Interview with Kurt Hoffman, Part IV
This post is part 4 of a 5 part series.
A.H: Why start these funds? What were your motivations?
K.H.: The Foundation was designed to focus on social issues that relate to Shell’s business; namely, energy and the environment, and energy and poverty. Both Chris West (Deputy Director) and I have development backgrounds, so we were both naturally inclined to look at some of the more fundamental needs.
Two billion people don?t have adequate access to energy or water, and there is not a sufficient public sector driver to meet the needs. The only answer is a market-based solution. Shell managers knew of many local banks with money to lend, but the banks had doubts about the abilities of local SMEs to pay. The problem was lack of proper risk assessment. There were lots of local companies who wanted to be a Shell supplier, but they could not get financing to scale their operations. So we got the idea: don?t try to help by putting in loan guarantees–instead use Shell’s ?muscle? and expertise.
A.H.: So your insights came from local Shell managers who saw the problems and opportunities everyday?
K.H.: That’s right, that and from Shell’s core knowledge from working in these markets. Management had knowledge, and we learned from our colleagues on the ground, and that’s how we arrived at the Fund. We were also struck by the fact that the local managers had more business savvy in their little finger than any of the NGOs. Which isn?t to say that local NGOs don?t have a role–they do. But we decided to stick closely to those that have private sector experience. And we never let anyone but the SME do the business plan–they have to own it.