Incorporating Community Perspective Whether the Japanese communities benefiting from an investment understand the term impact or are aligned with the goals of investors is another part of the story. One of SIIF’s early investees and a leader in Social Impact Bonds (SIBs), Professor Masataka Fukao, faculty of Policy Science at Ryukoku University and co-founder of Plus Social Investment Co. (PSI), explains this Lost in Translation disconnect from his perspective: “I rarely hear colleagues in finance talk about listening to community and understanding about community needs or understanding the unintended consequences of their investments on community. Putting community at the center of investments is critical. Local communities and beneficiaries must define impact.” 27 Fukao believes that communities and others who work at a local level also face Lost in Translation challenges. Community leaders work with financial institutions that are unprepared to work locally and listen to community. PSI has spent time working with regional and local banks and community foundations to build a bridge between community needs and financial tools. He believes “uniting the two can result in powerful and positive social change. “It is often said that there is no culture of donation in Japan. I believe people are not donating because they lack the opportunity to do so,” says Fukao. 28 Fukao’s frustrations with Japan’s financial systems and his belief in community-driven solutions led him to founding PSI. The organization was built to address a critical gap: the lack of financial mechanisms for local impact investing. In his words, “If there’s no mechanism, let’s create it.” 29 PSI has two models of investment. One is where residents invest in residents, like crowdfunding. 30 They vary in size from about ¥500,000, to be repaid within one year, to tens of millions of yen, repaid over five years. Investors are either citizens or local financial institutions. PSI believes the fact that the project is being supported itself by community gives it significant social meaning. Projects are designed by the community, with community support and have impact where it is most needed, like in creating sports facilities, renewable energy projects or local specialty products. Their other type of funding is the Ritsumeikan University Impact Fund, which connects investments with research, still through a grassroots philosophy. For the crowdfunding investments, PSI still sees a difference between regions. In some cities, the concept doesn’t resonate at all, and in other places it really hits and garners support. Learning that there are these regional differences is a key takeaway for their work. It could be a matter of size—for example, in large cities such as Kyoto—if PSI explains 173
Ten Years in the Making
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