Source: Adapted and Re-drawn from Rexhepi (2017)
Figure 1 depicts an overview of social finance and the way this market operates. The role of government in social finance has been critical and as noted by Myers and Conte (2013) governments can be actors on both the supply and demand sides of the social finance marketplace. Intermediators, as depicted in Figure 1, are institutions that help investors invest their money in the demand side for social purposes. HRD should be at the intersection of all these social and private actors in the social finance ecosystem with what Bierema and D’Abundo (2004) describe as socially conscious HRD.
Social finance has been heralded as a driver for social change and social good. It is framed as an attempt to “humanize” or re-moralize capitalism by utilizing financial markets to tackle social problems (Berndt & Wirth, 2018). Proponents of social finance are of the conviction that many people will be earning a good amount of money instead of just a small group of people getting very rich. Social finance also influences social innovation and social entrepreneurship, which can solve many problems of today’s economic system. Social finance approaches enable governments to “share the risks” with the private sector. It also helps governments improve outcomes by aligning interests so that capital is channeled toward the most effective interventions. Similar issues HRD is confronted.
Just like any other innovations and advances, there also those who are very critical of social finance. While dedication to social finance to solve social and environmental problems increases among governments and the networks of supporting organizations, broader opinion on the merits of the various forms of social finance like development bonds are divided (Dey & Gibbon, 2018). “The scope and depth of the critique emerging from this literature suggest that the claims being made about the potential role of impact bonds in addressing fundamental societal, developmental and environmental problems are often exaggerated.” (Dey & Gibbon, 2018). It has been argued in some of the academic literature that social finance has the potential of increasing economic insecurity, accentuating inequality trends and exacerbating vulnerability especially in the global south (Lavinas, 2018). This critique is predicated on the belief that social finance is ‘financialized’ capitalism that is radically subverting the role and logic of social policy, which raises concerns of re-commodification replacing de-commodification; and debt, through financial inclusion, now serving as an alternative to exclusion (Lavinas, 2018). It has also been argued that social finance is a “co-imbrication between the state and the financial sector in which the state is using finance to intervene in society in ways that ostensibly seek to reduce costs and welfare dependency, while at the same time the state is used as a vehicle for financial capital accumulation.”(Dowling, 2017). Another critique of social finance is that it is a way “marginalized people are converted into commodities and re-packaged as derivatives by investors plying their trade in the new marketplace of inequality” (Neyland, 2018). HRD cannot be left out of these dialogue relating human and development with the potential of bringing a new social order.