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Social entrepreneurship & finance

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Fair Street’s main objective is to show how finance can support the development of Social Entrepreneurs. In our various reports, we emphasized the crucial role of finance in allowing entrepreneurs to successfully carry out their innovative ideas.

In the recent years, several conferences have taken place to allow the actors of the impact investing sector to gather, network and exchange ideas with the objective to extend their impact.

To that extent, we want to share with you a conference on Social Venture Capital and Social Enterprise focusing on Latin America, the Caribbean, and the state of Florida that is taking place in March-2010 in Miami. Fair Street is going to attend this conference and we strongly encourage you to do the same if you have an interest in the field or if you want to have a feel on the major shifts happening in this part of the world.

John Rosser, SVC/SE, Miami-2010 Founder and conference Organizer tells us more: “SVC/SE, Miami-2010 will be a major regional meeting place for Social Venture Capital and Social Enterprise- connecting capital to people, and ideas to funding. Miami is rapidly becoming a hub for Social Venture Capital/Social Enterprise for Latin America, the Caribbean and the state of Florida. This translates into sustainable regional economic and social development through social entrepreneurship”.

Spread the word and visit the web site: www.connectionmiami.com

Fair Street’s objective being to put forward an ethical and responsible finance, our interest in microfinance is obvious as it is one of the financial activities that has contributed the most to reduce poverty during the last three decades. Reduced to its simplest, microfinance is “the access to capital for the most vulnerable communities”. Today, close to 10,000 microcredit institutions serve 130m people with liabilities of €30 billions. With a potential market constituted by the 4 billions individuals that live with less than €3 per day, the growth potential is important.

By attributing microloans to entrepreneurs who cannot have access to the classic financial institutions, microfinance enables the realisation of microprojects which favours the economic activity and wealth creation in the developing countries. Based on simple, efficient and responsible principles, the microcredit activity is considered as one of the main driver of these countries’ economy.

Depending on the structure, the working method and the geographical area the size of the microcredits fluctuate between €100 and €2,000. Today, the MFIs activity does not only consists in providing credit but includes different financial services such as savings, micro-insurance and even credit cards; this is why the term microcredit has evolved towards to microfinance.

As financial actors contributing to the economic and social development of the most destitute populations, microfinance institutions are good examples of the message Fair Street wants to promote. In the frame of Fair Street, the case of microfinance will be studied under two perspectives:

- Firstly as a field of social entrepreneurship. The most famous social entrepreneur is without a doubt the Nobel Price winner Muhammad Yunus, founder of the Grameen Bank, who by creating the first microcredit institution has been able to balance economic and social interests. The success of his model has encouraged other people to replicate it throughout the world. Fair Street has visited a Bolivian microfinance institution that will be the subject of the next video report.

- Secondly, microfinance and social entrepreneurship are two activities that are increasingly converging. Several social entrepreneurs collaborate with MFIs to extend the social impact of their innovations. This collaboration can take different forms. Some social entrepreneurs work with microfinance institutions to take advantage of their distribution network. It is for example the case of Sobre La Roca which sells a part of his solar cookers through a microfinance institution. This institution provides loans to the rural populations in Bolivia to help them financing the purchase of the solar cooker. Microfinance can also be at the origin of a micro-franchise system by financing several micro enterprises (franchisees) whose activities are centralised by a “mother” organisation. Other forms of collaboration exist and this is why many actors see a strong potential in this association.

With the apparition of new approaches and the diversification of activities, microfinance, as any activity growing sharply, is facing different challenges. The most important one being to avoid excessive debt within the populations it addresses. If in the case of Sobre La Roca the grant of consumption credits has a positive effect, an excessive debt erases all the advantages of the social and economic progress initiated by microfinance. It is therefore essential that microfinance institutions stick to their main mission that is providing loans to income generating activities.

In this framework, MFIs in collaboration with governments and regulatory bodies work towards the elaboration of good and bad governance practices. For example, several countries have already put in place national credit offices with mission to monitor the debt level of the MFIs clients.

These different questions and the initiatives they trigger go hand in hand with the evolution of microfinance and are part of a healthy process of maturation. Microfinance is an extraordinary financial tool that supports the economic development of many people in developing countries. By offering millions of entrepreneurs the opportunity to develop a professional activity, it constitutes a strong lever for their empowerment and their integration in the economic life. Consequently, the reflexions aimed to determine better practices are vital.

