Ideas Blog

Thought of the Day

2011-07-15T16:48:06Z

“Today, 85 percent of the $400 billion that the government spends to encourage things like home ownership, college attendance, investment and small business ends up in the pockets of the top 20 percent of earners (and half goes to the top 5 percent). Very little ends up helping the working poor. On the other hand, many social benefits cut off when a family’s income rises roughly 30 percent above the poverty line — which is still a far cry from being out of poverty.” (From an NYTimes article titled Out of Poverty, Family-Style)

Think about that. The government spends money to incentivize the better-off to do what they would be able to do without the subsidy, while they penalize the poor when their income increases. That is an eye-opening fact, one that puts into stark contrast the policies affected rich and poor in the wealthiest country in the world, and one that should force us to re-think traditional notions of why people are poor. The truth is that the deck is stacked in favor of those with power.

My New Favorite Quote

2011-05-28T14:23:12Z

As the absurdity of our current budget process becomes ever more painful (we cut services to the poor during a recession but refuse to raise taxes on the wealthiest Americans) the extent of our military spending has become that much more egregious. This quote, by Dwight D. Eisenhower, who was an opponent of the then inchoate military industrial complex, captures what happens when we spend more on guns than on education…

“Every gun that is made, every warship launched, every rocket fired, signifies a theft from those who hunger and are not fed, those who are cold and are not clothed.”

We are a nation more interested in defense than in what we are defending. It is time for a new generation of people to emerge that will question--and change--the status quo!

Thoughts on a Book: “Where Good Ideas Come From”

2010-12-09T16:15:27Z

It seems fitting that as all the controversy about Wikileaks is reaching a fever-pitch I just got done reading a book, called “Where Good Ideas Come From: A Natural History of Innovation,” that is all about the extent to which open environments--be they natural, office, or other--are essential to innovation. Two things have really stayed with me after reading the book. The first is that when we tell the story of great inventors, we always like to think in terms of the “eureka” moment, of the lone genius in his garage; however, the author points that many of these innovations actually were developed over years and were built upon the platforms of other ideas. This is not to deemphasize the role of the individual in innovation, but rather to emphasize the importance of collaboration and openness to those innovations--for the simple reason that if good ideas are not allowed to flow, then people can’t do anything with them. The second thing that stuck in my mind from the book was that if we are to really solve social and environmental problems then we must be relentness--if not reckless--in our pursuit of giving away our secretes. That is to say, if I have a hunch about a new way of doing microfinance in the US, it does no good to society if I hide it from others in the vain fear that the idea will be “stolen.” The book, of course, goes into great depths to refute the notion that the profit motive is the only way to stimulate and encourage new ideas; in fact, he has an entire chapter devoted to what he calls the “fourth quadrant,” which he defines as ideas that were derived from non-market, collective sources (such as academia or governemnt--think of things like GPS and the internet as great examples of ideas that were developed in this quadrant). By mapping out 200 inventions over the last 600 years, he shows that the preponderence of good ideas have come from this quadrant, where the profit-motive is conspicuously absenst; indeed, most profitable ideas have built upon the platforms and ideas that came from here (think of Google, Facebook, satellite TV, etc.).

So when it comes to making the world a better place, we should be even more open and collaborative. Why should every non-profit have to build its own customized database? What if Capital Good Fund spend $100,000 to build a fantastic database, and then shared it, for free, with 100 organizations? Well, there would be the lost revenue--we could charge, say, $100 per organization as a licensing fee, and maybe that would be a good strategy. But those 100 organizations could then use that tool to understand their own data in a way that could provide insights on how to solve all sorts of social problems--and if they shared that data, then society would be better off. This should be eminently obvious, since non-profits are designed to exist for social benefit, yet even in this sphere there is a lot of secrecy. Well, Capital Good Fund will not be like that. Yes, we want to be given credit for the ideas and innovations we come up with; but we also want for others to be able to build on those ideas and take them a step further. We want to see society change, whether or not we are the ones that do all of it! (obviously, that sentence speaks to a larger truth: we can never change all of society ourselves, so we need to rely on the good ideas and practices of others; to the extent we can influence that, we can further increase our social impact).

These are my initial thoughts on how I can apply the book I just read to Capital Good FUnd. Of course, I have a ton of ideas about Wikileaks, its implications for society and the reactions of government, media and society to them, but I will save those for another time!

Visiting a Village--Part 1

2010-02-08T14:26:52Z

Andy and Jill with a Grameen Bank Center Manager and Borrowers

If you talk to anyone at Grameen Bank they will tell you that the real bank can only be found by going to the villages where Grameen operates. Grameen, after all, means rural, and in fact by law Grameen can only operate its lending programs in the villages. It is for this reason that on our third day in Bangladesh we--Jill, me, an Australian named Mark, our translator Matin and Mark’s translator Yunus--are all crammed into a mini-van barreling down the roads that lead to Rashahi, the zone that we will be visiting. Traffic here is an eclectic mix of motorcycles, bicycle rickshaws, cars, trucks hauling absurdly large loads and comically unstable buses all chaotically weaving and swerving, honking and narrowly avoiding catastrophe.

After 6 hours of bouncing along these roads we are happy, if not relieved, to have arrived at the Branch that will be our home for the next 10 days. It is a two-story building--the first occupied by Grameen--with two small rooms for guests. In order to understand where branches fit into the Grameen hierarchy, I need to take a moment to explain how the bank is organized. For in truth, Grameen is nothing short of an organizational miracle. In fact, I would go so far as to say that while Dr. Muhammad Yunus is praised for recognizing that the poor can be credit worthy, his real, lasting achievement is in the details of how he goes about delivering that credit to them in a cost-effective manner.

The most fundamental unit of Grameen is the group. Groups consist of at least 5 and up to 10 borrowers (97% of whom are women). Groups come together to form a Center; the standard number is for there to be 60 borrowers in a Center consisting of 12 groups of 5. In many ways the Center is the heart of Grameen; this is where the borrowers gather once a week to make payments on their loan, deposit their savings, make loan proposals and discuss various issues with fellow borrowers. What’s more, the Center Meetings, which take place in Center Houses--made of bamboo and with tin roofs--also serve as “female empowerment zones.” It’s hard to describe how interesting it is to see, in a male-dominated society such as is found Bangladesh, 60 women gathered together, in public. It truly stands conventional notions of women staying out of public life on their head and, of the last 30 years, these centers have actual begun to change manner in which women are perceived and treated. That’s so small accomplishment for an organization that “just gives out small loans.”

