Social Entrepreneurship in Haiti

At the recent 2010 Skoll World Forum, one of the most passionate calls to action was made by Paul Farmer, charging social entrepreneurs around the world to come together to assist in rebuilding Haiti. Indeed, we are daily reminded that the direct damage wreaked by the earthquake is far less than the disruption of aftershocks rolling through a fragile economy.  While we can hope that even more people heed Farmer’s rallying cry, it is interesting to look at how the concepts of social entrepreneurship are already being successfully applied to help rebuild Haiti.

From the side of innovation and technology development, inventive designs have been applied to both power delivery systems and easy housing solutions.  A piece at Change.org has recently highlighted one entrepreneur who has made a suitcase-sized solar generator for use to power small devices and lighting.  This is particularly a problem in many countries where central power supplies are unreliable or demand is too great for suppliers to provide on the existing infrastructure.  Unfortunately, this leads to horrifying tales of hospital blackouts where surgeries are abandoned mid-way, or conducted in the dark, due to power loss (watch the remarkable TED talk by Patrick Awuah).  The second innovation is an easily transportable, cheap, and durable housing unit that was developed by Rafael Smith, an Unreasonable Institute fellowship recipient.  The shelter is easily collapsed for shipment to places experiencing natural disasters or political unrest, constructed of durable components, and raised off the ground to improve the sanitation and health for residents (see a nifty construction diagram and image of the “Uber” housing).

To increase the liquidity of resources and capital in an economy that has been severely damaged, we see principals from the microfinance sector being applied in new directions within Haiti.  This includes partnerships between the non-profit microfinance institute Fonkoze, and MasterCard.  Notably, Fonkoze’s expanded influence following the earthquake has also lead to the establishment of Zafen, a collaboration between Fonkoze, The Vincentian Family, DePaul University, and the Haitian Hometown Associations Resource Group.  Zafen’s aim is to provide intrest free loans to enterprising Haitian individuals in order to assist in establishing and maintaining both non-profit and for-profit businesses that will improve nearby social circumstances.  Intriguingly, while Zafen employs a model that is very similar to Kiva’s (empowering many people to make online contributions to fund microloans), it dodges a couple of contentious issues faced by Kiva’s critics.  Namely, Zafen’s loans will be interest-free by acting in conjunction with its charitable organizations.  Furthermore, Zafen’s loans are not pre-approved in the same manner as Kiva’s, which is to say that if a loan is not fully funded by online donors, the project will not be funded at all – therefore the selection of users on the site is more critical to determine the borrowers that will receive loans.

These efforts are but a couple of the many humanitarian approaches underway in Haiti right now.  Have a favorite program, technology, or institution of your own?  Share it below.

Admit Your Imperfections

This is a guest post by Nathan Bashaw, a student at MSU, and the founder of Brighten, an early stage digital publishing startup. He tweets as @nbashaw and blogs on his website.

Nobody likes the guy who tries to be perfect. It’s the same way with businesses.

Ultimately, a business is a group of people taking collective action. You’re going to mess up sometimes. It’s impossible to flawlessly predict the consequences of our actions. Yet some corporations think the proper response is to sweep the mess under the rug. They’re afraid of being imperfect – human. Your customers are smarter and more forgiving than you think. We all make mistakes sometimes. What separates leaders from the pack is their ability to admit mistakes and move on.

For too long, businesses have been able to sidestep responsibility for their impacts on society. As long as your customers are happy, nobody else matters, or so they thought. But we all know that’s not how the world works. We need a broader definition of what counts as a mistake. It’s not just failing to serve your customers – it’s failing to be a positive force in the world. The organizations that thrive in the 21st century will be those that admit responsibility for their external impacts. We don’t expect you to be perfect, we just expect you to try in good faith.

When you let go of the unrealistic dream of perfection, it frees you to tell a more true story about yourself. It shows strength of character. We’ll respect you for that.

Online Transparency: Tools for Increasing Consumer Conscientiousness?

