December 20

Scott Anderson

Practical Progress Via the ’Opportunity Collaboration’

Recently, I had a chance to chat with Jonathan C. Lewis, the founder and CEO of the Opportunity Collaboration, an intentionally diverse community of 300 social investors and entrepreneurs which for the last two years have met on World Poverty Day. As Lewis explains, the design of this gathering, which completed its second meeting in October, is altogether different than many other conferences. Lewis also is the founder of MicroCredit Enterprises, which finances $20 million worth of microloans for impoverished entrepreneurs across 15 nations on four continents. In addition, Lewis blogs regularly at the Huffington Post. What is the Opportunity Collaboration?

Lewis: The core idea is to create a platform, a gathering if you will, for the leadership of the anti-poverty movement to talk about and actualize opportunities to work outside traditional silos. Hence, get the water people to talk to the health people, encourage the microfinance people to talk to the education people, the for-profit social enterprises to talk to the nonprofits; and to uncover where we can work more efficiently, with greater impact and with more – to use the term of art – collaboratively. That’s basically it. We realized that you do business with people you trust. So the Opportunity Collaboration is a very business-like meeting. No plenary speakers, no formal panels, no PowerPoints. Instead, delegates get together in small work groups to explore partnership opportunities in very concrete, nitty-gritty ways. In four days a delegate can have multiple and deep conversations with the same person or organization to assess policy alignment, mission chemistry and intra-personal chemistry to move an agenda forward. Have you witnessed some solid partnerships generated from the first two OC events you’ve completed?

Lewis: Absolutely. Three or four nonprofits started merger talks, an investment fund raised three to four million dollars, grant makers discovered that they could collaborate in their funding, board members were placed, nonprofits linked up with overseas community groups. The assumption is every delegate is doing high-quality work. It is a vetted meeting; you can’t just show up with a check. So, the general assumption is every delegate is working very hard — tough-minded, under-resourced and serious people. The intent is to help them advance their particular vision or mission — not create yet another organization, yet another report or yet another theoretical analysis. Was the OC borne out of the fatigue that goes with attending too many conferences with too little impact?

Lewis: I do think at some point leaders get conferenced out. Why does everyone go to conferences? They don’t go to get more information or grand ideas, and they don’t go for a pep rally. They attend for the networking, which is just fancy business school talk for meeting and identifying the people and organizations with whom you want to work. The Opportunity Collaboration is a meeting aimed at encouraging anti-poverty leaders to think strategically, as well as tactically, about what their institutional needs, how their mission values are played out through their organizational work and how they can accomplish more.

The key advice is: ’Don’t tell people about your organization, ask how you can helptheirs.’ This simple directive, when followed, results in terrific moments of new energy and new resources and, yes, new collaborations. What are two or three trends you’re seeing over the last few years that are having a significant impact on poverty reduction?

Lewis: In microfinance, the single most important trend is moving away from the idea that microfinance is only about financial inclusion and financial products. Instead, microfinance is being combined with social services. Microfinance is and can be the delivery channel for health care, social services, anti-malaria bed nets, whatever. While not a new policy initiative, this is pivotally important. The concept has been overshadowed of late, but it’s returning as best practices for microfinance.

Second, funding and innovations for small and medium-sized businesses under the leadership of DC-based ANDE is producing truly promising results. Root Capital is probably the best example — providing business loans and technical assistance plus opening up global markets in support of their funded companies in the developing world.

Third, really exciting to me are projects targeted to communities below the poverty levels served by even microfinance — people who are so desperately poor that what they need is community based organizations at the grassroots level to provide economic development grants and innovative, low-risk financial services. Trickle Up, the Firelight Foundation, Oxfam’s Saving for Change, Freedom from Hunger are pioneers. With the creation of MicroCredit Enterprises, you were one of the pioneers in the microfinance sector. What are some of the takeaways from the recent microcredit crisis in Andhra Pradesh?

Lewis: (The crisis) again reminds us that microfinance standing alone is not best practices. Microfinance combined with education, healthcare, social services, financial literacy training, etc., is. Poverty is a multi-disciplinary problem, so it needs multi-disciplinary solutions. We need to be careful not to turn the poor into more profitable chattel which is the danger if you do financial services without education and other life-enhancing services. It sounds a lot like the “moral hazard” situation we experienced in the U.S. with the mortgage/housing crisis.

Lewis: Exactly. The parallels are shockingly similar, although I think the fundamental difference is that microfinance is not led by bad actors. No one starts a microfinance program to screw the poor. The leadership is motivated by a desire to alleviate poverty. Because the implementation went awry is a reason to learn and correct, not to point the finger. Is that where you see the tension right now? Between, say, the Muhammad Yunuses and Vikram Akulas of the world?

Lewis: I think I they both, to make their point, can sound dogmatic. Vikram promotes a market fundamentalism that believes on faith that the market will self-correct abuses as it deploys private capital to scale up microfinance programs. I think this view is terribly naive. Competition can drive great innovation, price reductions and better service. It can also be a race to the bottom, ignoring externalities, consumers and the larger public interest.

Yunus’s fundamental argument is that historically for-profit enterprises have not worked on behalf of the poor and that it is very difficult to serve two masters: shareholders and consumers. I think there’s a lot of evidence to support his viewpoint. But his solution, I think, is also a little naïve. With so many poor people at the edge of the formal economy, I think we need a lot more experimentation and that’s the spirit in which I view the recent microfinance IPOs.

I think the watchword is business ethics. The example is bottled water. In the USA private bottled water companies distribute through markets that are privately owned; and they sell water at a gas station outlets that is more expensive than the gas I buy for my car. We can all accept that this vital commodity is readily available and privately distributed at whatever price the market will bear. That’s ethically different than predatory pricing bottled water sold to Katrina victims the day after a hurricane and flood. The free market means you have free choice to do the right thing, as an informed consumer and as an informed investor. For example, I don’t buy rugs that aren’t certified by Good Weave because I don’t want to walk on a carpet that a 10-year-old slave-child knotted in a cave in Nepal. The same ethical issues apply to investors.

Impact Assessment
microfinance, poverty alleviation, social impact