1. Popularizing investment knowledge: Enabling everyone to participate in finance

Most people shy away from the financial markets due to unfamiliarity with technical jargon and complex rules. Terms like Contango (spot premium), LIBOR (London Interbank Offered Rate), and CDS (Credit Default Swaps) may be well-known within financial circles but can seem distant and inaccessible to the average person. However, participating in finance doesn’t necessarily require mastery of these terms. Basic financial education should cover the following:

• The operation mechanisms of the financial markets
• The basic principles of investing, such as the balance between risk and return
• How to identify opportunities and pitfalls in the capital market

Real-life example: How the spread of financial knowledge can change destinies

In India, the Pradhan Mantri Jan Dhan Yojana initiative, launched in 2014, introduced millions of low-income individuals who had never accessed banking services to the financial system by promoting bank accounts and financial education. This not only improved household financial management skills but also significantly boosted savings rates, providing new momentum for economic development.

Only when everyone understands the basic knowledge of financial markets can we truly achieve a wealth distribution system where everyone can participate.

2. Improve transparency in corporate operations and investments

Ordinary investors often cannot gain a clear view of how the companies they invest in operate. For example, who is managing the projects? How are the company’s resources allocated? What production processes do the products undergo? These details are often hidden in a “black box” and only come to light when a scandal breaks. For example:

• Enron scandal: This company, once hailed as one of the most innovative in the U.S., used complex financial maneuvers to hide massive losses, ultimately leading to significant losses for investors.
• Wirecard scandal: The German payment giant was exposed for financial fraud, resulting in the evaporation of billions of euros in assets, leaving investors with nothing.

Investors need not only returns on their investments but also the right to be informed about the use of their funds and the operations of the companies they invest in.

3. Promoting borderless financial investment

The current financial market still has many restrictions, such as investment barriers between countries and capital flow regulations. This not only reduces the chances for ordinary people to enter the global market but also limits the funding channels for small businesses and social organizations.

Envisioning a borderless investment environment

In the future, borderless financial investment would allow individuals to provide funding for the following entities:

• Multinational corporations or small social enterprises
• Specific projects or specific aspects of a project
• An individual with leadership ability

For example, company employees could invest in their boss’s decisions instead of solely relying on the overall profitability of the company. If a leader’s performance is poor, investors could withdraw their investment, promoting more transparent management and higher execution efficiency. This form of investment could also have a significant impact on the company’s power structure, which we will analyze further in the future.

The support of blockchain

Through blockchain technology, we can realize this form of borderless investment. For example, decentralized finance (DeFi) platforms allow individual investors to directly participate in global projects without intermediaries. This technology is gradually breaking down the geographical limitations of traditional finance, allowing more people to benefit from global economic growth.

4. Advocating for socially responsible financial investment

Currently, the main goal of financial investment is still wealth growth, but we must introduce more concepts of social responsibility. Before making decisions, investors should consider the following questions:

• Can the company bring positive impact to society?
• What is the potential for the company’s long-term development?
• Are there any actions that exploit employees or harm the environment?

Trends in Socially Responsible Investing (SRI)

In recent years, socially responsible investing (SRI) has gradually gained attention. Although it is still in its infancy and has yet to fully realize its potential for “universal participation,” some trends are already emerging, such as:

• ESG Standards: Environmental (Environment), Social (Social), and Governance (Governance) criteria have become key reference standards for many investment funds. According to a study by Morgan Stanley, the global assets in ESG investment funds reached $31 trillion in 2019, highlighting the market’s focus on social responsibility.
• Sustainable Development Bonds: Green bonds and social impact bonds, advocated by the United Nations, have provided substantial funding for global public welfare projects.

This type of investment not only helps improve social and environmental conditions but also encourages businesses to develop in a more sustainable direction.

Our goal at Yicheng Commonweal: Social Citizen Finance

At Yicheng Commonweal, one of our goals is to establish a “Social Citizen Finance” system that allows everyone to participate and benefit. Through methods including but not limited to the following, we aim to promote a fairer financial ecosystem:

1. Public Economic Education: By offering open courses and online resources, we aim to help more people understand the basics of financial operations and how a social citizen can use investments to safeguard their rights.
2. Transparency Policies: Advocate for businesses and social organizations to disclose the use of funds and operational details.
3. Technological Innovation: Leverage blockchain and decentralized financial tools to provide ordinary people with secure and efficient investment platforms.

This model not only reduces the inefficiency and bureaucracy of traditional financial institutions, but also enhances the overall resilience of society, creating a more equitable and diverse economic system.

Inequality within financial markets

The resource and information gap between everyday people and capitalists

When retail investors step into the financial world, they are often met with significant information disadvantages. Unlike capitalists and major institutions with privileged access, ordinary people must depend on public market data—information that is frequently delayed and previously leveraged by the powerful.

