I had lunch with Jonathan Lewis the other day, and it was fun to catch up. Jonathan is a serial social entrepreneur who founded, among other things, Opportunity Collaboration, an annual gathering of about 300 social entrepreneurs down in Ixtapa, Mexico. He’s also belongs to my club of “favorite people” owing not only to his sharp mind but his irreverent sense of humor. Our laughter rocked the walls of D.C. Coast restaurant long after the lunch crowd had gone back to work.
One of the things we talked about was the proliferation of “gadgets” that have been designed by social entrepreneurs seeking to solve health, housing, clean drinking water, type problems or otherwise improve the lives of poor people in developing countries. Jonathan is one of a number of people who have noted how difficult it is in practice to get poor people to actually purchase these consumer products that are “good for people”, not only because of the absence of purchasing power in this segment of the population, but also because poor people — like all of us – often have other priorities or preferences as to where they will direct their limited resources. (see his article) Jonathan recently launched a Nairobi-based start up, copiaglobal, that is taking a catalogue-based approach to marketing not only products that are good for people, but also products they want.
I really appreciated Jonathan’s advice, as FINCA is entering the scale up (we hope) phase of a renewable energy “gadget” next door, in Uganda. Our Sunking solar-powered lantern has a seemingly killer value proposition for an off-the-grid poor family in rural Uganda, delivering several different benefits: 1) it illuminates the home so the kids can do their homework after dark (education), 2) it reduces or eliminates need for kerosene lamps, whose fumes are harmful in confined quarters (health benefit plus savings on kerosene expenditures – and shall we throw in the environment? Why not) 3) it can recharge a mobile phone (communication plus micro business opportunity). So it can’t miss, right?
“It’s 20% the product and 80% the distribution,” Jonathan warns.
Personally, I think I have the distribution down. I was explaining to two people from Microvest, one of our funders on the debt side, at a breakfast this morning and they both put in orders. I’m two for two on my pitch/sale ratio.
I recently became aware of another interesting start up: Crowdmission. This company has operationalized a concept I have been thinking about for a long time, an offshoot of microfinance which I call “micro equity”. As it’s name denotes, it works with a “crowd funding” model– like Kiva or Kick Starter – but invests in social enterprises that offer a real return to the micro investor, versus merely a psychic one. I’m going to watch that one closely.
I made the trip in the dead of winter, January or February, I think. Part of our Western propaganda was that all Soviet women were fearsome apparatchiks , but when we disembarked from the plane we were met by what I still think of as probably The Most Beautiful Woman in the World, a stunning blonde in a mink coat and hat who cheerfully escorted us to the baggage claim. Outside immigration, I was met by my Rotarian contact, Konstantine, and my interpreter, Nataliya, another stunning Ukrainian woman. There were no tourist class hotels in Kiev at the time, so they put me on a cruise ship docked on the Dnieper River. The room was minute, the food bland, but the crew friendly. I thought it was also deader than tomb at night, but this proved not to be the case.
The next day, Konstantine took me on a tour of Kiev, and then to a meeting of the Kiev Rotary Club in one of the many drab buildings that had housed the Soviet bureaucracy and grew like urban blight around the beautiful Ukrainian Orthodox Churches in the center of the city. There was a huge in the room, and the Rotarians were so immersed in their own bilateral conversations the brief speech I had prepared at Konstantine’s urging went entirely unnoticed. Afterwards, I asked my guide to introduce me to people who already had a small business or were trying to start one and might need credit. The economy of the Ukraine was in terrible shape, like that of the rest of the former Soviet republics. Unemployment was high as the government agencies laid people off and State-run enterprises shut down altogether. Many former professionals — doctors, scientists, lawyers, etc. — had established kiosks and were selling cigarettes, vodka and canned goods. The markets were actually pretty active, with people selling fruits and vegetables from the small plots there were permitted to cultivate. One small farmer greeted me enthusiastically, asking me to send his best wishes to Bill Clinton. What Kiev lacked completely at that time were retailers of any size or with any inventory other than garments left over from the Soviet era. My guide seemed embarrassed to have to show me this. “What a bunch of junk!” she exclaimed, picking through a rack of drab-looking dresses. “Who would want to buy this rubbish?”
That night, I went poking about the small cruise ship, in search of a way to pass the time. For a while, I stood on the bow, watching the black waters of the Dnieper rushing by, carrying large chunks of ice. So far, my impression of Kiev was that it was a pretty gloomy place, populated by people who seemed not to have got the news that their Soviet masters were no longer in charge. On my way back to my room, I saw a door with a cocktail glass on it, and pushed it open. Music exploded out into the cold Kiev night. Before my eyes, about fifty people, men in jackets and ties and women in evening dresses, were staggering about a dance floor, all in advances stages of inebriation. So this was where the party was! It changed my view of Kiev and Ukrainians completely. In fact, as I went to other former Soviet satellites over the ensuring years — Hungary, the Central Asian Republics — I found this to be a common theme: the secret, inner life of the cities and towns. Beneath the ugly, outer skin of the Soviet infrastructure was a vibrant core where people exercised their love of music, dancing, and life itself.
