When Saeid Binzagr began to question income inequality in his home country of Saudi Arabia, everyone in the kingdom’s wealthy upper echelons he spoke with told him the same thing: That is simply the way the world works. But this explanation didn’t feel right to the 45-year-old executive, who holds a number of positions at Beit Binzagr, his family’s 115-year-old importation and distribution empire. After much study and reflection, and a bit of philosophical seesawing that included dabbling in Ayn Rand, he determined that he didn’t buy it. And two years ago, he founded the Binzagr Institute for Sustainable Prosperity.
“This is my way to contribute, to express my belief that there is no reason for poverty to continue and grow,” Binzagr told the audience at the institute’s first conference last year. “Jobs are the answer, and every person has something to contribute … and should be able to do so in a dignified way.”
To that end, the Binzagr Institute, which calls itself an independent public policy think tank, has begun promoting the idea of a social venture partnership (SVP) that would provide a job guarantee program for Saudi Arabia’s young workforce. Something of a public-private partnership, the funding would come from a combination of government grants and philanthropic donations from banks, businesses and individuals. However, the end goal is not simply charity. Participants in the program would take part in internships and other professional career exploration during high school and college, then have up to four years of guaranteed employment in certain industries, such as sustainable construction, sustainable agriculture, solar energy, health and wellness, education and cultural heritage. What Binzagr hopes to do is create a generation of Saudis who not only have jobs but good-paying careers, working toward social and environmental change, perhaps even as entrepreneurs themselves.
“We don’t see this as a permanent job guarantee program,” says Fadhel Kaboub, an associate professor of economics at Ohio’s Denison University who serves as the institute’s president. “We see it as an incubator for building skills and building capacity while addressing social problems and helping young people transition into the private sector with strong transferable skills.”
Whether or not Binzagr’s dream becomes a reality—and there are challenges still to be tackled, more on that in a bit—it serves as an example of a slow but steady transition taking place in the Middle East, where wealthy families and other business owners have begun to see impact investment as an effective tool for addressing social and environmental problems. In a recent worldwide survey of 525 family business owners and managers, the Ernst & Young Global Family Business Center of Excellence found that family businesses invest, on average, 3.1% of their wealth for social impact, with the Middle East leading other regions at 3.5%.
While the percentage sits slightly higher, the impact investment trend is still in its early stages in the Middle East, people who work in the region say, and these business owners may look at “investment” differently from many westerners and not necessarily expect a financial return. That said, instead of simply writing a check to support the local orphanage or school, they are taking more control, getting more deeply involved in addressing root causes. Some impact investment advocates see potential in the Middle East for everything from fighting climate change to women’s empowerment—to possibly even promoting peace somewhat with the stability brought by jobs, financial inclusion and basic services.
“There are a lot of families now thinking of changing the way they spend their money,” says Adib Rashid, a Dubai-based family business advisor at the E&Y Global Family Business Center. “Instead of calling it charity, they now want to focus more on projects where they can see the impact of their money and how it is helping the communities and families they’re investing in.
“In Saudi Arabia, a lot of families are interested in developing projects for renewable energy and social projects such as microfinancing.”
Peter Englisch, the global family business leader at E&Y Global who conducted the survey, attributes the region’s lead in social impact investment to a culture of charitable giving. “When talking about the Middle East, you also have to take into consideration the religious background,” Englisch says. “In the western world, shari’a law is heavily misunderstood. One of the basic principles of shari’a law is caretaking of others and social giving back.”
This includes the concept of “zakat,” one of the five pillars of Islam, which is a charitable tax, customarily 2.5%, and religious obligation for all Muslims who meet the necessary criteria of wealth. The collected amount is paid first to zakat collectors, and then it’s used to help poor Muslims and support other social and religious causes. Today, in most Muslim-majority countries zakat contributions are voluntary, while in a handful, including Saudi Arabia, zakat is mandated and collected by the state.
This brings us back to Binzagr. Nonprofits don’t exist as we know them in Saudi Arabia—charities tend to be religious in origin and chartered under the Ministry of Labor and Social Development. Earlier this year, the Saudi government passed a law allowing for the creation of “civil society organizations.” For the first time in the kingdom’s history, the law and its implementing regulations provide a comprehensive legal framework for establishing and running associations and foundations. However, the requirements new nonprofits must meet are many, including compliance with the Saudi government’s interpretation of shari’a law and public morals. So the Binzagr Institute has its work cut out for it in creating its SVP program in accordance with strict government regulations. Still, its leaders remain optimistic.
“We are building this infrastructure from scratch,” Kaboub says. “But we’ve met a lot of people in the business community who believe in this and are willing to put money on the table. On the government side as well, they’re supportive of anyone who wants to create jobs.”
The conversation always comes back to jobs, specifically unemployed young people.
While the global youth unemployment rate has stabilized at 13%, the Middle East and North Africa (MENA) region continues to have the highest rate by far—right around 30% in 2014—a situation that has worsened since 2012, particularly for young women, according to the International Labour Organization’s most recent report, “Global Employment Trends for Youth 2015.”
Still, for a variety of obvious reasons—from the instability brought on by continuous conflicts to terrorism to the perception of the Middle East as an oil-rich region that can take care of itself—MENA doesn’t necessarily top the list of most private impact investors from outside that part of the world. In the latest survey conducted by the Global Impact Investing Network (GIIN) of the more than 150 largely European and North American investors who participated, private debt investors allocated 3.6% to the MENA region while private equity investors allocated 3.3%.