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Opportunity Collaboration

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Content

Issue 3

beyond profit

Social Enterprise. Ideas. People.

jan-march 2010

Blended Social Mission Value: Weaving Profit into
through Hybrid Models
The Village Bank Fund Model Microinsurance, Sanitation and Solar in South Asia Social Enterprise Steals the Show at TED India

www.beyondprofit.com

An Intellecap Publication

jan-march 2010

CONTENTS
19
BLENDED VALUE:
Weaving Profit into Social Mission through Hybrid Models

23
FINANCING
It Takes a Village: Testing the Village Capital Hypothesis

25
FINANCING
Tackling the Missing Majority and Why We Must Look Beyond Agricultural Productivity

beyond profit

28
MEASUREMENT
How Social is Your Business? Creating a Standard Measurement System SPECIALS
NEW IDEAS Social Enterprise steals the show at TED India TORCHBEARER An Interview with Ruthless Revolutionary, Paul Polak JUXTAPOSE Tall Tales on Online Platforms? A Closer Look at Kiva and Vittana FUTURE It’s Not Architecture, It’s Ecotecture. Life on a Lilypad

30
VIEWPOINT
Kissing the Tiger: Peace as a Pre-requisite for Development

37

38

40

44

33
NEW IDEAS
The Space Between: Dynamic Philosophies for Change

PHOTO JOURNAL Visual Memories from SightImpaired Photographers

51

REGULARS
RADAR OUTLOOK 10 12 13 14 15 16 18 42 54

45
SOUTH ASIA FOCUS
Microinsurance in Pakistan, Sanitation in India, Solar Villages in Nepal

PRIME NUMBERS COMPANIES DOING GOOD DEAL ZONE MEDIA HUB ON THE GRID GURU LIVES

NEW IDEAS

The Space Between:

Dynamic Philosophies for Change
In October 2009, over 250 entrepeneurs, innovators, thinkers, funders and students came together in Ixtapa, Mexico for five days to create new solutions and forge new working relationships. The event, called the Opportunity Collaboration, was the first of its kind, and served as a unique format that enabled those interested in working to alleviate poverty to come together and connect. Each delegate had the chance to present to fellow attendees. In the following pages, we’ve asked some of the most dynamic presenters to share their philosophy or big idea with you. Each one is playing a unique role in driving change by filling the space where no solution or model previously existed.

New Energy: Disrupting the Marketplace
In the early days of my career, I had the opportunity to work in the US, Russia and Vietnam as a trained-architect. When I was living in Hanoi in 1995, I witnessed firsthand human trafficking: a European man bought a local girl for sex. I tried to intervene and ended up risking my life, as well as failing to change the outcome for that girl. This event changed my life and my career. I decided I had to play a role in the prevention of human trafficking. Having experienced this event up close and personal, I couldn’t erase it from my mind. I wanted to understand what the motivation was. I started to research human trafficking and saw it as a marketplace, where, unfortunately, the commodity is a person. Since the sale of a person is a business transaction, I couldn’t let go of the idea of setting up a company that would offer people at risk an alternative. Once this idea was in my mind, I knew I had to create a company to do just that. It would be a long journey—nine years of collecting information, connecting with different people, and waiting for the right time in the market to launch such a company. In my research on human trafficking, I learned that prevention is key because the traumatizing effects are devastating. Also, urban migration trends play a role. When people move from the village to the city, they are especially vulnerable at that juncture. I found that artisan communities are at risk since they are without economic stability. During these years of research, I built relationships with artisans, cooperatives and then designed a business model that aligned with the artisans’ needs and created economic options for these communities. These artisans do not think of themselves as poor but as rich with skills. Lulan Artisans is a for-profit social venture that designs, produces and markets contemporary modern textiles. We work with over 800 weavers, dyers, spinners and finishers in Cambodia, Laos, Thailand, Vietnam and India. We use natural or low-impact dyes and source fibers locally. Our years of inwww.beyondprofit.com 33

NEW IDEAS

depth work with our weaving partners has led us to understand that true sustainability has four critical components: economic, cultural, environmental, and social. We hire both men and women artisans, pay ample wages and open new markets, and then we go further, discerning the specific needs of individual communities we work in and offering tailored benefits, such as education and housing allowances. We believe beauty is intricately interwoven with sustainability. We are not just creating a set of designed textiles or only a sustainable model for artisan products, but something even larger: an ecosystem design solution that works at the product, service and community levels across economic, ecological, social, and cultural systems. This approach makes sweeping, systemic change using design at the core.