• Case study: The Enron financial scandal
  The Enron scandal of 2001 stands as a classic example of financial market inequities. Executives, armed with insider knowledge, cashed out millions before the company’s fall, while ordinary investors were kept in the dark about its real financial status. The result was devastating losses for small shareholders and enormous gains for those at the top.

Market manipulation and the zero-sum game

High-frequency trading (HFT) exploits technological advantages to generate profits from minute, fleeting market movements. Capable of executing millions of trades within a second, HFT systems give capitalists a decisive edge over ordinary investors, who lack the speed and infrastructure to compete in this time-sensitive environment.

• Merrill Lynch: A case of market manipulation
  In 2019, Merrill Lynch faced a multi-million dollar fine for engaging in market manipulation. Investigators discovered that the firm used automated trading algorithms to create a false impression of market demand by generating a high volume of fake trades within short periods. This deceptive practice misled ordinary investors, causing financial losses due to misleading price movements, while Merrill Lynch profited from the artificial volatility.

The contradiction between the labor market and the financial market

Ordinary people are trapped in the labor market

For ordinary people, the uncertainty of participating in the financial market makes the labor market the primary means of acquiring wealth. Education, skill enhancement, and career advancement in companies form the only path for most people to pursue economic security.

• Real-life comparison
  An ordinary office worker, even with a 5% annual salary increase, would need decades to achieve a certain level of financial freedom. Meanwhile, capitalists can earn hundreds of thousands of dollars in a single day through the financial market. For example, in 2020, renowned global investor George Soros made over $1 billion in just two days through a successful operation in the financial market.

The labor market serves the capitalists

The operation of the labor market is actually driven by capitalists. The efforts of ordinary workers are often centered around meeting the needs of capitalists. From college entrance exams, university education, to career planning, the majority of people are striving to become “higher-level employees.” The end result is that, despite working harder, ordinary people are only given the opportunity to create more profits for capitalists, rather than achieving true economic independence.

The vicious circle of class stratification

The design of the capitalist financial system ensures that ordinary people and capitalists are always on different tracks. The core mechanisms of this system are as follows:

1. Differences in wealth accumulation methods
   • Ordinary people: Accumulate wealth slowly through labor and wages.
   • Capitalists: Achieve rapid wealth growth through capital appreciation.
2. Education and employment division
   • Ordinary people strive for higher education and work skills to meet market demands, but this “upward path” is often designed by the elite class to serve capital expansion.
3. Capitalists use financial tools to amplify wealth
   • Stock buybacks and dividends: Capitalists directly benefit from company dividends through equity holdings and use buyback policies to increase stock value.
   • Tax advantages: Capitalists further minimize wealth loss by taking advantage of lower capital gains tax rates.

Possibility of reform:

Scholars have long pointed out that the current state of the capitalist financial system is not immutable. Nobel laureate Joseph Stiglitz has emphasized that the inequality in financial markets can be alleviated through policy reforms. For example, limiting high-frequency trading, increasing capital gains taxes, and expanding ordinary people’s access to capital markets are all feasible measures to reduce wealth distribution inequality.

At Yicheng Commonweal, we believe that such reforms cannot rely solely on the government. Therefore, we will propose a “financial system that is accessible and beneficial to all,” and we hope to unite the efforts of various social groups, enterprises, and individuals to drive deep innovation and gradual reform.

While the capitalist financial system undeniably plays a role in driving economic growth, it is also one of the key factors contributing to class stratification. Only through reforms that allow universal participation can the financial market truly become a tool for promoting social equity, rather than a weapon for capitalists to consolidate their power.

In today’s world, finance has become an integral part of personal and corporate life. However, for most people, financial participation often revolves around wealth preservation or accumulation. While tools like stocks, mutual funds, and cryptocurrencies have democratized access to investment markets, this engagement often remains disconnected from deeper values such as personal fulfillment or meaningful contributions to society.
Amid this gap, social enterprise finance has emerged as a transformative financial model garnering increasing attention. This innovative system bridges the connection between socially conscious citizens and social enterprises, positioning itself as a promising engine for driving sustainable development and collective progress.

Limitations of Traditional Finance

The traditional capitalist financial system is characterized by opacity and capital centralization. Companies rarely disclose the intricate details of their operations, leaving the public reliant on financial reports, media coverage, or analysts’ assessments for insight into corporate activities. This inherent information asymmetry creates a gap between investors and businesses, often resulting in investment decisions based on incomplete or superficial information.

The primary goal of traditional financial investments is profit maximization, with investors typically focusing on metrics such as profitability and market share. Although some companies have started publishing corporate social responsibility (CSR) reports in recent years, these documents are often vague, failing to provide a clear picture of how businesses contribute to societal value. This narrow profit-driven approach limits the potential of capital to drive meaningful social progress.

