9 December 2007 - 11:48Sasa Vucinic talks about investing in a Free Press

Sasa Vucinic is trying to keep a free press alive across the world. Along the way he came up with a new way of helping charities (listen carefully at the end of the talk).

Official Spiel:In this quietly persuasive talk, Sasa Vucinic tells how being an independent radio broadcaster in the former Yugoslavia led him to create the Media Development Loan Fund, a radically new way to support independent media. He explains the importance of creating media businesses rather than mere journalistic entities, and proposes his vision (since realized) to issue “free press bonds,” publicly traded securities that support independent media in developing and transitioning countries.

My Spiel:
The discussion of the value of free press and the difficulties in keeping it alive was interesting, but what gets this talk onto my favorite list is the idea he has at the end of the talk to create bonds for companies that have charitable aims, and provide those bonds on the open market. This is genius.
It is important that it be bonds and not stocks because you don’t want the charity going out of business because of a temporary swing in public opinion- you cannot afford to have a charity catering to investors first, and their public second. A bond bridges the gap between charity and pure commercialism as a bond is repayed in full, with or without interest.
Many investors want not only to make money (or at least break even) but also to be socially conscious about it. Many if not most mutual funds today have notations on them that they will not invest in Tobacco, Firearms or similar industries that the investor may find reprehensible. It is known and acknowledged in the investing community that the effect of the investment matters to the investor- this idea takes that knowledge one step further.
Right now most charitable organizations rely on a mixture of angel donations, commercial loans from banks and revenue (if any) from their charity model. This leaves out the opportunity for an investor that would happily loan them the money at less than market rate as long as he was guaranteed his money back.
Two examples:
Grameen Bank when it was started by Muhammed Yunus was funded off of his personal cash out of his pocket (literally). As it grew he needed larger loans from a commercial bank. The commercial banks were not set up to loan to the very poor directly so every loan was in Yunus’ name, and on his behalf Grameen bank loaned the money to the poor. They had donations as time went by, but not enough to match the massive volume of loans they were handling and so they had to suffer with the awkward constraints of dealing with commercial banks.
www.kiva.org is a microlending organization that is a mini example of this bond idea. Kiva searches out and finds worthy microlending causes across the world, takes a picture of the guy who wants a loan and gets a description of what business venture he needs the loan for. Socially concious investors go to www.kiva.org and find one of these microlending borrowers they like. They lend that guy some part or all of his loan (usually 100 to 1000 dollars). As the borrower pays off his loan the investor gets his money back with no interest. This is exactly like a bond, but from person to person, me to some guy in Tibet. If he fails to repay the loan he will find it very difficult to get another microloan, and as a result the repayment rate is typically 95-99 percent, far above American credit repayment rates.

The beauty of the bond idea is that it is so flexible. There can be no interest, some interest or even negative interest if the cause is worthy enough.
The bonds could be rated for their charitable performance much like stocks are rated by Morningstar for their financial performance.
I cannot emphasize how much I love this idea.