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The challenges of financing culture

How has the financing landscape for culture evolved in the last five years?
Well, there actually are a couple of interesting evolutions in the landscape for what has happened with respect to financing culture. I think there are two very important elements. One is, of course, the financial crisis and what it has meant for accessing finance for cultural and creative actors. And then the second element is, of course, digitization and social media and all the evolutions and the new tool-setting tests it has brought about. When we look at the financial crisis and the impact of finance for culture, of course one aspect– and a very important pillar in financing culture– is how it has affected public budgets. So in several countries there had been really significant budgetary cuts with respect to public finance.
Another element that evolved from the financial crisis is also the way one looks at return on investment. And there have been a lot of discussions on financial return on investment, the major focus on that. And we see in the financing landscape nowadays that the debate on return on investment has diversified and that now you see new forms of financing popping up, trying to combine financial return on investment with also social return on investment. And this mix is very interesting for cultural organisation and cultural practises. That maybe has influenced what we call market finance. And you see new ways of finance developing. For instance, impact investment or impact investing is an interesting new thing that is evolving and growing.
And then a third pillar in the financing landscape that has also developed in the last five years significantly is what we call informal finance or social finance. And that is a form of finance that has a different mechanism. Whereas when you want to attract public finance you have to write a dossier and argue why you deserve public funding, how your project fits in to the policy objectives in place, whereas for market finance the argumentation is about do you have a good business plan, can you repay the money that you will lend. In the formal sphere, the argumentation is about why do I deserve to get your money, what will I do with it.
So you have to convince people that your project is worth their money.
And crowdfunding, for instance, is a very nice example in that sphere, specifically when we talk about reward-based and donation-based crowdfunding, where actually you use a crowdfunding platform to launch a campaign in which you present your project and try to convince backers– people in your inner circle but also in the outside world– to finance or to provide finance for your project because they like it, because they think it is meaningful what you do, that you create a certain impact that aligns with their identity, with their values and their beliefs. So it’s a different kind of mechanism to attract finance.
And this new field makes the financing landscape for cultural and creative organisations has become richer, more diverse than it was like 10 years ago. All of these instruments– be it public funding, market finance, informal finance–
they together make that the financing landscape has become richer for cultural and creative organisations, and so also the opportunities to create a financing mix that fits their needs, that also evolve over time. For an organisation at some point they need this type of financing. At another moment, they need another type of finance also to balance. So in that sense, it’s a positive evolution that you see in the financing world that this diversity of possibilities for cultural and creative organisations has increased a bit.

Listen to this interview, where Isabelle de Voldere, from IDEA Consult, answers the question: “How has the financing landscape for culture evolved in the last five years?”

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Isabelle De Voldere distinguishes between public finance, market finance and informal/social finance. How do you think these different sources of funding can affect cultural products?

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