If you use many social media outlets at all, chances are good that you’ve heard a fair bit of buzz lately about changes in the connectivity and privacy settings of social media behemoth, Facebook.  In a nutshell, Facebook is looking to integrate its platform with a variety of other online media, including sites like Yelp, Pandora, and various news outlets.  The upswing is that one can now comment, “like”, or otherwise draw their friends’ attention to various products/media/articles/events across all sorts of online material.  The downside is that Facebook is requiring new personal settings for the users that want to take advantage of these features, increasing access of those outside your confirmed network to basic information related to your profile, and generally reducing your privacy.

The overall trend of increased online presence and personas is also highlighted by a New York Times article this Friday related to a handful of websites/services that are helping users to expose themselves in their daily activities.  With these new online tools, you can let people know where you are, what you’re doing, and how much it is costing you at all times of the day.  We’ve previously featured Foursquare, and the related Causeworld, platforms that allow users to report into businesses and other establishments in real time.  These popular platforms are being joined by the likes of Skimble, an app used to inform friends of one’s exercise routines and sport’s activities.  Even more of an online voyeur/exhibitionist?  Consider Blippy and Swipely, two internet services that will allow you to report all of your purchases online and through the use of your credit card.  In an era where we are being bombarded by warnings of identity theft, you can guess that everyone isn’t equally excited about these developments.

After all of this wind, you may be asking yourself why I am even discussing this topic on a forum that is concerned with social business.  The answer is entangled with the current notions of transparency as virtue within both corporate and governmental institutions. In essence, the belief is that increased transparency will lead to more ethical behavior in these large organizations because the ‘powers that be’ within them will no longer be able to hide behind anonymity or conduct secret deals that benefit themselves at the expense of the common good.  The idea is quite sound, assuming of course, that someone with sufficient clout is actually watching carefully enough.

So, the question then becomes, can this same logic be applied to individuals?  Assuming that the trends of the last decade don’t reverse themselves (and they show little signs of doing so), we will be likely to be able to find more and more information about our friends, family, co-workers, and acquaintances through a simple online search.  Should we be cheering on Blippy as a tool with the same transformative power to help individual consumers make more ethical purchasing decisions with the same gusto as we may be curently calling for increased transparency in the executive decisions of Goldman Sachs?  Or should we berate any friends so naive as to post their personal transactions for everyone to see?  Will a platform for declaring purchases that is integrated with one’s Facebook account lead to consumers taking more thought in what their purchases say about them?  Or will said platform become merely a tool for friends to brag about their latest acquisition of some tech gadget or other superficial indulgences?

Finally, in what ways can the social entrepreneurial movement (which often claims deep ties with the social media movement) leverage this increased spirit of sharing to make people more aware of how their spending decisions connect them to their communities and the world in very tangible ways?

exhibitionist

Women’s Bean Project: Simple Concept and Elegant Execution

When thinking about strategies for creating a social venture, its easy to get caught up in the notion that one must come up with an entirely new paradigm or innovation in order to  make a difference.  This concept is a hurdle that stymies the efforts of many would-be entrepreneurs and is why I think an example of a successful social venture with a simple design can be so illustrative and empowering.

Enter, the Women’s Bean Project, an established social business tackling a complicated problem (chronic poverty and unemployment), with an elegantly simple approach.  The Women’s Bean Project began in 1989 in Denver, Colorado with very humble roots: $500 worth of beans and one determined woman.  Jossy Eyre then used this ‘seed’ money to hire 2 homeless women in order to make gourmet foods and gifts.  The project aims to break the cycle of poverty, unemployment, and homelessness by providing underadvantaged women a place to improve job skills and reenter the workforce.  Women who begin in the Project are often unemployed, single mothers who are frequently on public assistance and may lack high school education.  Through the Women’s Bean Project, these individuals are taught basic work skills in a gourmet food industry, as well as provided with a platform that facilitates access to services (such as GED preparation), encourages positive self image, and helps place participants in career-track positions.

A distinction that the Project clearly states is that “the Women’s Bean Project does not hire women to make and sell bean products. We make and sell bean products to hire women.” This makes the Women’s Bean Project a great example of a leveraged non-profit organization, taking limited resources and utilizing them to garner additional community support and capitol, all for a socially-minded cause.

6 Ethical Concerns in Microfinance: Not as Simple as it Looks

This post was written by Fehmeen Khan, a guest blogger from Microfinance Hub, a website that aims to educate people about the various nuances of microfinance.

