How Microfinance Transformed a Filipino Mountain Village

How Microfinance Transformed a Filipino Mountain Village

March 9th, 2013   by Roger Alford

http://opiniojuris.org/2013/03/09/how-microfinance-transformed-a-filipino-mountain-village/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+opiniojurisfeed+%28Opinio+Juris%29

“Three years ago I could never have dreamed that we would be selling our tomatoes directly to the restaurants in Manila,” said Johnny Rola. Just a few years ago the poor farmers in this mountain village in northern Philippines had little hope. They would grow a few staple crops and sell it at the local farmers market. They were at the whim of the spot market prices set by the local wholesalers at the village below the mountain, and were struggling to survive.

Three years ago they were approached by a local microfinance institution, Gulf Bank in Lingayen, about the possibility of selling their produce directly to the Jollibee restaurant chain in Manila, a major food outlet in the Philippines. The major banks won’t lend to the local farmers who have no credit history, collateral, or crop insurance. But microfinance institutions are now filling the gap. In partnership with the National Livelihood Development Corporation, a Philippine government entity, many farmers today have access to microcredit. For someone like Johnny Rola, this development is a godsend. “I’ve been a farmer for thirty years,” said Rola, “and the past three years have been the best years of my life.”

In 2011 Rola joined with forty other local farmers to establish the Sitio Mapita High Value Crop Growers Association as a farming collective. Gulf Bank now loans Sitio Mapita money to buy seeds and fertilizer, and the farmers sell their produce directly to Jollibee restaurants. At harvest time, the farmers deliver the produce to the restaurant chain at a guaranteed price, and Jollibee repays the Gulf Bank microloan and deposits the profits to Sitio Mapita’s savings account.

Together with Catholic Relief Services, Gulf Bank is training the farmers of Sitio Mapita how to transform themselves from poor farmers to budding entrepreneurs. These indigenous farmers have no electricity and no running water. To communicate with the outside world they walk thirty minutes up the mountain to get cell phone reception. So I was amazed when I arrived at the village meeting hall to find spreadsheets with handwritten monthly commodities prices, balance sheets, revenue projections, and production targets posted on the walls on large brown sheets of paper. These farmers have a business plan and big dreams.

“At sunset we used to go to sleep,” said Margarita Rola. “Now we are planning for the future.” They plan to use their profits to improve their lives in ways we take for granted. They dream of electricity, better irrigation, refrigerated trucks, even a high school for their children, who today must choose between becoming farmers after sixth grade or, for the lucky ones, boarding at a high school in a nearby town.

I’m in the Philippines as part of Notre Dame’s award-winning business school class entitled,Business on the Front Lines. The class has around thirty business, law, and peace studies students who focus for a semester on four specific case studies of social entrepreneurship. After weeks of study, the students travel during spring break to the countries and do field analysis. I’m here with six students, and there are three other teams right now in Nicaragua, Rwanda, and Sierra Leone. You can read about their exploits here. We work with Catholic Relief Services, which is one of the largest relief agencies in the world. The goal is not simply education. We are conducting due diligence to recommend how millions in venture philanthropy can best be utilized.

As we toured the farms, one could feel the pride these farmers felt at what they had accomplished in just three years. Graduate students from the United States were coming to study what these poor farmers were doing to see if their business model might be replicated elsewhere.

The success of farming collectives like Sitio Mapita has garnered attention around the Philippines. Other farmers want in on the action, relishing the idea of microfinance providing a way to reach institutional buyers. Major corporations are taking notice too. Next month Sitio Mapita will contract with Rocky Mountain Coffee to begin growing coffee for sale throughout the Philippines. Coffee has a four-year growing cycle and the start-up costs are large by their standards, so it is a major development in their lives.

The proudest moment of Johnny Rola’s life was when he went to Manila last year and spoke to an audience of one hundred bankers, farmers, and politicians. “I even shook hands with a senator,” he beamed. When I asked him if he went to a Jollibee restaurant in Manila to try one of the hamburgers with his tomatoes in it, he said with a big grin, “Yes! It was quite good.”

Re-Thinking Social Responsibility - corporate citizenship

Re-Thinking Social Responsibility

http://www.forbes.com/2008/01/25/davos-corporate-responsibility-lead-cx_pm_0125notes.html

Paul Maidment, 01.25.08

Notes On The News With Paul Maidment

The definition of a company and its involvement in wider society is expanding, as is the expectations of shareholders, employees and consumers. Traditional corporate social responsibility is starting to be replaced with a new notion of corporate citizenship, which for larger companies means global corporate citizenship.