The sign on top of the Branch where we stayed: the Grameen logo can be seen on the left

The borrower-group-center structure of Grameen is what allows it to be profitable despite the extremely high transaction cost/low profit margin nature of microlending. Consider this, for example: center managers (Grameen’s equivalent of a loan officer), each visit two centers per day, 5 days per week. Given that centers typically have 60 borrowers, that means that one loan officer oversees 600 borrowers! This is possible because so much of the customer service that is done by a paid employee in a Western bank is done by other borrowers in the Grameen model--underwriting, support, encouragement, recruitment, etc. As a result, a Branch--which is the next level up in the hierarchy--can have up to 10 Center Managers, overseeing 6,000 borrowers. Given that at any given time upwards of 90% of these borrowers have outstanding loans, and that the repayment rates are usually above 98%, it isn’t hard to understand how it is that Branches can be profitable. For example, the Branch we are visiting has 4,700 borrowers, of which 4,500 are active, a 100% repayment rate and is highly profitable.

In the next post I’ll discuss how the Branch operates, conclude my explanation of the Garmeen organizational structure, and tell stories of some of the borrowers.

Andy and Jill with a Grameen Bank Borrower

A Story on Super Bowl Sunday

2010-02-07T17:26:38Z

This morning I was thinking about the fact that throughout America people today are resting, attending church and making preparations for watching the Super Bowl, while at the same time in Haiti, in Iraq, in Myanmar, and in so many unknown villages, slums and cities around the world there are people deprived of food, justice and dignity. And it occurred to me that the great responsibility of living in a free society is to strike a balance between fully enjoying that freedom--and the comfort and security it affords--without turning a blind eye to the lack of freedom elsewhere. How do we confront the horrors of Haiti without reducing our own hearts to rubble? Yet if we can look at these things with clarity and not turn away, then we can find sustainable, practical solutions.

Yes, that is our task. What follows is the story of how I came to that realization.

Up until I started college at 17, my goal was to become a professional tennis player. However, during my freshman year I acquired a keep interest in social and environmental issues. In particular, I become extremely opposed to the pending war in Iraq. I started attending numerous protests, and even took a bus, overnight, to San Francisco to attend one of the largest anti-war demonstrations. Still, though I enjoyed seeing a mass of humanity united to try to stop an injustice, something about the whole movement seemed insufficient. For one thing, I felt that simply showing up at a march and then returning home and going about my life was not an answer.

My epiphany came one day when, after a protest, I returned to my car still chanting to myself “No War For Oil” and, as I put the keys of my car in the ignition, suddenly saw the irony of protesting a war for the very oil on which my own lifestyle was so dependent. Soon after I resolved that a more efficacious means of protest would be to cease driving--and I haven’t owned my own car since. Of course, I now realize that it is impossible to extricate oneself from fossil fuels, as everything from plastic to food to anything that is manufactured and transported is, as it were, “awash” in oil.

Still, it was a symbolic step, and after that fateful decision I went and purchased a new bicycle that would become my primary means of transportation. The next day I went for my first ride on the bike. On the way home I was going 30 miles per hour when I hit an enormous pothole, lost control, went flying over the handlebars and crashed into the pavement, breaking my elbow and collarbone and suffering a serious concussion. I had amnesia for 5 hours and briefly there was concern that I might have had bleeding in my brain. Fortunately I did not, and my helmet--which shattered completed--undoubtedly saved my life.

This is what I looked like not long after the crash.

The next morning I awoke and, somehow found myself on the couch (I don’t remember how I got there). The T.V. was on and CNN was announcing that the invasion of Iraq had begun. Groggy from the concussion, swollen, bloody, sweaty and in agony from my broken bones, bruises and other injuries, that was one of the lowest moments of my life.

Later that today I was in bed, quite possibly hallucinating from the powerful medication the emergency room doctors had given me. I was looking out the window and suddenly, instead of the quiet, suburban trees and the roof of my neighbor’s house, I saw the battlefields of Iraq; I saw innocent men and women and children cowering in fear of the bombs that were dropping; I saw one of the cradles of civilization burning with murderous rage and fear; and I saw, in a visceral way, that as long as such things were happening I could not look away and live completely free of that suffering. I realized that my pain was their pain, and at that moment I committed myself to a life during which I would never look away, during which I would devote myself to the painful--yet also joyous--work of preventing bombings, literal and metaphorical.

I want to be clear: the balance between enjoying freedom and fighting for it must be struck. No one wants to listen to a demagogue that admonishes everyone to give up their comfort to help others--these people are really just miserable and longing for others to join them in their miserable. No, the beautiful thing is that a committed life, in particular thanks to social entrepreneurship, is one that challenges us to use our skills and our passions to help create a better world while earning a living for ourselves. After all, life if difficult even in the freest of societies, as all human beings struggle with doubt fear, depression and insecurity, and if we are not happy, whole and healthy ourselves, then we can do nothing for others. The point is that there are new models emerging that enable us to meet our deepest needs for comfort and security while helping to provide others with, in some cases, a basic level of security. That is why the work I do with Capital Good Fund is the most rewarding thing I could ever imagine, and why I always say that I am living my dream. After all, I get to earn a salary and spend my days using my creativity and communication skills to solve problems that are always cropping up. But at the same time, all this work is geared towards enabling amazing people who lack opportunity to seize onto that opportunity and better their lives.

One thing I refuse to believe, however, is that this path is not open to all. In America we cannot afford to become complacent about how good life is here. I was just in Bangladesh for three weeks, where I saw a government that was truly unresponsive to the needs of its people and where many basic services were nonexistent. By and large, the greatest benefit of a free society is the freedom to forge our own path, and I encourage anyone I met to follow their dreams and their hearts and realize that they can lead a life that is in accordance with their ethics, their beliefs and their souls.

