Walt Whitman High School
1st Place, Maryland
Vision with Action
Microfinance Blends Social and Business Entrepreneurship
"A vision without action is just a dream; an action without a vision just passes time; a vision with an action changes the world."
In the northeast corner of Uganda, high in the lush green mountains that nearly touch the cloud-laden skies is Buyobo, a remote and inaccessible village. Women, dressed in colorful gomesi, tend to the children, plant crops, bring in water and perform other traditional tasks. The village is comprised of a few dozen decrepit buildings, some low cinder-block structures and a few, one-story whitewashed schoolhouses that accom-modate most of the children regardless of age. The smell of burning garbage wafts through the air as small children play with makeshift toys. Buyobo is a world apart from Wall Street and Silicon Valley. There is unreliable electricity, intermittent water and in-adequate medicine. Villagers rely on supplies from Mbale, a 45-minute drive to the west on dirt and mud roads. Nevertheless, it is here that we can see the intersection of social and business entrepreneurship -- how self-interest and self-sacrifice can come together to improve the lives of these villagers and make a profit for investors in the United States. We can see how, through microfinance, social and business entrepreneurship can flourish in small but powerful ways.
Sarah Mogombe dresses conservatively with her close-cropped hair and her broad smile. She rises early and lays a thin sheet of sweet dough on a flat table, pounding out circles with a die. She loads the small discs with fresh bananas she buys in the village and drops them into a pot of hot oil, removing them when they turn golden brown. Her supplies – the flour, the pots, the bananas, the oil, are all financed through the Women’s Microfinance Institute (WMI) – a small investment of a few hundred dollars to enable Sarah to do more than make a subsistence income. In fact, Sarah makes the best banana pancakes in any of the villages. She stuffs them into plastic bags to sell to local truck drivers, who buy them from Sarah and take them for resale in South Sudan. Sarah is an unlikely entrepreneur. Like most of the recipients of funds from the WMI, she is in her early 30’s and married. Most women in Buyobo who receive funds from the WMI get some economic support from their husbands, but are the primary caregivers for their chil-dren – on average three children per family. Almost half of them are responsible for caregiving for orphaned members of the community as well. Before the investment, the average annual income of these women was between $250 and $500 (Stevenson).
WMI is not a handout, nor is it a mere social science experiment. WMI teaches women the importance of budgets, interest and the significance of investment in capital and inventory. It teaches them about supply-chain and distribution, marketing, advertis-ing, customer service, product design and other skills necessary to run a business, but most importantly, self-confidence and self-empowerment.
With a small investment in capital and a large investment in confidence, these women (and the families that depend on them) become success stories in a very short time. Their family incomes rise from $250 to more than $2,000. They use the money to buy school uniforms and shoes for their children, thus reducing the rates of soil-borne disease dramatically. They buy mosquito nets with the profits, thereby reducing the inci-dence of malaria. They buy better and healthier foods for themselves and their families. They may gain financial independence from abusive relationships. They learn the value of saving and investment. While most villagers live hand to mouth, after 6 months, 30 percent of the participants saved more than 10 dollars a month; after two years, that num-ber increased to 63% (Stevenson).
Joy Nangalama is far from Sergei Brin or Steve Jobs, but no less entrepreneurial. She used a small loan from the WMI to lease a boat, which she operated on one of the lakes down the Namusi Budadiri road. She used the boat to catch fish. She used the profits from the fish business to diversify – buying and reselling Bell Lager beer with a much higher profit margin. She used profits from the beer sales to buy a motorcycle to operate a taxi service. When competition and fuel prices forced her to sell the motorcy-cle, she used the profits to buy a chain-saw which she leased to local lumber businesses. Joy explained that this transferred the costs of maintenance and fuel to the borrowers, and her investment in the saw paid off handsomely. She has used the profits to purchase and operate a small shop where she continues to sell beer and other local items (Stevenson).
Microfinance does not just work in the third-world. Bernardo and Cecy Figueroa moved from El Salvador to Washington, D.C. for a better life. They ran a small food truck selling Salvadorian snacks. After receiving a small loan from the Hilltop Micro-finance Institute, a 501(c) (3) non-profit organization staffed by Georgetown University students, the Figueroas were able to expand their business. Three years later, Bernardo and Cecy were the proud owners of Lalo’s market in the heart of Columbia Heights, D.C. Hilltop uses the resources of Georgetown students and faculty to provide business con-sulting, marketing advice, bookkeeping services, family citizenship services and credit repair assistance as well as access to capital for a host of aspiring small businesses in the D.C. metropolitan area. Mariam Qureshi relies on Hilltop’s business entrepreneurs for advice on social media marketing like Facebook, Yelp and Groupon for her D.C. based spa business (Meet).