The social and corporate agenda is being integrated, and often involves partnership with other companies, government and nongovernmental organizations--which is a challenge to those who hold to the traditional narrow economic definition of a company as an entity that is meant to maximize profits for shareholders.

John Chambers, chief executive of Cisco Systems (nasdaq: CSCO - news - people ) and a poster child for corporate citizenship through Cisco's backing of the training of hundreds of thousands of engineers a year in developing economies, has no truck with that point of view. "The most successful in life have an obligation to give back. And it is not just the right thing to do; it is just plain good business," he says.

Four of the high-tech companies most involved in corporate citizenship, his own, Google (nasdaq: GOOG - news - people ), Microsoft (nasdaq: MSFT - news - people ) and Intel (nasdaq: INTC - news - people ), are four of the five most valuable companies, Chambers says.

On Thursday, at the World Economic Forum meeting here in Davos, Microsoft Chairman Bill Gates, in launching his campaign for creative capitalism, pointed out that companies are doing a lot for society's benefit, but much of it has little impact.

Peter Sands, group chief executive of Standard Chartered (other-otc: SCBEF.PK - news - people ), which operates widely in the developing world, offers four benchmarks against which companies can judge which corporate citizenship projects to get involved with. They should be relevant to the markets a company operates in; leverage a company's competencies and infrastructure; have the potential to extend existing business lines or become a new business; and offer an opportunity to make a distinctive impact.

Sands' bank's commitment to making $500 million available for microfinance passes his four tests, as does its support for a program tackling preventable blindness, a project undertaken in partnership with nongovernmental organizations.

"A lot of social issues have to be done in partnership with governments," says PepsiCo (nyse: PEP - news - people ) Chairman and Chief Executive Indra Nooyi, who has made corporate citizenship a part of her company in the past year. "If societies succeed, companies succeed. We all act in enlightened self-interest, so it is critically important that partnerships work."

But governments, she says, have to accept that companies are a force for good in society, both commercially and morally. The same, too, applies to nongovernmental organizations, which are often even more suspicious of business.

Governments, for their part, are becoming more aware of their limitations, a point made with disarming honesty by U.K. Prime Minister Gordon Brown. He has been a champion of the Millennium Development Goals, intended to improve the living standards of the world's poorest people, goals Brown said Friday would not be met buy the target date of 2015 unless the effort was redoubled. Those goals won't be met, he says, "unless there is a private, voluntary sector and government partnerships."

In areas like the environment, "governments have to understand they have to make it possible for companies to effect change," he says.

That will involve incentives such as tax breaks, but also an understanding that governments at times need to let go and to see companies as providers not just of resources but also resourcefulness.

Turning good intentions into success from a company's point of view is no easy matter. PepsiCo's Nooyi says it is essential to get the whole company committed to the cause. Cisco's Chambers says one of the big reasons his company gives is that his employees want it to. Cisco wins awards for being one of the best companies to work for, which helps with staff retention, he adds.

Chambers also points to the need for long-term commitment and says private-public partnerships are essential so there is a holistic approach. It is no use training engineers unless there are economic policies that create the jobs for them to go to.

Cisco and PepsiCo are still in the minority of companies that see corporate citizenship as core to their business. But consumers are increasingly demanding that companies produce environmentally friendly products and show a sensitivity to other issues such as education or labor conditions.

Witness ProductRed, a scheme founded by U2's Bono and philanthropist Bobby Shriver, in which a group of companies such as Motorola (nyse: MOT - news - people ), the Gap (nyse: GPS - news - people ) and now Dell (nasdaq: DELL - news - people ) (see "Dispatches From Davos") donate a portion of the sales of certain products to help fund AIDS research in Africa. Gates says the scheme has generated $50 million for that cause.

The biggest contribution that companies make to society is by being a good company, serving customers and creating value, says Standard Chartered's Sands. But the sweet spot, he adds, is to do all that and help address the big issues.