First Experiences With Bangladesh and Grameen

2010-01-08T14:16:07Z

This photo shows one of the Grameen center meetings

First Impressions of Bangladesh and Grameen Bank

When Jill and I landed in Dhaka on Sunday the city was shrouded in an intense fog that, we later learned, is quite common this time of year. The scene when we walked outside the airport was pretty much what one would expect of a third world capital city: people everywhere; rickshaws competing for space with taxis and buses and all manner of other vehicles, human, animal and fossil-fuel powered; bustling markets; polluted air, etc.

We were taken to the Grand Prince Hotel and then immediately met up with our interpreter, Matin, who accompanied us to Grameen Bank’s head office. Our first adventure took place when Muhaimeen hailed a bicycle rickshaw that, in just three chaotic minutes, brought us to the office. Amazingly, Grameen, a Bank that exists for and is owned by the poor, has a 21 story head office, one of the tallest buildings in the area. One can’t help but feel that Grameen is a kind of conglomerate for good: leveraging all the ingenuity, efficiency, scale and power of corporations while being driven entirely by the motive to eradicate the world of poverty, of pollution, of injustice. The numbers are staggering: Grameen has 8 million borrowers, 97% of whom are women and all of whom are poor. They have 20,000 employees, a staggeringly high repayment rate, 4 million bank accounts for non Grameen borrowers (all borrowers must open an account so that they can deposit their required weekly savings there), and have turned a profit all but three years of operation. Lastly, they are 95% owned by the borrowers themselves--each borrower gets a share in the company--and 5% owned by the Bangladesh government. In short, Grameen’s Nobel Peace Prize was well deserved.

This photo depicts the issuing of a loan to a Grameen client

Plans for the Coming Weeks

On the 11th floor of the building we met with our coordinator from Grameen’s International Program: Harun. Harun sat down with us to provide an overview of Grameen’s history, philosophy, methodology and products and services, as well as an explanation of how the Basic Training program works. Like everything with Grameen, the Basic Training program is extremely well organization and thought out: yesterday we had an orientation visit to a village (Grameen means village in Bangla) and today we leave with our interpreter to spent 12 days at another village where we will be intensely trained in the Grameen approach. After that we will come back to Dhaka to debrief with Harun, ask additional questions, etc., and finally we will spend the remaining week visiting some of Grameen’s ‘sister organizations:’ these are organizations, some for profit and some non profit, all designed to meet a need of the poor. Examples include an eye care hospital, a telecom company (the largest in Bangladesh) and a renewable energy non profit. Lastly, we will meet with some key Grameen people, including--hopefully--the Managing Director, Dr. Muhammad Yunus! What follows are photos and thoughts from our first trip to the village.

Jill and Andy in a mustard field

Visiting a Village

We visited a village that is about 2 hours from Dhaka and went to a Grameen Branch office. There, we had tea and conversed with the Branch Manager as well as the Zonal Manager. Then came the highlight of the trip: we got to attend a Center Meeting (more on this in coming posts, but basically to get a loan the women form a group, and then 6-8 groups form a Center) where borrowers make repayments and discuss various issues relative to their businesses, health, education, and so on. The Center Meeting took place inside a non-descript building made of corrugated iron; inside, 60 sari-clad, shy-yet-smiling women sat waiting to make their loan repayments. Harun introduced us to them and lead a kind of question and answer session. Some of the women told us about what they do with the loans--many of them had been with Grameen for 15 years or more--the impact of the loans, and much more. They were so excited to meet us; at the end of the meeting they practically begged us to see their homes!

Sitting in that room, surrounded by women who were previously poor and subservient to men but who have moved out of poverty and are now full of confidence, I felt so much optimism about the future of the world. Yes, there are staggering problems in the world, but the simple beauty of Grameen is that it empowers the people who are struggling to help themselves; they do not need to wait for government aid, or for a law to be pass, rather, they are able to take charge of their lives and their destinies. They vast majority take full advantage.

Grameen has expanded from offering micro business loans to also loans for education and the construction of homes. It is simple amazing to hear how Grameen has literally changed the villages of Bangladesh over the last thirty years. They like to say that they do not have 8 million individual borrowers but rather 8 million families that they engage with! Think about that. Grameen has managed to slowly begin to change the way in which women are treated and viewed in society (Bangladesh currently has a female prime minister). Grameen has brought millions out of poverty, helped built hundreds of thousands of safe, sanitary homes and enabled tens of thousands of the children of Grameen borrowers to attend college and even earned advanced degrees.

Over the next 12 days Jill and I are going to learn all the nuances of how Grameen works so that we can replicate this success in America. For now, I am absolutely amazed by what I am seeing. The people couldn’t be nicer and more hospital and Grameen couldn’t be more inspiring. Stay tuned for more thoughts, photos, ideas and musings!

Jill and Andy outside of a borrower’s home

First Blog Post From Bangladesh--Actually, From the Bahrain Airport

2010-01-03T14:09:07Z

This photo is from our first flight from Boston to London on 1-01-10

Jill and I are currently in the airport in Bahrain waiting for the third, and final, leg of our 28 hour trip to Dhaka, Bangladesh. We left Boston on the first of January at 7:20 PM and arrived in London at 6:50 AM on the second. As you can see from the photo above, we really lucked out in terms of our seating on the first flight: we got the seats that are usually reserved for flight attendants when they take naps on long flight; as a result, we had seats that could recline all the way down (even though we were in coach) and we had as much leg room as we could possibly want! The flight went smoothly and, as I have been reading The Rise and Fall of the Third Reich--an absolutely fascinating history of Hitler’s Germany--the time passed rather quickly. Our second flight took us from London to Bahrain, where we are currently in the midst of a seven hour layover before one final flight to Dhaka.