Microfinance is a unique credit model that allows capitalism to work in a social context, by creating an optimal mix of profit motivation and social entrepreneurship. This merging of two traditionally-divergent philosophies makes microfinance a delicate balancing act, which increases its vulnerability to criticism on ethical grounds. Here are six ethical questions in microfinance, along with their censures and relevant explanations, that help clarify the intentions of practitioners.

Credit pollution

This occurs when multiple microloans are advanced to individual clients without much consideration of their credit ratings or repayment capacities, because microfinance institutes (MFIs) simply wish to widen their customer base. This behavior is typically driven by intensifying competition in the sector, since a failure to expand or maintain clients will spell failure for the firm. As a result, clients become over-indebted and many defaulters may simply visit the next MFI for a new loan, carrying their debt with them. In the long run, the market may face a repayment crisis, as in Bolivia.

Profit Motivation

Many critics say it is not ‘fair’ to profit from the poor but they fail to realize that interest rates need to be charged to ensure financial sustainability, on account of the less-than-perfect repayment rate (usually 95-98%), overheads, and the high transaction cost of manually extending a large number of small loans to individuals in remote areas. Nevertheless, it is difficult to know the difference between greed and sustainability, as highlighted below.

High Interest Rates

Many MFIs use the above-mentioned justifications  to charge excessive interest on loans, but proponents of the free market economy believe higher rates will attract competition and improve the flow of funds to the poor. Indeed, in the long run, competition will help lower interest rates. However, interest-based income often leads to fat bonuses and paychecks for managers of microfinance providers, and cases like those of Bank Compartamos highlight the severe danger of mismatched financial and social objectives.

Merging business and charity

At the other end of the spectrum lie MFIs that aim to succeed purely as a social business. They employ poor credit control, and as Professor Yunus puts it, ‘credit without discipline is charity’. These firms may forget that being too compassionate will prevent financial sustainability owing to an increasing number of loan delinquencies. Microfinance providers must partner with their client and ensure mutual success, and when borrowers default, their loans should be rescheduled instead of forgiven, or their credit histories should be reset if new loans are sought.

Transparency in pricing

The lack of transparency in pricing is a direct result of high interest rates on micro loans because microfinance providers wish to target as many borrowers are possible, yet profit maximization remains an objective. Hidden transaction fees and sales taxes, complex interest rate representations, and compulsory deposits mean the rate paid by the client is a lot higher than the rate advertised.

Group Lending

In an effort to lower the risk associated with collateral-free microlending, many MFIs practice group lending, which acts as a form of social collateral. This delivers immense advantages in terms of lower costs and cooperation, as a result of which microfinance providers boast high repayment rates, especially among women. This became a moral issue when it was revealed that group borrowing leads to immense peer-pressures that women cannot bear. In other words, the high repayment rates may be a result of the inability of women to bear opposition and disapproval of their group members, and not because they are inherently good entrepreneurs.

Microfinance, like any other social enterprise, has to tackle many gray areas. This context helps us understand the dilemma faced by MFIs on a regular basis, and appreciate the effort put into managing the delicate balance between social good and financial independence.

McKinsey’s What Matters

McKinsey has recently published a series of essays on social enterprise on its new forum: ‘What Matters‘.  The forum represents a new direction for a wing of the world’s most recognized and acclaimed management consultant firm, and aims to bring together a wide array of important thinkers on the pressing topics and problems of tomorrow.  The “Social Entrepreneurs” segment of the website has been added and updated with several essays within the last couple of weeks, in order to coincide with the 2010 Skoll World Forum on Social Entrepreneurship which was conducted last week in Oxford.

The collection of essays is notable in the scale of the topics addressed; everything from how business presents an enormous engine for change, to how companies are already leveraging that energy, to the next step, how social entrepreneurship must be active in driving cultural revolutions to shift the pattern of how business is conducted globally.  The What Matters forum itself is also worth visiting for the depth and style of the  conversation that is being generated there, unusual for most online forums.  Take a look and  see how some of the best minds in the area are defining the problems and the targets for social enterprise in the twenty-first century.

