Youth Social Innovation Capital Fund (YSI-CF) is a Canadian social finance intermediary that connects young social entrepreneurs with impact investors. Based on the Social Finance Chain model of Young Social Entrepreneurs of Canada (YSEC), YSI-CF officially launched itself on May 23, 2012. By September 2012, YSI-CF gave out its first loan to Twenty One Toys. The next call for young social entrepreneurs’ applications at YSI-CF will be launching tomorrow.
YSI-CF’s national microlending program provides entrepreneurs loans ranging from $1,000 to $10,000 for a one to two years period. The investors in this program need to provide a minimum of $1,000 with expected, but not guaranteed, return of around 6 percent.
To learn more about the initiatives and ideas supported by YSI-CF, who was one of the nominees for the Social Finance Awards 2012, I got in touch with their Co-Founder, Saumya Krishna, and Managing Director, Jory Cohen.
Conception of YSI-CF
What made you enter the social finance industry?
Cohen: I was lucky enough to discover Muhammad Yunus, microfinance, social finance, and impact investing during my second year at Richard Ivey School of Business. From that point on I knew that I want to combine business with helping people, and I want to leverage market solutions to solve societal challenges.
Krishna: My story is a bit different. Growing up, I had very little clue of what I wanted to do but certainly had passion for things related to teamwork, projects, creativity, and challenges. When I had my first taste of entrepreneurship, a few years ago at The Next 36, that’s when I saw all the dots connect in my life. I realized then that this is the field I want to be in.
How is the YSI-CF model different from YSEC’s Social Finance Chain?
Krishna: Social Finance Chain was a microfinance program that only gave out $1,000 loans for three to four months. Based on the interest in that program, and the goal to further meet the financing needs of young social entrepreneurs, YSI-CF connected young social entrepreneurs to impact investors. I think that bridging between the young social entrepreneurs and impact investors is sort of a significant development in the business model.
Why is YSI-CF focusing on youth social entrepreneurship specifically?
Cohen: We really believe in the passions and skills of the young social entrepreneurs. And we also feel that they are the ones who need most support. They are the ones who have a hard time getting financing. They are the ones who need the resources to succeed. So YSI-CF attempts to empower young social entrepreneurs with financial support and the soft support to help grow their ventures successfully and safely.
How do you feel about being nominated for the Social Finance Awards 2012?
Cohen: We feel really honoured to be nominated amongst extremely successful and powerful organizations such as RBC, Desjardins, and Centre for Social Innovation. It’s really an honour for us and I believe it’s a testament to how far we have come as an organization in such a short period of time. This is our first year of operation and we are already being recognized as potentially the most promising new financial player. That’s really indicative of our successes so far.
How do you assess loan applicants?
Cohen: We run applications through a thorough due diligence process. It ensures that their ventures are financially sustainable and that they have a measurable and quantifiable social and/or environmental impact. We also incorporate other factors, related to the operations of the venture and the character of the entrepreneur, in our due diligence process.
Do you have any particular committees set for loan assessment?
Cohen: What we have set up now is an internal team to do the due diligence. We are currently in the process of setting up an investment committee.
Krishna: The investment committee is a panel of experts with experience in entrepreneurship and private equity. They definitely have the investment background to figure out if one of our investments is worthwhile.
Cohen: Once YSI-CF says yes to a social entrepreneur, we are going to pitch the entrepreneur’s venture to the investment committee. If the investment committee signs off on it and also agrees that this is a good investment, then we are going to proceed with our investment.
Why does YSI-CF not have any collateral requirement? And how do you tackle the related credit default risk?
Krishna: We realize that young social entrepreneurs don’t always have the credit history or assets to put down collateral on their loans. Through our research and brainstorming with our advisors, we realized that there are other ways to decrease the risk and providing non-financial support is definitely one of them.
Cohen: We attempt to connect the social entrepreneurs to resources, such as mentorships and workshops, to just help them along the way in order for them to succeed.
Social Finance in Canada
Do you think social finance can take mainstream role in Toronto?
Cohen: I see more and more people and qualified business professionals having interest in social finance and youth entrepreneurship. I believe that the space is about to expand pretty rapidly in Toronto.
I think YSI-CF is in a very good position to help lead the way.
Krishna: I completely agree with Jory. Social finance is not just going to but it has to become the next mainstream way of investing. I think more and more people are becoming very intentional about where they place their money and really wanting to invest it in organizations that are driving positive impact. In that sense, social finance is very much on its way to become a very integral part of our financial system. Just today, in the Social Finance Forum, there was a Call for Concepts from the government on how we can all do a better job of advancing social finance.
What are some challenges that Toronto may face in the social finance field?
Cohen: I think there are people out there who are too ingrained with traditional operations and definition of finance that they won’t see the point of social finance. They won’t see the value behind social and environmental impact.
Krishna: I think another challenge is the democratization of the impact investing process. Right now an overwhelming amount of impact investors are angel investors who are deep pocketed individuals. We need to create investment options and make them more accessible to the general public so that people don’t need tons of money in order to invest into social ventures.
Do you have any tips for young adults who want to get involved in social enterprise or social finance?
Cohen: If young social entrepreneurs need resources, they can come to YSI-CF for help. For others, my recommendation would be to go to every social finance event and talk to whomever they can about the space.
Krishna: I think they should also take some time to ask themselves what they are passionate about. Often times a lot of people are very quick to follow the status quo. If you realize that you do have a passion for something, give yourself the opportunity to try things out. The chances are they might realize that they have what it takes to be a social entrepreneur.
This interview took place on November 8, 2012 in Toronto, Canada and has been edited and condensed. Photo from Youth Social Innovation Capital Fund.
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