Sasa Vucinic announced it at TEDGLOBAL last Summer, raising both interest and skepticism: he wanted to sell "free press bonds". "If investors are willing to fund the US deficit, why wouldn't investors want to fund the press freedom deficit?", Vucinic said.
It's now reality: for the first time a social cause will be listed on a major stock exchange. The Media Development Loan Fund, a non-profit run by Vucinic (picture) and based in New York and Prague providing low-cost financing to independent media in emerging democracies, is launching a security that mobilises private investment to support a free press - basically a bond with a social element. They're doing so together with Swiss bank Vontobel and Zurich social investment specialists responsAbility.
The investment instrument, issued today and called “Voncert responsAbility Media Development”, will be listed on the Zurich stock exchange on May 18. It combines an interest rate market element (giving investors a fixed-interest monetary return) and a 20 percent investment in MDLF (which will provide a "social" return).
The timing of the issue is not coincidental: today May 3 is World Press Freedom Day. Vucinic said this morning in the Financial Times that he believes the new product could become "a blueprint for engaging private finance in social projects around the world".
MDLF was founded in 1995 (with seed money from George Soros) and has always pushed innovative models to foster independent media in developing and democratizing nations. In a long article I wrote about them in 2001 for the Industry Standard magazine, I called them "not-for-profit VCs":
"We want to create a new class of media entrepreneurs," says Vucinic, who prior to founding MDLF was a top editor with Belgrade opposition radio station B92. In most of the countries where the foundation is active, management skills are dramatically lacking, and grants too often backfire by creating a situation of dependency that cannot be sustained over the long term, when the donors are no longer there.
All the projects supported by MDLF espouse the reverse philosophy. The foundation is not simply a supporter of free speech and it doesn't give grants. Instead, explains Vucinic, it strives to "help independent media with the business of providing news". He adds: "Only when a media company is capable of sustaining and developing its activities with its own revenues can it be free of outside influences and truly independent."
That's why, though the foundation's primary activity is making low-interest loans, it functions more like a venture capital fund that enters into a close, involved and long-term relationship with its borrowers. The application process itself is used as a first training ground, forcing those seeking MDLF's support to come up with a realistic appraisal of their commercial situation and a detailed business plan. Sometimes, the first restructuring takes place during this phase of "due diligence", and in many cases the loans have been structured to give managers and journalists an ownership stake in the company.
When a loan is allocated, MDLF provides training, technical assistance and introductions to clients and partners, and closely monitors the progress of the projects. Every month, all borrowers are required to file a detailed report.
MDLF has so far financed over 120 projects in 17 countries, and 97 percent of the loans are repaid. Loans typically buy printing presses, new TV and radio transmitters and broadcasting equipment, "helping independent news outlets reach more people, generate more revenue and stay clear of government monopolies", says the foundation. Vucinic: "The needs are immense. More than 80 percent of people live in countries without a free press and do not really know what is happening in their own country."