Part one of a two part series examines a new white paper that showcases the promise -- and the peril -- of social entrepreneurship in conversation with the paper’s author.
By Francesca Rheannon
An Idea Seeds An Urban Garden
I was a social entrepreneur long before I ever heard the term. In 1990, while working in my garden and pondering the poverty that kept so many of my social work clients mired in dysfunction -- like one suicidal young teen who was worrying me in particular -- an idea birthed itself like Athena emerging full-grown from the head of Zeus.
I was working then as a clinical social worker, treating families caught in a trap of poverty, drug abuse, HIV/AIDS and violence in the Latino community of Holyoke, Mass. As I plunged my hands into the fragrant chocolate brown of a garden bed, I thought of the rich agricultural traditions my clients’ families had left behind in Puerto Rico.
They once had verdant gardens where they raised the small sweet chile peppers ajies dulces, chayote, papayas and plantains and celebrated the harvest with neighbors, roasting a pig or two and playing the lively tunes of plena, jibaro and salsa music.
Was it any wonder that, cut off from those traditions and condemned instead to the concrete streets and burned over neighborhoods and deserted factories of Holyoke, they fell prey to so much despair?
But, perhaps if they could just re-connect to those agricultural traditions in the midst of the urban jungle, they could re-grow pride and renew purpose? The vehicle came to me in a flash: an urban agriculture nonprofit called Nuestras Raices (“Our Roots” in English) that would incubate small businesses -- gardens and greenhouses supplying farmers markets and restaurants, processing operations that would turn produce into value-added products -- and seed community and school gardens to bring all generations together.
A Garden Sparks An Enterprise
Wonder of wonders, it happened.
I found a sympathetic city councilman (the first Latino elected to that post in Holyoke), who put me in touch with a group of community gardeners who had disbanded but were interested in starting anew, connected them with sustainable agricultural pioneers and activists from the colleges near Holyoke, wheedled a farmworker organizer away from his job to become the director of the new grassroots (pun intended) effort -- and Nuestras Raices was off and running.
Years later, when the phrase “social enterprise” had come into the lexicon, that director became an Ashoka Fellow. And in the more than 20 years of its existence, Nuestras Raices has spawned numerous gardens, has a 10 acre urban farm providing extra income to its farmers, an environmental youth group, a women’s health group -- and has incubated a restaurant, several bakeries, and other flourishing small companies.
Leadership Ceded Is Leadership Nurtured
There are many lessons I drew from the experience, but the main one was the wisdom of my determination from the start to leave Nuestras Raices once its board was composed overwhelmingly of people from the community it served.
I wanted the organization to be run, owned and determined by those it served. Unless they had the power, my original vision would be undermined: for Nuestras Raices to nurture pride and leadership in both the individuals and the community of Latino Holyoke.
Social Enterprise Ripens, But Risks Rot
In the years since Nuestras Raices was born, I’ve seen social entrepreneurship go from the margins to the mainstream. And, while I rejoice in the spread of the idea of enterprises dedicated to solving persistent social problems like poverty and its attendant ills by harnessing the energy and passion of the entrepreneurial spirit, I have become increasingly disturbed about a trend that threatens to undermine the foundational purpose of this excellent model for doing good while doing well.
That trend is the exploitation of social entrepreneurship to privilege the profits and power of private interests over social needs and justice.
The Microfinance Debacle
Take, for example, the poster child for social entrepreneurship: microfinance. We have seen the “bottom up” model pioneered by the Grameen Bank give way to huge private interests angling to get in on the business of the very poor, charging usurious interest rates -- sometimes as much as 100 percent -- that bankrupt the borrowers.
In India, some 200 suicides resulted from skyrocketing indebtedness among poor borrowers who were being strong-armed to repay their loans. And SKS Microfinance, one of the first companies seeking to scale up microfinance by commercializing the industry, as well as other such investors, saw its profits plummet as the backlash grew.
Muhammed Yunus put his finger on the heart of the problem, as I noted when I heard Yunus speak in 2009, and as Georgia Levenson Keohane of the Roosevelt Institute writes in a white paper based on her book, Social Entrepreneurship For The 21st Century:
Yunus has long maintained that the profit motive, by definition, compromises the integrity of microcredit, since it privileges the needs of investors over the needs of the poor. In The New York Times in January 2010, Yunus wrote, “Commercialization has been a terrible wrong turn for microfinance, and it indicates a worrying ‘mission drift’ in the motivation of those lending to the poor. Poverty should be eradicated, not seen as a money-making opportunity.”
Problems of Scale
While the white paper justifiably touts the many benefits – and innovative forms – of social entrepreneurship, I took the opportunity in an interview with Levenson Keohane to discuss some of my questions and doubts about its “dark side.”
I asked her if she was concerned that the original vision of social entrepreneurship could be sabotaged and even corrupted by the drive for profits. She pointed out that sometimes the problem was one of scale – there’s less room for a robust social mission the larger the company:
"I do think much of this is about scale. It’s about corporate structure and how companies are owned and whether they are public or private -- and whether you have fiduciary responsibility to shareholders and how often the public markets make these companies report quarterly. You have to have a high stock price and show returns every quarter, which might not make you make responsible investments in your operations for the long term"
The Conundrum of Scaling Up
Yet scaling up is a key goal, if one wants to create systemic change. This can bring means and ends into conflict with each other. Levenson Keohane cites in her paper the work of the New York City Acquisitions Fund in seeking to enlarge the stock of affordable housing. Major banks like JP Morgan, Bank of America and HSBC have been brought in to infuse large amounts of cash.
I noted the irony of having the very interests that played such a large role in the subprime mortgage crisis and the foreclosures that followed taking such a large role in an affordable housing initiative in New York City. They destroyed the housing security of millions by making it completely unaffordable.
“We can only do so much with government money to preserve affordable housing stock without an infusion of public cash,” she responded, noting that private lenders are not going to invest in affordable housing without a robust subsidy from the private sector in the form of loan guarantees.
So then the question is, in return for scale and the amount of capital that we want and need, are we willing to use public funds, public risk absorption, and philanthropy to mitigate the risk in order to give back returns to the major financial institutions, who are not doing it charitably? And that gets back to the question: can we address some of these needs without private sector capital? And what are the risks? We saw in micro-enterprise that there are huge risks.
The conundrum goes even further, however.
Is social entrepreneurship being used as a Trojan Horse in the growing privatization of public goods? Does it promote liberal values – or a neoliberal agenda? And how can it remain true to its mission to create systemic change for good?
My conversation with Georgia Levenson Keohane continues next week.