Our “bottom up” approach invigorates artistic processes that have been passed from generation to generation and provides economic stability. Safety comes from the whole community. This approach is a way artisans participate in the global economy: this is their seat at the table. We create value by honoring values. Our holistic approach adds purpose, meaning and vitality in the larger cultural context. To us it is all interwoven:the beauty of experience, the experience of beauty.

Eve Blossom is the Founder and CEO of Lulan Artisans, which celebrated its 5th anniversary in November.

New Breed: Social Connective Tissue
There is a new breed of social change organization that shapes markets, builds fields, and accelerates social change, playing the role of connective tissue. We step into the boundaries between sectors, between the lines of established approaches to social change. We use networks of relationships to manage intersections across traditional boundaries. As a result of playing in the margins, we are able to find the unexpected synergies, spark innovation through unique connection, reframe issues, and advance the market. You may know the type but you can’t quite define the category. We are accelerators, facilitators, mavens, network weavers, intermediaries, connectors. It is a field that hasn’t yet been defined, but one that has a definite market role. At Criterion Ventures, we want to further define and support this role and identify the business models that best sustain it: consulting, technical assistance, brokering transactions, conferences and events, gifts and grants. And, we consider the methods for greatest impact given that measuring effectiveness is confounded by outcomes not defined in near term value or outputs of individuals served. We seek to strengthen this function within the social change marketplace and accelerate the accelerators. Individuals and organizations who play the role of connective
34 beyond profit jan-march 2010

tissue enable leadership, innovation, and action to cross-pollinate and create more effective solutions to today’s complex challenges. The diversity of focus and approach makes it difficult for people to locate themselves in broader ecosystems and to identify potential partners and innovative solutions. Working to find solutions to social problems can feel isolating or embattled; this is particularly true in emerging markets. By pulling together the disparate players, translating and creating a common language, and helping all see the opportunities and challenges they have in common, the “connective tissue” forms bridges and accelerates market formation. People are able to identify as something larger, to share experiences, pursue new opportunities, and forge partnerships. Collective will and common vision are possible when seemingly disparate people and elements are revealed as part of a connected web, part of a whole. Criterion launches social ventures that respond to complex social systems and as a result accelerate innovations. Our answer to the business model challenge is to play the role of consultant half of the time, helping organizations launch their ventures, and half the time we step out on our own to launch venture that shape markets. In particular, we have taken on projects focused on the gen-

NEW IDEAS

der lens in social investing by launching Women Effect Investments; we have redefined a conversation about medical debt in the United States as a poorly formed “cash market” in health care and launched a financial services company to respond; we saw the gaps in scaling social enterprises and helped form Good Capital. We, like others and with other others, step out and build the bridges. In our case, those bridges take the form of new ventures that shape markets. Ours is but one set of practices that accelerate social change, that shape social systems and that create innovations in the margins. Other organizations that have taken on similar responsibilities include Acumen Fund, Clinton Global Initiative,

and Skoll World Forum. Bridge building is powerful stuff, rife with possibility, essential for market formation, proven to work. We must continue to create the connections and conversation necessary to better define the practices and outcomes of this role and ensure that we have sustainable organizations playing this role, creating collaborations and redefining pos-

Dr. Joy Anderson is president and founder of Criterion Ventures, a national firm that identifies, examines and solves system social problems by launching social ventures.

