Steve Wright is Director of Grameen Foundation’s Social Performance Management Center. He is a keynote speaker for the upcoming SOCAP11 conference. This is the 2nd of a series of blog posts focusing on money and meaning (You may also want read Part 1). We’ve excerpted a section of the post below, with a link to the full post afterwards.
Maximize Impact
Markets : Capitalism :: Physics : Ideology
Markets have natural laws, like physics. Capitalism is an ideology. Ideologies can be changed.
All social enterprises want to know if they are producing positive social outcomes. They closely monitor their financial performance to maintain sustainability and closely monitor their social performance to see if they are achieving their mission of doing good. This blog focuses on the questions “Am I any good?” and “What is the good I am producing?”
There is no quantifiable unit of good
I have always found it strange that social performance is predominantly perceived as a measurement problem. The reality is that great social enterprises don’t focus on measuring what matters; their priority ismanaging what matters. Measurement is an artifact of good management. To a large extent the obsession with measurement is a problem unique to socially-funded entities (by that I mean organizations with capital provided at a rate of return between -100% and about 6%.) Because the money is not earning as much as it might otherwise, it needs additional justification to be invested. An investor/funder wants to ensure that their money is well spent, that it earns a valuable return that includes both money and social impact. The social impact or non-monetary component of the return on the investment comes in the form of social metrics or measurement.
However, as Kevin Jones, Co-Founder SoCap Conference, said to me recently, “Understanding the specific impact of a specific dollar invested is a pipe dream.” Even if it were possible to track a specific dollar’s impact, the overhead to do it would be significant and would subtract from the resources needed to achieve the impact. With this as a given, how do we build a marketplace when a marketplace requires comparability to understand relative value?
For a for-profit entity this is easy. An investor gives an entrepreneur a dollar and sometime later gets $1.25 and rejoices at the 25% return on investment (ROI). The math is easy because the input and the output are the same thing: money. In a social enterprise, money is an input but it is not an output. Money is important because it dictates sustainability but profit is not the purpose of the enterprise; social impact is. A massive amount of work has gone in to replicating this math to calculate an SROI (social return on investment). The work of REDF, Jed Emerson, Social Venture Technology Group and others have taught us a tremendous amount about what is possible. A primary lesson from this SROI work is that there is no monetary equivalent to a universalunit of good. Moreover, it is not rational to equate a specific social outcome to the amount of money that was spent to produce that outcome. We cannot use a financial balance sheet to compare the relative goodness of a homeless advocacy group in Brooklyn and a fair trade cooperative in Peru. The Beatles said it best: Money can’t buy you love.
Luckshmi Sivalingam is a program officer in Grameen Foundation’s Solutions for the Poorest initiative, where she is managing a pilot program to expand income opportunities for the very poorest people in India.
After what seemed would be a third year of dry spells during the critical monsoon season, the rains have finally come in Gaya district of Bihar, India. Agriculture is one of the primary revenue sources for both farmers and wage earners like the 200 households that Grameen Foundation is reaching through the Integrated Livelihoods Model for the Poorest (ILM) pilot project being implemented in partnership with BASIX/The Livelihood School. The rains bring increased wage-earning opportunities, which translates into enhanced income and food security for most poor rural households.
The rains have finally come in the Gaya district of Bihar, India
To lessen the risks that come with erratic income-generating opportunities, Grameen Foundation’s Solutions for the Poorest (SfP) team is trying to gradually enhance the skills of the primary breadwinners of the households participating in the initiative, and connect them to more stable livelihood activities. These activities include supplementary income-generating opportunities that are often seasonal and low-skill, as well as entrepreneurial or productive activities that have a higher income-generating potential and often require increased skill sets and start-up capital.
Through our project, we are promoting livelihoods by first enhancing existing supplementary income-generating activities or introducing new ones that can rapidly increase household income and enhance our clients’ self-confidence and trust in our project team and partners. Next, we will introduce new, entrepreneurial livelihoods that generate higher incomes and can sufficiently fill the gaps in income that the rural poor often experience throughout the year. Examples include rearing goats, poultry farming and selling vegetables. By using this approach, we move away from creating an immediate dependency on credit to meet daily consumption needs and avoid disrupting clients’ existing livelihoods.
Over the past month in Gaya, we’ve held “exposure visits” for our clients to enhance their understanding of both the supplemental income-generating and entrepreneurial livelihood activities. These visits enable clients to visit another location to observe and learn from the other community’s activities and experience. Most importantly, they are able to see the various processes and participants involved in the entire chain of activities we will link households to. This deepens their understanding of the benefits and challenges of each activity and better informs their decision to commit to the “right” livelihoods for themselves and their households.
