Stand-Up

Everyone knows the classic joke about the man who complains, “Doctor, it hurts when I do this,” and the doctor says, “Well don’t do that.”

Think about it for a second – why is that funny to us?

The doctor’s advice is actually completely practical. But we all understand the doctor is ignoring the actual problem, and that makes it funny.

So – have you heard the one about the poor villager and the cause marketing business? The villager says, “We have no opportunity.” The business says, “Here, have these shoes.”

This time, it’s not funny. Not only is the problem being ignored, the prescription is creating side effects.

The reason people are without shoes is because they are in poverty. Shoelessness is, “Doctor, it hurts when I do this.” Dumping shoes on the problem is, “Don’t do that.” A real doctor – and a real social entrepreneur – will spend time to understand the root cause, and work with the patient to cure the condition.

Social entrepreneurs have a natural impulse to help others. But when you take large-scale actions, it’s important to look at the side effects of your activity.

What are the side effects when you give away masses of shoes in a poor area?

– What happens to the people who make shoes in the region? What about the people who make the leather or fabric for them? The people who bring them to the village to sell?

– What happens to a child when she wears shoes for six months and then outgrows them, and there is no replacement?

– If only half the children in a village receive free shoes, what is the impact on the other half?

Real, sustainable solutions to poverty focus on empowerment – which in practice means information and access to basic resources. If a social entrepreneur wants to make a healthy impact, she focuses on sustainable ways to increase access to water, nutrition, education, healthcare, capital, employment, and legal rights – the necessary foundations for sustainable prosperity. A family with access to these foundations will buy their own shoes – the right shoes for them, at the right time for them.

It’s important to follow our impulse to help others. It’s also important to be wise about how we go about providing that help. To address the right problems. To use tools of empowerment, so that those in the grip of poverty can stand up their own lives and their own communities. No joke.

Heroes

Professor Muhammad Yunus

Most entrepreneurs, myself included, are independent spirits.

The “independent” part has always been a big piece of my personality. I’ve never aspired to be “like” someone, and when those stock interview questions show up I’ve always cringed at the one that asks “Who is your hero?”

That is, until 3 years ago.

Three years ago, I found myself with heroes, and someone I want to be like.

In 2010, I heard Professor Muhammad Yunus speak about humanity. He spoke extemporaneously for 45 minutes, sharing first hand stories of mothers and daughters whose lives had been transformed through education and opportunity; a vision for the end of the man-made condition of poverty; a call to action to all people to end the unacceptable suffering in our worldwide community.

It was the first time I ever had the thought, “I want to be like him.”

Yohaustria Pena, Hero

That same year, I went to the Dominican Republic and to Chiapas to see the work of poverty-ending microfinance institutions in the field. I saw for myself the bravery of women standing up against cultural oppression; taking steps that no woman in the history of her family had ever taken before so that her children could go to school; finding the right balance between personal initiative and working as a community; taking risks and succeeding with so little capital and time that they put entrepreneurs like me to shame. I found my heroes.

When I first started Soap Hope, my intention was to create a strong example of social entrepreneurship so that we could make a huge impact in ending poverty, both with our own company and through others adopting the model and learnings that came out of Soap Hope. And while Soap Hope did grow again for the third year in a row, and we did fund over 10,000 days of microlending for women entrepreneurs this year, most days my vision for Soap Hope still seems distant and fragile to me.

As if on cue, this week a friend sent me a video about social entrepreneurs, and when I clicked play I heard the unmistakable compassionate voice of Professor Yunus – there once again to motivate and inspire. Every time I hear his voice, I hear my calling. And when I go inside and ask what I’m to do, Soap Hope always is the answer I see.

When someone buys one bar of soap from us, it funds one day of microlending for a woman. So I say, “A bar of soap is a day of hope.” This spring, I’m starting a new initiative at Soap Hope called “One Million Days of Hope” – to fund one million days of microlending through sales and partnerships with other companies and organizations.

Everywhere Professor Yunus goes, he looks for ways to create partnerships with people, companies, and institutions small and large, to further his vision of ending poverty in our world. Yes, I want to be like him. So I will do the same.

