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MEDIA: Virtue May Be Its Own Reward, But a Hot Stock Never Hurts

Mithre J. Sandrasagra

NEW YORK, May 18 2006 (IPS) - A new project to support press freedom using the stock market could be a model for other social causes seeking access to new sources of capital.

The new financial instrument, called “Voncert responsAbility Media Development” (VONCERT), was listed on the Zurich stock exchange Thursday after being issued for World Press Freedom Day on May 3. VONCERT will enable investors to invest in the establishment of independent media organisations in developing and transition countries, and to help promote freedom of the press.

“The listing of a financial product that mobilises private investment to support a free press is a truly revolutionary step, not just for media development but for all social causes,” said Sasa Vucinic, managing director of the Media Development Loan Fund (MDLF).

MDLF is a New York-based non-profit group that provides low-cost financing to independent news media in emerging democracies. The VONCERT product combines an interest rate market element, which gives investors a fixed-interest monetary return on their investment, and a 20 percent investment in MDLF, which provides the social return.

VONCERT “could provide a blueprint for engaging private finance in social projects around the world”, Vucinic said.

“This is a great product for investors with social conscience,” Rajiv Bahla, who works with the New York-based Millennium Fund, told IPS. “We are always asked to find ways to balance a client’s philanthropy with their investment returns – this product addresses both sides of the problem.”

“People generally invest in bonds that they see a future for, that are sustainable,” Bahla explained, adding, “To be able to place an investment in a sustainable charity is like having the cake and eating it too.”

Other investors see it a bit differently. “I have to help build democratic institutions to protect my investments,” a major investor in the Sri Lankan stock market who wished to remain anonymous told IPS. If products like VONCERT were available in Sri Lanka, if they benefited Sri Lanka, “I would buy them immediately,” the investor said.

“For investors, the relationship between economic growth and information is of key importance,” according to Vontobel, the Swiss Bank that helped to organise VONCERT’s issue along with responsAbility, a Zurich-based company which focuses on social investments in developing countries.

A recent World Bank study demonstrates that reliable, current and independent information is vital in order to make good economic decisions. In addition, on a political level, the study establishes that there is a significant positive correlation between high media transparency and good governance.

“The needs are immense,” said Vucinic. “More than 80 percent of people live in countries without a free press. In other words, more than five billion people can’t trust what they read in the newspaper, hear on the radio or see on TV, and do not really know what is happening in their own country.”

“Access to objective, current information is essential if a country’s inhabitants are to have the possibility of reaching their own decisions on political, economic and social issues and of shaping the future of their country,” according to Vontobel.

Amartya Sen, who was awarded the Nobel Prize for Economics in 1998 for his work on economic development, summed this up when he said, “There has never been famine in a democratically governed country with a relatively free press. I cannot think of a single exception.”

While the VONCERT offering is relatively small by bond market standards, it comes at a time when innovative financing techniques are increasingly being enlisted to address social, humanitarian and political issues.

“More and more investors are asking for such products because it provides another option in addition to regular donations they might make to such causes,” said Roger Studer, head of financial markets at Vontobel.

“Investors end with a slightly lower yield than a normal bond but there are also social returns,” said Studer.

MDLF financing is often the only way an independent media company can access the capital it needs to strengthen, grow and increase circulation while staying free from state control or vested interests.

“We want to create a new class of media entrepreneurs,” says Vucinic, who prior to founding MDLF was a top editor with Serbia’s independent opposition radio station B-92.

After the fall of the Suharto government in 1998, leading Indonesian journalists founded the radio news agency 68H, with MDLF financing. 68H is the only independent radio news agency in the country. It connects more than 400 local radio stations via satellite, something that had never been done before.

Today, the agency provides 18 hours of locally produced programming each day to more than eight million listeners. Some of the 18,000 islands in Indonesia are receiving independent news for the first time ever.

Following the tsunami of 2004, 68H immediately started a fund for the victims. Listeners gave what they could afford. A team of well-diggers was recruited over the radio and dispatched to Aceh in early January 2005. That month, while the government was still reeling from the shock of the disaster and appeared completely paralysed, these volunteers dug scores of wells, providing clean water for thousands of people in disaster-struck locations, according to MDLF.

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 donors’ projects end.

All the projects supported by MDLF espouse the reverse philosophy. The foundation is not simply a supporter of free speech – it doesn’t give grants. Instead, explains Vucinic, it strives to “help independent media with the business of providing news”.

“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,” Vucinic stresses.

Though MDLF’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 forces prospective clients to come up with an appraisal of their commercial situation and a business plan.

In its 10-year history, MDLF has financed over 120 projects in 17 countries, and 97 percent of those loans have been repaid.

MDLF is currently active in countries of the former Yugoslavia and the former Soviet Union. In 2006, it plans to make new investments totaling 10 million dollars in Colombia, Bolivia, El Salvador, Kosovo, Bosnia and Herzegovina, Serbia, Russia, Ukraine, Senegal, Angola and Mozambique.

In the past, the work of the MDLF has been funded by donations from private and public development organisations, including George Soros’ Open Society Institute and the Swiss Agency for Development and Cooperation (SDC).

Now, for the first time, European investors have the opportunity to co-finance this work through their own investment. The product is not currently available to U.S. investors.