Two weeks ago, our clients visited the neighboring village of Orr, where they met with women of the same socio-economic background who have successfully engaged in “kitchen gardening.” This method of small-scale vegetable production involves very little or no land, and mostly organic inputs. Home-grown vegetables significantly increase nutritional levels while also contributing to income, as families can sell excess produce. Our clients also received a demonstration on gunny-bag gardening, which is essentially a garden in a bag that grows along creepers against the walls and roof of the house.
Before the visit, our clients doubted whether they had the capacity to start new activities, but after seeing how successful their peers have been, they said, “Now that we have seen them do it, we know we can do it too! And, we are ready to start!” Seeing really is believing.
Recently I had the pleasure of visiting our sister organization, Grameen America, which has been providing microfinance services to low-income, mostly Hispanic clients in New York since 2008, and has since opened branches in Omaha and Indianapolis. My host was GA’s CEO of Operations, Shah Newaz, someone I have known for more than 20 years.
When I first arrived in Bangladesh, Shah was head of Grameen Bank’s audio-visual unit, and later became the longest-serving zonal manager in the bank’s history. (A zonal manager is the most senior field-based position in Grameen Bank’s structure.) Some years after that, he served as a senior technical consultant for Grameen Foundation in the Dominican Republic, where he did a great job and picked up some Spanish (which he has continued to perfect in his new role).
Alex Counts attends a Grameen America center meeting in Jackson Heights, NY. (Photo by H.A. Shah Newaz.)
I was interested in how GA was progressing for a lot of reasons. My book Small Loans, Big Dreams extensively examined one of the earliest microfinance programs in the United States, the Full Circle Fund. While doing that research, my eyes were opened for the first time to the vibrancy of the grassroots economy in many inner-cities. Later, I became involved in microfinance institutions in the United States that Grameen Foundation also supported: Project Enterprise in New York City, the PLAN Fund in Dallas and the New Opportunities program of Volunteers of America in Los Angeles. Though the LA program was phased out, the other two continue providing microfinance effectively while drawing on the Grameen Bank model extensively. However, they operate on a relatively small scale, even as they try to serve a lower-income population (including many African-Americans) than other microfinance and microenterprise programs here serve.
Professor Muhammad Yunus recently paid a visit to Grameen Foundation headquarters, meeting with leaders and speaking to staff (as well as to staff from RESULTS) during a visit to Washington, DC. Todd Bernhardt, Grameen Foundation’s Director of Marketing and Communications, was part of an audience who listened to Professor Muhammad Yunus speak, and provides this update on his recent activities.
Prof. Yunus recently visited our DC office.
It’s hard to believe that it was only a bit more than three months ago that microfinance pioneer and Nobel Peace Prize winner Professor Muhammad Yunus stepped down from his post as Managing Director of Grameen Bank, the poverty-fighting organization that he founded in the late ‘70s. During the government’s campaign to remove him from office (read this Fact Sheet to find out more), many Grameen Foundation supporters voiced their concern about Prof. Yunus and the independence of Grameen Bank, and have wondered about his activities since then, asking us to provide an update. A recent visit by Prof. Yunus to Washington, DC, provided us with an opportunity to catch up with him personally, while demonstrating to everyone who spoke with him that his commitment to fighting poverty through innovative solutions remains as firm as ever.
Grameen Foundation President and CEO Alex Counts welcomes Prof. Yunus (right) while Microcredit Summit Campaign Director and RESULTS founder Sam Daley-Harris listens.
Prof. Yunus stayed in Washington from Aug. 10-13, giving a keynote speech at the annual forum of InterAction (an alliance of U.S.-based international NGOs focusing on the world’s poor and vulnerable populations), making several media appearances (he spoke with NPR’s Kojo Nnamdi and Andrea Stone at The Huffington Post) and meeting with U.S. Secretary of State Hillary Clinton, as well as officials from the U.S. Agency for International Development.
He also met with a number of leaders in the international-development community – including Grameen Foundation President and CEO Alex Counts and Sam Daley-Harris, Director of the Microcredit Summit Campaign and founder of RESULTS, a anti-poverty lobbying organization – and spent a morning speaking to the staff of those organizations at Grameen Foundation’s DC headquarters.
