I’m not sure if this is a disadvantage or an advantage. I think it might be a good thing if people starting charities thought more about what confidence they had in how effective their activities would be, rather than simply having good intentions and an idea of how they might be able to fulfil them. I’d be happier giving my money to a charity whose founders stood to lose something themselves if their work turned out to be ineffective, and welcomed the chance to prove their effectiveness one way or the other. However, I agree that people are often too risk-averse and that there might well be a need for charities to be able to share some at least of the risk with lenders who had social as well as financial goals.
The point is that this requires making founders residual claimants of their “charities”, otherwise no-one is going to want to start one because the risk is all on the downside. Which means that you actually have a social enterprise, rather than a charity.
Another disadvantage that you haven’t mentioned:
5) Starting a new charity suddenly requires an investment and carries a risk. If you fail to live up to expectations, then you are suddenly in debt.
I’m not sure if this is a disadvantage or an advantage. I think it might be a good thing if people starting charities thought more about what confidence they had in how effective their activities would be, rather than simply having good intentions and an idea of how they might be able to fulfil them. I’d be happier giving my money to a charity whose founders stood to lose something themselves if their work turned out to be ineffective, and welcomed the chance to prove their effectiveness one way or the other. However, I agree that people are often too risk-averse and that there might well be a need for charities to be able to share some at least of the risk with lenders who had social as well as financial goals.
The point is that this requires making founders residual claimants of their “charities”, otherwise no-one is going to want to start one because the risk is all on the downside. Which means that you actually have a social enterprise, rather than a charity.