The Economic Benefits of Supporting Private Social Enterprise at the Nexus of Water and Agriculture: A Social Rate of Return Analysis of the Securing Water for Food Grand Challenge for Development

Ku McMahan; Saad Usmani

The Economic Benefits of Supporting Private Social Enterprise at the Nexus of Water and Agriculture: A Social Rate of Return Analysis of the Securing Water for Food Grand Challenge for Development

Ku McMahan; Saad Usmani

This article attempts to evaluate the comparative socioeconomic benefits of funding performance-based private sector social enterprises and posits that the social rate of return of such investments is significant and exceeds expectations for similar investment portfolios. Using the case study of the Securing Water for Food Grand Challenge for Development, we perform a social rate of return analysis on 16 water conservation technologies (WCTs) in 10 nations. Through using an extensive benefit cost ratio, we obtain the Marginal Internal Rate of Return whereby the discounted value of future benefits is equal to the reinvestment cost of capital for the SWFF portfolio. This allows the impact of SWFF to be comparable to other investments and serve as a benchmark. The resulting social rate of return metrics exceed the conservative expectations of impact investment funds as well as comparable foreign aid investments. The reasons behind this high rate of social impact are further explored and recommendations are provided accordingly for an alternative performance-based investment model of foreign aid disbursement that prioritizes scalable small and medium-sized social agribusiness enterprises in developing nations.

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