He quotes the billions of financing and advisory services his bank is making available in Africa, Asia and the Middle East for research and development of clean and renewable energy. "I make no apology--we fully intend to make lots of money out of doing his," he says. "But it is a way we can play our role in addressing the issues of climate change."

making sense of Benefit Corporations, L3Cs, B Corporations

Benefit Corporations, L3Cs and All the Rest: Making Sense of Those Confusing Choices

http://www.forbes.com/sites/annefield/2012/05/25/benefit-corporations-l3cs-and-all-the-rest-making-sense-of-those-confusing-choices/

Anne Field, Contributor   5/25/2012

With Illinois and Louisiana poised to become the next states to adopt Benefit Corporation legislation, it’s time to take a step back and look at the confusing array of legal forms out there available to socially-minded companies.

And the landscape certainly is confusing.

Start with Benefit Corporations.  It’s a new class of corporation, pioneered by the Berwyn, Pa-based nonprofit B Lab (more about them soon), officially the law in seven states. It mandates that companies and their boards take into account public benefits that impact society and the environment when making decisions.

These companies also have to issue an annual report about just how they’re doing in addressing their social and environmental goals, audited by a third party.

The goal is to give companies legal protection to take certain steps that benefit their non-financial objectives, even if it’s not so good for the bottom line. And for shareholders, it ensures that companies won’t drift from their non money-making mission.

Flexible Purpose Corporations.  This one is only the law in California, which also allows for Benefit Corporations. They were passed in October.

Flexible Purpose Corporations, unlike the Benefit variety, don’t have to meet general public benefits. Instead, they can specify at least one “special purpose”–addressing environmental sustainability, for example, or building a park. So the social focus is a lot more narrowly defined than it is with Benefit Corporations.

Ultimately, the Flexible Purpose is designed for larger, more traditional companies that want to consider matters other than the financial bottom line, but aren’t “mission driven at their core,” according to Heather Van Dusen, a senior associate at B Lab.

Maryland Benefit LLC. In addition to allowing for Benefit Corporations, Maryland also permits companies to do the same thing but as a Limited Liability Company. That way, businesses already registered as LLCs don’t have to convert over to a corporate structure.

L3Cs. They’re low-profit limited liability companies with a charitable or educational purpose. (I recently wrote about them).  There are about 600 such companies in nine states.

Proponents created L3Cs to be entities that can be treated as Program Related Investments (PRIs) by foundations. By law, foundations have to direct 5% of their assets to charitable purposes every year.  They can do that through PRIs, as long as the organization they’re investing in has a charitable or educational purpose and doesn’t include making a profit as a significant goal. Plus, for-profit investors can put money into an L3C and, as a result, companies potentially can attract considerably more funding.

Foundations have been slow to adopt PRIs. But, with new rulings from the IRS, that could change soon.

B Corporations.  This isn’t a corporate structure, even though that word is in the name.  It’s a certification from B Lab, which rates triple-bottom-line companies. (Think of Fair Trade USA, which certifies Fair Trade companies). Started in 2007, there are now 530 such businesses.  Ratings cover five areas–society, environment, employees and so on–with 130 to 180 factors depending on company size and industry. Businesses have to score over 80 out of a total of 200 points. There also are unannounced audits of about 10% of all certified companies every year.

There you go.

Of course, there’s a long ways to go before, say, the Benefit Corporation is adopted by many, if not most, states.  But it’s kind of amazing that in a relatively short time, so many choices have become available

Big Ideas for 2010 - ways to finance social ventures; local capital markets

Big Ideas for 2010

http://www.businessweek.com/smallbiz/running_small_business/archives/2009/12/big_ideas_for_2.html

Posted by: John Tozzi on December 31, 2009

What big ideas will change small business and entrepreneurship in 2010?

I’ll start with two that are on my radar.

New ways to finance social ventures.  Right now profit-making enterprises that also have social and environmental goals don’t neatly fit into existing legal structures like corporations or nonprofits. That limits how they can raise money. People are working to create a new corporate form for hybrid social ventures (see this briefing from B-Corp). That could unlock new capital — think of assets in philanthropic and university endowments — for social enterprises.

Local capital markets.  Speaking of unlocking new sources of capital, people are looking for ways to easily invest in local businesses. It’s a natural extension of the “buy local” and “eat local” movements. The nascent Slow Money movement wants to develop vehicles to invest in local food enterprises. Others are floating new types of financial instruments or the return of local stock exchanges. The point is right now you can easily invest a portion of your retirement savings into a diverse mix of global companies, but you can’t use the same savings to capitalize local businesses in your city. Changing that would open a huge new source of capital to small businesses.

What big ideas are you tracking?

