"If people don't have a job, they don't have hope. And if you don't have hope, what do you really have?" (George Roberts of Kohlberg, Kravis Roberts & Co., the founder of REDF)

Recently Jocelyn Wyatt and I were fortunate to have Carla Javits, the President of REDF (originally named the Roberts Enterprise Development Fund), as a guest speaker in our class at Berekely's Haas School of Business.  REDF is a nonprofit based in San Francisco that creates job opportunities and pathways to employment for people with significant barriers to work.  It was also one of the first organizations to embrace the venture philanthropy approach, serving as both a model for others in this field, notably Acumen Fund, and a testing ground for Jed Emerson's ideas on measuring social returns.

For most people, even those who may be facing homelessness, having a job is one of life's top priorities, and creating opportunities for those who might otherwise be unemployable is the main focus of REDF's efforts.  According to Javits, REDF's approach falls squarely into the arena of venture philanthropy.  "We concentrate on achievement of an overall goal and deploy all the resources at our disposal to meet those goals.  We treat our activities as investments, and we expect to see a return on those investments measured by jobs, changed lives and reduced public costs."  And, like a venture capitalist, REDF has a high engagement, hands-on approach.

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This fall, Jocelyn Wyatt and I taught a seven week course at the Haas School of Business at UC Berkeley, which spanned the worlds of philanthropy, business and many of the way points in between. We were both Acumen Fund Fellows (class of 2007) and as part of our post-Fellowship goals each of us wanted to find a way to get teaching experience and also share what had learned over the past several years. 

As good luck would have it, our next steps took us to San Francisco a year ago (David via Mercy Corps and Jocelyn via IDEO) and through one of the student leaders we met at the Global Social Venture Competition, we were asked to teach a one-credit course held for two hours each Thursday.

The class was called Enterprising Solutions: Market-Based Approaches for Reducing Poverty. Each week, we took on a different theme with the overall goal of understanding where we had come from in the development field, what market- based approaches were, why they were so interesting and what were some of the macro issues, like trade policy, that impacted this work.  Other themes included social enterprise, microfranchising, design for social impact, corporate responsibility, social investing, and trade.

We began each session by framing the topic and brought in guest speakers to dive in more deeply. Our phenomenal speakers included David Green, Kevin Jones, Dwight Wilson, George Scharffenberger, and many more.

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The final day of last week's SoCap event was, for me, the best of the 3 days.  It was the chance to meet with lots of other participants, hear their ideas, and get actively involved in the things that I really cared about and wanted to discuss.  The "strategically unstructured" format of the day was SoCap’s way to take the informal discussions of the hallways and expand on them.  It was also the place to find the people that were in the sessions on Monday and Tuesday who you never found the time to have a chat with.

I attended only 2 sessions that day, the first on franchising as a tool for scale and the second on China and development, but I actually spent the entire day on-site chatting with new found friends, old-found friends, and a whole host of compelling ideas.  The franchising talk brought together seasoned members of the community from organizations like VisionSpring one of the early adopters of microfranchising, and those that were just starting to look at franchising such as Rubicon. 

I also learned of a really interesting mobile medical initiative in the US that was considering franchising ambulance services in the Midwest and had the chance to share some of the key findings from my own microfranchising research.

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Every few weeks, members of the Silicon Valley Microfinance Network (SVMN) converge in the San Francisco Bay Area to learn about microfinance, microcredit, and related finance and economic topics. The last session, Fueling the Growth of Small and Medium Enterprises (SMES), was led and hosted by Google.org members Linda Segre and Swati Mylavarapu, who outlined why SMEs are so important and their plans on stimulating SME growth in developing economies.

In most economies, small and medium enterprises, generally employing between 10 and 250 workers, are the drivers of new job creation, innovation, and overall economic growth.  The World Bank estimates that SMEs contribute an average 51.5 percent of GDP in high income countries-but only 15.6 percent in low income countries. By contrast, the "informal" micro-enterprise sector accounts for an average 47.2 percent of GDP in low income countries, but just 13 percent in high income countries. 

Low-income countries typically have very large numbers of informal micro-enterprises and may also have a handful of larger firms-possibly ventures created by foreign investment, or family-controlled conglomerates built up over generations.

