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Social finance is a category of financial services which aims to leverage private capital to address challenges in areas of social and environmental need. Having gained popularity in the aftermath of the 2008 Global Financial Crisis, it is notable for its public benefit focus. Mechanisms of creating shared social value are not new, however, social finance is conceptually unique as an approach to solving social problems while simultaneously creating economic value. Unlike philanthropy, which has a similar mission-motive, social finance secures its own sustainability by being profitable for investors. Capital providers lend to social enterprises who in turn, by investing borrowed funds in socially beneficial initiatives, deliver investors measurable social returns in addition to traditional financial returns on their investment.Consensus has yet to be established on a formal definition of social finance due to lacking clarity around its scope and intent, however, it is said to include elements of impact investing, socially responsible investing and social enterprise lending. Investors include charitable foundation, retail investors and institutional investors. Notable examples of social finance instruments are Social Impact Bonds and Social Impact Funds.Since the 2008 Financial Crisis the social finance industry has been experiencing a period of accelerated growth as shifts in investor sentiment has led to greater demand for ethically responsible investment alternatives by retail investors. Mainstream sources of capital have entered the market as a result including Deutsche Bank which, in 2011, became the first commercial bank to raise a social investment fund.New research in the field calls for increasing the role of government in social finance to help overcome the challenges which the industry currently faces including the struggle to produce desirable returns for investors, high start-up and regulatory costs, neglect from mainstream banks and lacking access to retail investors. Proponents of social finance argue that until these gaps are addressed, mass participation in social finance will be prevented.

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