Never has it been easier to anonymously do harm to people and the planet: environmentally or socially-damaging products can be purchased with the click of a button or tap of a screen from the comfort of our home, car, or […]
Mission Versus Business
Here’s a fundamental challenge in our business: the greater the alignment between our lending and our mission, the greater the strain on our loan portfolio performance. Phrased another way, the highest impact loans–those to ex-offenders, domestic violence survivors, and the temporarily homeless– are also the riskiest. This is through no fault of their own; rather, it’s simply a result of the tremendous strain that personal and financial instability places on a person.
As a nonprofit, it is incumbent on us that we adhere to our mission, which is to use financial services to create pathways out of poverty. Yet as a business, especially as one that debt finances its lending operations, we must also ensure that we are fiscally sound. To address this tension, we’ve taken several approaches. First and foremost, the interest rates we charge are designed to compensate for higher losses
The Power of Live Theatre (yes, I prefer the British spelling!)
Growing up I was privileged in many ways, one of them being the number of plays, musicals, and concerts I had the opportunity to see. I distinctly remember dressing up for the show, the architecture of the theatres, the voices and movements of the actors. Several theatrical experiences stand out as seminal moments in my development as a person in general and a writer and poet in particular. For instance, a number of years ago my parents and I went to see The Glass Menagerie at a small playhouse in Burbank, CA. The play, which is a masterpiece, came to life thanks to absolutely brilliant acting; when the curtain finally came down I was transfixed.
Live theatre, when done well, can be a transformational experience. It opens the mind, stirs the soul, and awakens the senses. In short, it can play a critical role in a person’s life–making them more cultured, thoughtful and self-aware. Unfortunately, as I’ve grown older and become more involved in fighting poverty and injustice, I’ve found myself increasingly concerned that all too often the arts are by the rich, about the rich, and for the rich.
“We are tied together in the single garment of destiny, caught in an inescapable network of mutuality. And whatever affects one directly affects all indirectly.” – Martin Luther King, Jr.
The thesis of this post is simple and, I hope, provocative: that if you care deeply about a particular social or environmental issue, then you must at least be familiar with many other social or environmental issues. This is due to the increasingly unavoidable link between seemingly disparate challenges, be they economic growth and climate change, health care spending and hunger, or defense spending and education.
I was inspired to write this after reading a phenomenal article in the most recent edition of Time. The article, titled ‘Bitter Pill: Why Medical Bills Are Killing Us,’ is one of the best pieces of journalism I’ve read in a while. But more importantly, it highlights the fact that the way in which medical products and services–hospital stays, prescription medications, etc.–are priced is egregiously, if not criminally, disconnected from the cost of providing them. In fact, the content of the article is so galling that I found myself unable to read it more than a few paragraphs at a time before my stomach would begin churning and I had to take a break.
I decided to start Capital Good Fund (CGF) in response to the 2008 financial collapse because I feel that, in the face of calamity, it is far better to take action than to lament. From day one–indeed, from the time I moved to Providence, RI for a masters program in environmental studies at Brown–my interest has been the intersection of poverty and the environment (my masters thesis deals with this very topic–you can check it out here). Why? Because it turns out that the poor bear the brunt of environmental destruction. Consider this: low-income Americans spend 17% of their income on energy, compared to 4% for the rest of the population. This makes them far more vulnerable to energy price volatility. At the same time, low-income families are more likely to live in neighborhoods with poor indoor and outdoor air quality. What’s more, by virtue of more often living in low-lying areas, they are more vulnerable to the effects of climate change (something Hurricane Katrina clearly demonstrated) and less able to evacuate from and rebuild after a storm.
Unfortunately, for the first couple of years as Executive Director of CGF, I’ve had to focus my efforts on the more immediate challenges of fundraising, building infrastructure, developing policies and procedures, and so on. In addition, I’ve had to accept that just tackling poverty is hard enough without incorporating an environmental justice component. That said, I never gave up on the idea of using equitable financing in order to tackle poverty and redress environmental degradation.
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.
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 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.
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.
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.