One million days of hope would mean 100 times the impact we had last year. It would provide tools and opportunity to thousands of the women who have become my heroes. That’s not something I can do alone. You’ll surely hear me ask you for ideas and action, partnership and participation.

Watch for #onemilliondays. Think about how we can partner together. Expect a call from an independent spirit.

Solving The Puzzle

Jenny is VP of marketing at a $150 million company. Each year for the last three years, her CEO has given the senior team a set of measurable goals. They get a huge bonus when they meet the goals. Every year they’ve met them.

Some of this year’s key goals:

– $30 million in new revenue.
– Double the number of small-business customers.
– Do this without impacting profitability.

Jenny is confident she will meet the goals this year.

And that’s how I know the people in Jenny’s company are passing up a huge opportunity to improve our world.

Huh?

That’s right. Follow me:

Jenny’s company has a simple but powerful formula for financial success that works every year:

– The CEO sets goals that are easy to measure (all numbers).
– He fully empowers his team.
– He pays them a big bonus when they succeed.

The goals are like a puzzle – they only fit together in certain ways, and when the team solves the puzzle they get a big reward. They bring all the creativity and hard work necessary to solve the puzzle.

Last year’s puzzle included, “Do this without impacting profitability.” It would be easy for Jenny to generate the new revenue by lowering prices, or running a massive ad campaign. But the puzzle is harder than that: she has to find ways to reach new customers without spending too much or lowering margins.

Remember, Jenny told me she is confident she will reach her goal. She’s done it three times before. The team has already come up with multiple creative ways to go after new customers.

Now, here’s where Jenny and everyone else in her company is missing an enormous human opportunity.

Jenny’s company will make no measurable impact on any of the biggest challenges in our world: poverty, clean water, clean energy, conflict, education, disease. The company has no social focus at all.

Why? Because there’s no social impact goal tied to their bonus. It’s not a part of the puzzle. Jenny won’t spend any time on it. None of the team’s creative potential will go toward it.

My critic says, “But Salah, it’s not the role of a business to solve social problems. Whatever energy they would use to solve social problems could be used to make more money, which is the purpose of the business. You’re just making the business less effective by injecting extraneous requirements.”

That’s a fallacy that is preventing us from using the vast human capacity in businesses from making big strides toward solving our world’s greatest challenges.

Let me show you how:

Give Jenny this extra goal: “Reduce the number of children who are hungry every day next year by 1,000.” The last part of the CEO’s puzzle is still, “do this without impacting profitability.” Jenny can’t just donate a million dollars to meet the childhood hunger goal, any more than she could just lower prices to meet the sales goal.

The worst possible way to meet this goal is to figure out how to earn more money as a company and then donate the money to organizations that feed children. That will cost over a million dollars. If that were the only way to solve the problem, I would have to agree with my critic.

But that’s not how Jenny is going to solve this puzzle.

Jenny is going to develop creative solutions that integrate the goals – just as you would approach traditional company goals. She will use the social goal as a tool to help meet the financial goals, and use the financial goals as leverage points to meet the social goal.

She might use the requirement about childhood hunger to create new opportunities and tactics for marketing and selling. She might bring opportunity to customers and vendors around the childhood hunger goal that result in a financial benefit. If Jenny is effective, her team will develop a strategy that doesn’t treat the social goal as separate, something outside the main plan, something to figure out at the end. She will use the social goal to help solve the total puzzle.

If Jenny’s CEO will create a social goal that is measurable and clear, and make the team’s bonus dependent on it, he will find what I and other social entrepreneurs have found in our own business experience:

– Brilliant new creative marketing ideas arise from the team.
– New partnership opportunities emerge.
– New dimensions for business appear with customers and vendors.
– A new kind of passion and creativity ignites inside the organization as employees start to see that their work every day is human, not just financial.

Every day millions of people go to work to solve the puzzles presented to them by their company leaders. And almost none of those puzzles include working on the most important problems in our world, because leaders have made the mistake of thinking that the social goal will diminish the business results. That’s an error, and it’s leaving an enormous amount of positive social change on the table.