We couldn’t resist taking a photo of this display inside the airport terminal in Bahrain

Both Jill and I are extremely excited to begin the training with Grameen Bank, though we are also somewhat tired from all the travel. Personally, I can say that I consider Grameen to be one of the beacons of hope for creating a world in which poverty, as Muhammad Yunus likes to say, is “relegated to museums” and people around the world have the health, safety and economic opportunity they need to lead fulfilling lives. I am certain that over the next three weeks we will learn much, experience much and come up with many ideas that we can implement at Capital Good Fund. We are inspired and honored to have this opportunity to learn from a Nobel Peace Prize winning organization, and we are confident that this experience will help us to make Capital Good Fund even more effective and innovative as we worked towards realizing our mission of creating poverty-free, inclusive green economy in the United States.

Stay tuned for more blog posts! We will be posting many photos and thoughts every chance we get, and feel free to leave comments, as well.

After much searching, Jill and I found travel adaptors that allowed us to work on our computers

Reducing “The High Cost of Being Poor”

2009-08-15T17:11:28Z

I originally wrote this article for The Capital Good Fund’s blog

Here’s a simple dilemma that plagues many American families: how does someone that lives from paycheck to paycheck and is without a credit score—and therefore without a credit card—afford to cover unexpected expenses between paychecks, such as fixing a flat tire, a doctor’s visit, or even regular expenses such as groceries and phone bills? For higher-income families, this simply is not a problem. For one thing, consider how often you use a credit card to make purchases; doing so enables you to delay paying for the item until you have received your paycheck and can afford it. And of course, being higher-income by definition means that one can most likely already afford most expenses that occur between paychecks. But in the case of lower and moderate-income families, a lack of access to credit combined with a lack of savings forces them to so-called payday lenders to make ends meet during the week.

The Definition of, and Problem with, Payday Lenders
If you go to any lower income neighborhood, you will invariably find on almost every street corner places that offer check chasing, payday loans and other fringe and predatory financial products and services. A payday loan is a small loan designed to cover the borrower’s expenses until they receive their next paycheck. For many Americans, this is the only way to make ends meet. The problem with check cashing, as a recent article on Slate.com makes obvious, is that “the average payday loan has an annual interest rate of more than 400 percent.” What this means is that “a customer who takes out a $100 loan each pay cycle and repays it the following one will have spent nearly $400 over the course of a year.” The borrower would have been much better off covering expenses with a credit card, as “the APR on most credit card debt is 16 percent” and therefore far lower, but many payday loan customers don’t qualify for credit cards because they have no credit.

The same Slate article pointed out that a recent study by economists at the University of Chicago found that many payday loan borrowers don’t fully understand the true cost of the loan and that “providing a clear and tangible description of a loan’s cost reduced the number of applicants choosing to take payday loans by as much as 10 percent.” In other words, 9 out of 10 people have such urgent interim financial needs that they are willing to pay 400 percent APR to cover them.

Some Interesting Conclusions
These findings lead us to some interesting conclusions. First, financial education is essential. If families understand the true cost of their debts they can make more informed decisions about the debts they do incur. Second, many people would be better off using a credit card to finance interim debt. In order to be able to get a credit card, however, these same people would need help establishing and building credit to first quality, and then truly take advantage, of a credit card. Lastly, payday loans borrowers would benefit greatly from financial literacy training. For example, by learning how to budget and coming up with a plan to do so, they could reduce the need for payday loans in the first place, reserving them only for emergencies.

Capital Good Fund is working to offer all of these solutions. We provide financial literacy to our borrowers, teaching them about budgeting, credit and various loan products. We are developing a credit builder loan designed specifically for those with no or poor credit history. This loan is the first step towards being able to get a credit card and qualifying for other mainstream loan products and services, such as mortgages and car loans. Lastly, we encourage all our borrowers to open and maintain bank accounts, and to use them properly. Many advocates refer to what they call “the high cost of being poor,” which speaks to the fact that lower-income individuals end up paying more for basic services such as check cashing and loans. The services offered by Capital Good Fund, combined with our loan products--which enable our borrowers to increase personal income and access more benefits through citizenship--are an important step to reducing the cost high of being poor.

Source: 400 Percent APR--Is That Good? Fisman, Ray July 22, 2009 http://www.slate.com/id/2223378

Green Microfinance: Advancing Social Equality and Environmental Sustainability in the United States

2009-05-06T14:15:24Z

Click here to download a PDF of my complete thesis. Questions and comments are much appreciated!

My masters thesis in Environmental Studies at Brown University looks at how microfinance--the provision of small loans and other financial services to people not considered credit worthy by traditional financial institutions--can be used to advance environmental sustainability as well as social equality and empowerment in the United States. The thesis starts out by explaining the philosophical approach that I applied to problem, namely, that to create a green economy in the US we need to ensure that all segments of society are engaged on environmental issues through entrepreneurship, jobs, investment opportunities and a sense that environmental problems are relevant to people’s lives. The rest of the thesis explores how microfinance can accomplish those goals through 1) supporting ‘green collar entrepreneurs’--low and moderate-income individuals who want to start or expand green micro and small businesses, 2) by providing environmental education to all borrowers so that they are empowered to become civic leaders advocating for policy changes, organizing community events, and starting businesses that improve environmental quality, and 3) by providing loans for residential energy-efficiency and renewable energy upgrades to homeowners that wouldn’t ordinarily be able to partake in these types of programs due to problems with credit history or other barriers.

A key component of my thesis was working to develop an organization, The Capital Good Fund, that can implement these aforementioned ideas. In particular, we are working to develop “green credit builder loans,” which are loans of $100-$300 that finance the installation and purchase of low-flow showerheads, energy-efficient light bulbs and programmable thermostats. The borrower receives education on how to use the product and realize additional savings; she also sees reduced energy bills AND she gets to build her credit history as well. In addition, we are working to develop a larger loan product ($3,000-$10,000) that will cover 100% of the up-front cost of doing residential energy-efficiency projects. What’s unique about the loan is that it is structured such that the payments are equal to or less than the savings, meaning that at a minimum the loan is revenue neutral to the borrower. Lastly, we are working with our business borrowers to green their businesses and we are developing an environmental literacy curriculum that can be taught to our borrowers.

