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AMIABLE AID PHILANTHROPY CAPITAL

INTRODUCTION
AMIABLE AID has an ambitious vision of creating a world in which people with advanced age, challenged physique and underdeveloped intellect lead their lives with respect, dignity and opportunities to fulfill their life ambitions.

AMIABLE AID set out to expanding its base from Nagapattinam to Tiruchirapalli to make it accessible to more beneficiaries in the remote rural locations. The new outfit requires separate infrastructure for residential care of the physically and intellectually challenged and common facilities for vocational training, hospital and a research center.

AMIABLE AID is taking initiatives to institute chain of residential care homes, hospitals and resource centers at various geographical locations worldwide through established local organizations.

The whole process of starting AMIABLE AID at the initial stage have been natural and evolutionary and the result of sudden or abrupt changes in many lives that have set times for crossing each stage. While in progress, AMIABLE AID realizes a degree of financial security is necessary to fly into higher realms. To ensure its welfare measure to reach out 25 % of world intellectually challenged populace by the year 2025 is the target. For achieving these new social facilities, fundraise is enormously time consuming and ruins risk of cannibalizing other resources.

THE CHALLENGE FOR AMIABLE AID
For this new social facilities, to fundraise for capital appeals is enormously time consuming and ruins the risk of cannibalizing it’s other resources.

Fund raising alone for this project can also prove problematic as large amounts of money need to be raised over a relatively short period of time – for example for a new building where costs are negotiated based on their taking place within a certain time period. In these instances, fundraising alone can take prohibitively long. Alternative models that accelerate the process of constructing suitable buildings are therefore needed.

PROPOSED SOLUTION
AMIABLE AID has developed a financing model that will address this challenge. At the center of its model is ‘venture philanthropy’ targeted at private donors and corporate sectors. This involves an interesting hybrid: combining 1. a zero-interest loan with 2. a donation into a single philanthropic unit, together with 3. an interest-bearing loan. The basic concept of innovative social investment model is by issuing charitable bonds to finance the development of its upcoming Residential care home, hospital, vocational and research center for the persons with physical and intellectual challenge at Tiruchirapalli.

In this model AMIABLE AID invites donations and investments in exchange of charitable bonds aimed at donors. On maturity Repayable bonds can be encashed by the donor or his designee.

This Social investment plan offers AMIABLE AID to pay for expensive infrastructure developments.

BACKGROUND - SOCIAL INVESTMENTS
The spectrum of financing options for AMIABLE AID is broader; there is a whole range of non-grant finance (loan) available too. Sometimes collectively termed social instruments, they all require the AMIABLE AID to pay at least some of the funding provided immediately, as well as generating social or environmental benefits.

AMIABLE AID can also take out loans, mortgage with commercial banks. These are not generally regarded as social investments, however, as the social impact created is incidental, rather than deliberate.

Social investments can take a myriad of forms, including secured and unsecured loans, bonds; ‘patient’ capital (ie, long-term loans, often with favorable terms); equity or quasi-equity. It also includes AMIABLE AID with standby or overdraft facilities, or underwriting particular projects.

But above all, the concept of ‘social investment’ is beginning to pierce the consciousness of more funders and investors looking at using social investment instruments either as a way to achieve greater social impact or as a way to diversify their financial investment portfolio, or both. So AMIABLE AID intends to make use of this best opportunity available.

OPPORTUNITIES FOR SOCIAL INVESTMENT
There are many instances where AMIABLE AID can use traditional fundraising to pay for costs that might be funded more efficiently through non-grant (loan) finance. This is particularly the case with capital costs, where expenditure on a new building or on increased capacity, say, provides an asset or an income stream against which loans can be secured and/or repaid.

Non-grant (loan) finance can be used by AMIABLE AID for several purposes:
- Hard development capital, eg, a bridging loan to purchase a building;
- ‘Closed’ working capital, eg, to tide our organisation over before a committed grant is paid;
- ‘Open’ working capital, eg, to tide our organisation over to meet unfounded costs;
- Soft development capital, eg, supporting start-up costs or periods of big growth

ADVANTAGES OVER FUNDRAISING
Social investment can relieve pressure on AMIABLE AID ‘S cash flow. Fundraising costs are often paid upfront and projects with low levels of working capital may find these difficult to cover, especially when the returns are not guaranteed. With loans, interest only accrues once the loan is drawn down – hopefully once the loan materialized means a revenue stream has been established.

BALANCING SOCIAL AND FINANCIAL RETURNS
Social investment aims to produce both financial and social returns. But the range of returns varies considerably between investment and this need to be balanced according to the motivations and priorities of the investor.

For some investors, sometimes termed finance-first investors; their main motivation is financial, meaning that receiving a market rate of return is a priority. This does not necessarily mean that they sacrifice the social impact of their investment but it does narrow the market in which they are prepared to invest.

For other investors, sometimes termed impact-first investors generating a high social impact is their primary motivation. While they may receive a handsome financial return on their investment, they may be prepared to accept below-market financial returns.

