Global Academy Presses Social-Business Ventures
Social entrepreneurs from around the world, organized by Ashoka's global Academy for Social Entrepreneurship, gathered in Dhaka, Bangladesh, in October where they began building a common global agenda for promoting social-business ventures. Such ventures build profitable business opportunities directly into the pursuit of social objectives — thereby gaining revenues, independence, and an engine of replication.
"The future of the world lies in the hands of market-based social entrepreneurs," said Muhammad Yunus, founder and manager of the Grameen Bank and its growing family of profitable enterprises that are devoted to eradicating poverty. "The more we can move in the direction of business, the better off we are — in the sense that then we are free; we have unlimited opportunities to expand and do more, and replication becomes so much easier. We can create a powerful alternative to the orthodoxy of capitalism — a social consciousness-driven private sector, created by social entrepreneurs."
Yunus has made the Grameen Bank famous for popularizing microcredit — lending small amounts of money to poor people so they can invest in productive assets and rise above the poverty line. As one of the first social entrepreneurs to market a social innovation globally, Yunus is a founding member of Ashoka's global Academy for Social Entrepreneurship. The Academy provides a framework, and supports, that enable these leaders to collaborate and to help the social sector grow beyond local, national, or regional-scale projects towards systemic change on a global scale.
The gathering worked towards three goals: 1) to map key steps that would help social entrepreneurs and the citizen sector see and seize the opportunity that social-business ventures represent far more rapidly; 2) to identify models and methods that the participants know work and make them more readily accessible; and 3) to begin constructing concrete collaborations at global scale.
The Three Barriers
What are the chief barriers to the more rapid spread of social-business ventures? The gathering pointed to three — which in turn pointed to key action opportunities.
The first barrier is not seeing the opportunity, a barrier made more formidable by the long history of social-business mutual incomprehension. The best antidote here is a growing number of highly successful — and visible — ventures that give concrete testimony to the value of building social-business synergies. (See sample stories below.)
The second barrier is resources. One cannot launch anything without an investment. As almost every Fellow meeting points out, today's mechanisms of social finance are broken. [This is why Ashoka has fellowship programs: 1) to encourage the emerging wave of entrepreneurship that is creating new forms of social investing, including a number of social-business hybrids; 2) to encourage habitually competitive and client-oriented business financial companies to enter the market; and 3) to stimulate the citizen sector to move aggressively to build broad grassroots bases of citizen support for its work.]
To address the problem of resources in the emerging social-business area, the Dhaka gathering explored the creation of a model Global Social Venture Fund. "I think the time is right" to establish a fund that would capitalize social entrepreneurs' social-business ventures around the world, said Mark Swilling, whose ventures include an ecovillage near Cape Town, South Africa, that features ecologically sustainable housing, energy, waste and water treatment facilities; the largest black-owned organic farm in South Africa; a primary school for farm workers' children; and the Sustainability Institute, which provides a master's program in sustainable development planning and management.
"This is what we need so we can support social entrepreneurs," Yunus agreed. "The Global Social Venture Fund would be a place where venture capital is available for social entrepreneurs." Dialogue participants expressed an interest in working with other Ashoka Fellows to create a fund in which social entrepreneurs participate in raising capital and screening social-business projects for investment.
To overcome the third barrier, one that involves lack of access to knowlege, the Dhaka dialogue members felt there was great leverage in institutionalizing the collection and exchange of knowledge (a process they had just begun) about social-business ventures that are developing in pockets around the world. They particularly favored two ideas for ongoing collaboration:
Global solutions bank: Juan Infante, an organizer of urban revitalization projects in Lima, Peru, and former director of a Peruvian government agency that develops micro and small enterprises, presented a plan to develop a "solutions bank" that amasses an inventory of key innovative social-business ventures across the world. It will work to develop a worldwide movement in support of social change.
Toolkit for social ventures: This toolkit would list the critical resources and strategies needed to create social-business ventures, and provide strategies for overcoming common obstacles to success.