I challenge every company leader to try this experiment. At your next goal-setting time, add one measurable social goal to your puzzle. Give it teeth: make it as important to the bonus as everything else. Make it impactful: work on the most critical social problem you can. Help your team understand that this goal isn’t a tactic – it’s not a corporate sponsorship donation or a volunteer day. It’s to be integrated into the plan and leveraged, just like the financial and operational goals are.

See the results for yourself. You will never go back, and your whole business will become a part of solving the real puzzle: how our society will cooperate to address the greatest challenges in our world.

Stop Talking About The Poor

• “I’m looking at the best models out there for using business to solve social problems.”
• “This is so hard – I’ve been looking for the right organization to work with for almost a year. I don’t want to waste my time working on something that won’t really make a difference.”
• “One day, I hope to get involved in ending poverty, so I’m studying as much as I can today.”

These are a few of the things I’ve been told by people in the last month who have e-mailed and called because they are passionate about social entrepreneurship and microfinance.

I hate to be the one to break it to them, but talking with other people about helping the poor does not help the poor. While you are talking, they are still hungry.

If you want to discover the best model for combining business and social problems, the very first thing you should do is start a business to solve social problems, or go work for one – right now. Then you will learn what is really involved in a social enterprise. I can tell you from experience, you will be throwing out almost all the ideas and opinions you have about the matter until you do it yourself.

If you want to find the best organization to work with, go work for any organization that is focused on changing any life besides your own – right now. During the year you have been carefully avoiding wasting your time, you have wasted a year.

If you are studying as much as you can today, you have forgotten that while you are studying the problem, a child has missed her opportunity to go to school, so the cycle of poverty is being extended an entire generation in her family. Why are you studying to work on the problem later? The problem is now – work on it right now, and you will learn more than any book could ever teach you.

I’m not saying we shouldn’t talk, reflect, or study. But I have noticed there are too many people who are mostly talking, reflecting and studying. Ask yourself now, am I spending more time talking about changing the world than I am actually working on it? If so, I suggest correcting that imbalance – now.

Stop looking for the perfect way to participate. Go do anything for those in extreme poverty, anywhere – not for you, for them. Not a conference – first provide a meal. Not a study – first send money for medicine. Not a meeting – first fund a water well.

Raise money for Grameen Foundation. Volunteer with Women For Women. Buy a scarf from WORN. Fund a Bank of Hope at Esperanza International. Donate services to CitySquare. Start a weekend business that funds microloans.

Stop talking about it, and do it.

It’s not enough to teach a man to fish (or, Poverty is a Process)

Almost everyone knowns the proverb: “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

But what good is teaching a woman to fish if she cannot afford a fishing pole? If her children are sick and she cannot leave them? If a middleman buys her fish for a pittance and keeps all the profit, because she cannot determine the market price?

Most people view poverty as a problem, as a situation. But poverty is actually a process. The many intertwined aspects of the poverty process are self-reinforcing. In order to end the process, many simultaneous individual problems need to be addressed at the same time.

Think about a 28-year-old woman in Africa who is currently trapped in the process of poverty:

Unlike us, she was not taught to read. Did you ever learn anything from a book? Do you remember every recipe you will ever make? Do you ever use a list to remember what to do? Have you ever read how to repair something, or how to use a medicine?

Our friend cannot learn anything except what she experiences directly in person. She must remember everything important in her head. There is no to-do list, no planning. No recipes. No new food preservation technique unless she can remember exactly how to do it when shown. She certainly cannot make any written agreement with a buyer of goods. If her children need three medicines, she will need to remember the dosage and timing of each one by the color and shape of the pill. Can you do all this?

Unlike us, she was not taught how to do basic math. “How much feed can I afford to buy to raise my livestock, given the amount of time it takes to mature them and the price at the market?” “Given the cost of this thread and dye, how much do I have to be able to sell these shawls for to make it profitable?” It is almost impossible to operate the simplest trade without some basic math skills.

Unlike us, she does not have water nearby. Have you ever been thirsty for a few hours? Do you remember how slow you become, how tired it makes you , how it becomes difficult to think and the mood it puts you in?