Here is an executive summary of the thesis:
Executive Summary
The nature of 21st century environmental problems—climate change, deforestation, the geopolitics of oil, etc—is such that they can no longer be separated from social problems such as poverty, malnutrition and war. In order to effectively tackle both challenges at the same time, a green economy must be created that is environmentally sustainable, socially equitable and inclusive. Without the support, ideas and passion of people of color, immigrants, women and the poor, a green economy will flounder and lack the vibrancy and potency it would otherwise have. This paper argues that an effective means of achieving an inclusive green economy in the United States is through the use of green microfinance, defined as loans of less than $35,000 that have benefits to both the borrower and the environment.

Microfinance, starting with the work of Dr. Muhammad Yunus in rural Bangladesh in 1974 and now expanding to reach over 100 million people worldwide, has irrefutably proven that 1) the poor are credit worthy, 2) given the chance, people are capable of bringing themselves out of poverty, and 3) the provision of small-scale financial services to disadvantaged people can serve as a platform for providing other products and services that are empowering and beneficial to the recipients. As an example, Dr. Yunus, founder of the Grameen Bank, with which he shared the 2006 Nobel Peace Prize, has gone on to found nearly 20 other companies, ranging from enterprises that provide health care and clean energy to affordable eye care hospitals and the largest cellular provider in Bangladesh. The majority of these enterprises use microloans from Grameen Bank to finance the purchase of the product or service. In the United States, microfinance can similarly serve as a hub around which other socially and environmentally beneficial activities take place.

Specifically, microfinance can support both social and environmental goals in the United States by incorporating environmental education and empowerment into lending programs; supporting ‘green collar entrepreneurs’—low and moderate-income individuals with ideas for green businesses—with loans and technical assistance; and by providing innovative loan products that cover 100% of the up-front cost of residential energy-efficiency and renewable energy.

Green microfinance has the potential to address pervasive poverty, financial exclusion and energy inequality in the United States. In addition, it can also allay the view among minorities that environmental organizations are predominantly white, middle class, and out of touch with their concerns. In so doing, it can bridge the divide between those that are arguing for environmental improvements and those that are suffering most from environmental degradation. Lastly, green microfinance can create green collar jobs, reduce greenhouse gas emissions, save ratepayers money and spur a revolution in small-scale businesses that create a more livable community and environment through market-based solutions.

The Commencement Speech That Never Was

2009-04-30T12:42:31Z

Several weeks ago I was nominated--and then auditioned--to speak at the commencement ceremony for graduating graduate students from Brown. Though I was not selected to be the speaker (I have some conspiracy theories on that front, I assure you!) I would like to share the text of the speech that I wrote, because I believe it captures the essence of how I feel about leaving the confines of the university and entering the ‘real world.’

New Opportunities in A Global Century of Innovation

At first glance it would seem that now is an inopportune time to leave the grounds of the university and venture out into the world. After all, between rising unemployment, a financial system in disarray, and a whole host of other local, regional and global problems ranging from urban blight to climate change, it would seem that the prospects for putting our newly minted skills to work as teachers, researchers, entrepreneurs and employees of firms large and small are, to put it bluntly, dim. Yet we are also entering a world rife with unprecedented opportunities for those willing and able to take advantage of them. An explosion of innovation in information technology has made it easier for more people to collaborate to tackle poverty, to create new products and services, and to share thoughts, ideas and experiences. The cost of renewable energy is falling. Social entrepreneurs are creating self-sufficient businesses that solve social and environmental problems. The list is seemingly endless, and I believe that regardless of our particular field of study, as graduates of one of the finest universities in the nation, we are in a unique position to seek out these opportunities and apply our intellectual and financial capital toward them.

It used to be that upon receiving an advanced degree one would have to choose between a career that would be rewarding financially and one that would be rewarding emotionally or spiritually. Yet the aforementioned opportunities speak to the fact that such a dichotomy is no longer valid. For as daunting as the challenges of today are, we also live in exciting times. It is possible that during our lifetimes a cure for cancer will be found, poverty, as Dr. Muhammad Yunus often says, will be relegated to museums, and catastrophic climate change will be averted thanks to a proliferation of clean energy and energy efficient technologies that also lead to a more equitable use of natural resources. However none of these scenarios are foregone solutions. They will only become reality if they first take hold as dreams in our hearts and minds and take shape through countless hours of tinkering, innovating and collaborating.

During our time at Brown, we have all developed highly specialized skills in our respective fields, but we have also lived in an atmosphere of intellectual rigor, experimentation and debate. We have cultivated the holistic understanding needed to be able to carve out careers for ourselves that are thrilling and challenging and also create a better life for our fellow human beings. Rest assured that beyond the confines of this campus we will find more conformity than creativity, more laxity than discipline. It is imperative, then, that we take with us a spirit of freethinking and open-mindedness because, as Martin Luther King once said, “the hope of a secure and livable world lies with disciplined noncomformists who are dedicated to justice, peace, and brotherhood.” I would add that the hope of a satisfying career rests on our ability to creatively apply ourselves to the issues that matter to us and to prove that it is possible to make a living by living our passion.

I encourage you to be bold and audacious in the pursuit of your goals. When a naysayer tells you that technology cannot address poverty, tell them how in Bangladesh farmers use cell phones to find the best price for their goods, tell them how in the slums of Cairo entrepreneurs are using iPods to teach people how to build solar water heaters out of locally available materials, and then seek out new ways of using old technologies, or create new technologies altogether. Or, if a skeptic points out that financiers are all crooks, remind them that microfinance--the idea of providing tiny loans to people deemed not credit worthy by banks--has now reached over 100 million people globally, with miniscule default rates and tremendous social benefits. Then go out and develop a new financing mechanism, such as an affordable health insurance for low-income Americans or a fund that invests in socially responsible businesses.

In short, do not allow yourselves to be limited by what others tell you is possible. Have confidence in your abilities, your values and your passions. Be unyieldingly open minded but never to yield to the status quo. At one time these admonitions may have seemed superfluous to the task of finding a job and starting our post-academic lives. But the job market, as well as our hearts and minds, demand that we ask more of ourselves. The opportunities in this century will not come to us; rather, we must find and create them. If we do so, there is no limit to what we will achieve.

