December 2011 Archives

The Art of Social Entrepreneurship

I just closed the book on fall  semester.  For the past few weeks, I've been plowing through an eight-inch stack of papers my students wrote on topics related to microfinance, social entrepreneurship, and the base of the pyramid.  

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I'd be lying if I said I never complained about all the grading, but there's a nice upside, too:  Because the assignments I give are open-ended, asking students to think deeply and write about a topic that really grabs them, I feel like I'm crowdsourcing answers to the question "What stuff do you think a professor of social entrepreneurship and microfinance should know about that he might not?" I get the benefit of receiving both interesting ideas and the current outlook and perspective of those I'm trying to reach.

I read about specially commissioned train rides across India to prepare social entrepreneurs; soccer balls that convert kinetic energy into electricity; and a Detroit classroom where students learn about the judicial system by issuing real criminal sentences.  (Sound interesting? Follow this space.)

But one paper stuck out by helping confirm and extend some ideas I was struggling with.  A paper about the video projects that I had assigned my students.

A few years ago, I was at the Skoll World Forum at Oxford. Steve Skoll spoke about his transition from eBay to Participant Media (then Participant Productions), which creates social change through movies.  An Inconvenient Truth, Fast Food Nation, Syriana, Waiting for Superman, The Help -- these and other films attract people wanting a fun night out and, in the process, educate and let people know how they can take action (with respect to the environment, the food industry, global oil, education, and domestic workers in these cases).

I loved the implication that you don't need to join the Peace Corps, start a microfinance institution or work for Ashoka to create social change. And if you could do so as a filmmaker, what about as a a photographer, an artist, a designer, or an engineer?  Indeed, I've thought about this a great deal and have laid out some of my thoughts about looking at the impact you the person or you the corporation can have by exploring the Changemaker's Cube.

Fast forward to last August. I was contemplating how I might gut a course I teach that culminates in students writing business plans for base of the pyramid businesses.  Why would I do that to a highly successful course?  Because, as much as I knew that students were learning from creating those business plans, they were still fictitious businesses.  Students weren't creating genuine impact.

So, I decided my students would create videos for real social enterprises.  Videos with impact.

Early last September, when I told students what their term-end project would be, much was uncertain.  How would they react to the idea of something so, uh, non-academic? How would they learn to film and edit videos? What organizations would the videos support?  Was there any chance this project could even work?

Today, the day ater Christmas, answers have replaced most questions.  Students created videos dealing with health care and microfinance, the revitalization of Detroit and student volunteerism, improving education and creating better food systems.  Sponsoring organizations were located in Liberia, Haiti, and Honduras as well as an hour away in Detroit and a short walk across campus.

Students succeeded in all aspects, from researching their organization, capturing their essence through short videos, and creating calls to action that create awareness for their organization, help with fundraising, recruit volunteers, or provide other forms of support.

But a question remained.  I knew students were engaged by producing their videos, but were they actually engaged in a process that transcended that particular form of expression? 

Jon Hornstein, one of my students, was exploring a similar question and wrote about it in his paper for the course.

The project undoubtedly was a blast for our team.  We each had the opportunity to display a certain talent and use this towards the creation of something that told an important and unique story. We learned a great deal through the process both about the company and social entrepreneurship in general, and we were able to share our creative product with an appreciative audience. So not only was this project a blast, but it was incredibly worthwhile. Yet, for some reason, after its completion, I wondered if we had accomplished what we had set out to do. More poignantly, the question I kept finding myself coming back to was: did we help?
Or, in other words, does art themed around social entrepreneurship truly contribute to the betterment of humanity through business, or is it just purely an art expression for aesthetic purposes. If I am a rapper who writes songs about Social Ventures and different issues going on around the world, am I a social entrepreneur?
Art's role in Social Entrepreneurship is to help a social enterprise gain traction and publicity. But much more than that, art's is to build a bridge ... between the strictly logical and the emotional. By linking hope with memories and inspiring courage, art serves to make tragedies bearable by connecting one's emotions with the cause. 
[And that is also] the essence of social entrepreneurship! It's not just a form of business centered solely on profits, but a form of business that is also about bettering the common good. To better the common good, one needs to have a passion to make change, and this is what art evokes in us. 
The rap song we created for Union Microfinanza doesn't just inform the public about their mission, but it emotionally connects the listener with the problems of Honduras and, hopefully, evokes a sense of compassion among the listener to care about the cause. This, after all, is where creativity and growth stem from in Social Entrepreneurship, through caring about a particular issue and shifting the focus of Entrepreneurship from solely garnering profit, to garnering profit with a greater cause.
So now group beansquad can rest easy, as we truly did help Union Microfinanza in eliciting these emotions surrounding their cause among the video's viewership. We succeeded, after all. That is, if the video goes viral.

