Financing Reform

I wrote this last year (2007-09-13), but in light of recent developments, I wanted to bring this up again.

“So we thought that some kind of a big idea is needed to reform, to totally rethink fundraising... Instead of people running in the dark, trying to find their own match, who will be willing to, has the same goals, instead of all of that, we thought... there is something new [that] needs to be invented, and we came up with this idea of issuing bonds, press freedom bonds. If there are investors willing to finance US Government budget deficit, why wouldn’t we find investors willing to finance Press Freedom deficit. We’ve decided to do it this fall. We will issue them probably in denominations of $1000... if we ever survive to actually issue them, find enough investors so this can be considered a success, there’s nothing stopping the next organization to start to issue bonds next spring, and those can be environmental bonds. And then, two weeks later, Iqbal Quadir can issue his ‘electricity in Bangladesh’ bonds, and before you know it, any social cause can be actually financed in this way.“

That was from Sasa Vucinic, speaking at the Technology, Entertainment and Design conference in Monterey, California, more than two years ago. Vucinic, co-founder of the Media Development Loan Fund, was the editor-in-chief and co-founder of an independent radio station in Belgrade and is a passionate advocate for free, independent press all over the world.

At the TED conference in Monterey in 2005, Vucinic gave a sort of report card to the audience. Over ten years, starting with a $500,000 investment from George Soros’ foundation, they had provided about $14 million in affordable financing. ‘Affordable’, by the way, translated to 5-6% interest, and at times, when they ‘went wild’, as he puts it, up to 7%.

That was 2005. Back then, Vucinic talked about his Press Freedom Bonds; in the spring of 2006, the bonds hit the market. The Swiss bank Vontobel and a Zurich firm specializing in social investments helped bring the "Voncert responsAbility Media Development" investment instrument to the Zurich stock exchange.

A quick look at the MDLF website shows that the $14 million Vucinic had mentioned back in 2005 is now  a much healthier $60 million-plus, financing 147 projects for 61 independent media companies in 20 countries, including Indonesia, Malaysia, Senegal and a host of countries from the CIS (Commonwealth of Independent States), and Eastern Europe.

Here’s the best part. The return rate, the rate of loans paid back? 97%.

Let me say that again. Ninety-Seven Percent.

The idea is brilliant, and more importantly for the capitalist-minded amongst us, profitable. The idea that independent media can be successful goes somewhat against the grain in our consolidation-hungry marketplace today, but clearly, independent media has profitability potential. More importantly, it has a social payback, and the aforementioned fund takes this social return into account. It uses an interest rate market element to give investors a fixed-interest market return, also makes a 20% investment in the MDLF fund to give investors a ‘social’ return.

So this of course begs the question: Why not a Muslim Development Fund?

I’m no financial expert, nor am I an Islamic scholar well-versed in what I am sure are thorny issues related to interest and investment. But it seems to me that at the very least, such a concept is worth investigating.

Investment in socially responsible causes is a growing field - and a multimillion-dollar field at that. A recent Wired magazine article talks about eco-investment, where hundreds of millions of dollars are being used to buy up and prevent forests from being cut down. These large tracts of land in places like Malaysia are being bought up by investors who end up making deals with corporations looking for a way to offset the pollution they are creating. While I’m sure we’d rather see those companies take steps closer at home to reduce pollution in their own back yards, there is some consolation that efforts towards carbon-neutrality are at least being made.

Wired puts this very nicely:

The eco-capitalists are coming, and they aren’t wielding Thoreauvian platitudes about the sanctity of nature. Their jargon is far less lyrical; ecological assets, environmental markets, ecosystem services, natural capital. For these guys, biofuels and long-lasting lightbulbs are fine, but they’re nothing more than a short-term play. The real money is in nascent markets indexed to the health of Mother Nature.

Now backtrack to my original point. What about a Muslim Development Fund?

True, there’s no profit in activism - at least not in the kind of activism that has, in the past, relied on donations and championed causes centered on theological and philosophical reform. No one makes any money at rallies (except the halal hot dog vendors) and there is no mechanism in place for getting a return on investment on women-led prayer.

But there is potential for getting a return on investment by focusing financing efforts on the ancillary industries that help organizations like MPV, PMU and the rest achieve their goals. Here’s two key examples, both of which are near and dear to me.

One of my favorite anecdotes about the dismal state of Islamic education (at least, in my back yard) is the story of a child who went to a local Islamic school here in Orlando, Fl, and was told by her teacher that Shaitan (the Devil, for the uninitiated) lived in the child’s slightly overlong fingernails. This child of six was basically wrapped from head to toe in a black abaya and hijab - in the Florida heat - and was taught the kind of absolute nonsense that makes my skin crawl.

To this day, there isn’t a school that teaches Islam from the perspective of my progressive values. The one that comes close is quite far away (geographically), and is quite expensive.

Would there not, then, be a market, especially in metropolitan areas, for schools that focused their efforts on primarily on academic excellence while at the same time, providing a grounding in Islamic education that dealt heavily in facts and left interpretation up to the kids’ parents? A school in which modesty could be enforced without making the hijab compulsory? Where Arabic might be taught as a language, so that the Quran made sense linguistically as well as theologically? Where the progressive values espoused by this site’s parent organization, MPV, could be given equal forum with traditional values and the choice of adherence left to parents?

Education is big business, and such an enterprise would be capable of returning loans made to it by a Muslim Development Fund. There are plenty of financial organizations that could set this up in a way that prevents the inclusion of usury, thereby bringing things in line with Islamic principles prohibiting the same.

The second example is - shameless plug coming up - organizations, publications and websites that focus on the advocacy of certain rights. Websites like altmuslim.com and muslimwakeup.com already incorporate advertisements on their sites, and thus are capable of generating revenue. Investment in such media properties (and yeah, I count ProgressiveIslam.Org among them) could very well yield help take their reach and impact to a point where they have serious ramifications on social, theological and political movements.

And if you think this sort of thing won’t work, well, you might want to talk to Markos Moulitsas of dailykos.com.

That’s just two examples; there’s a host of other endeavors I could reel off, from entertainment companies promoting Muslim artists’ works, to organizations providing loans to Muslim students. In each case, we aren’t talking about charity, but capital that is lent and paid back in accordance with the best principles of Islamic and capitalist economics.

We have already seen such efforts work; the Media Development Loan Fund and the microcredit efforts in Bangladesh are excellent proofs of this concept, while increased activity in the field of socially responsible investment demonstrates the existence of a market for this sort of thing. I ask again, therefore: Why not a Muslim Development Fund?

I mean, come on. What’s in your portfolio?