Hearing Dr. Muhammad Yunus Speak in Queens, New York

2009-04-20T11:19:06Z

This unfortunately grainy photo was taken while Dr. Yunus spoke about microfinance on Saturday, April 18, 2009

Ever since I read about Muhammad Yunus and the Grameen Bank in 2007 I have been absolutely enthralled with the concept of empowering people to help themselves through access affordable, small loans. After all, my masters thesis deals with green microfinance, and during my time at Brown I have co-founded The Capital Good Fund, a non-profit microfinance institution. So when I heard that Dr. Yunus would be speaking at St. John’s University in Queens, New York, I knew that I could not pass up the opportunity to go.

I went with two other Capital Good Fund staff members, Nabeel and Faiz. We met at 8:30 in the morning at Kennedy Plaza in downtown Providence, Rhode Island, and caught a bus to New York City. From there, we took the subway and a bus to get to St. John’s. Outside of their basketball stadium, a market had been set up where Grameen America’s borrowers were selling their wares--food, purses, jewelry, etc. Grameen America was founded in 2008 by Muhammad Yunus, and is being run by senior executives of Grameen Bank. In their first year of operation, they made 650 loans totalling $1.5 million dollars, with a repayment rate of over 99%.

Yunus has become my hero, and to see him in person was a truly moving experience. He comes across as extraordinarily regal, patient, humble and passionate, all impressive traits considering he is a nobel laureate who has revolutionized the way the world thinks about finance and whose stated goal is to relegate poverty to museums. The event began with presentations by Grameen America staff, as well as several of Grameen’s borrowers, who sang songs and gave mini-speeches. Then, after several other speakers, Dr. Yunus himself stepped onto the stage and told the story of how Grameen was founded and why the work of Grameen America is so important.

I want to take a moment to talk about what the vision and work of Grameen and Dr. Yunus mean for The Capital Good Fund (CGF). As we spent countless hours dealing with all the tedious details of creating and running an organization, It can be easy to forget WHY we are doing all this work. The answer is simple: we are working to help realize the vision of a world without poverty, a world in which economic development and environmental stewardship go hand in hand, and a world in which the dreams of any entrepreneur can be realized. It takes time to achieve these goals, yet it must be remembered that over the last 30 years Grameen Bank has reached over 7 million of the poorest women of Bangladesh (roughly 7% of the entire country!) and launched a revolution that now reaches over 100 million over the world’s poorest families. At one point someone asked Yunus where he would like to see Grameen America in 3 years, and he answered “I would like to see us reach 50,000 people. Why not? The need is there.” That is the kind of passionate, optimistic thinking that enables Grameen to be so successful, and it is the kind of spirit that we must bring to CGF.

It would be easy for CGF to remain a tiny organization that serves a handful of individuals every year. But there are 40 million US households that are underbanked or unbanked. The US has a poverty rate of 13%, concentrated among blacks and latinos. 50 million Americans have no credit score, locking them out of the power of the American financial system. In short, there is a massive, unmet need for the services that CGF provides. In order to achieve our mission we must, and we will, grow, expand, innovate and share what we learn until the land of prosperity ensures prosperity for all. It will not be easy to do all this: we will have to raise a lot of money, we will have to streamline our operations, invent and refine our products and service, etc. But that is easy compared with the challenge of living in poverty. We are uniquely positioned to take advantage of our skills, resources and energy to be leaders. We must aim to make CGF the best microfinance institution in the country, and to become a model for countless others.

If all this sounds overzealous, let’s never forget that Yunus started with $26 in loans to 42 Bangladeshi women. From there, he has created an organization that has lent out over $6 billion with an average loan size of around $200. That is absolutely astounding, but when you hear Yunus speak, it had much more to do with listening to the needs of people and working hard to meet those needs than it did with an other-worldly injection of inspiration and genius. In other words, anyone can do what Grameen has done--it is merely a question of time, of patience, of passion and of a willingness to pursue a vision grand enough to solve the problem you are seeking the address.

Now its time to get out there and make it happen.

Social Business and The Genius of Muhammad Yunus

2009-04-02T11:53:54Z

I am currently reading a book by Dr. Muhammad Yunus titled Creating a World Without Poverty: Social Business and the Future of Capitalism, and I am left mesmerized both by the brilliance of Dr. Yunus himself and the beauty of the idea which he proposes in his book--the idea of social businesses. Let me start by providing a summary of what Yunus means by a social business. He defines it as an enterprise that has investors who recoup their initial investment but who do not receive dividends or profit from their investment. Thus instead of making their investment based on the company that is most likely to offer them the highest, most secure return, they choose based on the company that offers the greatest social or environmental benefits. Social businesses exist for the sole purpose of addressing social and environmental problems, but they are not charities. Instead, they must achieve self-sufficiency by selling low-cost products and services, or through a myriad of other methods that enable the organizations to pay back the investor’s initial investment, to achieve financial sustainability and to achieve the mission of the organization. In essence, then, what Yunus is proposing is a blending of for-profit and non-profit models, but in a way that I have not seen in the past. He suggests that social businesses will compete with traditional profit maximizing businesses (PMBs) on quality, price, availability, etc. He goes on to propose new innovations such as a stock market for social businesses where the company’s stock price reflects its ability to achieve social good, rather than it’s ability to make profit at any cost.

Perhaps if this idea were to come from anyone but a Nobel Peace prize winner and the founder of the Grameen Bank and the Grameen family of companies in Bangladesh--one of the most remarkable group of organizations ever established--it would be seen as naive. But to illustrate the power of the idea, Yunus starts his book by describing how he convinced the CEO of Dannone Group, one of the largest companies in the world, to launch a social business in Bangladesh that would focus on providing low-cost, healthful food products the poor, rural Bangladeshis. Within a year of proposing the idea, Grameen Dannone, as the new company was called, had completed an environmentally friendly yogurt factory, and were selling their nutritious yogurt through Grameen borrowers. Dannone fronted half the start-up costs and, aside from getting back its initial investment, will make no money on the deal. All profits earned by the company will be reinvested in the company to lower prices or to expand into new markets.

