market based solutions

Investing in Social Enterprise to Fight Poverty

FINCA

By Rupert Scofield, President and CEO of FINCA International 

Rupert Scofield will be speaking at a dinner hosted by Women Advancing Microfinance UK on Tuesday 10th May in London. He will talk to us about the work FINCA does and the impact it’s having, in particular in the social enterprise and innovation space. Tickets to the event are available here

Ahead of the event, we asked Rupert to give us some thoughts about what it is that makes FINCA different, how they have evolved their approach and support for those they work with and their unique approach to fostering social enterprises.

 Tell us about the clients FINCA reaches and what it is about your offering that allows you to reach clients other microfinance organisations don’t.

FINCA’s segment is not “the poorest of the poor”, which are now reached by specialised “Ultra Poor” or “Graduation” programmes which provide subsidies not loans, although some of our most successful clients have come from that segment.    Most of our clients live on $2 to $4 per day when they take their first FINCA loan and then progressively move up the ladder.

The vast majority have an existing business when they join FINCA, but not all.  In Africa, for example, we encourage our village banks to take on one or two younger women who want to start a business but need mentoring and support from the group in order to succeed.

While many other MFIs work in this segment, FINCA is unique in that we have done this now for three decades and on four continents, learning to adapt our methodology to many different cultures.   We still deliver the majority of our loans through “village banks”, and although that methodology has been adapted over time, it remains largely the same, depending on local knowledge and a group rather than physical guarantee.   When you visit a village bank, you can see that it is a strong, community-based support group where the members help each other weather the adversities that come with living at the base of the economic pyramid.

You developed an initiative called FINCA Plus back in 2012. Can you explain a little about what you hoped to achieve?

We saw an opportunity to become a “holistic” MFI, one that would also provide non-financial services of value to our clients, things that would make them more resistant to the contra temps that threatened to knock them off the ladder out of poverty.   We sought instead to develop interventions in new sectors like healthcare, water & sanitation, education, energy, and agriculture.   While organisations like BRAC had been doing this for decades, we decided to take a different approach.   Rather than becoming experts in these sectors, we would find partners whose products and services would be of high value to our clients, and figure out how to finance and deliver them.

We discovered that there were literally hundreds of social enterprises doing amazing work, and who were eager to partner with FINCA and take advantage of our well-known brand.

Furthermore, there are “incubators” working with social entrepreneurs and helping them to develop their concepts to the point where they are “investible” and scalable.   This led to our decision to create the Social Enterprise Collider, a facility that will invest in early stage social enterprises deemed promising but too risky for institutional investors or even most Venture Capitalists.   At the same time, we created Brite Life, a distribution company that markets solar energy products, fuel efficient cook stoves, water filters and other products which bring a powerful value proposition to our clients, providing benefits in the health, education, and energy areas.

To hear more from Rupert about FINCA’s unique approach to social enterprise initiatives, please join us for the dinner discussion on Tuesday 10th May 2016. Tickets for the event are available here.

Rupert

Rupert Scofield, FINCA International President and Co-Chief Executive Officer, also serves as President and CEO of FINCA Microfinance Holdings, LLC, a first-of-its-kind, socially-responsible investment partnership for microfinance, formulated to strike the right balance between attracting capital needed for expansion and protecting the integrity of FINCA’s charitable mission.

Mr. Scofield co-founded FINCA in 1984 with John Hatch, and has served as its President and CEO since 1994. A practitioner at heart, he is actively involved in the management of FINCA’s operations, and is also a frequent keynote speaker. As author of The Social Entrepreneur’s Handbook: How to Start, Build and Run a Business that Improves the World, Mr. Scofield seeks to inspire the next generation of microfinance leaders and social entrepreneurs.

Prior to FINCA, Mr. Scofield served as the CEO of Rural Development Services, a consulting firm, and country program director of the AFL-CIO’s Labor Program in El Salvador. He earned two Masters of Arts degrees in agricultural economics and public administration from the University of Wisconsin, as well as a Bachelor of Arts from Brown University, and served in the Peace Corps in Guatemala.

Read more about FINCA here.

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7 Things I Learnt at the Global Social Business Summit 2015, Berlin

By Sophia Velissaratou, co-founder WAM UK

GBS

Source: Global Social Business Summit 

Social business is a relatively new concept introduced by Nobel Peace Prize winner, Professor Muhammad Yunus, which he describes in detail in Building Social Business. Simply put, Yunus describes two types of social businesses:

Type I: a non-loss, non-dividend company devoted to solving a social problem (concerning education, health, environment, access to technology etc) and owned by investors who re-invest all profits in expanding and improving the business.

