I’ve posted this idea on both Futureshifters and UnLtdWorld to generate some discussion about this topic, and would like to continue the conversation further. So, I’m going to post this on my blog and elaborate a bit more…

First off, I was reading an article: “What Microloans Miss” from The New Yorker from March 2008. In essence, the article explained a bit about the trend of microloans:

The innovation—​microfinance—​involves making small loans to poor entrepreneurs, usually in developing countries…Even ordinary Americans can now get in on the act, at sites like Kiva.org, where you can make a microloan yourself.

However, microloans do not always guarantee success, and they also do not necessarily improve the economic well-being of developing countries. As Surowiecki puts it,

The idealized view of microfinance is that budding entrepreneurs use the loans to start and grow businesses—expanding operations, boosting inventory, and so on. The reality is more complicated. Microloans are often used to “smooth consumption”—tiding a borrower over in times of crisis… It’s less common to find them used to fund major business expansions or to hire new employees. In part, this is because the loans can be very small—frequently as little as fifty or a hundred dollars—and generally come with very high interest rates, often above thirty or forty per cent. But it’s also because most microbusinesses aren’t looking to take on more workers. The vast majority have only one paid employee: the owner.

Furthermore, there is a conception out there that all individuals in developing countries can (and want to be, but lack the opportunity to) be an entrepreneur. While this is true for those seeking the microloans,this is not the case for all others:

[I]n any successful economy most people aren’t entrepreneurs—they make a living by working for someone else. Just fourteen per cent of Americans, for instance, are running (or trying to run) their own business. That percentage is much higher in developing countries—in Peru, it’s almost forty per cent. That’s not because Peruvians are more entrepreneurial. It’s because they don’t have other options.

The article continues to discuss the need for small-to-medium-sized businesses to find a source of funding and investments (versus microloans to microbusinesses) in developing countries. While this is also an important issue to discuss, I’d like to touch upon microloans the are ‘helping’ entrepreneurs.

A concern I have with all microlending institutions and websites (such as Kiva.org, etc.) is that it seems, based on my research, that there isn’t really any follow-up. What I mean by this is, are the entrepreneurs who have received these loans, paid them back, truly benefiting from these loans? We make the logical assumption that seeing as they have paid back their loans, that they are better off. But is that true? (Of course, user-based microlending sites’ main mission is to raise funds for microloans to entrepreneurs, and something such as the “follow-up” I am proposing may be out of the scope of these organizations’ mission.)

Microbusinesses and entrepreneurs in developing countries are often very focused — rightfully so — on very local endeavors, such as increasing the size of a shop, or finding funding to raise more farm animals. But there seems to be a lack of a medium that helps them expand and grow their businesses. The closest I’ve found to something like this is Endeavor.org that offers “high impact entrepreneurial consulting” to entrepreneurs in developing countries. The website includes much more detail on their selection criteria, but in essence it looks like Endeavor selects entrepreneurs based on:

• entrepreneurial initiative
• business innovation
• value and ethics
• role model potential
• development impact
• fit with Endeavor

But to get back to the entrepreneurs who have received microloans in the past (such as through Kiva.org, UnitedProsperity.org, Wokai.org, Microplace.com, etc.), is there a way to help those entrepreneurs to expand their businesses? Of course, several implications come with this, including whether or not it is “our” place to “help” them expand the businesses that they operate, regional conflicts, competition, etc. However, what about just creating an online platform that features these microfinance-d entrepreneurs with their products or services?

Some more details on my idea:

Like Craigslist, this online marketplace would be geographically specialized, and could connect either locals to different business’ products, or even those from abroad (i.e. in the US) to buy a local business’ products.

Of course, there would be tons of logistical details to work out, such as:

• Would the website provide the transaction, or just connect the two people?
• Would this be a nonprofit, or how could we make it a for-profit social business?
• How would we get these listings? An idea is to partner with microfinance organizations
• How would this website be differentiated from the microfinance organizations that already LIST their entrepreneurs they’re financing? My answer to this would be that THIS website would feature businesses that already got off the ground, VIA the microfinance loans that they’d already PAID OFF.
• How could we bridge the connection between someone from, i.e. the US, to the business in the developing country, via shipping?