Today, Ukraine is one of a number of countries, struggling to shape its new destiny. Syria, Egypt, and Libya are others where opposing groups are rushing to fill the vacuum left by fallen despots. A decade from now, will they have found a way to live together in more tolerant, pluralistic societies? It seems a question no amount of well-intentioned — or not – intervention by outsiders can answer.
Two somewhat contradictory articles on the Millennials and Entrepreneurship appeared recently, one by Scott Shane claiming that young people are less interested in starting their own businesses than were people of my generation (Boomers), and the other by Annika Small, suggesting that interest in self employment among this group is on the rise. To be fair, the articles quoted different studies that compared different population samples across different time frames – the classic “apples to oranges” quandary. But, clearly, interest in entrepreneurship among Millennials can’t be both increasing and abating, can it?
But wait: where the authors are in agreement is that if you add the word “social” to the mix (as in “social entrepreneur”), then there is an unambiguous trend among Millennials towards a desire to create a better world vs. fatten their bank accounts. Annika Small sees Millennials as “looking for radical solutions to social problems rather than creating a product or service that will make them a stash of cash.” Shane finds that “young people have broader goals life goals than their parents did when they were in school. Millennials may be less focused on being successful entrepreneurs because they think it is important to achieve other goals, like being good parents and citizens.”
It is, of course, possible both to improve society and make wads of money, as the entrepreneurs of Silicon Valley have done. The difference with Social Entrepreneurs is that we focus on curing some societal ill or injustice as the top priority. But like all entrepreneurs, we strive to do so in a financially sustainable way. Microfinance is probably the best example of a social enterprise that started out trying to put capital into the hands of the poorest micro entrepreneurs in developing countries so they could create their own businesses and bootstrap themselves out of poverty, and has grown into an industry that has transformed the global financial sector. Players in the microfinance industry today include commercial banks, payments companies, retailers, money transfer companies, telecoms as well as the pioneers like FINCA who started the revolution.
What excites me is to see more and more young people entering the Social Enterprise space, bringing their passion and new ideas for creating a more just world with less poverty. The kind of disruption that my generation created in the ‘60s, and which birthed microfinance, is seeing its echo in a whole new generation of social entrepreneurs.
Had a great time giving a talk at Berekeley’s Blum Center for Developing Economies yesterday. Thanks to Sean Burns, Paula Zamora and their team for organizing this fun event, and also the chance to meet separately with some of the faculty and students where I learned about some of the fascinating products and social enterprises that have been developed in this incubator which they call “Big Ideas”. There is a CNN award winning “Solar Suitcase” developed Laura Stachel that is used to fight maternal mortality at off-the-grid hospitals in Africa. There is a device call “CellScope” that turns a cell phone into a diagnostic quality microscope, facilitating remote diagnosis of infectious diseases. Two graduates, Khaitan and Dickinson founded Gram Power, which has cracked the code for solar energy storage in remote villages in Indian.
There is an interesting divergence taking place in this space, and one that FINCA is currently reviewing to gather ideas for our “FINCA Plus” initiative where we seek to partner with Social Entrepreneurs who have developed promising innovations in the areas of healthcare, water and sanitation, renewable energy, education and small scale agriculture and value chains. Some of these interventions are “village level”, and involve higher investments and demand a greater degree of organization on the part of the beneficiaries to make them sustainable, both in terms of the long term financing model (via user fees) and physical maintenance. These are two areas that most often doom this type of initiative over the longer term. Others are “family level”, and involve products that are affordable for a single household, examples being solar powered lanterns and water filtering systems.
In either case, this whole space is gathering momentum, which is good news for millions of currently vulnerable families, whose progress out of poverty (owing to interventions like microfinance) can often be sabotaged by a family health crisis.
A conference was held in London this past fall entitled “Financial Inclusion 2020. At the conference, an ambitious — some would say unrealistic — to achieve universal financial access over the next six years. While there is some debate over what is meant by “Universal Access to Financial Services”, the basic idea is that everyone in the whole wide world who wants one will have a bank account, or if not a relationship with a formal financial institution, will be able to transfer money, make payments, buy insurance or otherwise undertake transactions via some means other than physically handing out cash.
While this may seem like an impossible goal, there are some great changes taking place in the financial and technology sectors which make it less than the ranting of some lunatic. For one, mobile phone penetration has grown — and continues to grow, even in the poorest countries — astronomically. There are few of FINCA’s million plus clients in 22 countries who don’t own mobile phones. And mobile phones, increasingly, are being used to save and transfer money. In other cases, agents — who could be owners of gas stations, small groceries stores, or money transfer businesses — are taking the place of bank branches, especially in remote areas where banks do not find it cost effective to build branches.
Then there is the penetration of non-financial businesses — large retail chains, especially — who have “invaded” the space of formal financial institutions in the supply of credit and other financial products, with or without a banking license.
While all this is very exciting for people like myself who recalls the days when only a tiny percentage of the citizens of developing countries could get loans or open savings accounts (and I even remember a time when my mother could not have a bank account or a loan in the U.S.), it does carry risks. The questions is, will this proliferation of “access” bring with it a host of irresponsible actors, as microfinance has opened the door to many predatory consumer lenders who take advantage of customers, especially those who lack financial education to understand the terms of the services and products they are receiving?