Type II: a profit making company, owned by poor people, either directly or through a trust that is dedicated to a pre-defined social cause.

Professor Yunus distinguishes Social Business from other concepts such as Corporate Social Responsibility (CSR), social enterprise and entrepreneurship; seeing CSR as charity (CSR) and social entrepreneurship as profitable outfit for investors. Since its first inception the Social Business movement had gained momentum amongst many, ranging from businesses to NGOs to academia.

On the 6th and 7th of November, I attended the 7th Global Social Business Summit in Berlin and as the co-founder of WAM UK, I would like to share a few things I learnt with the wider WAM community:

  1. The Social Business movement is here. To stay: During the summit I came to realise that there are many social business initiatives and they take many forms. Take for example Grameen Danone who set up a small unit in Bangladesh to produce nutrition fortified yoghurt for low income families. Or McCain industries who have a program helping Greek farmers in the Northern village, Notia. Not to mention numerous university programmes worldwide focussed on the research and promotion of social business, for example The Grameen Creative Lab and Yunus Social Business, both of which have ample information to share.
  1. It’s not about the star, it is about the purpose: This year’s summit was marked by Prof. Yunus’ absence. A minor health issue prevented him from travelling to Berlin to be there in person but he addressed the participants with a video message. Undoubtedly any event Yunus attends attracts notable crowds and WAM UK experienced that first hand when we organised an event with him back in 2011. Yunus is often lovingly described as a rock star in his own right within the sector, which despite its obvious benefits can also be a drawback, since his absence could have led to disappointment and deflation. However, that was definitely not the case. Organisers and participants alike worked, presented and interacted with incredible drive and on top of it all – we had fun!
  1. Some CEOs get it. Big multinationals like Danone, Veolia, McCain and others talk and think seriously from a business perspective on how to solve social problems. They are not just interested in ticking CSR boxes or having a good PR profile. They are showing commitment to this type of business. They understand that failure is part of the process and not all social business ideas will work but they allocate time, resource and energy just like any other business unit they are running. They showed us that they won’t stop until their social businesses become sustainable and poor or unprivileged people have profited from it.
  1. There is such a thing as ‘good’ business, it’s called social business: During my years in finance I was always wondering why profit and growth usually come at the expense of values such as partnership, compassion or empathy. Can you not have a serious business proposition by combining all these aspects? The summit made me realise that social business is a legitimate answer to this question. Yes, you can have a business which is both profitable and solves a social problem. Yes, you can generate profit and re-invest it in the business to create more jobs; ameliorate conditions for poor people – to change the world.
  1. Partnerships are a must: Listening to the panel discussion during the conference I was impressed to see the degree to which partnerships are important for the success of social business. Words like competition, confidentiality, possession were not part of the social business vocabulary. Instead words like transparency, exchange of ideas, collaboration, resilience, joy and facilitation are the language of social business. This was evident in focus groups where there was a genuine exchange of ideas. The workshop organisers were not interested in telling their stories but in hearing our ideas on how we would approach a social business idea differently or find a better solution than the ones they thought of.
  1. Youth is the future: Yunus’ decision to focus on youth and academia shows he is a visionary. Social business is a relatively new concept that taps on ideas such as non-dividend business, compassion and teamwork etc. These and similar ideas are not commonly found in the conventional business world, and that’s likely because today’s professionals were not educated to think otherwise. Educating people on the concept of social business from an early age is key. Because these young students will be tomorrow’s academics, investors and entrepreneurs who will strive for a better world. On top of that, youth are very creative and driven – and experience suggests they don’t give up easily. Moreover, today’s youth are raised amongst increasingly advanced technology, a leading force in social business.
  1. Location, location, organisation: Last but not least I would like to mention the organisation of the conference. First I was impressed by the venue: Hangar 7 at Tempelhof airport was for me the perfect location for such a conference. The set-up of the venue facilitated the smooth transition from the panel discussions to the meeting area where participants could meet, grab a coffee and roam around the various stands promoting social business. The organising team practiced what they preached: from the conference bags, the conference furniture, the catering, the products, everything had a social business story to tell. Every single moment you were surrounded by inspiring examples. Hans Reitz (Head of GSBS and Founder of the Grameen Creative Lab) and his team created a fantastic environment for participants and they deserve compliments all round.

In short, I can’t wait for next year’s summit.

Find pictures of the Summit on GSBS website newsroom , GCL Facebook page, and a new video on YouTube.