Sources:

www.lamicrofinance.org

www.blueorchard.com

Because travelling can be a great source of inspiration, Fair Street wants to introduce the TOMS shoes initiative. Although we have not had the opportunity to meet them, being headquartered in the US, we find their model fantastic. 

In 2006, during a trip in Argentina, Blake Mycoskie, now aged 32, is struck by the number of children walking and running bearfoot. As in rural areas, walking is the main transportation mean, putting on nothing on their feet provokes numerous healings, infections and diseases.  

To cope with this problematic and inspired by the Alpagartas (popular slip-on that Argentine workers have been putting on for more than 100 years), Blake Mycoskie creates the TOMS shoes company that produces fashionable and comfortable slip-ons. TOMS Shoes’ real innovation stands in the « one for one » model on which the company works: for each customer that buys a pair, they offer a pair to destitute children in the world. 

The company has met tremendous success. Three years after his creation, TOMS Shoes has already provided families and more particularly children with more than 140 000 pairs of shoes in South America and Africa. At the end of this year, their ambition is to reach the total number of 300 000 offered pairs. 

Currently, the TOMS Shoes are available in the US, in Canada, in the UK and in Sweden. 

Before they expand to other markets, discover the presentation below:


TOMS Shoe Drop in Argentina from SJ Yeom on Vimeo.

Concretely, what is social entrepreneurship?

In its special report on entrepreneurship published in March 2009, the British magazine The  Economist defined an entrepreneur as “someone who provides an innovative solution to a problem.”

On the basis of this definition — and although current debate on a precise definition of social entrepreneurship is strong between academics and leaders of the movement — a social entrepreneur can be defined as someone who brings innovative solutions to a social problem. A wide variety of social problems can be tackled by these entrepreneurs: environment, access to education, healthcare, food access…

Several individuals who stood out throughout history are now recognized as social entrepreneurs. One of the most common examples is that of Jean Monnet, for his role as architect of modern European Union. Over the past ten years, the trend has considerably accelerated, and initiatives from entrepreneurs aiming to solve the most pressing problems of our planet have multiplied and gained visibility. On their side, several organizations have been set up on a global scale to promote their development.

One of these is Endeavor: an organization that since 1997 has worked to help social entrepreneurs develop their activity in emerging countries by supporting their strategies and helping them gain access to capital. In 2008, the total revenue of entrepreneurs associated with Endeavor reached $2.1 billion (€1.5 billion)! In his book “The World is Flat”, writer and journalist Thomas Friedman referred to Endeavor as “the world’s best anti-poverty program of all”.

The co-founder and current CEO of Endeavor is Linda Rottenberg. This year, she was invited to open the Harvard Business School’s 10th conference on social innovation. In her optimistic and hopeful speech, Linda Rottenberg retraced the path taken by the movement’s pioneers. She identified three moments as decisive to the movement’s universalization, which she calls “the ‘Great Man’ theory of Social Entrepreneurship”:

-          When Bono, lead singer in the band U2, launched Product Red to fight AIDS in Africa, he morphed from rock star to social entrepreneur. In an instant, Social Entrepreneurship became cool.

-          When the Nobel Peace Prize was attributed to Muhammad Yunus for his pioneering work with Grameen Bank and his innovation in the field of micro-credit; the Norwegian Nobel Committee provided the movement a global icon.

-          When Bill Gates stepped down from his CEO position at Microsoft to devote himself fully to his foundation, and to promote a capitalism that will create “a market system that eases the world’s inequities”, he moved the movement mainstream.

These three key moments help understand the scale of the movement as well as the concept as a whole.

Even though these moments have a strong symbolic value, social entrepreneurship is more than a fashion or a tendency. As explained by the founder of Endeavor, the initiatives taken by Bono, Muhammad Yunus and Bill Gates demonstrate that social entrepreneurs are more “problem-solvers” than idealists: they are motivated by innovation rather than charity, and they use entrepreneurial strategies in order to achieve social change.