Packaging Your Product With Social Entrepreneurship

Social Entrepreneurship is a field where it can pay to have some great brand recognition.  It can mean all the difference if your customer base recognizes your commitment to social values when compared to your competition and comes to you specifically because your mission speaks to them.  However, it has been often cited that to have a successful social entrepreneurial venture,  one must begin with a competitive product, regardless of the relative merit of your work.  Its often quite difficult to imagine how a social entrepreneur can compete in traditional markets; where the opposing companies have been established, have more capital, and might use whatever tactics they can to drive down cost, indifferent to any negative social impacts.

So, it is always a bit refreshing to see an instance where an innovative personality is able to bridge this gap, providing a new product or service into an entrenched marketplace that is not only price competitive, but also addresses a social problem.  Enter Shannon Boase, founder and CEO of Earthcycle Packaging Ltd., a company that aims to address the ecological impact of our produce and shipping industries by redefining the nature of the packaging material that is used.  At a first glance, it may not seem as glamorous an activity as alleviating poverty or curing disease, yet when one realizes that product packaging accounts for one third of land-filled waste in the United States (much of this non-biodegradable), the problem itself cannot be so easily discarded.    Most of us have heard stories about landfills running out of room, giant floating continents of plastic waste in the ocean, and how plastics take forever to fully degrade in landfills.  These are probably many of the things that Shannon Boase had in mind when she decided to try using excess palm oil tree fibers to construct biodegradable packaging.

Earthcycle was formed in 2005, and has enjoyed healthy growth in its startup years.  This is partially because the material that Earthcycle generates is cost-competitive with other forms of plastic-based packaging.  Additionally, the venture generates a use for palm waste that would otherwise be incinerated, an environmentally toxic process that also has health consequences for the palm workers whom inhale the smoke fumes.  Since the project relies on palm oil plantations that have already been established in Malaysia (some, sadly, as a part of mostly ill-conceived biofuel ventures), no natural habitats need to be disturbed for the packaging.  Finally, the source of Earthcycle’s raw materials is renewable on a 6 month time scale, whereas plastics rely on fossil fuels that replenish on the order of millions of years.  Icing on the cake?  You can take Earthcycle packaging and stick it directly into your garden as a compost source that will actually help your veggies grow.

All of these reasons likely contributed to Earthcycle being recognized as one of the top 6 companies in the 2009 Social Venture Network Awards.   Check out the Earthcycle blog for articles related to consumer waste, or just some good tips on how to be an urban gardener/composter.

Agriculture as Environmental Agent

Perhaps it is because there are typically so many aspects of agriculture acting as forces of environmental degradation, but I find myself powerfully drawn to stories of social enterprises that rely on agriculture to drive positive environmental change.  This week on Social Edge, Patrick O’Heffernan carried a piece on Guayaki Yerba Mate Organic‘s efforts to market a popular drink in many South American countries to the robust economies of North America.  As a drink with qualities not entirely unlike tea, mate is made by steeping the dried leaves of a species of holly tree in warm water, and can provide an energy boost that does not come from caffeine.  However, the real power of yerba mate might prove to be in it’s ability to preserve tropical forests and native species, if you believe in Guayaki’s vision.  Guayaki’s yerba mate leaves come from areas of the rainforest that are reforested as part of projects that involve cultivation of yerba mate and reintroduction of many additional native species that help to maintain the ecosystem in which this crop species thrives.

Currently, Guayaki claims to be preserving 20,000 acres of rainforest through partnerships with local farmers, supported by sales of yerba mate products.  If Guayaki achieves its goal of making mate a product with a similar market to coffee within the United States, they hope to push this number into the millions of conserved acres.

Ethisphere’s Top 2010 Ethical Company Picks

One of the biggest challenges facing the social entrepreneurial movement is a matter of definition. All business has some manner of social implications, and it can usually be argued that even the dirtiest, least socially-responsible firms provide some measure of social good (in the form of job opportunities, GDP, etc…). While in some instances it can be clear what makes for genuine social commitment, in most circumstances the level of social engagement for any given company lies somewhere on a continuum. Therefore, if we hope to be able to best reward those companies who are doing good work, it’s useful to have unbiased sources out there who work to evaluate and rank the activities of different businesses with regard to their commitment to social change or particular causes of interest to socially minded consumers. The folks at Ethisphere are engaged in doing just this very thing, evaluating companies for their commitment to ethical practice and social commitment in business. What’s even better than the fact that they have just released their list of the top ethical companies for 2010? The knowledge that these companies outperformed their competition when compared to the market as a whole!

