Executive Director of Community Sector Banking Peter Quarmby believes that not-for-profit organisations (NFPs) currently have the best opportunity they are likely to have, possibly for decades, to exert an influence over the way that financial markets operate, enabling greater social benefit to flow from the use of available capital.

“NFPs must exert greater control over traditional financial practices if they are to have an impact on the way that capital is sourced, allocated and used for social purposes,” he explains.

“In the current economic conditions, many NFPs have found themselves at a tipping point regarding how to continue delivering services now and yet maintain a sustainable, long-term future. This is largely due to not anticipating changing circumstances in the past and a lack of innovation relating to both organisational strategy and the establishment of commercial partnerships.”

Quarmby points to the concept of the Fourth Sector as a way of addressing these issues. The term Fourth Sector describes hybrid organisations that are distinct from those operating in the government, business and community sectors.

Fourth Sector (or For Benefit) organisations are driven by a social purpose, are economically self-sustaining and strive to be socially, ethically and environmentally responsible. They generate social impact by delivering beneficial products and services that improve quality of life for consumers, create jobs and contribute to the economy.

“Communities are looking for guidance and leadership,” Quarmby says. “This is what the Fourth Sector is all about – collaboration to build new models that deal with twenty-first century issues.”

By their very nature, Fourth Sector organisations are innovative and seek new opportunities to build partnerships that will assist in their endeavours to deliver social benefit. This readiness to embrace change, evolve and adapt to new circumstances gives them an edge during challenging times when other organisations can struggle to maintain a focus on their core activities – their ‘magnetic north’.

By dealing with capital and engaging with government and private sector organisations in innovative ways, NFPs can link private interest with public benefit – thereby harnessing the strengths of all parties. While the social benefits that result from such collaborative arrangements might take some time to come to fruition, it would appear that now is an ideal time to put in place the structures, partnerships and processes that will deliver those benefits in the future. This is particularly so, given the significant levels of Government expenditure now being made available.

Case studies
Quarmby cites the example of a certain local organisation whose success is largely the result of it constant efforts to respond to an array of community demands for welfare services and developing innovative solutions to meet those demands.

The mission of this community NFP is: “To alleviate the effects of poverty and disadvantage by seeking and initiating employment, training and community development opportunities, which facilitate and support positive change for job seekers, employers and communities.”

The organisation has, however, evolved from being solely an employment services provider into a different, more diversified and responsive organisation. The NFP’s diversification and evolution resulted from an acknowledgement that issues such as housing, child care and financial literacy can all affect an individual’s employability. It was recognised therefore, that these issues needed to be addressed to achieve better employment outcomes in local communities.

The organisation undertook a formal analysis of community needs and subsequently assessed its capability to respond. The Board and management determined that, of all the issues identified, the provision of affordable housing was the best option to pursue in terms of community need, organisational capability and external opportunities.

Rather than being solely reliant on Government funding, the organisation sought non-traditional means of raising equity for the NFP sector. This innovative way of engaging with capital enabled it to establish partnerships between community organisations and the private sector, as well as local and state government bodies. This facilitated the NFP’s ability to access debt funding to build a viable and sustainable financial model that will provide affordable housing over a long period of time.

The success of this innovative thinking and new approach has enabled the organisation to prosper when other similar organisations have been struggling in the emergent circumstances of a changing economic landscape.