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The Social Enterprise
At Entrepreneurs4Change, a social entrepreneur is anyone who uses free market principles to address pressing social issues, and a social business is the means for accomplishing that objective.
About Micro-Finance and Social Entrepreneurs
Making small loans to launch businesses is not new. It has been one of the ways business has been done for as long as commerce has been exchanged between those that have and those that want. Micro-finance in its current iteration, however, has more commonly been associated with Muhammad Yunus and his first loan to a Bangladeshi woman to buy straw for a basket she was weaving and so launched the Grameen Bank in Bangladesh and the modern spread of micro-finance. Yunus began this process as a way of eliminating loan sharks and middlemen who were taking advantage of poor borrowers. It was a means to get money into the hands of the poor, without having to pay unbearable interest rates, so that they might actually pull themselves out of their poverty.
Micro-finance is a highly effective means of providing access to capital to those disenfranchised entrepreneurs starting micro-enterprises without saddling the poor with more debt then they can handle. Keeping the greedy and exploiters out of the pool is difficult, especially when the need is so apparent and those with the funds to lend often so exploitive.
We believe that the key to successful micro-finance lending and building social entrepreneurs and social business that serve the community is to focus on neighbors supporting neighbors. When micro-finance is focused on the people being served on not on the generation of windfall profits, there is a successful payback rate and and sucessful social businesses are created that actually serve the community can be launched.
Entrepreneurs4Change is focused on providing access to micro-finance in the spirit that launched the Grameen effort - making small and effective loans available through credit unions and community banks, dedicated to serving their constituents and their community.
When seen as an opportunity to provide small sums of money to launch a business to become self-sufficient, micro-finance makes great sense. So much sense in fact that Yunus won the Noble Peace Prize for this efforts. Unfortunately, in the name of micro-finance, many of the loan sharks and moneylenders have begun circumventing Yunus' original intent and have begun referring to their efforts as micro-finance. Also, some micro-finance institutions that were established to facilitate micro-loans began charging higher and higher interest rates, justifying the increases by saying that they were still less than those charged by the loan sharks. The result has been a lot of bad press about "micro-finance" and a lot of people who were in great need being unable to meet these obligations.
In its intended state, micro-finance is a means of providing a small loan that does not create a burdensome indebtedness. It is not about creating windfall profits for anyone in the lending chain. From a social business perspective, it provides a means of sustainability for an enterprise that might normally be forced to rely solely on philanthropic charity. Micro-finance is not the answer for every social business, but it is a means to seed a social entrepreneurial venture and provide it with a degree of credibility for further investment. It is, however, a loan and as such, it must be repaid. And for the most part, when these loans are made appropriately, they are paid back.
Like all businesses, social efforts are not without risk, and many fail for a variety of business reasons and situational developments. We believe that many of these failures can be avoided by establishing social businesses that are truly supported by the community. When social business engages both the micro-finance investor to be an active participant in the business process and brings in community coaches and support from other businesses and institutions of higher learning, social issues can be meaningfully addressed, and the condition of the lives being served can be improved. Social Businesses require a community supported effort to succeed. In that regard, micro-finance, is actually only a small portion of the social business equation. Ashoka: Innovators for the Public founder, Bill Drayton, makes the point that for a social sector organization (social business) to succeed requires four elements: Income Generation, Partnerships, Volunteers and an ability to get the word out. Finance is one part of the formula.
At Entrepreneurs4Change, we seek to not only provide access to capital, but to do so in a way that connects the social entrepreneur to the variety of resources available within their community of operation. It is that support and community building among other businesses, educational outlets, financial institutions and government that elevates a successful social business and allows it to meet its mission while obtaining sustainability. And it can all begin with a micro-loan and a willingness to become actively engaged in the community.
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