs and guide social awareness of innovation.

Thank you!

Beijing Normal University China Philanthropy Research Institute

/Tel+86-10-58801928 /Fax+86-10-58801966 /Add191003A100875 Rm.1003A Jingshi Building, No. 19 Xin Jie Kou Wai Street, Haidian District, Beijing, China100875

www.cbucf.org

What skills do entrepreneurs need

to participate in social investing?

3 Types of Social Investing

Commercial

Philanthropic

Social Investing

Four Forces of Social Investing

Social Impact

Social Needs

Transferability

Management Capabilities

Strength of Implementation Framework Capital

Surplus Resources

Sustainable Platform

5 Levels of Social Investing

Individual Team Industry Society Integration

Lin Feng

Thank you

Collective Sharing of Capital

Dezhi Lu

Chairman, Huamin Charity Foundation

Vice Chairman, International Confucian Association

Vice President, China Social Security Society

Capital is omnipotent

Capital is evil

Welfare Capitalism

New view of capital: capital is the wealth that can

reproduce wealth from itself

I. Understanding of Capital

In sum, the more developed capital is, the richer the

material benefits, to a greater extent it will benefit the

majority, the more progress the society will achieve,

and the more civilized the society will be.

Two important categories in human development:

The majority vs. the minority

Equality vs. Efficiency

II. The Necessity of Collective Sharing of Capital

Traditional views of capital in main social forms:

Traditional socialism view of capital

Traditional capitalism view of capital

Main view:

The more developed a society is, the mode developed

the capital will be. The more developed the capital is, to

a greater extent it will serve the majority, and the more

civilized the society will be.

III. Approach and Trend of Collective Sharing of Capital

Philanthropy is an important approach toward collective

sharing of capital

Collective sharing on the domestic scope: the minority

bears a little more to achieve the benefits of the

majority (modernized literati spirit)

Collective sharing on the global scope

With capital and the majority in mind, China will rise

peacefully. A stronger China will not pose threats to

others, but firmly safeguard the worlds peace, stability,

and development. Philanthropists should be clear on

this.

Western civilization has made a significant contribution

Eastern civilization should also come into play

Let oriental wisdom play a great role in the collective sharing

of capital

Conclusion

AVPN Country Session 1- China (Presentation)

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