Our friend cannot fetch water because it is 2 hours away, and she must be with her baby, prepare food and tend to her family’s other needs. So her two oldest sons, perhaps 8 and 10, walk with containers to fetch water for the family. It takes 2 hours to get there, and it takes 3 hours to get back. Have you ever carried water? It is heavy. The boys make this trip 3 times weekly. This trip is one of the main reasons they are not in school. They, like their mother, will not learn to read and write, perpetuating the poverty process.

There are many other dimensions to the poverty process. Chronic illness, climate change, political unrest and many other forces can create instability that makes it difficult to thrive.

Because there are so many interacting factors that work to keep people in poverty, many attempts to address poverty fail. If there are five or six intertwined problems and a program only addresses one or two, the program won’t work.

One of the most powerful tools for addressing all the elements of poverty comes in the form of nonprofit microfinance institutions. In the absence of an industry term, in my group we call it “Microfinance Plus.” Microfinance Plus institutions deploy programs that enable the local population to address all their poverty drivers. They provide small loans to women who use the capital to fund a personal business, like making something to sell at market, opening a kiosk, raising livestock, and yes even fishing. But these loans are also tied to antipoverty programs like literacy training, math skills, healthcare education, schools, and highly local needs like how to preserve an abundant local food or how to avoid a particular local pathogen.

They also provide the intangible but critical ingredient of human support – also known as “hope.” In many areas, poverty has been present for so long and is so profound that the people need to hear about the possibility for a different and better future for themselves and their children, in order to kick-start the process of working toward that future in a new way.

Now we can see that our old proverb doesn’t give us the outcome we want: the end of the process of poverty. “Teach a woman to read and to do basic math; provide her with affordable sources of clean drinking water, basic healthcare, and business training; give her human support and respect; and enable her children to go to school.” Then you don’t need to feed her for a lifetime. She can do that for herself and her family, just as we do.

The Moneylender in Microlender’s Clothing

When Dr. Muhammad Yunus first went into the villages of Bangladesh to study the causes of poverty up close, he found the people oppressed by loan sharks or as he calls them “moneylenders.”

Dr. Yunus’ model involved lending small sums of money to women in self-motivating, self-regulating groups of women for the purpose of creating sustainable income. His approach has improved the lives of millions of people around the world. The model became known as “microfinance.” One key success factor in his model is that the lender’s primary goal is not to earn a profit; instead the first goal is to lift women from poverty.

Dr. Yunus’ approach became so large and successful that it attracted the attention of corporate, banking and political interests around the world – most of which do not have the cause of ending poverty as their priority, but rather see profit potential in lending to the world’s poorest. These interests now dominate the microlending landscape. They have usurped the term “microfinance.” The most egregious of them are big, sophisticated, well-financed and powerfully marketed versions of the moneylenders that Dr. Yunus fought so hard against.

I have called on Grameen Foundation and other anti-poverty leaders to create a new, legally protected term for the kind of microfinance that is designed to end poverty, and to develop an international certifying body that will let philanthropists, foundations and social entrepreneurs have a clear picture of what groups are practicing anti-poverty driven microfinance. Minimum standards and practices would be developed by this international body and would evolve as our knowledge, tools and methods evolve.

In the absence of a branded term, those in my circle who work in anti-poverty driven microfinance have begun to call it “Microfinance Plus.” Microfinance Plus implies the following to us:

– The lender is either not for profit, of if it is a for profit institution (which is required by law to engage in lending in some countries) then the lender is owned almost exclusively either by a not-for-profit or by the clients of the lender themselves. Another way to think about it: the lender’s profits are not for the enrichment of anyone except the poor.

– Although failure to pay loans may impact a borrower’s ability to borrow again, the lender never punishes a borrower for failure to pay. Another way to think about this: a borrower’s financial situation is not to be made worse by having taken a loan, whether repaid or not.

– Money is only loaned for purposes of investment (for example business, education, home, and so on) and the borrower must demonstrate a plan for repayment. Loans are never given for paying back other debt or for purposes that do not increase the borrower’s ability to improve her financial situation.

