Patient capital is another name for long-term capital which is revolutionizing philanthropy. It is use of charitable financial resources over a longer spectrum, and can be particularly effective in a country like India.
It is a paradigm in which donations are collected and then converted into numerous small equity and credit investments in entrepreneurial initiatives and businesses that serve poverty-stricken communities
Patient capital is contrary to venture capital firms which are high risk, high return investors, and their limited partners expect high returns quickly. To them, patience is not a virtue.
No expectation of turning a quick profit
With patient capital, the investor or backer is willing to make some type of investment in a business with no expectation of turning a quick profit. Instead, the investor is willing to defer any return for an extended period of time. The anticipation with patient capital is that by foregoing any type of immediate return, the profits down the road will be more substantial.
For investors, extending patient capital can be a good thing for two reasons. First, the rate of return on a long-term investment of this type often carries a larger return once the business does begin to pay. For an investor who is looking for an investment that will yield a substantial return five or ten years down the road, the investment of patient capital in a business is a great move. Second, there is the potential for tax breaks on the amount of the investment. While the amount of tax benefit varies from one country to another, many governments do tend to offer some sort of incentives as a way of promoting business development.
Innovative investment
Patient capital can be an effective and innovative investment in enterprises that are currently seeing poor people as passive charitable recipients. Patient capital will convert them into vital human beings who want to make their own choices and take their own decisions.
Watch video “Renewal Partners – Patient Capital.”
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