Social entrepreneurship is a reality that is accelerating. Through its success, it demonstrates that innovations should further serve social problems. Today, and although the model has proved its worth, Linda Rottenberg points to access to capital as one of the main issues at stake in order to bring social impact one step further. In effect, several leaders of the movement agree that donations induce dependence, and that there will never be enough donations to support all initiatives. However, by becoming a investment opportunity in its own right, the movement will be able to evolve much faster and to extend its impact considerably. Indeed, even though not every social entrepreneur seeks economic viability, many examples show that it is not only possible, but also beneficial, to reconcile economic and social interests.

As Kofi Annan said, paraphrasing Victor Hugo: “Social entrepreneurship is an idea whose time has come!”

 

Fair Street Team

The first company that we presented aimed at solving the problem of waste management in big cities such as Buenos Aires. Recycling programs, renewable energy developments, and other initiatives promoted by Fair Street will share this interest in environmental issues.

World Environment Day on June 5th will recognize the major challenge facing our planet. In this context, photographer Yann Arthus-Bertrand will mark the day by releasing his new film HOME, which aims at making us all aware of this issue by showing what is left of our planet and why it is necessary to preserve it.

Home will be freely available on the Internet from June 5th. Watch the trailer!

HOME

“In 200,000 years on Earth, humanity has upset the balance of the planet, established by nearly four billion years of evolution. The price to pay is high, but it is too late to be a pessimist: humanity has barely ten years to reverse the trend, become aware of the full extent of its spoliation of the Earth’s riches and change its patterns of consumption.”

www.home-2009.com


HOME - A film by Yann Arthus Bertrand from CoolPlanet 2009 on Vimeo.

The current economic crisis, which began as a financial crisis, has called into question our entire financial system and its links to the economy. What is the role of finance? Its main purpose is to provide capital necessary to the development of economic activity. Most of us, as economic actors, feel the need for capital at one point or another. Thus, we are all financial actors as well, and we can measure the importance of access to capital in our everyday lives.

The role of the financial sector is to support the real economy. Banks, insurance companies, investment funds and others are the middlemen of this sector, and as such, their mission is to ensure that the demand for capital matches its supply. In short, finance must serve the real economy. However, following the crash of the American real-estate bubble, the existence of a financial sector became apparent — a financial sector whose evolution had grown out of step with the economy. Bankers’ greed, lack of regulation, rating agencies’ under-estimates of the risks involved: lengthy discussions about the causes of this crisis and the responsibility of the financial sector have already taken place, and are likely to continue. Fair Street has a different objective.

Fair Street aims at putting forth a different financial model, one that continues to serve the real economy by taking into account one of the key criteria when attributing capital: the quality of the entrepreneurial initiative. One type of initiative has set itself apart by its quality: that of social entrepreneurs.

Social entrepreneurs have a considerable impact on development, as their priority is to tackle the most pressing challenges facing our planet, be the environmental issues, or the problems faced by the 4 billion people who make up the “base of the pyramid”, who live with less than €2 per day. These entrepreneurs are all, in their own way, leaders, innovators and visionaries.

Although these extraordinary individuals always demonstrate strong courage and determination, they rely on capital in order to achieve the impact they have imagined. Taking a closer look at their financing strategies will allow us to reveal ways in which finance can participate in social and economic development.

Be it private investment funds, innovations drawing on collaborations with microfinance institutions, or governmental initiatives, what Fair Street wants to focus on is the impact that can be made by those providing capital. At a later stage, we will aim at identifying financial players who participate in this development, in order to determine where the impetus comes from.

Such is Fair Street’s intention: in a time of economic crisis when bad news seems to be coming from all sides, Fair Street wants to convey an optimistic message by presenting the principles of a more responsible financial sector and the fundamentals of a more sustainable economy.

More than just a message of hope, what we want to communicate and define is an intensifying reality.

 

Fair Street Team

FairExchange

May 1, 2009 | FairExchange

By introducing the principles of a more responsible financial system and the fundamentals of a more sustainable economy, Fair Street wants to provoke a debate! Share your reflections, your articles anything that touches on the project’s different themes in an optimistic and original way by sending them to fairstreetproject@gmail.com.

We will do our best to publish them here.

It is essential nowadays to take into account the impact of our actions upon the environment. That is why Fair Street is CO2 neutral for all transport-related emissions! Watch this great video directed by Angalio Production and CO2logic to learn more about global warming.

Climat Change from Angalio Productions on Vimeo.