Focusing on the Social Business
In all of his visits, Prof. Yunus emphasized the need to develop and popularize the social business, which he wrote about in his book Creating a World Without Poverty: Social Business and the Future of Capitalism. Simply put, social businesses are for-profit entities created primarily to serve a social goal. Such businesses strive to generate modest profits that are used to fund and expand operations, rather than to pay dividends to investors.
Since his departure from Grameen Bank, Prof. Yunus has continued to advocate for its independence from government control and to defend the interests of the Bank’s 8.3 million borrower-owners (97% of whom are poor women). Bank employees have continued to keep operations running smoothly while the Bangladesh government has seemingly turned its attention away from the Bank to unrest in the country caused by, among other things, moves to amend the constitution to remove the non-party caretaker system that oversees the country during general elections.
But many people fear that the government’s apparent lack of interest in taking control of the Bank may prove to be temporary, and that it may move again soon to amend the Bank’s bylaws and change the composition of its Board. With this in mind, Prof. Yunus urged the group assembled at the Grameen Foundation offices to remain vigilant and work with others around the world to ensure that the rights of the 8.3 million owners of the Bank are protected. “We have to stand behind them,” he said. (You can help by signing this petition asking the Bangladeshi government to keep Grameen Bank independent.)
He then reviewed the progress made by Bangladesh over the past 30 years, explaining that it was because of the power of ordinary people working together in civil society that the quality of life had improved for so many. Social business, he said, provides another way for people to work together to achieve social aims, leveraging the power of capitalism and the free market. “Business can be used to solve problems, not just to make money,” he explained. “Money is not the way to happiness. We make ourselves happy by making other people happy.”
Prof. Yunus talks to staff at Grameen Foundation’s DC headquarters about the Asian Social Business Forum recently held in Japan, while Sam Daley-Harris and Alex Counts look on.
Prof. Yunus has been traveling the world explaining the social-business concept, meeting with enthusiastic responses in the developed world (he told the group about a recent and very successful visit to Japan, which is looking at social business as an approach in rebuilding after the tsunami of last March) and in the developing world (he has been invited to visit Haiti in October to show people there how the concept could help them improve civil society). In addition to describing a successful series of events that were held around the world on Social Business Day, June 28, he said is looking forward even more to a series of meetings in November, including the Social Business Summit in Vienna on Nov. 10-12, and the Global Microcredit Summit in Spain on Nov. 14-17.
It’s Up to Us
In taking questions from the staff at Grameen Foundation offices, Prof. Yunus emphasized the power of the individual, as well as our responsibility to empower them – all for the overall good of society. “Peace can be threatened by poverty,” he explained. Microfinance and social businesses create opportunities that “keep people from being dependent … and helps them channel their energies into positive avenues, away from violence.” Creating such opportunity, he said, also helps to address inequalities on a larger scale – between groups of people and even nations – reducing tensions and resentment.
It’s up to all of us, he concluded, to change how we view, and interact with, the world. In capitalist societies, people grow up “wearing ‘profit-maximizing glasses,’ but if you take off those glasses and put on the social-business glasses, everything looks differently! New possibilities open to you.” He gave the example of Danone, which is involved in a social business in Bangladesh that makes inexpensive, nutritious yogurt available for poor women to sell to other poor people. When Danone was starting this enterprise, and asked its shareholders if they would like to invest part of their dividends in a new business that would help people but not give them additional financial return on their investment, 98% signed up, resulting in millions of euros in investment. “Give people a choice to help others,” Prof. Yunus concluded with a smile, “and they will come through.”
Dani Limos is a Marketing and Communications Intern at Grameen Foundation’s Seattle office.
The dairy cow needed more calcium.
When Gonzaga Kawuma’s cow collapsed and could not stand up, Gonzaga was away from his farm. His wife called him on his smartphone with the disheartening news. Without seeing the cow in person, without conducting expensive tests, without being an expert in agriculture, Gonzaga was able to conclude that the cow needed more calcium.
Why was this cow having trouble standing up? Gonzaga relied on his smartphone to diagnose its illness.
This cow’s fall could have been caused by a number of ailments – muscle fatigue, arthritis, foot rot – but a shortage of calcium in a cow that produces milk? How could Gonzaga ever come up with such a diagnosis?
As a Community Knowledge Worker (CKW) in Uganda, Gonzaga has access to a wealth of farming knowledge through mobile phone technology. He helps other poor farmers every day find solutions to their problems, providing them with information about weather, crop and animal diseases, market prices, and the like. Now, as a poor farmer himself, he was his own client. He took out his smartphone, typed in the symptoms of his dairy cow and pored through databases of information. The verdict? “Milk fever.”
