The new world of impact investing demands cooperation and integration among anti-poverty organizations.
By Gary Ford
Why do organizations that truly care about poverty in the developing world, and share a mission to eradicate it, not cooperate more? When social enterprise leaders at the problem solving retreat Opportunity Collaboration faced this question, they had several reasons, the most important of which was fear. They fear collaboration because of the potential to lose funding, business models, and even their jobs.
There is also a general lack of knowledge on how best to implement these kinds of collaborations. And, of course, there are communication and “connective tissue” issues even among complementary organizations.
And so it is that fragmented nonprofits and NGOs proliferate, each based on its own similar vision of a better world. These entities all lack the private sector incentive to merge, consolidate, do layoffs, and bring profit to the “bottom line.”
Interconnected Solutions for Interconnected Problems
Regardless of the creativity and zeal of many traditional poverty alleviation models, there are still fundamental problems with our current efforts. Poverty is not segmented, but rather a connected set of inequalities that can quickly turn into bigger issues with greater consequences.
Access to education is meaningless if a mother cannot afford to buy shoes so that her son can walk to school, or a uniform and fees so that he can remain in school. Likewise, an increased income for the family from a microbusiness does not solve this problem if there is not an adequate school nearby to begin with.
In developed countries, these are often addressed as separate issues, but in many parts of the world, global poverty is a multidisciplinary problem requiring a multidisciplinary solution. As much as the issues are interconnected, so need to be our efforts.
Impact Investing Demands Integration
Unfortunately, the new world of impact investing further challenges these institutional silos. To connect millions of investors—many of them “retail” investors using their limited personal wealth—with enterprises in the developing world requires an unprecedented amount of integration among various operating models.
To deliver real social and economic returns, investor and analyst education must be streamlined. There must also be an adequate supply of suitable investment products and developing world businesses, along with secure platforms for investing in them. To carry out these initiatives requires investment monitoring and outcome analysis.
The following are some ideas that I hope will stimulate a flow of better suggestions from others:
1. The narrowly focused, heavily branded foundation funding initiative needs to change.
Funders need to create and support alliances that offer complementary skills and resources in the fight against poverty. They should tout their alliances in the same way that airlines tout their “SkyMiles” and “oneworld” alliances. If rival airlines can sell seats on each other’s flights, funders can work with other funders, governmental organizations, and NGOs.
2. It’s essential that funders set aside a minority of their money and staff time for—nothing in particular.
I mean that they need the resources to react opportunistically to new ideas and to support new alliances. Funders should give grants with longer terms and more latitude try methods that are well thought out but still risky. In the midst of trial and error, we may find new ways to partner health care with microfinance, for example.
3. Funders need to explicitly require collaboration among grantees, NGOs, and social enterprises.
In the legal world, large private corporations lead significant advances in employment by requiring that their outside law firms practice hiring methods that attract a diverse workforce. This same philosophy should be present in the philanthropic world.
4. Organizations like the Clinton Global Initiative need to revamp their strategy.
CGI gives leaders a chance to connect and turn their ideas into actions, but all too often, in joining, they simply identify what they are already doing or poised to do, dress it up as a new “commitment,” and unleash the Mad Men to fan it out. CGI should instead require members to come in with an open mind and a commitment to build structured, serious alliances that allow them to accomplish more than any one could do on its own.
5. Charity evaluators like Charity Navigator that help nonprofits to become more efficient and responsive should use their system to rank collaborative efforts.
In doing so, they’ll incentivize alliances through “high scores” that result in increased funding by those looking to give intelligently.
6. Finally, the most difficult step for funders, governments, and NGOs is to decide that they care enough to change and then to set out to do so.
The balkanized approach to poverty alleviation is quite ingrained, but speak up anyway. The reason why we are spending much of our lives in this field is to make a difference. Building effective alliances can be hard and frustrating and even disappointing, but remember to treat the roadblocks as though we’re in a team sport. Be both demanding and supportive. After all, poverty is inherently complex, and the impoverished deserve to have it looked at as such.
About the Author:
Gary Ford is the President and Chief Executive Officer of MicroCredit Enterprises, a pioneering private sector, antipoverty program that leverages the private capital of institutions and high net worth individuals to provide small business loans to impoverished entrepreneurs in developing countries. MCE is backed by a growing network of Guarantors with a current total of $70 million in guarantees. To date, MCE has funded 95,000 micro-entrepreneurs across 22 countries on four continents, improving the living conditions of 500,000 poor people.
MCE can be found on Twitter (@MCEorg) and on Facebook.