Da beansquad's video helps support coffee growers in Honduras who receive support from a microfinance institution specially designed to provide them financial, technical, and marketing support.  Help it go viral by watching it on YouTube.  Or watch it below.
 
Jon Hornstein is the lead rapper in the video.






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Juhudi Kilimo

Two key questions about microfinane and then an amazing model for extending credit to poor, rural African farmers:  

1. Does microfinance reduce poverty?

A recent CGAP study reviewed the evidence from field experiments.  Recently published randomized control studies of microcredit variously found: 
  • business creation as well as increases in non-business (i.e., "consumption") spending (India); 
  • improvements for farmers but not others; and business owners increasing savings but non-owners increasing only their consumption (Morocco); 
  • increases in income and food consumption in general (South Africa); 
  • a decrease in business activity and employment (Philippines).

Ambiguity, at least surprise, also surrounds experiments that explore non-credit applications of microfinance, including savings, technical support, and insurance.  For instance, 
  • providing advice to business owners to keep their  personal accounts separate from their business accounts helped them more than when they got more detailed accounting advice;  
  • farmers recognize that droughts are the most significant risk they fact, but they are very reluctant to purchase insurance, even when they receive information explaining how it works and its benefits.

Three other randomized studies focusing on the design of microfinance products showed that 
  • allowing a grace period before a borrower's first loan payment is due helps some but hurts others; 
  • borrowers with individual versus group liability were just as likely to repay;  
  • fingerprinting borrowers caused borrowers with marginal credit worthiness to take smaller loans and be more likely to repay them.

To summarize: we don't know enough to generalize about what works and in what circumstances.  And, although we are far from certain about what design features are likely to "take," design considerations seem to matter.

If the situation is not uncertain enough, let's also ask ...


2. Should microcredit be for business-building loans only?

There is ample reason to believe that the poor need credit to help them through the unpredictable, uneven (and, of course, low-income) financial lives they lead to make their lives manageable.  Still, from the perspective of alleviating poverty, are loans for businesses most important?  The very framing of the question seeks opinions, not facts; and there is no consensus here.

The relatively recent trajectory of extending credit seems to be away from business-only loans, as even Grameen II now permits borrowing for reasons other than starting or expanding a business.  In many respects, this may reflect the reality that, after someone receives a loan, how do you prevent them from doing what they want with it?  

Yet fears about poor people becoming over-indebted remain prevalent and valid.  And the arguments that rising out of poverty comes from building (a business, your home), rather than consuming, has much resonance.  

My microfinance class was lucky enough to hear from Nat Robinson,  CEO of Juhudi Kilimo the past week.  The microfinance organization's lending model is no less a revolution than being able to have a real-time, interactive conversation with Nat, at his office in Kenya, as my class and I did with him over Skype video.  Juhudi's model directly addresses the issues of using microfinance to lift people out of poverty, ensuring that loans go towards business rather than consumption, and preventing over-indebtedness.  All are baked into the design of its microfinance products.

Juhudi Kilimo (Effort in Agriculture, in Swahili) provides loans in the form of durable assets to rural Kenyans.  For instance, smallholder farmers may receive a milk cow, instead of cash.  Farmers can then immediately begin to improve their income.  To make this loan most productive, Juhudi provides technical training and ongoing support.  By making loans in-kind, a struggling farmer has a real asset that can be sold (with Juhudi's help) if he can't repay his loan, and Juhudi also insures the cow against theft or death to provide further protection against over-indebtedness.

Juhudi Kilimo began in 2004 as a non-profit initiative after observing the low productivity of Kenyan farmers.  Five years later, after proving its model, it became a for-profit organization in an effort to serve as many clients as possible.  As it has grown, it has added supporting technology to improve efficiency.  It uses Kenya's wildly popular M-PESA system to collect payments, and is beginning to use an open source application on Android phones to replace  cumbersome, manual record keeping in the field.  

By raising capital, including grants and quasi-equity, within three years, Juhudi Kilimo expects to become sustainable and help lift 100,000 farmers and others with small agri-businesses out of poverty.


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