Caused by a sudden shortage of blood calcium, milk fever causes the cow to stagger, experience difficulty rising, and finally become unable to stand at all. It often occurs when the cow gives birth, and the demand for calcium to produce milk exceeds its ability to do so. Gonzaga’s cow had given birth just three days ago.
Gonzaga was able to save his cow – and his livelihood – thanks to the information he found using his smartphone.
The information that Gonzaga had found suggested contacting a veterinarian for help. Taking advantage of his smartphone once again, he called a vet, who prescribed a calcium injection. The treatment was administered and the cow successfully recovered. Thanks to Gonzaga’s CKW access, the cow is healthy and currently produces between 18 and 20 liters of milk per day!
Learn more about our Community Knowledge Worker program in our previous blog posts, or read more at Grameen Foundation’s AppLab website.
Steve Wright is Director of Grameen Foundation’s Social Performance Management Center. He is a keynote speaker for the upcoming SOCAP11 conference. This is the first of a series of blog posts focusing on the intersection of money and meaning. We’ve excerpted a section of the post below, with a link to the full post afterwards.
Recently, a lot of great thinking has happened around the idea that business – and by extension the economy – should return value, in addition to generating profit. For example, Mark Kramer and Michael Porter wrote a very interesting piece on creating shared value that was also discussed in this New York Times article, “First make money. Also, do good.” Nestle Corporation is one of a growing number of companies that see shared value as an evolved form of corporate social responsibility. Customer capitalism (which focuses on providing value to the customer before the shareholder) is described in the Harvard Business Review as the third stage in the evolution of capitalism. (Professional management and shareholder capitalism are the first two.) And Umair Haque’s book, the New Capitalist Manifesto, describes “thick or authentic value” as the subtraction of total or real cost from the price a product can demand.
This is a good thing; however, it is still within a largely amoral paradigm, where the mythology centers on the primacy of profit while – potentially, maybe, hopefully – “doing good”. This can also be seen in how we (social enterprises and investors) use the words “sustainable” and “profitable” interchangeably, depending on who we are talking to. “Sustainable” implies a primary focus on doing good, while “profitable” implies a focus on profit.
My intent here is to make arguments that err on the side of doing good, arguing that we should focus on meaning before money.
Kim Kerry-Tyerman is a volunteer for Grameen Foundation’s Bankers without Borders® initiative who was based in Ghana and Kenya for eight weeks to help the BwB team develop relationships with local organizations (companies, associations, microfinance clubs and institutions of higher education) there. She recently posted a blog about her experience working in Kenya; an excerpt from that post is below, with a link to the full post. If you’d like to read her first two postings about her BwB experience in Ghana, you can read Part 1 and Part 2.
Many find it difficult not to be condescending about Africa. Some might argue that referring to 54 diverse countries with thousands of cultures as “Africa” alone is demeaning, and yet it happens every day (just look at my blog address). Footage of kids with big bellies and stories of corruption seem to be the only stories to travel across the ocean, and they are typically only salvaged by some agency telling the world not to worry, they’re working on it. No, I am not immune. I’ve been known to lament the inefficiency of “Africa” while sitting in Nairobi’s unbearable congestion or one of Accra’s power outages. At the same time, I feel fortunate to tell a story that I hope will travel across these borders and demonstrate that “Africa” is indeed a place of innovation and hope.
Exhibit at the National Museum in Nairobi.
Nairobi is one of the continent’s star children: the one who may place third in the spelling bee but won’t mind because she has a good shot at winning the science fair competition. The region serves as a lab for innovative ideas, and the microfinance sector here is a great example. Like Ghana, each MFI in this region has varying models of delivery and a unique portfolio of products. Unlike Ghana, every MFI in this region has a website. Is this a key indicator of success? Surely not, but it indicates that microfinance is a visible and competitive industry here. Microfinance institutions here are not asking “what can we do?”, but “how can we do more?” For them, it’s not just about lending money. It’s about finding ways for that money to create things that generate a larger return for the community. Two trends have emerged here to ensure that microfinance is doing just that: mobile services and partnerships.
Steve Wright is Director of Grameen Foundation’s Social Performance Management Center. He is a keynote speaker for the upcoming SOCAP11 conference. This is the 2nd of a series of blog posts focusing on money and meaning (You may also want read Part 1). We’ve excerpted a section of the post below, with a link to the full post afterwards.
Creating a World Without Poverty 