Investments in people

The next few years could see a shift in emphasis in the non-profit world – at least, if the work of organisations supporting entrepreneurs is an indication of the direction the sector is taking. “Philanthropy is one of those wonderfully antique words that we will stop using in 10 to 15 years,” says Bill Drayton, who founded Ashoka and pioneered the idea of identifying and investing in entrepreneurs. “The business/social boundaries are simply collapsing.”
As models such as venture philanthropy, microfinance and social entrepreneurship are embraced by non-profit organisations, and corporations start to focus on social issues, the barriers between the business and non-profit sectors continue to erode.
Leading the way, when it comes to breaking down these barriers, is an expanding cohort of non-profit organisations whose mission is to support for-profit entrepreneurs. In Afghanistan, for example, Arzu Rugs helps women generate income by sourcing and selling their rugs, providing employment for about 700 female weavers in the country’s villages.
In the US, Count Me In, which was founded in 1999, also focuses on female activities, providing loans and other resources to businesses owned by women. “It’s a long-term approach to poverty alleviation – creating businesses that create jobs,” says Nell Merino, founder of Count Me In.
Aid to Artisans, a 30-year-old non-profit organisation, helps craftspeople in developing countries gain access to new markets for their products and establish sustainable business models. Those it supports now sell to outlets such as Neiman Marcus, Saks Fifth Avenue, Pottery Barn and Crate & Barrel, as well as to smaller boutiques.
First, the organisation helps artisans develop products that will appeal to western consumers. “Design is really key because you need a good product to develop a viable business,” says David O’Connor, chief executive of Aid to Artisans. “We also do a lot of skills training in areas such as production and marketing. Then we link producers with buyers.”
As well as funding individuals, many of the non-profit organisations targeting entrepreneurs aim not only to help those entrepreneurs expand their business but also to have a wider impact.
Ashoka seeks out entrepreneurs (it calls them “Fellows”) with big ideas. By making a financial investment in them and giving them access to its network of other Fellows, as well as to experts in areas such as marketing and accounting, Ashoka believes it can help both the individuals it supports and the communities they serve. Moreover, these entrepreneurs can serve as role models to others. “They have to get local people in thousands of communities to say ‘this idea is better’, and introduce the idea of being a changemaker to the community,” explains Drayton. “Then you have a highly contagious process – and that’s the most important thing social entrepreneurs do.”
A similar philosophy lies behind the work of Acumen Fund. Acumen takes the philanthropic funds it receives from organisations such as Google.org and the Bill & Melinda Gates Foundation, as well as from wealthy individuals, and looks for entrepreneurs serving poor markets.
In India, for example, it supports Drishtee, an internet kiosk franchise business. The kiosks enable farmers to check commodities prices online and give villagers access to services such as health insurance via the internet. As well as taking an equity stake in the business, Acumen also funds individual loans to entrepreneurs who want to buy the start-up kit they need to open a kiosk.
Another organisation that supports entrepreneurs is Endeavor, which identifies what it calls “high impact” entrepreneurs in emerging markets such as Argentina, Mexico, Uruguay, South Africa, India, Egypt and Jordan.
However, rather than raising capital or granting funding, it mentors entrepreneurs in areas such as financing, marketing and leadership development. In Brazil, for example, it helped Tecsis, a technology company, come up with a programme for expansion into international markets, which created more than 1,000 local jobs.
By supporting the right entrepreneurs, the organisation gets a bigger bang for its buck. “In 2006, Endeavor’s worldwide budget was $6.87m and Endeavor entrepreneurs generated revenues of $1.9bn,” says Elmira Bayrasli, the organisation’s head of partnership policy and outreach. “That’s a pretty good return on investment.”
Leslie Lenkowsky, a professor of philanthropic studies at Indiana University’s Center on Philanthropy, believes that for the next generation of donors, this model is highly attractive. “A new generation of philanthropists is coming on the scene,” says Lenkowsky, who also teaches a social entrepreneurship course at the University’s School of Public and Environmental Affairs. “A lot of people now feel traditional philanthropy is something their grandmothers did, and they want to do it differently and more effectively.”
However, some remain sceptical of the market-led approach, Lenkowsky says. He cites comments made in the book Just Another Emperor? The Myths and Realities of Philanthrocapitalism by Michael Edwards, director of the Ford Foundation’s governance and civil society unit (see column on right). “One of the points Edwards makes is that the examples of successful social entrepreneurship ... most frequently cited typically succeed because of continuing subsidies of one sort or another,” he says. “There are very few that have become market sustainable.”
However, many argue that addressing poverty is not a case of choosing between the market and the charitable sector, but will involve what Lenkowsky calls “a marriage of for-profit and non-profit for philanthropic goals”.
Drayton argues that the old division between sectors is meaningless for entrepreneurs. “Entrepreneurs disrespect boundaries – they don’t care if it’s business or social,” he says. “With every human need, you have a business system serving the need and a social system serving the need and for centuries they haven’t talked to each other – that’s all changed.”
Bayrasli agrees. “For so long, people thought you needed a private sector, government and non-profit world and everyone would do their own thing. But no one was connecting the dots.”
She believes the role of non-profits will remain crucial when it comes to supporting entrepreneurs. “We’ve been asked the question: ‘Why aren’t you doing this as a for-profit organisation?’” she explains. “And the reason is that, in emerging markets, people don’t have a community to go to and they don’t trust anyone. Entrepreneurs are afraid to show their business plans to anyone because they’re afraid their ideas will be stolen.”
Because Endeavor has no financial stake in any of the businesses of its entrepreneurs, she says, they feel confident sharing their ideas and problems. “We connect them to the business people that they would otherwise not trust,” she says. “So we’re creating an environment that’s safe and non-threatening.”
Non-profit organisations can also test new operational models and take risks that for-profit organisations – which are accountable to shareholders and clients – may not be able to. Moreover, when it comes to making loans, legislation means some models need to be run through a non-profit structure.
“If we were a for-profit, we’d be subject to banking laws and those limit what you can do to test new things,” says Merino of Count Me In. “So we went at it from it from a non-profit perspective, which allows us to experiment. And the notion of accelerating women’s business growth is not something we might have come to as a for-profit organisation.”
For Ashoka’s Drayton, the type of organisation doing the funding is less important than the process of tracking down and supporting entrepreneurs whose ideas have far-reaching potential. “We don’t care how big our organisation is, the size of the budget, or the number of employees. That is not the purpose,” he says. “What we want to do is change the world, and if we can get 10,000 people in 10,000 communities to take the idea and apply it – even if none of it runs through our organisation – we’ve succeeded.”
Unlike traditional development agencies, the mission of those such as Ashoka, Acumen Fund and Endeavor is to bring about change not by what the organisations themselves do but through the progress of the people they support, in improving lives, generating employment, inspiring others and transforming the way things such as education and healthcare are provided.
“You have to give people fish if they’re starving, but it’s better to teach people to fish,” says Drayton. “But it’s better than either of those two to change the fishing industry – and that’s what entrepreneurs do.”
sourcece: www.ft.com