We’ve all recently heard the “dangers of leverage” – housing crisis, debt crisis, derivative losses – when it multiplies risk. But it’s also important to understand the power of personal leverage, which enables each of us to maximize our impact for good in the world.
Leverage allows you to take a small action that multiplies itself over and over, so your action can create a large positive effect in the world. It’s dear to me because it makes nonprofit microfinance work, it makes Soap Hope work, and it makes the Good Returns social business model work. Leverage will create the scale we need to solve the world’s greatest problems.
AlSol is a microfinance institution in Chiapas, the state in Mexico with the deepest level of poverty today. When AlSol provides a $50 loan to a woman and helps her start a business we see leverage operating at every level. The woman who receives the loan gets a permanent investment in her well-being. Unlike charity organizations, AlSol doesn’t give its clients food or money or clothing. Instead it gives them knowledge, confidence, skills and loan capital to start a business. AlSol uses leverage: it creates a lifelong change for its client, not just one-time help.
The $50 loan has its own leverage. As AlSol’s client becomes successful the loan is repaid. The $50 can be loaned to another woman who will also repay it. Over ten years the $50 loan will help twenty different women. A $50 gift would have helped only one.
AlSol as an institution creates leverage through the entire world of sustainable nonprofit initiatives. It shares its best practices and its lessons learned with other institutions. As it succeeds, other groups learn from its model and grow faster. Other people become inspired to start their own similar institutions around the world.
It’s because of this kind of leverage at every level that my social business Soap Hope chooses to invest in AlSol. Our own model provides leverage too. Soap Hope’s model of Good Returns, where every dollar of profit spends one year interest-free in sustainable non-profit partners, is designed to scale to thousands of businesses, creating billions of dollars of capital to solve the world’s most pressing problems.
It’s important to remember the power of your own personal leverage. As you make your every day choices in life, notice which ones will multiply many times over for the good of yourself, your family, your community, and your world.
Founder, Soap Hope