In 1989, Paul Ylvisaker’s essay Small Can Be Effective made a strong plea for a more professional type of philanthropy that goes beyond ad hoc grantmaking and considers classic financial techniques like lending, insuring and investing. Today we are all familiar with the idea of recycling money through the use of social investment, which allows the same amount of precious philanthropic money to be used for numerous people in need. The same pound can consecutively be invested in education, affordable housing and protecting wildlife habitats. Use of social credit scoring models based on traditional credit scoring models can enhance the effectiveness of this sort of social investment.
Doing good by doing very well indeed has been the new mantra of success among a circle of socially minded investors and entrepreneurs, fuelling microcredit funds and responsible investment forums galore. Traditional credit scoring techniques that are used for all of us dreaming of buying a new house or car have been applied to Muhammad Yunus’s first group of protégées, which has since attracted profit-minded investors to the sector and greatly enhanced social impact.