The VisionSpring Model: Creating Markets And Players Instead Of Empty CSR

http://www.forbes.com/sites/ashoka/2012/10/05/the-visionspring-model-creating-markets-and-players-instead-of-empty-csr/

The VisionSpring Model: Creating Markets And Players Instead Of Empty CSR

Laura Zax, 10/05/2012

A talk with Dr. Jordan Kassalow about the field of social enterprise—how far it has come, where it’s gone astray, and where it’s headed.

http://www.visionspring.org/home/home.php

Earlier this month, the Schwab Foundation announced its 2012 “class” of outstanding social entrepreneurs. Among them was Dr. Jordan Kassalow, the founder of an organization called VisionSpring that works to ensure that everyone in the developing world has access to eyeglasses. Part of the VisionSpring strategy is to equip local people – identified as Vision Entrepreneurs – with the tools they need to create businesses that generate jobs while addressing an important health need.

It’s perhaps no surprise that Kassalow’s organization was the breeding ground for another disrupter in the world of optics, Neil Blumenthal. Blumenthal, who started his career with VisionSpring, is the co-founder of Warby Parker. You may have heard of the company. After all, it’s the talk of both the fashion and business worlds: a company proving that hip eyewear can be affordable and can change the world for the better. For every pair of glasses sold, Warby Parker funds the production of a pair of eyeglasses for VisionSpring, which VisionSpring in turn sells either directly to Base of the Pyramid (BoP) consumers or to vision entrepreneurs.

How is what you’re doing with Warby Parker different from traditional Corporate Social Responsibility (CSR)?

- One thing that’s kind of unique is that the founder of Warby Parker worked at VisionSpring for 5 years. During this time he really saw firsthand the power of using markets to effect change. So, Neil’s desire to create a company that is a force for good is rooted in his personal experience and deeply authentic. Also Warby is taking the one-for-one model further than others, in that most one-for-ones are using donations to get glasses and shoes out there, whereas Warby Parker has bought into the VisionSpring model: this is about creating markets and helping local markets to function.

What’s wrong with the donation model—“you buy one, we give one”—of social enterprise?

- The donation model is the tried and true model people understand. But it has clear limitations. Let’s use eyeglasses as an example: glasses that are donated often don’t match the needs of the consumer and so the uptake and usage is less than optimal.

Earlier in my career, when I worked with donation-based organizations, I literally had people who were blind hand back glasses to us because they felt those particular glasses made them look ridiculous; there was ridicule culturally. If you’re just giving something away, you don’t have the market as a mechanism to determine whether or not the consumer really wants your product, whereas when you ask the consumer to pay, you know clearly where that person places value.

Also, if you don’t develop the capacity of local communities to devise their own ongoing enterprises that provide glasses or shoes or other needed products, then as soon as the company that is donating these products goes away, the products go away as well. By creating a company that’s more locally owned and market driven, you increase the chance of having the solution embedded sustainably in the community.

A very trendy friend of mine recently looked at herself in the mirror and found she was wearing a pair of TOMS and a pair of Warby Parker glasses. Social change is getting trendier – is there anything to worry about there?

- The [social enterprise] space is going to get more crowded, and there’s going to be a battle for the consumer in every category. If you’re getting a whole bunch of noise and a whole bunch of players, some are just going to be doing it to capture the consumer, who might not have a good enough sense of smell in terms of sniffing out authenticity versus marketing exploitation. Then it could end up being a trend for trends’ sake.

B Corporations, companies certified to meet rigorous social responsibility standards, could play a role here.

- Absolutely. It’s like a LEED stamp of approval for buildings. People will see that B mark and will understand what that represents.

Will B corporations make non-profits go “out of business,” so to speak?
- No, I don’t think so. There are so many problems that don’t really have a market-based solution. What will be harder is for organizations that have for-profit potential or market potential to live in the no man’s land of non-profit social enterprise for ten or twenty years. Product-based social enterprises will have a harder time attracting long term philanthropic capital unless they are on a strong pathway to cost coverage.

What does social enterprise look like in ten years?

- Extremely bright, but there will be more scrutiny. Bright because social entrepreneurship is burgeoning and attracting some of the brightest young people to the field. The next ten years are critical however because it will be a time when more mature social enterprises with revenue models like VisionSpring will have to prove that social enterprises are scalable and able to wean themselves off philanthropic capital. Unless social enterprises develop balance sheets that are robust enough to attract Impact Investments or true commercial capital, they will always remain small.