Purchase Success (PFS) can be an innovative new funding mechanism that’s used to finance social-benefit projects with high-quality impact metrics. PFS projects are popping up in most sector from homelessness, to healthcare, to education. New models prove that PFS projects may be used to stimulate investment in commodities, in addition to workforce development. What impact will this have on the private sector? Will your business Purchase Success?
The Common Fund for Commodities unveiled a Development Impact Bond (DIB) to modernize cocoa and coffee production in Peru’s Amazon region, the Ashaninka. This first standing commodity-sector DIB breaks in to a new frontier of Purchase Success (PFS) possibility.
DIBs follow the main principles of PFS projects, but they have a third-party end payer, rather than government. In this instance Impact Investing, the Common Fund for Commodities has consented to repay the investor, the Schmidt Family Foundation, once pre-determined target outcomes are successfully achieved.
Rainforest Foundation UK could be the service provider for the project, and the business has recently started trying out leaf-rust resilient coffee strains. A year ago, the leaf rust disease plagued almost 70% of coffee production areas in the Ashaninka.
Because of global recognition as a top-notch commodity, Peruvian cocoa has experienced an amazing demand increase among foreign consumers. Driving supply to generally meet demand, higher-efficiency cocoa production methods are increasingly being implemented close to time.
This Peruvian coffee and cocoa project raises the question of whether DIBs may be used to modernize other types of commodity production. Could a DIB be used to supplement exports of quinoa, corn, and salt from the Peruvian Andes?
Sustainable Tech and Water:
During the Social Entrepreneurship at UVA Purchase Success Conference, one participant raised the question of whether or not PFS projects could be used to fund sustainable technologies and water conservation. The likelihood exists. On the basis of the Peruvian model, a fund for California commodities could pay an investor when a non-profit produces wide-spread adoption of sustainable planting methods. Could you invest in California’s water conservation?
What about climate change? A clean energy fund could pay an investor, contingent on service providers spreading the adoption of sustainable technology. PFS projects are exactly about aligning interests, so provided that you have trouble, partners, and payable outcomes PFS possibilities exist.
Entrepreneurship and Art:
To successfully complete a PFS project, you’ll need a fund, a fiduciary and a non-profit service provider. Venture capital funds could become end payers, purchasing non-profit entrepreneurship accelerators. If the accelerator achieves a specific way of measuring success, private investors, potentially well-connected angels, are certain to get paid. Success could be measured in how many companies to generally meet a prerequisite rate of growth, target revenue, or social-impact metric.
Dual-incorporated businesses with a non-profit branch may manage to experiment in-house with the PFS model. Village Capital, which is made up of non-profit and stand-alone fund, could essentially structure an in-house DIB. If private investors wanted to invest in the non-profit, they could enter in to a PFS agreement with VilCap Investments.
From an art form accelerators standpoint, they could scale their operations with a PFS project, much like entrepreneurship accelerators. If art investors wanted the McGuffey Art Center to expand its artistic co-op model, the investors could provide up-front cash, and a fund, even local government, could part of as an end payer. This PFS model could easily be piloted in Charlottesville, VA if art-backing investors step-up to the plate.