What is so amazing about Yunus’ idea, as well as the numerous real-world examples of social businesses that he has launched, is that it seems to solve so many of the pitfalls of non-profit and corporate social responsibility (CSR) approaches. As Yunus points out, non-profits are perennially hampered by a lack of funding and a lack of accountability to their customers, and CSR almost always falls by the wayside in lean times when a company must choose between people and profits. Thus what social business offers is a way of doing business sustainably, without the challenges of raising donor funds, and in a way that is 100% socially-minded and accountable to its customers. People will invest in social business in much the same way that they currently invest in microentrepreneurs through sites like Kiva.org, where the investor gets her principal back but earns no profit. What’s more, investors in social businesses will have a say in the operations of the company, and could presumably oust the leadership if they feel that social goals are not being achieved efficiently or on a large enough scale.

This idea excites me for a number of reasons, not least of which that it’s something I can experiment with in my own companies. I love the idea of doing something that hasn’t really been done before, experimenting wtih new models, and finding creative approaches to solving challenges. For instance, one of the issues I’ve been struggling with on the energy-efficiency lending model is that if we are to scale up we’ll need private investment, yet to offer a return to private investors we’ll need to charge higher interest rates to our borrowers, making it challenging to ensure that borrower’s utility bills don’t increase as a result of our program. If, however, people invested in our model with the aim of simply getting their principal back, then we could charge lower interest rates, making it more likely that default rates will be low, and maximizing the social benefit of our program. It would also be easy for us to achieve financial self-sufficiency from profit earned through interest payments because less of our revenue would be going to pay back investors.

Muhammad Yunus is a serial entrepreneur who has started over 20 companies, ranging from renewable energy, to health care, to micro credit, to information technology companies, all aimed at ending poverty, improving environmental quality and providing better nutrition to disadvantaged people. The jobs and opportunities created by these and other social businesses enables people to earn a good salary while working on things that they find intellectually challenging and ethically sound and satisfying. For entrepreneurs, social business represents a new way of raising capital and bringing innovation to the market.

What I love about Yunus and his ideas is that they are almost audaciously optimistic about human nature, and somewhat naive in their assumptions. Yet he has proven time and again that his ideas are not optimistic or naive but rather practical and essential. He began by questioning the idea that the poor are credit worthy, and showed how the global financial system cuts out half the world’s population. Since then, he has gone on to question health care, the way in which energy is generated, and even the basic tenets of capitalism--arguing not that capitalism is bad, but rather that at present it is incomplete because it neglects the desire that human beings have for ethical and spiritual satisfaction. As he questions these notions and practices, he develops alternatives and then implements them in ways that are undeniably effective and powerful.

I want to found dozens of social businesses. I want to demonstrate that what is deemed impossible can be done, and I want to do it in a way that is so high quality, so professional, so unyieldingly good, that no one can doubt it.

Such are my thoughts as I read this book, and such are my dreams as I live my life.

Microfinance, Microfinance and more Microfinance

2009-03-25T23:44:51Z

Microfinance has completely invaded my life of late. My thesis, titled ‘Green Microfinance: A Blueprint for Advancing Environmental Sustainability and Social Equality in the United States,’ is about 80% complete, and obviously deals with the various ways in which microfinance can be used for advancing environmental aims. In addition, the non-profit that I co-founded, The Capital Good Fund, is in the middle of a pilot phase, and I have been very busy speaking to and meeting with applicants. Lastly, I have been working with my business partner, Mike, and the company we founded, The Capital Good Group, Inc. so launch an innovative financing mechanism that covers 100% of the up-front cost of doing residential energy-saving upgrades and is, in effect, a microfinance program as well. I haven’t written here in a while, and I want to provide some updates on these projects, as they are all intimately related despite the fact that one is a masters thesis, the other is a non-profit, and the last is a for-profit.

The Capital Good Fund
We have made a lot of exciting progress recently. First, we just launched our new web site, www.capitalgoodfund.org. On the site, you can learn more about microfinance, see our community partners, check out the latest updates on our program, make a tax-deductible donation, download a loan application or find out how else to get involved with us. We are really excited to have the site up, and we have already received inquiries from potential borrowers through the site!

Second, we have received several applications from people interested in applying for United States citizenship, and we are about to receive several applications from people interested in starting or expanding small businesses. What’s really exciting about the business loans is that given the current recession, many people are looking to start a business in order to earn some extra revenue, and our program is currently the only microloan available in the State of Rhode Island in the $500-$3,000 range.

Lastly, we are about to submit our application for 501c3 status, which would make us a tax-exempt organization (currently, we have a fiscal sponsor that is a 501c3, and donations have to be made through them and then sent to us).

The Capital Good Group, Inc.
Mike and I have been working feverishly on our proposal for financing for residential energy-efficiency, especially because we are hoping to get stimulus funds in order to launch our model. We recently presented our idea to the Energy Efficiency and Resource Management Council (EERMC), which advises National Grid (our utility) on various issues, and the presentation went really well. We are now ironing out some of the details of our program and putting together a detailed proposal to submit to the state. In essence, our model works as follows: a loan is made to cover 100% of the up-front cost of doing energy-efficiency--though the model can also work with renewables--and as a result of the installation the borrower’s utility bills go down. The loan is structured such that the savings realized from the installation are equal to or greater than the monthly payments on the loan, meaning that at a minimum there is no net cost to the borrower, and ideally she experiences positive cash flow over the life of the loan. In order to secure the loan, we use a unique repayment mechanism: a line item on the utility bill. This allows us to do several things; for one, we can use consistent utility payments as a proxy for credit history, meaning that we don’t cut people out who need an efficiency loan but have no or poor credit history; we can assign the repayment to the property, so that if the property is sold before the loan is paid off then the new owner would inherit the repayment and the lower energy bills; and it allows us to leverage the utility’s tremendous experience in billing customers.

In addition to the loan, we are providing a turnkey solution to the homeowner, so that she doesn’t have to deal with the hassle of identifying auditors and contractors. Instead, we handle all that, and we also provide a third-party post audit to ensure that the contractors did the work to scope and that the homeowner will actually see savings on her bills.

I could go into more detail, but I believe that we are developing an extremely unique and innovative model, one that leverages the principles and power of microfinance to effectively reach people--especially low-to moderate-income people--as well as to lower costs, ensure low default rates, and allow for scalability and replicability. Our long term goal is to begin leveraging private capital to scale and grow our lending programs, as well as offering loans for renewable energy and innovative efficiency measures such as “super insulation.”

