Friday, December 22, 2006

How to change the world

If there ever was a book on the subject you would think it would be a best seller, there is one – and it isn’t a best seller. Partly because no one wants to change world, and partly, because the book is about social entrepreneurs; a set of stories of people who have used entrepreneurial spirit to solve social problems. This post is not meant to be a review of the said book but to just put down a few thoughts on social entrepreneurship and a couple of trends which I thought were wonderful.

No doubt, the term ‘Social Entrepreneurship’ is a buzzword, but a bit more than that. Ashoka - whose founder Bill Drayton is credited for coining the term - defines social entrepreneurship as “individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change.”

Around the world hundreds, If not thousands of people and organizations are engaged enterprising initiatives which benefits not only themselves but many more people around them. They are in every imaginable sector from education, health care, environment, finance and more. From Florence nightingale to Muhammad Yunus and Bono they have lived through the ages. Due to advances in technology, globalization, freer and more open societies, these social entrepreneurs along with the rest of the ‘citizen sector’ is getting more mainstream and more prominent. I wonder whether we are seeing a new phase of socially oriented capitalism. This may or may not be the case.

I would not take the time to go much further into whole concept of social entrepreneurship for more intensive exploration on the subject and an extensive collection of stories on different social entrepreneurial initiatives I’d recommend the book by David Bronstein of the same title as this post.

For the purpose this post I would just touch on two initiatives, or rather phenomena’s that I’ve found interesting.

One is the (Red) initiative designed to harness the power of consumerism to combat AIDS and other ills which plague the African continent. The initiative is led by Bono, the U2 lead singer and has support of people like Opera and Kanye West; it was also featured on the Google home page in recent the International AIDS day. The model works by companies creating specific (red) products such as iPods, phones, watches and Amex Cards, etc where portion of the profit is given to the global fund to combat AIDS in Africa. The campaign has so far raised more than $10 Million in Europe alone. The model itself is easily replicable and overcomes problems of similar models by having solid products that can’t be easily ‘pirated’. There is even room for it to be replicated for local causes within the Sri Lankan context. Will any Sri Lankan be that enterprising and committed remains to be seen.

The second phenomenon I’d like to touch on is Microfinance. The concept is nothing as new and has been around, it seems, for ages. Nobel Laureate Professor Muhammad Yunus pioneered the concept of micro-credit in which his Grameen bank gave out loans for groups of poor people (mostly women) where each member is responsible for the due repayment of the others in the group, failure to make repayments in time would mean the whole group loses access to further loans, thus creating a sort of a social pressure in the absence of hard collateral, like say land, which is necessary in the case of traditional lending institutions.

Grameen is by no means alone, there are many other institutions offering similar programs elsewhere in the so called, developing world, especially in places like Africa where lack of formal property rights makes it impossible, for poor people to access traditional loans and thereby alleviate themselves from poverty. The key ingredient in all these initiative is localization, just because it worked in Bangladesh doesn’t mean it will work in Ethiopia, or Monaragala. Diversification is an another critical element, it may be the case that the need for a particular community may not be credit per se, but other financial needs such as insurance, or leasing. Microfinance institutions (MFI’s) have therefore developed microinsurance, microleasing and other innovative schemes to address the needs of that particular community. A good report on the subject is available at the Globalisation Institute, which is well worth a read.

I’m not sure of any Sri Lankan Microfinance initiatives, I suppose ‘grameeya’ Banks which are quite prevalent in some (somewhat rural) areas serve a similar purpose, but they are state-run and therefore inherently impotent, and I’m not sure of the extent they could be termed as microfinance institutions. There may be others, but I’m not aware. Perhaps the Sri Lankan situation is different that there may not be a dire need for Microfinance, for the uninformed inquirer (I confess I have no clue as to the proper numbers) it seems that Sri Lanka has comparatively stronger property rights and therefore have access to more traditional forms of credit and other financial services. This of course is a guess, in any case though, microfinance will have its place, and it has proven to be more effective and dignifying than traditional charity.

No one, including the very pioneers of Microfinance claim that it’s a silver bullet solution to poverty. It’s not. Roots of poverty fundamentally lies in ‘bad governance’, lack of property rights, over-regulation, corruption, I think we are familiar with the list. Addressing these issues is a must if any country seeks to ‘alleviate’ its citizens from poverty. But a more economically empowered ‘poor’ are best placed to demand more from their governments in terms of getting out of the way, as opposed to queuing for handouts of free-milk, or subsidized pohora (fertilizer). In most occasions people just need a hand-up rather than a hand-out.

Muhammad Yunus appreciates the fact when he says:

Grameen believes that charity is not an answer to poverty. It only helps poverty to continue. It creates dependency and takes away the individual’s initiative to break through the wall of
Poverty. Unleashing of energy and creativity in each human being is the answer to poverty.
The message could not be clearer – traditional charity, handouts and most other governmental or indeed nongovernmental good intentions sustain poverty. The best help therefore that anybody can give is not to throw the ‘poor’ scraps, instead create or help create systematic mechanisms which let people help themselves. As can be seen by many examples of social enterprise, given the right conditions, and structural requirements there are many individuals ready and willing to help themselves, their communities and others - at a profit.

Merry Christmas

Related Links/Reads

Gift of Giving
Microfinance Report - Globalisation Institute
How To change the world
The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else By Hernando De Sato
[Any person feeling particularly charitable this Christmas are most welcome to donate this book to me ]

No comments: