Profit Making Charities

For-profit and non-profit charities both do philanthropic work.

Profit making charities are a newer type of philanthropic organization. These groups engage in pursuit of economic gain as well as social service. The money that for-profit charities generate are used to improve themselves, their projects and the lives of the people they help. Micro-finance, a form of lending to help loan recipients to start their own businesses, is a type of charity that is increasingly using for-profit methods.

For-Profit Charities

For-profit charities are different from non-profit charities because their approach to their philanthropic projects takes into consideration investment returns as well as social returns. The monetary focus creates incentives for successful operation. It also increases the necessity of accountability in charitable practices. The income that for-profit charities generate benefit the charitable organizations themselves, investors and the recipients of donations or charity.

Micro-finance

Micro-finance lending charities give out money for charity recipients to create a business and generate income for themselves. For-profit micro-finance charities charge interests on their loans. However, interest rates are considerably lower than market interest rates. Banks pay their lenders based on how much money they lend or make, unlike for-profit micro-finance charities. These charities focus on catering to the financial needs of individual recipients, not playing a numbers game.

Benefits of Profit Making Charities

For-profit charities that rely on outside investors may be more publicized because of their connections. They may therefore reach more people, both donors and donation recipients. Economic strategies used by other businesses besides charities may also increase the success of for-profit charities. Plans to increase monetary intake positively effect all involved parties besides just the investors.

Ethical Issues

Some believe that running a for-profit charity is unethical. Generating money for a profit making charity's investors rather than recipients may increase greed and the pursuit of monetary gain. Investors could become more interested in making money than helping people, which would negate a charity's philanthropic efforts. There are concerns that for-profit micro-finance charities will take away from rather than give to the poor.

References

• Techdirt: Can Charity Work With A For-Profit Motive?
• NPR: The Tuesday Podcast: What's Better For Helping The Poor --- Greed Or Charity?
• Virginia Law Review; "For Profit Charity": Not Quite Ready for Prime Time; Victor Fleischer; January 2008