Grameen Bank, a microfinance organization founded in Bangladesh, opened of-fices in Brooklyn to expand the idea of microfinance to the United States, providing not just financing, but business advice (American). Their goal is to “reverse the age-old vi-cious circle of ‘low income, low saving & low investment’, into virtuous circle of ‘low income, injection of credit, investment, more income, more savings, more investment, more income’" (Grameen). Microfinance and other forms of hybrid social and business entrepreneurship bring the promise of enabling small businesses, ensuring access to capital and credit, and promoting business risk taking in the United States.
The message of these successful entrepreneurs is that we need not make the artifi-cial choice between business entrepreneurs and social entrepreneurs. We can and should empower business entrepreneurs in the United States to examine ways to make a profit while achieving social good. We can and should empower social entrepreneurs to look for ways to incentivize self-reliance and personal responsibility.
American corporations are traditionally measured by companies like Standard and Poor’s and Moody’s based upon their earnings, profits, risks and other financial meas-urements. Increasingly these ratings companies are measuring more than dollars and cents. They measure the social impact of a company’s investments as well. From his office a few dozen yards from the rising World Trade Center in Manhattan, deep within the bustling financial center of Wall Street, a Moody’s analyst compiles charts and statistics to be used by investors in deciding how to maximize social investment. This is no charity case; no mission of mercy. It is intelligent and informed capitalism. The analyst’s work empowers the next generation of business entrepreneurs. In 2010, as part of the Clinton Global Initiative, Moody’s created a Social Performance Assessment of Microfinance Institutions (Moody’s). The goal was to help investors make rational decisions based not only on profit and loss but on the social impact of investments. Investors can consider things like sustainable development and growth, impact on global warming and energy dependence, and a host of “social” factors in making investment decisions. They can continue to be business entrepreneurs – but with a social conscience (Moody’s).
At the same time, groups like WMI, which might have been drawn by their social conscience to collect funds to purchase and distribute mosquito nets, medicine or shoes to villagers in Uganda, instead collect investment funds -- not to be given away but invested to empower social good. The rates of return are remarkably high and the rates of default remarkably low. It is a good investment.
Business entrepreneurs are typically thought of as possessing power, leadership, money, influence and the ability to reach a wide audience. Social entrepreneurs are ste-reotyped as do-gooders and bleeding hearts, with compassion, concern and the power of ideas and inspiration. So which will do more for America in the next decade -- social or business entrepreneurs? We need not choose between the two. To succeed, social entre-preneurs need to adopt the rules, strategies and mores of business – marketing, tapping into self-interest, mass media and mass communication, political action and community. Likewise, business entrepreneurs need to adopt the heart of the philanthropist – compas-sion, concern and caring in what they do and do not do in business. Compassion without power is a dream. Power without compassion is a nightmare. Compassion with power, however, can make for real change. That is what both social and business entrepreneurs should aspire to.
"American Offshoots: Will Microfinance Ever Really Take Root in the U.S.?" KnowledgeWharton American Offshoots Will Microfinance Ever Really Take Root in the US Comments. University of Pennsylvania, Wharton School of Business, 17 June 2011. Web. 03 Nov. 2013. <http://knowledge.wharton.upenn.edu/article/american-offshoots-will-microfinance-ever-really-take-root-in-the-u-s/>.
"Grameen Bank." Grameen Bank. Grameen Bank, n.d. Web. 03 Nov. 2013. <http://www.grameen-info.org/index.php?option=com_content>.
"Meet Our Clients." The Hilltop MicroFinance Initiative. Hilltop MicroFinance Initiative, n.d. Web. 03 Nov. 2013. <http://hilltopmfi.org/meet-our-clients/>.
Moody's Corporation. Corporate Communications. Moody's to Develop Social Performance Assessment of Microfinance Institution.Business Wire. Moodys.com, 22 Sept. 2010. Web. 3 Nov. 2013. <http://ir.moodys.com/releasedetail.cfm?ReleaseID=510044>.
Stevenson, Montana, Ainsley Morris, and Hannah Kahl. "WMI Eastern Uganda Factbook." WMI July/August 2013 Update. Women's Microfinance Institute, Aug. 2013. Web. 03 Nov. 2013. http://wmionline.org/dataanalysis/profile/WMI-2013-Factbook-Eastern-Uganda.pdf> and <http://www.wmionline.org/bprofiles/bprofiles.html>.