From posting it online, I’ve received responses including one from Kevin, who commented:

I think this idea might work within a partnership framework meaning leveraging existing platforms whether it’s the two above, ebay, craigslist, local and global MFI’s, to create a unique value to these already proven entrepreneurs as well as these partnering institutions. I think connecting these proven entrepreneurs’ goods to the global marketplace is a valuable service but I think is not so much if you can create a unique tool or platform to do so, but whether or not you can find the right institutions that already exists to create a network that leverages each others partners strength.

Alastair also brought up a similar point in regards to partnerships:

As I understand it, this marketplace would have some sort of seal of approval – businesses listed on the site are recommended, on the basis that they must do what they say on the tin because they’ve paid back their financing. The question is how you build that brand, why do people trust you?

One approach would be to piggy back on the current work in the UK around social enterprise branding (see here: view link). Is there something similar in the USA?
Even if the enterprises you’re listing aren’t in the UK we could still hold them to similar standards.
Most of the MFIs won’t be recognised by most businesses so I perhaps think the real opportunity lies in partnering with a household name (like google).

Those have been insightful responses, but I’d love to get more discussion going on this topic. Please comment and let me know what you think!

I’ve always, always enjoyed reading..as a kid, I loved going to libraries, although I must say..a majority of what I read as a kid included The Babysitter’s Club, Sweet Valley series, and others like those…but regardless it has always been enjoyable to me.

As I went through high school, I never lost that love for reading (books that I want to read) but I just found less and less time to do so. I don’t think it was really until the summer after I graduated high school that I began to read a lot again, and re-discovered how amazing it was.

After starting college, I still tried to maintain some for-fun reading, but mostly it ends up being during the summer time that I get to do this. So, this summer (well – the 4 days left of it..) I’ve also been trying to get some reading done. The list of what I want to read just keeps getting longer and longer, and I order some of these books and they just keep sitting on my bookshelf waiting to be read, but yet I can’t seem to give them the time of day!! I feel bad for them, really. I’ve been meaning to read Atlas Shrugged for a YEAR now (and I know this because I’d added this book to my Library last year..) and finally am just starting to read it!

I know that I really DO have time to read books for fun – I just have to make time for it. I think that during the year when I’m in school, it’s just harder to want to read for fun with my spare time because I already am reading so many books/articles/etc. for my classes… Who knows. But I just know – I need to spend more time doing it in order to read everything I want to…..

So, for one of my summer school classes, our term paper was to write on whatever topic that relates to the social, political, or ethical environment in business. It only made sense that I wrote it on social entrepreneurship (or more specifically, social business). I did a ton of reading for my paper including academic/journal articles and other books.

Anyway, the main focus on my paper is –

While social entrepreneurship historically has been in practice, it has recently become an emerging field. In this paper, I am going to examine social entrepreneurship and the model and application of social business. More specifically, I will investigate the potential for poverty alleviation through social businesses serving the “bottom of the pyramid” (BOP) as a market.

In my paper, I evaluate the nonprofit vs. for-profit model, including discussion on the fundamental core values of what it means to be “nonprofit” vs. “for-profit.” I also discuss whether or not investors that invest in social businesses should get a return on their investment. Additionally, my paper examines the potential for partnerships between BOP communities and multinational corporations.

Anyway, the point of me posting it online is to get feedback on points made in my paper. Seeing as I am not a social entrepreneur, and I have no experience in social business, I’d really like some feedback on the different issues I discuss. I’m positive that there are many points I made that may have no basis in my argument, and can be refuted. I’d love to hear it — it will definitely be a learning experience for me. Furthermore, it’d be great to have some discussion about social business as a model and the potential for poverty alleviation.

View my paper here (PDF): Social Entrepreneurship and Social Business