– The lender, whether itself or through partners, actively works with its clients to eliminate the drivers of poverty in borrowers’ lives. These drivers are different in various parts of the world, so each lender creates its own approach. Some common drivers of poverty that are currently addressed by Microfinance Plus institutions are: lack of affordable clean water, lack of basic health education, malnutrition, illiteracy, chronic illness, lack of affordable childcare, and cultural or political oppression. There are many more. Each organization addresses its local needs.

It is imperative that the anti-poverty driven microfinance industry move quickly to create a protected term and a certification process, because without it we cannot drive large capital flows into Microfinance Plus institutions. Companies like my business Soap Hope (which invests all its profits into Microfinance Plus institutions) and philanthropic donors and investors need a simple and reliable way to identify these groups and to hold them accountable. By making the investment to define and certify what qualifies as anti-poverty microfinance, our industry will be able to grow the number of people served under Dr. Yunus’ original intent.

– Salah Boukadoum

Stay in touch with me:
salah@soaphope.com
@soaphope
(subscribe to this blog in the sidebar on the right)

The Deep Well

Regardless of any political party, sociological theory, or business organization telling you to the contrary: it is a fundamental part of our humanity to help those who are in great need. It is totally unacceptable to allow another human being to suffer in poverty without assistance.

I did not teach myself to read, did not haul my own drinking water across miles today, did not give myself a vaccine against polio. Because I’m smarter or work harder? Of course not – it was a gift of the circumstance of my birth, and yours.

A close up look at the lives of those in extreme poverty will show that the poor are creative, resourceful, and hard-working – contrary to common prejudices held by many in the developed world. Realize the amazing enormity of the gifts you were given in life, and give just a small share to those who haven’t been so lucky. Use your time, talent or money – all three if you can. Start right now, not tomorrow.

If you don’t know where to start, I invite you to go to any of the pages at the end of this post to learn about nonprofit microfinance, my preferred way of enabling those in very deep poverty to lift themselves up.

If you are in a deep well, no amount of creativity and hard work will get you out of that well. You will need someone outside the well to throw you a lifeline, or you will die in the well.

Those in the deep well of poverty cannot climb out without a ladder provided by someone else. Nonprofit microfinance is such a ladder. It’s not charity. The recipient does all the climbing themselves.

Pick whatever you see as the greatest need that another human being is facing, and begin to do something about it, today – don’t let this day go by without taking an action for another human being who needs you.

Please visit:

Grameen Foundation
Grameen America
Chiapas International
Esperanza International
The PLAN Fund

– Salah

Good Returns = Good Incentives

One of the special benefits of the Good Returns model is that it causes all the parties in the model to be incentivized for desirable outcomes.  A quick recap of Good Returns:

A business invests 100% of profits into sustainable non-profit organizations each year, for a rolling one year term, in the form of an interest-free loan.  The non-profit uses the cost-free capital to increase the reach of its sustainable mission (for example, providing more microloans to women in poverty, or issuing more low-cost student loans in Africa, or providing low-cost medical services in Guatemala, or … ).  At the end of the next year, the original funds are returned to the business and the process repeats itself.

Here are some of the interesting structural outcomes that Good Returns creates:

– Management is motivated to maximize profits. The company’s management team is motivated to drive the company’s bottom line, just as in any traditional capitalist business.  This incentive is a big advantage over non-profits, which often burn money and other resources because they are not required to generate profits to survive.

– Non-profit partners are motivated to become sustainable. The vast majority of non-profits are unsustainable – they must continually raise funds from donors in order to survive. In order for a company to invest in a non-profit and be assured of the return of capital, the non-profit must be sustainable, or at least have a segregated sustainable program. Good Returns will drive more non-profits to develop sustainable programs.

– “Mission-fudging” is eliminated. In many traditional for-profit social enterprises, the management team must be incredibly strong in its convictions about the mission, because every dollar spent on the mission is one less dollar in profit, which results in lower compensation for the management team.  It’s simply not realistic to count on large numbers of people to give up personal gain for mission on an ongoing basis.  Under Good Returns, every extra dollar of profit is an extra dollar toward mission, not taken from it.

