I recently spoke with Guillermo MacLean, a social entrepreneur with a background in banking and finance. He is founder of a company called Social Futures Exchange Corp. (SFFX), which has the intriguing motto, “Anything a society truly wants is financeable and achievable.” He is developing a set of financial products and a system through which average citizens concerned about social problems in their country can play a direct role in solving those problems.
Through SFFX, people can register which issues are most important to them or to their country, such as improving education, reducing crime, increasing access to health care, ending hunger or any other problem they feel are keeping their society from moving forward. Next, participants make “promise contracts” – pledges to make payments to companies when they meet certain goals in addressing the social problems identified. SFFX then works to launch new enterprises, each developed for the express purpose of addressing one problem. These new corporations will hold the promise contracts in the asset side of their balance sheets. SFFX recruits first-round funders to help pay for each company’s pilot stages – and as with other forms of venture capitalism, their early investments may lead to financial returns if the venture is deemed successful and ready to expand. MacLean describes himself as an “arranger,” since the pledges are made not to SFFX, but to each new corporation and its corresponding social mission.
This unusual system, says MacLean, is not meant to reinvent the wheel or duplicate existing efforts, but rather to identify systemic bottlenecks and empower people or organizations who can solve them. He says that the SFFX is “agnostic” as to whether these new companies are for-profit enterprises or nonprofit organizations – he is more interested in whether each project is effective than in who’s behind it. He adds, “I am sure not many people care who discovered penicillin, they just know that they are alive today thanks to it.” He explains that the goals of each of these promise contracts are designed to be highly ambitious and achievable only if the government, private and social sectors work together.
Peru is the first country that will benefit from SFFX’s new system. MacLean, a native Peruvian, says that his homeland exhibits a contradiction common to many Latin American and emerging markets – on many fronts, it exhibits truly positive statistics, but on the other hand some very basic needs are not being met. What’s perhaps worse, a large percentage of people expects that these needs will not be met anytime soon. MacLean believes that with well-focused human and financial capital put to work on key issues, Peru could make a quantum leap forward in quality of life for its citizens. MacLean says that once the groundwork is laid in Peru, he hopes to expand SFFX into other countries in the next few years.
SFFX started its efforts in Peru by asking Peruvians a very simple question: “What would a first-class Peru look like to you?” Through a website, perudeprimera.com, SFFX invited people to submit their answers. More than 13,000 people did, and thousands more joined them through a radio campaign on Peru’s national radio station, CPN 90.5FM. MacLean explains that the question is more complex than it appears: “The basic pillar of making something financeable is if you truly want it or not. It is about breaking down clichés and talking about what you truly want for your society and not just what sounds nice. So, do you want it, or not? If the answer is yes, then we will create financial solutions.”
Now, through its website 2millonesdeperuanos.com, SFFX is hoping to collect enough promise contracts to eventually apply as much as US$10 billion in new capital toward reaching ambitious social goals in Peru. The website will keep the public informed on the progress, ensuring transparency and accountability. The first SFFX project for Peru focuses on the topic of sanitation – only about half of Peruvians have access to toilets. SFFX is collecting promise contracts for a newly created company, “Dignified Toilets for All Peruvians,” whose 10-year goal is to have 90% of Peruvians get access to clean water, sewage systems and a clean and sustainable bathroom. Apoyo Consultoría and IPSOS will determine whether this goal has been reached within 10 years.
MacLean admits his idea is new and a little complicated to understand. He says, “It’s like describing a football game to someone who has never seen it! I know that to many people, a figure like $10 billion sounds unachievable. But we are already processing about $1.5 million in promise contracts from individuals. And we are not doing this alone, this is an open architecture model, not unlike very successful financial products in the US and elsewhere.”
For MacLean, the bottom line is this: “How much would you pay for your country to thrive? If you really mean it, through market mechanisms, you can put your wishes and beliefs about the future to work for you and your country. “
Do you have questions about SFFX for Guillermo MacLean? He’ll visit the IDB soon for a presentation, and we’re collecting questions for him to answer. Send them to info@majoritymarkets.org by March 30.
