Root Capital: A Case Study in Strategic Nonprofit-Corporate Collaboration

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Source: Ashoka

Ashoka Fellow William Foote started Root Capital in 2000 with an ambitious goal: to bridge the "missing middle" between microcredit and commercial lending by providing capital to small grassroots businesses, such as farmer cooperatives and artisan associations, living in isolated rural communities.
Today, the organization celebrates its 10th year anniversary - and some impressive results:

  • More than $175 million in harvest loans and long-term credit for productive infrastructure
  • Loans to 265 small and growing businesses and 385,000 farm households
  • Financial education and training to more than 70 enterprises
  • 99% repayment rate on loans and 100% repayment rate to investors

One of the most notable features of Root Capital is its partnership approach to delivery: the nonprofit leverages relationships with multinational companies, such as Green Mountain Coffee Roasters, Starbucks and The Body Shop.

What typically comes to mind when one thinks of corporate-nonprofit partnerships is positive PR for the company and money, visibility and promotional opportunities for the nonprofit. But in many cases such partnerships are more than just a marketing exercise.

For example, according to Ben Packard, VP of Global Responsibility at Starbucks, the relationship with Root Capital “helps to strengthen and stabilize [Starbucks’] supply chain” (Root Capital). In other words, there is a strong business case for investing in Root Capital.

Milton Friedman would likely not have been convinced – he wrote in a 1970 New York Times Magazine article that “there is one and only one social responsibility of business” – “to increase its profits.” If charitable contributions are to be made, Friedman argued, they should be made by individual stockholders and employees and not by corporations themselves.

But Friedman’s famous dictum on corporate social responsibility implicitly assumes that social and economic objectives are distinct. In reality, such objectives may be overlapping and mutually reinforcing. As Michael Porter and Mark Craper of Harvard Business School argue, “there is no inherent contradiction between improving competitive context and making a sincere commitment to bettering society”.