OPPORTUNITIES FOR DONORS FOR SOCIAL INVESTMENTS
Very few philanthropists are engaged in social investment, indeed there are limited opportunities for them to do so. There are even fewer opportunities for the general public to get involved – aside from putting funds on deposit with banks.

AMIABLE AID has been offering donors the opportunity to give loans either to complement donations or as an alternative to donations. When donors have become involved social investment is often an ad hoc arrangement.

BARRIERS TO GREATER SOCIAL INVESTMENT BY DONORS
Many donors perceive their philanthropically minded grants and donations as entirely separate from their other investments, which they see as driven by an entirely different and perhaps opposing motivation; a desire to see financial returns.

Many donors struggled to grip with the idea of receiving their money back on charitable project. Since they could usually afford to loose money, and it was going to a good cause, some simply were not interested in having paid back, let alone with interest.

Many donors embarrassed about the idea of making profit from a charity organisations like AMIABLE AID. This is linked to a more general perception that loans and other forms of non-grant finance are somehow ‘uncharitable’ and so not something that Social institutions should take on. Donors are sometimes reluctant to give because the Trust’s reliance on loan finance means that it is not seen as a proper charity.

JUSTIFICATION
AMIABLE AID’S blended financial model will help to meet the pressing needs of its beneficiaries: developing appropriately adapted residential care home, hospital and research centre for the aggrieved persons.

Many of our donor’s perception are that Social Institutions with loans on their books are somehow not properly charitable. Overcoming this attitude is a major challenge for AMIABLE AID with high capital needs.

For AMIABLE AID’S capital needs, however, non-grant (loan) finance is often a more efficient way of meeting them than fundraising.

Donations are often thought as free money, but this is not the case. All fundraising has costs. Voluntary organization’s fundraising and publicity costs represent 15 % of total expenditures. These costs are comparable to those of loans from banks or even some commercial lenders.

The advantages to AMIABLE AID of using this social investment are:

Speed: it is quicker to borrow funds than to rely on a lengthy fundraising appeal;

Amount: larger sums can be raised via AMIABLE AID’s hybrid philanthropy product than through fundraising alone;

Allocation of resources: valuable unrestricted donations can be used for AMIABLE AID ’s other needs; and

Sustainability: The success of this model can be replicated across AMIABLE AID ‘S other projects in need of renovation.

AMIABLEAID FOUNDATION - PHILANTHROPY CAPITAL
Proposed amount to be mobilized             (Rs. In ‘000) Leverage Period Value of single Unit Maturity Value
1. Interest bearing loan – AEP-BOND
Rs. 2 00 00 15 years Rs. 10 500 Rs. 20 000
Repaid From the operating surplus of amiableAID FOUNDATION– the expenses on rental or leased housing be saved and utilized to repay the loan
2. Zero interest loan- ACP-BOND
Rs. 2 00 00 5 years Rs. 5 250 Rs. 5250
Repaid from sale of AMIABLE AID’s products and from fee collected for other services
3. Donation
Rs. 1 00 000 - Rs. 2 000 -
Not Repaid

ADVANTAGES
Recyclable: AMIABLE AID plans to repay a sizable portion of donors’ contributions allows this money to be ‘recycled’ into other projects. This means that donors interested in supporting AMIABLE AID from their current ‘maturity bond value’.

AMIABLE AID is willing to recycle the money on their behalf, putting it towards other of its projects supporting people with complex needs. This recycling means that the same money can go further.

Replicability: For donors, the opportunity to be part of an exciting and pioneering new venture will be appealing. AMIABLE AID can demonstrate that the model works and sustainable, it plan to roll out it to other geographical parts where this kind of need is required.

RISKS
Financial risk: Many charities do not have the necessary skills or knowledge to take on loan. If the charity is not able to plan repayments correctly, it may realize it cannot afford them only after taking out a loan.

AMIABLE AID, however, has a track record of successfully managing and repaying loans on its books. To make this financial model successful, AMIABLE AID recruits efficient auditors and financial planners.

Project risk: There are always risks associated with development projects which could compromise funding arrangements: the project goes over budget; the project takes longer than expected; the contractor fails to complete the project.

Any Social Institute undertaking capital projects faces these risks. AMIABLE AID overcomes this problem by adopting proper management and implementation strategies.

Incidental risks: AMIABLE AID plans to repay zero interest loans by means of ACP-BOND to donors from the sale of its medicinal products. If it can only sell it at a reduced volume, there is a chance that AMIABLE AID will be struggled to make this repayment effectively. The repayment period for ACP-BOND is 5 years. Within that period the building construction will be completed and a permanent fixed asset will be created in the name of AMIABLE AID.

Any nationalized bank will give mortgage loan on fixed assets. This gives AMIABLE AID a comfortable buffer and the repayment will be made appropriately.

Risk of Inflation: The cost to the donor of funding the project is not limited to just the donation element of the funding provided. The ACP-BOND at zero-interest rate the donor will be exposed to the risk of inflation reducing the value of ACP-BOND element when returned. Elsewhere if the donor invested, the funds could be generated a higher return.

However an extra return from a charity in five years period is arguably not as valuable as a lower contribution, which can be speeded up an important humanitarian project.