But they typically suffer from a "missing middle," with few SMEs in between, held back by perverse regulatory climates and poor access to inputs.

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A recent report, "Wireless Technology for Social Change: Trends in NGO Mobile Use," by the United Nations Foundation and The Vodafone Group Foundation highlights emerging trends by NGOs in the use of mobile technology to affect social change in global public health, humanitarian assistance and environmental conservation. While this report offers some great insights on how to use technology and telecom tools to address some of the world's toughest problems, it leaves out one of the most important challenges that NGOs, and most ICT for Development projects face; how toensure sustainability.

To shed some light on this tension, I spoke with Ken Banks, the founder of FrontlineSMS (a tool for mass text messaging) about sustainability and the choices he is currently grappling with. FrontlineSMS was initially funded by Ken's hard work, and more recently by the MacArthur Foundation, to fulfill his belief that "all non-profits, whatever their size and wherever they operate, should be given the opportunity to implement the latest mobile technologies in their work." Today, FrontlineSMS is free for non-profits and is being used by over 40 NGOs in programs around the world.

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Last month, the Silicon Valley Microfinance Network cosponsored "Microfinance West: The Investment Opportunity Conference." This event, which brought together some of the leading commercial players in the microfinance field, was heavily geared towards institutional and retail investors in the financial community. The topics ran the gamut from attracting capital to mitigating risk to benchmarking against other asset classes.

Though the focus was clearly financial, heavyweights from the development side also presented, including Elizabeth Funk, Chairman of the Board of Unitus, and Mary Ellen Iskenderian, President of Women's World Banking. The most provocative comment, however, came from Janine Firpo of Sevak Solutions as she described the evolution of financial services in the US and how technology has continued to lower the costs of transactions.

Warning the audience in advance, Janine shared her thoughts on an area that many might consider to be heretical. She challenged the attendees to question whether default rates on microfinance loans were really the right place to focus, or if in fact the emphasis on achieving 99% repayment rates might be somewhat misguided. Most microfinance institutions today follow a high-touch model, relying on a loan officer that makes frequent visits to his or her clients to collect loan payments and continually reinforce their need to repay. While this has been extremely effective it is also inherently unscalable; as the client base increases, the number of loan officers needed to serve them must also increase.

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As the search for developing market-based solutions for poverty alleviation continues, adequate entrepreneur training and support has been an ongoing issue. In fact, the Aspen Institute estimates that in the United States, half of the 21.5 million micro-enterprises (capitalized with US $35,000 or less and employing 5 or fewer people) across the US are underserved and could benefit from better access to micro-enterprise development services.

A recent article in the Wall Street Journal discussed some of the virtues of finding this help on line, and mentioned some of the leading offerings in the US from organizations such as Mercy Corps, Score Association, and iMantri, that helps founders of small enterprises find business mentors online.

MicroMentor.org, a nonprofit run by Mercy Corps, is one of an increasing number of Web sites that allow prospective mentors and protégés to easily find each other and develop a mentoring relationship, and one of the few looking to go international. Online mentoring does hold tremendous promise, with participating entrepreneurs reporting:

- An increase in median annual business sales of $15,500, or 63%;
- An increase in median annual household income of $20,000, or 50%;
- A 74% business survival rate, compared to a 66% national average.

Though the indicators are good, is this an approach that can scale internationally or across cultures?

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A recent Forbes publication, "Microfinance Fights Growing Pains," examined the rapid growth and associated challenges of the microfinance field.

As noted in the article (and thanks to Vital Wave Consulting for highlighting this), the explosion of new entrants and the overall rapid growth of microfinance may be creating an environment ripe for inefficiency or fraud. For example, with little communication between lending agencies, some loan recipients have borrowed multiple times against the same collateral. The Forbes article called for credit bureaus to be established so that lenders can communicate (formally and informally) with each other in order to avoid double or triple lending to dishonest borrowers.

Credit evaluating mechanisms exist throughout the developed world - credit bureaus for loans, better business bureaus for businesses, and even seller ratings for those trading on eBay. These institutions create trust, critical to a well functioning economy, and where the rules and behaviors of doing business are either not codified or not enforced, the economic impact can be severe. In fact, the worst case scenario - which was in full force during a recent work-related trip to Aceh, Indonesia - can bring business to a crawl.

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