The Emergence of Social Enterprise Finance

Unlike traditional finance, social enterprise finance prioritizes transparency and a multidimensional approach to value creation. In this system, every business process is made publicly accessible, allowing investors to gain a comprehensive understanding of how a company operates. This transparency enables investors to align their financial decisions with their personal values, choosing investments that resonate with their social and ethical priorities.

At the heart of social enterprise finance is the effort to break the closed nature of traditional finance by integrating investments with goals stemming from social responsibility and environmental sustainability.

This innovative financial model also embraces the concept of borderless investing, where investors are no longer confined to specific industries or markets. Instead, they can freely explore global opportunities, selecting investment avenues that align with their aspirations. Borderless investing not only expands the horizons of financial participation but also fosters the efficient allocation of resources on a global scale.

Case Study: Transparency in a Chocolate Brand

To provide a clearer understanding of how social enterprise finance operates, consider the example of a premium chocolate brand. This brand manages a complex production process, including sourcing cocoa beans from around the world, fermentation and drying, grading and roasting, packaging design, marketing, and selling through various channels.

Under a traditional financial model, consumers engage only with the final product, while the intricate details of its creation remain hidden. Similarly, investors are often limited to financial statements and broad summaries of the business. In contrast, within a social enterprise finance framework, the brand could utilize digital tools to ensure full transparency across its operations. For instance:

• Sourcing Phase: Information such as the origin, farming practices, and prices paid for each batch of cocoa beans could be made publicly available, emphasizing ethical and sustainable sourcing.
  
  
• Production Phase: Details about each stage of production, including personnel, processes, and quality standards, could be accessible in real time.
  
  
• Marketing Phase: The creative development of campaigns and their broader impact on society could be shared openly, showcasing alignment with social and environmental goals.

Even more significantly, social citizens can choose to invest not only in the brand as a whole but also in specific areas of its operations that align with their personal interests and values. Examples include:

• Empowering Local Communities: Investing in a particular cocoa farm to support local economic development.
• Improving Product Standards: Funding specific production processes to enhance product quality.
• Backing Creative Campaigns: Supporting the marketing team to implement innovative advertising strategies.
• Driving Innovation: Investing in the R&D department to develop new flavors or breakthrough techniques.

The Social Impact of Borderless Investment

A transparent and decentralized investment model transcends the limitations of traditional finance, turning investment into a powerful tool for social engagement and empowerment. Social enterprise finance encourages investors to focus not only on financial gains but also on these key areas:

1. Driving Social Impact: Evaluating whether the enterprise contributes positively to society, such as advancing Sustainable Development Goals (SDGs).
   
   
2. Ensuring Transparent Governance: Examining whether the business upholds fairness, avoids exploitative practices, and incorporates inclusive, democratic decision-making.
   
   
3. Fostering Global Collaboration: Assessing whether investments promote equitable resource distribution across the globe, particularly in supporting disadvantaged communities or regions.

This evolving investment mindset transforms capital into a catalyst for social advancement. By aligning their investments with broader societal goals, investors reap not only financial rewards but also the satisfaction of contributing to meaningful change.

The Future Potential of Social Enterprise Finance

Although social enterprise finance is still emerging, it holds immense promise for the future. There is a growing trend among both institutional funds and individual investors who are starting to prioritize businesses with a social responsibility focus. Some investment firms, for example, are incorporating companies that align with the Sustainable Development Goals (SDGs) into their portfolios, signaling that the principles behind social enterprise finance are slowly gaining traction in the marketplace.

Despite this momentum, the widespread adoption of this model faces several obstacles. Firstly, many investors lack sufficient understanding of social enterprise finance, which limits their ability and willingness to engage. Additionally, there is a need to increase the public’s financial literacy and awareness of the social impact of their investments. Secondly, social enterprises themselves must increase their levels of transparency and improve their reporting practices to build investor confidence.

Addressing these challenges requires a coordinated effort. Educational institutions can play a key role by raising awareness and educating the public on both financial literacy and the importance of socially responsible investing. Governments and industry bodies can help by implementing policies and frameworks that encourage companies to be more transparent and socially accountable. Moreover, advances in financial technology, such as blockchain, can facilitate greater transparency and trust by ensuring the integrity of information shared with investors.

Conclusion

Social enterprise finance is not just a new financial tool, but a form of social innovation. By linking investment with social responsibility, it offers individuals the opportunity to take control of their own destinies. In this system, financial activities are no longer a privilege reserved for capitalists, but a collective movement for social progress that everyone can participate in. Through social enterprise finance, we are on the cusp of a new era where material and spiritual prosperity go hand in hand. This is not only a transformation in the financial sector but also a crucial step towards a more equitable and sustainable future for society as a whole.