New Generation: The Shift to All Things Social
There is a groundswell beneath our feet, as the priorities and pursuits of a generation change. Millenials (those born between late 1970s and late 1990s) are reinventing the pursuit of meaning, as they excitedly tackle opportunities to volunteer abroad and seek service jobs like Teach for America. The shift is not just in a style of work, but in a new definition of success. Success, for young people, is increasingly about leading an integrated life of commitment and sharing. These trends are shaping and being shaped by a number of related factors. For simplicity, let’s call them social entrepreneurship, social media, and social capital. For young people, social entrepreneurship matters as much in what it stands for as it matters for particular models of social change. This generation grew up with the twin influences of the 60s generation that celebrated (and eulogized) activism and idealism and the 80s generation which sloughed off that communitarian sensibility for more individual, often financial, pursuits. For much of the past two decades, the culture war between the mindsets that these groups represent has dominated the media and political landscape of this country. Yet at the same time, there has been an emerging “common sense” common ground – particularly in approaches to nonprofit work – that began to replace the old antagonism between businesses and civil society with a sense of mutual need. This has led to corporate social responsibility, more management-minded nonprofits, and most of all, a class of change makers that explicitly embraces market opportunities for good and supports businesses that have social and environmental bottom lines. This is the field from which Teach for America, now arguably the most pursued path for top college graduates, emerged. If social entrepreneurship is emblematic of the new post-ideological aspirations of a generation, social media is the mechanism by which they’re organizing themselves. Today’s young people are the first so-called “digital natives” who have grown up surrounded by the internet. Particularly since the emergence of Facebook on college campuses in 2004, the trajectory of online life has been all about sharing – sharing photos, music, movies, links, even status updates. The density of tools like Facebook, Twitter, and now location-based services like Foursquare and Hot Potato is making it easier and more compelling to collaborate than ever before. What’s more, it’s putting a new emphasis on authenticity as this generation’s main currency. All of which relates to the third and most fundamental element of what’s different about this cohort: social capital—the conwww.beyondprofit.com 35

NEW IDEAS

nections between people. Only a few years ago academics like Robert Putnam lamented the death of civic life in America, yet today’s generation is fundamentally about We. From the way we like to learn and work, to the way we chose products, to just about everything else, we are group-minded and communityoriented. This doesn’t mean a rejection of entrepreneurialism, individual self-reliance, or any of those other storied American qualities, but it does fundamentally shape the way we see and value our pursuits and achievements.

The result is a shift in mindset and a shift in priorities that will have significant impact in the years to come.

Nathaniel Whittemore is the founder of Assetmap Strategies, which helps individuals and groups share information about their assets and needs. He edits the Social Entrepreneurship channel on Change.org and founded the Center for Global Engagement at Northwestern University.

New Model: Pay-It-Forward Financing
Loise Ndunge Mallei got an unbelievably good deal on her first small business loan. As the owner of Maridadi Hi-Tec Designers, a modest sewing shop with three employees in Nairobi, Kenya, she was a textbook case of a “missing middle” business—too big to receive loans from microfinance institutions, and too small and informal to get manageable credit from commercial banks. Loise’s pastor told her about an ad in the local paper for interest-free, charitable-repayment small business loans being offered by an American foundation in partnership with the local office of a regional NGO, International Child Resources Institute-Africa (ICRI). Though she thought this sounded too good to be true, she applied for a SMI loan and after subsequent interviews and site visits was approved. The terms were surely unique: in exchange for ICRI’s purchase of about US$2,000 in custom sewing and embroidery machines for Maridadi, Loise would sew and donate school uniforms to impoverished children whose families could not otherwise afford this most basic prerequisite to attending school of any kind in Kenya. At a retail value of about US$17 per uniform, Maridadi will satisfy the terms of their SMI loan by “paying forward” about 120 uniforms—enabling 120 children to begin attending school for the first time. The loan also enabled her to expand her product line and hire two new employees--a dream come true for Maridadi. The pay-it-forward philosophy of the Social Microenterprise Initiative (SMI) is the brainchild of the Arthur B. Schultz Foun36 beyond profit jan-march 2010

dation (ABSF), a small U.S. family foundation based in Sun Valley, Idaho. Since the mid-1990s, ABSF has made grants through in-country NGOs to provide over US$1.1m in these unique, interest-free loans to small businesses in Russia, Vietnam, Palestine, and Kenya--serving 120+ businesses, creating over 1,000 new jobs, and serving over 100,000 poor with inkind charitable goods and services. SMI provides capital equipment loans of up to US$10,000 to the smallest of businesses often included in the “missing middle,” typically with less than 10 employees. Unlike traditional microcredit models, SMI loan recipients pay back these interest-free loans not in profits, but by donating at least an equivalent value of in-kind products and/or services to the disadvantaged in their communities (paying it forward, instead of back to the lender). ABSF data shows that about 80% of all SMI loan recipients are continuing some community charity even after their loans are fully repaid! The ultimate objectives of SMI are 1) to enhance small business production and growth, 2) create new employment opportunities, and 3) to foster a lasting sense of social responsibility and community charity in participating businesses.

Erik B. Schultz is the Executive Director of the Arthur B. Schultz Foundation. The Foundation is currently seeking funding partners to help expand SMI programs. Contact Erik at [email protected] and learn more at www.absfoundation.org.

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