The dialogue participants' own work provides a number of proven social-business ventures that could well be adopted by many other social entrepreneurs. One ongoing task is to spread these stories and to make their operating experience available broadly. Here is a small taste of this richness:
Yunus' Grameen organization now has a growing family of more than two dozen such social-business ventures. They range from the Grameen Fisheries Foundation to Grameen Software and Grameen Cybernet, a leading Internet services provider. (See Changemakers' "Business-Social Ventures: Reaching for Major Impact" for a fuller introduction to Yunus' full range of such ventures - www.changemakers.net/journal/
GrameenPhone is one of the most successful of these social-business ventures. Grameen Bank made the leap from rural banking and agricultural enterprises into high technology when it successfully applied for a license to provide cellular telephone service in Bangladesh in 1996. Since then, GrameenPhone has grown to be the largest cellular phone company in South Asia, with more than one million subscribers in Bangladesh. It earned after-tax profits of about US$50 million in 2002, and is the second largest taxpayer in Bangladesh after British Tobacco.
An advertisement for GrameenPhone, in front of Grameen Bank's 21-story headquarters in Dhaka, shows a man using a cell phone in a rural rice paddy.
GrameenPhone's mission is to help alleviate poverty by creating a nationwide phone network that extends beyond the cities into rural areas. Grameen Bank provides financing to poor village residents who lease a telephone and create a profitable enterprise by offering phone service to the rest of their village, charging for calls on a per-minute basis. GrameenTelecom buys airtime in bulk and sells it to these "phone ladies," who resell it at a slight mark-up to make a profit. Grameen Bank administers the billing for the phone ladies, most of whom are illiterate.
By the end of this year, these phone ladies in some 46,000 villages will be providing telephone service where there had been no service available. They earn an average annual income of about US$800, twice Bangladesh's per capita annual income, and rural phone service comprises 17 percent of the activity on the GrameenPhone system.
Beyond increased income, the phone ladies enjoy elevated social status and mobility. Village residents have gained access to relatively inexpensive phone service for talking to relatives in other areas and countries. They use the telephone to check prices of crops and other goods in local markets before selling, giving them greater bargaining power, and to help cope with natural disasters. Eventually, GrameenPhone hopes to give rural village residents Internet access through the next generation of cell phone technology, and thus to global markets.
GrameenTelecom plans to make an initial public offering of its shares of GrameenPhone stock on the New York, Oslo and Dhaka stock exchanges as soon as global economic conditions are favorable, Yunus said. "Our ultimate goal is to take these shares of GrameenPhone and sell them to Grameen borrowers. So this will be a telecommunications company that not only brings telephone service to poor women — it is owned by poor women."
"GrameenPhone is one enterprise that has been able to combine its business objective with its development objectives — especially the social and economic development objectives," said Khalid Shams, Grameen Bank's deputy managing director and second-in-charge after Yunus. "The motto of GrameenPhone is 'Phones in the hands of the people'."
Renting Solar Power
At the Dhaka dialogue, Ashoka Fellow Fabio Rosa described his business model in which he rents — rather than sells — to energy customers. This allows him to deliver solar energy at low cost to an under-served mass market in rural Brazil, where 25 million people remain without electricity. "Who buys food for the next 25 years?" Rosa asked. "You buy food for the next week or month. It should be the same with electricity."
Click to see a larger version of this mapping that illustrates a range of social-business ventures by displaying projects managed by participants in the Dhaka dialogue. This event provided support for them to find ways to enlarge the impact of their projects by incorporating profitable enterprise.
About 30 percent of the world's population — two billion people — lack access to electricity. But it is estimated that about one billion of them can afford solar energy today at commercial rates — given their current energy expenditures — provided that they are given the option to rent it or pay it off in installments over several years. Bringing solar energy to a billion people would stimulate economic activity, improve education and health, reduce carbon emissions, and relieve stress on the world's overcrowded cities.