Please leave comments if you have specific questions--I would love to describe more elements on the program. I also promise to post more regularly on here, and I will post my masters thesis once it is complete!

The Price of Solar Plummets, Vindicating Visionaries

2009-02-24T21:34:30Z

Ever since Bell labs developed the first working solar photovoltaic cell in the mid 1950s, people have both lauded the potential--and indeed the poetry--of solar power, while others--the “realists” and “pragmatists"--have derided it as a niche technology whose costs and inherent limitations would always prevent it from overtaking good ol’ fossil fuels and nuclear power as the dominant source of energy for the world. Unfortunately for the naysayers, the geopolitical, social, environmental and economic impacts of both fossil fuels and nuclear power--which require massive subsidies, cause billions of dollars in health issues, and are tremendously expensive to regulate and clean up after (see my recent article on the spill of coal sludge in the Tennessee Valley)--have begun to far outweigh the supposed affordability and abundance of traditional energy sources.

So while countries like the United States avoided implementing strong subsidies for solar energy and other renewable sources, visionary leaders in Germany and Spain enacted powerful subsidies for renewable energy and compelled utilities to buy that energy at higher rates in order to stimulate the market and create jobs. Sure, the pragmatists might have argued--and probably continue to argue--that the money being spent on these subsidies, which amounts to roughly 20 cents per month per utility customer in Germany, could be better spent elsewhere. But in the meantime, Germany has developed into a leader in solar energy, creating tens of thousands of jobs in the process. Now, according to the New York Times blog, Green Inc., it seems that visionary leadership has begun to bear fruit. In fact, “On Tuesday, First Solar, a global photovoltaic cell maker based in Tempe, Arizona said it had reached an “industry milestone” by reducing its production costs to the point where making solar cells that produce one watt of power costs $1.”

To put that decrease in costs in perspective, not long ago solar cost $10/watt, and even four years ago it was still at $3/watt. Even more impressively, “The Company’s long-term financial model suggests manufacturing cost targets of 65 cents to 70 cents by 2012 and it believes reductions below these levels are possible over time,” meaning that by 2012 “solar power will be able to match peak-hour pricing by from coal and natural gas,” at which point the subsidies for solar could disappear. Now let’s compare this with the coal, nuclear, natural gas and oil industries, all of which need constant subsidies in order to encourage more energy exploration and to cover the enormous costs of investing in new infrastructure. Renewable energy creates more jobs per kilowatt hour, requires more innovation and intelligent planning with respect to resource use and allocation, and lowers health care and regulatory costs for society, all while slashing greenhouse gas emissions and freeing us from dependence on dirty coal and dirty nations under whose sands is buried oil and natural gas. Is that now an attractive investment?

So I see two main points here. The first we’ve already covered, and it’s that for those who think that the status quo is here to stay, the election of Barack Obama as president, and the recent strides in governmental support for and private innovation in solar energy augur well for a future powered by clean, equitable and beautiful energy. The second point has to do with the fact that for years--and in some cases decades--people have argued and fought for renewable energy, even when others made all of the aforementioned claims about its limits. Those visionaries are the kind of people we need in every society, and we should do everything we can to support, encourage, listen to and collaborate with these individuals. At present, visionaries are vilified, marginalized and laughed at; instead, let’s listen to them and embrace change. The 100% laptop; the idea of nonviolence (as first taught by a revolutionary named Jesus of Nazareth); microfinance; renewable energy: all these ideas were brought to the world by people who were willing to go against the grain, to endure ridicule and ignorance to change the world.

Lastly, I want to point out that no matter how cheap solar energy gets, there will always be an up-front cost associated with it because, in effect, you are buying 30 years worth of energy in one fell swoop. That is why I am constantly arguing for innovative new financial mechanisms that will cover that up-front cost and enables homeowners, businesses and governmental agencies to re-pay the loans through the savings they realize. With these financing mechanisms in place, along with continued innovation in solar manufacturing, distribution and installation, we will undoubtedly be able to usher in a new era of a renewably powered society. And think about the imagery of this new society: the old one was powered by dirty stuff pulled out of the depths of the earth, whereas this now society will be powered by the sun, the wind, the waves, and the hands and minds of the people that design, build and maintain all these beautiful systems that power the great cities, villages and rural areas of the world. . .

Via:
Green Inc.

First Solar

A New Logo For Two New Endeavors!

2009-01-26T20:41:33Z

As soon as Mike and I incorporated our environmental services company--The Capital Good Group, Inc.--on January 1st, we wanted to get to work branding ourselves as a socially minded, mission driven company dedicated to serving people and the planet. Our first step was to hire Douglas Bonneville, owner of BonFX, the company that designed and built this web site, to create a logo for both The Capital Good Group, as well as The Capital Good Fund. The idea was to develop a logo that would convey the concept of a “triple bottom line” (social, environmental and profitability); that would be applicable to environmental consulting, microfinance and any other endeavors we undertake using the ‘Capital Good’ name, brand and concept.

After several rounds with Doug, we finally settled on the above logo. Mike and I really thrilled with the way in which it conveys the concept of three without being oppressive about it, and how the shapes in the logo can be viewed as trees, or a family, or just interesting geometric shapes. Read on to see the logo for the Fund.

The Capital Good Fund will begin making its first loans in the next few weeks. We have completed our loan documents; put together our loan committees; established our underwriting criteria; and established an advisory board. At this point we are pretty much just waiting to hear back from our fiscal sponsor so that we can use their 501(c)3 status to allow people to write off donations to us until such time as we are able to achieve that status on our own (it can take up to half a year for the IRS to process the paperwork).

The Capital Good Group recently held a charette to discuss the various ways in which it is working to consult on and finance energy-efficiency and renewable energy. We had some brilliant people attend the meeting, and as a result we are armed with a ton of new ideas, fresh perspectives, and motivation to move forward. Especially now that we have an ally in the White House, we feel we are in the right place, at the right time, working on the right idea.

More updates to come as both the Fund and the Group make progress!