Social Enterprise Success – 10 long-term strategies

Sometimes as we create new ventures we get caught up in the day-to-day activities and begin to be shortsighted.  It only takes a few months, and soon enough we’re only concerned with our daily work again instead of keeping the big picture in mind.  Here are 10 long-term strategies that could help you when you get caught in tunnel vision:

Develop concepts from a business perspective (as opposed to a legal perspective)
Lawyers should be used to create the best structure for implementing a good market idea – not the other way around.  Legal barriers can usually be overcome.

Start with the “low-hanging fruit”
Launch the ideas that are the easiest to implement well first.  This generates confidence and immediate cash flow.

Remain consistent with your values
I can’t stress this enough!  It speaks for itself, but do not undermine your values to achieve business success.

Address organizational barriers
Assess your incentive structure, culture, team, recruitment, etc.  Prepare your organization to succeed by continuously refining and enhancing your processes.

Be clear about the primary purpose of your business
Is the business being formed primarily to make money or to directly help people?  You CAN have both and purpose will vary, but manage your venture accordingly.

Collaborate
There is no reason for your organization to act as an island.  Partnerships increase success, expand markets, reduce costs, and reduce risk.  This strategy is a personal favorite of mine!

Manage your cash flow
This is a common problem for many small businesses and start-ups and is especially essential for social enterprises.  The timing of cash flow can cripple your organization.  A profitable organization can still go bankrupt if there is too much gap between when cash is received versus spent.  Make sure you have a plan to raise sufficient funds to bridge this gap.

Talk to your customers
Another strategy that speaks for itself, but bears importance.  Your customers define your success.  Take intentional steps to involve them in defining your organization.

Don’t rely on mission only to sell your product/service
Customers make decisions based on their needs – not yours.  You must have a competitive advantage beyond simply being a good cause.

Experiment
Test new services or products on a small scale before making major investments.  College campus’s often (but not always) make for a great place to pilot your new innovation.

Sometimes as we create new ventures we get caught up in the day-to-day activities and begin to be shortsighted.  It only takes a few months, and soon enough we’re only concerned with our daily work again instead of keeping the big picture in mind.  Here are 10 long-term strategies that could help you when you get caught in tunnel vision:

Develop concepts from a business perspective (as opposed to a legal perspective)

Lawyers should be used to create the best structure for implementing a good market idea – not the other way around.  Legal barriers can usually be overcome.

Start with the “low-hanging fruit”

Launch the ideas that are the easiest to implement well first.  This generates confidence and immediate cash flow.

Remain consistent with your values

I can’t stress this enough!  It speaks for itself, but do not undermine your values to achieve business success.

Address organizational barriers

Assess your incentive structure, culture, team, recruitment, etc.  Prepare your organization to succeed by continuously refining and enhancing your processes.

Be clear about the primary purpose of your business

Is the business being formed primarily to make money or to directly help people?  You CAN have both and purpose will vary, but manage your venture accordingly.

Collaborate

There is no reason for your organization to act as an island.  Partnerships increase success, expand markets, reduce costs, and reduce risk.  This strategy is a personal favorite of mine!

Manage your cash flow

This is a common problem for many small businesses and start-ups and is especially essential for social enterprises.  The timing of cash flow can cripple your organization.  A profitable organization can still go bankrupt if there is too much gap between when cash is received versus spent.  Make sure you have a plan to raise sufficient funds to bridge this gap.

Talk to your customers

Another strategy that speaks for itself, but bears importance.  Your customers define your success.  Take intentional steps to involve them in defining your organization.

Don’t rely on mission only to sell your product/service

Customers make decisions based on their needs – not yours.  You must have a competitive advantage beyond simply being a good cause.

Experiment

Test new services or products on a small scale before making major investments.  College campus’s often (but not always) make for a great place to pilot your new innovation.