"At this moment," says Rosa, "we have millions of people without energy, just like we did 20 years ago. Brazil has this problem. India has this problem. China has this problem. Bangladesh has this problem. Two billion people have this problem. First, we will demonstrate results on a small scale, then on a regional scale, then all over Brazil, and then the world."
Rosa's model has incorporated an internal rate of return of 29 to 30 percent into his pricing calculations to entice foreign investors. His project will reach the break-even point after the initial 6,100 systems have been installed. From that point on, the rental income (minus variable expenses) will contribute to profit.
During the past 17 years, Rosa has pioneered an electrical distribution system capable of extending the electrical grid to millions of rural Brazilians by using inexpensive materials and simplified construction methods. This system, for example, uses one wire instead of three. It reduced electrical distribution costs from $7,000 to $400 per household. Soon after he was elected an Ashoka Fellow, during the late 1980s and early 1990s, Rosa spread his system to more than 27,000 people in Rio Grande do Sul, Brazil's southernmost state. Rosa's distribution system gained national recognition as he demonstrated its widespread applicability.
Throughout the mid-1990s, Rosa worked with state electrical companies to spread the system — which is called the "025 Norm" — to hundreds of thousands of low-income people across rural Brazil. He also built up a social-purpose business — STA Agroeletro — that delivered photovoltaic solar energy to rural dwellers across the country. He found he could make it cost-effective by packaging it with productive tools — irrigation systems, electric fences, and high-yielding organic farming methods.
Now Rosa is organizing Renove, the largest national network of citizen sector organizations that is devoted to developing and marketing renewable energy and sustainable development in Brazil. It includes 26 member organizations in 13 states throughout Brazil.
Demonstrating the power of a social innovator's idea, on November 11th this year, Brazilian President Luiz Inacio Lula da Silva endorsed Rosa's approach, announcing that the government of Brazil will invest about US$2.5 billion in it to bring electricity to all Brazilians in the next four years under a program called "Electricity for All." During a ceremony in the presidential palace attended by 500 dignitaries, Lula announced that the program will generate direct and indirect employment for about 300,000 persons.
"At this moment, life and the world were as I had dreamed, countless times," Rosa said. "Finally, we have a national policy and program to bring low-cost rural electrification to the poor people. People in Brazil's rural areas will have light and hope."
The Dhaka gathering has also seeded new global collaborations. For example, Arturo Garcia, who has developed cash crop self-help cooperatives that are owned and operated by 12,000 small farmers in Mexico, would like to share the organic farming techniques developed there. He will be discussing collaborations with Swilling, whose ecovillage project includes a 100-hectare farm that is the largest black-owned organic farm in South Africa and sells produce to major supermarkets. Garcia's cooperatives are forming alliances with other citizen organizations in developed countries to create markets for their produce. Swilling is developing a network of organic farmers with Tarak Kate, who supports a network of 400 organic farmers in India's Maharashtra State, and with Gerrit Hendriks, who is certifying organic farms in the Western Cape of South Africa. "I think there is an opportunity for a global organic farmers' marketing cooperative," Swilling said. "It would be a commercial venture that aims to get organic produce from the developing countries into other developing countries and first world markets."
What Can You Add to the Dialogue?
The Dhaka event is the first step of a broader effort to plant the seeds for a social-business approach to addressing poverty. Ashoka's global Academy for Social Entrepreneurship and Ashoka's Full Economic Citizenship initiative invite you to be part of an ongoing series of actions to begin building a common global agenda for promoting social-business ventures as it develops each month on Changemakers.net, and on the SocialEdge Web site. We welcome your ideas, and encourage you to submit relevant articles, case studies, and other resources.
Statement of Michael Porter
Author, Competitive Advantage; Professor, Harvard Business School
"Ashoka is a pioneer in fostering entrepreneurship in the social sector, a huge and growing part of today's economy and society. Ashoka itself personifies its vision — it is highly inventive and entrepreneurial."