– Investors will come. In its first year in business, Soap Hope had more than 45% month-over-month revenue growth on a fraction of the marketing budget that a traditional startup would require.  How did we achieve this growth? By the passion of our customers for our mission – they communicate virally to friends, family, and through online social networks. If a company can create significantly more leverage from its marketing budget, it can drive higher return on capital for its investors. We plan to prove this assertion through the financial results from Soap Hope and other early Good Returns companies.

I’m curious to see what else we will learn about the structural benefits and drawbacks of the Good Returns model over time.  Please share your thoughts and experiences with me.

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Many people have asked how they can help. I ask for and welcome your help:

• Purchase your all natural soap and body care products from Soap Hope – it’s less expensive than in the store, even with shipping
• Use Soap Hope for corporate gifting and personal gifts
• Connect me with national radio and tv personalities if you have those relationships
• Write about Soap Hope on your blog
• Share the Soap Hope fan page on your Facebook wall
• Tweet about us as often as you are willing

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Coming Soon:

Non-profits: I’ll be writing a post for you about many different types of programs that non-profits can implement that are all sustainable.

Investors: soon I will write a post about how down the road dividends will be insured against loss while they are doing their one year of service.

Good Returns: My intention is to develop Good Returns as a stand-alone organization that provides certification for sustainable non-profits, financing programs to mediate timing differences between companies and non-profits, an insurance guarantee for invested funds, a brand that companies can use to attract and retain customers – I’ll discuss this and more in an upcoming post.

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Thank you for your loyalty and support!

Regards,

Salah Boukadoum
Co-Founder, Soap Hope

One Billion Dollars Toward Ending Poverty – Let’s Do It

A reporter asked me today what my goals are for Soap Hope, and I gave her the answer that most of my friends know by now: to teach 1,000 small businesses the Good Returns Model and thereby raise one billion dollars for anti-poverty microloan initiatives.

I’m pretty sure this reporter was shocked – she said, “How much?!,” and actually sounded a bit disappointed. I think she felt I was being naive. Others have told me to start with a more “realistic” goal.  I’d like to show you how I believe it is reasonable to raise a billion dollars for microfinance over ten years, with just a few key numbers:

50 small businesses just like Soap Hope
In each of 20 American cities
Each generating $100,000 in profits
Each lending their profits interest-free to a microfinance institution for just 1 year
Over a 10 year period.

50 businesses x 20 cities x $100,000 x 1 year interest-free loan x 10 years = 1 billion dollars.

Let me share some key milestones and goals with you:

• 2009 marks Soap Hope’s first full year in business
• I first discussed the Good Returns model in public in the summer of 2009, just a few months ago
• We’ve already had two small businesses in Dallas spontaneously ask us for help in implementing Good Returns in their own companies
• In 2009 we’ve formed partnerships with three non-profit microfinance institutions
• In 2010 we’ll be launching an organized effort to teach Good Returns to businesses
• Simultaneously we will define sustainability programs that help nonprofits become ready for Good Returns style investments
• In 2011 we’ll be working to form an insurance fund that guarantees the return of Good Returns investment capital to participating businesses, virtually eliminating participants’ risk

One billion dollars may sound like a big number – but when you break it down, it’s right within our grasp.  If you read my last post (We Need 166 More People To End Poverty Worldwide) you know that there are six million people in poverty in the Dominican Republic.  One billion dollars is just about what it would take to give each of them a microloan.

1,000 Good Returns businesses generating one billion dollars toward ending poverty through microfinance – I don’t think it’s naive at all. Let’s do it!

Regards,

Salah Boukadoum
Co-Founder, Soap Hope

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Please help us eradicate poverty: tell someone you know about Soap Hope right now.

shop: SoapHope.com
learn: Soap Hope Learning Center
facebook: facebook.com/soaphope
twitter: @soaphope

e-mail: info@soaphope.com
phone: 888-893-SOAP

Some Soap Hope Bar Soaps