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On April 17th, 2010, student social entrepreneurs from the Social Venture Creation class will be presenting their 'change-the-world' plans to a panel of judges composed of UofM faculty, industry experts, and potential funders.  The four social venture ideas address issues of food access in Detroit, healthcare in Lesotho, education in Kenya, and environmental issues in Ann Arbor.  

Brief descriptions of the projects:

• Fresh Food Detroit:  The Fresh Food Detroit team is exploring the distribution of low-margin fresh food through convenience stores, liquor stores, and gas stations in Detroit.  The hope is to improve health, create jobs, and spark development.  

• eHealth Exchange:  In January 2009, the World Health Organization (WHO) declared an acute shortage, and the uneven distribution of health workers within and between countries - a global health workforce crisis.  eHealth Exchange provides a software solution to global Ministry of Health eHealth mandates, targeting the health education crisis quotas for community-based health workers in Africa.

• IMAGINE Africa: The Imagine Project, currently administered from within the University of Michigan's College of Engineering, has successfully designed a system to bring high-speed, satellite-based internet connections to some of the most remote parts of the world.  Pilot deployments in rural Kenya have demonstrated that the unique combination of durable, off-the-shelf technology and local support are a viable model for bringing internet connections into rural African communities. 

• Community Car Sharing: Car sharing models like Zipcar have been successful in reducing the number of cars on the road and changing driving habits. However, this model still requires input of new cars to be successful.  A community car sharing program would utilize the unused capacity of existing vehicles, allowing car owners to rent their vehicles and earn income while providing non-car owners with access to a car at an affordable rate for a short period of time.  

This event is open to the public and well take place at the Ross School of Business (room R1210) from 10am to noon. Coffee and light refreshments will be provided. 

If you would like to learn more about the projects or help these teams out, please let me know!

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March Madness, a two week long free-for-all college basketball tournament, is an annual American tradition.  Young college basketball players from the nation's top 65 teams will convene in 4 locations around the country and this year, the Final Four teams will face off in Indianapolis for the championship.  Each year, millions of people make bets on the tournament: they compete with friends, form office pools and even bet online.  Many compete by entering their predictions of the tournament in a bracket, while others participate in a Calcutta or "auction" of teams.  Money flies around pretty quickly this time of year as everyone decides to back their personal favorite teams.

Vittana.org, a person-to-person micro loan site entirely focused on student loans (described in detail here), recently launched its own tournament: March Microfinance Madness.  The idea is that groups form lending teams and compete to see which team can lend the most overall before March ends.  The madness is also called "the Vittana education challenge".  In that light, I challenge each of you to do more this year than just bet on who will win the NCAA tournament.  In addition to basketball, why don't you make a bet on individuals in need of education? 

Students on Vittana's site have already demonstrated that they have the drive to fight adversity to pursue an education; at this point they just need help with funding.  Vittana allows you to make a small, interest-free loan to a student (in a fashion similar to Kiva.org).  Once the student graduates, they repay you from their new earnings.  Traditionally, microfinance has been focused on providing loans to fund small businesses and capital investments, but Vittana has proven the concept that making loans to students makes sense. 

Recently, I had the pleasure of presenting with Kushal Chakrabarti, Vittana CEO and co-founder, at an event at the University of California at Berkeley meant to promote social entrepreneurship.  While Berkeley students protested fee increases, Kushal, Chris Cuellar and I presented the concept of micro student loans and the value of providing education to those at the BoP.  In his presentation, Kushal introduced the audience to Haward, one of Vittana's very first graduates.  Haward, a 22 year old, had tried to pay is own way through college but ran into a number of roadblocks.  Kushal described the situation facing many prospective students, "In most developing countries, you can't take out student loans, you either pay the tuition (which can be expensive) up front, or you don't go to college."  Haward's experience is a beacon of light for students out there who may not have the cash up front to attend school.  After recently graduating, Haward became a lawyer and has already repaid $232 of his $1,044 loan. 

Earlier this march, Vittana surpassed $100K in cumulative loans and has since raised another $15K.  March madness, however, is just about to begin.  As you scramble to put together your brackets and office pools, consider betting on March Microfinance Madness as well.  Next Billion is about "[bringing] together the community of business leaders, social entrepreneurs, NGOs, policy makers, and academics who want to explore the connection between development and enterprise."  As a community, we have the opportunity to make a difference - and win the March Microfinance Madness tournament.  Visit Vittana.org and join the NextBillion lending team (I created one here) today.  Make a bet on education.

Editor's Note: Daniel Gonzalez is an advisor to NextBillion and a key leader in Latin America's emerging social enterprise industry. In this interview, he shares some of the projects he and AVINA are currently working on. Stay tuned for more interviews in this Latin America special, a wrap-up of the Miami conference and coverage from next week's ANDE Conference in Nicaragua.

NextBillion.net: Please tell us a bit about AVINA and the partners you work with

Daniel González: AVINA is a private foundation created in 1994 by Swiss entrepreneur Stephan Schmidheiny to contribute towards a prosperous, integrated, compassionate and democratic Latin America that is inspired by its own diversity and built on a form of citizenship that positions it globally according to its own model of sustainable and inclusive development. In 2008, AVINA disbursed over US$17 million in social investments throughout Latin America, bringing the total disbursement to over US$317 million since 2003.

AVINA acts as an adviser, co-investor and facilitator on the ground - employing its resources, local presence and relationships with thousands of allies to develop and roll out strategies for change. AVINA develops its national strategies in 12 countries and regional strategies for the Amazon, Recycling, Sustainable Cities, Inclusive Markets, and Water. Some of AVINA's current international allies include the Interamerican Development Bank, the Bill and Melinda Gates Foundation, the Skoll Foundation, the Global Philanthropy Forum, and the Tällberg Foundation, among others.  

Regarding Inclusive Markets, AVINA is part of a broad collaboration and learning network with organizations like FUNDES, WRI, Ashoka, SEKN and the UNDP/Growing Inclusive Markets, among dozens of close national or local partners and as part of a movement of hundreds of organizations in Latin America. In 2009, AVINA invested USD $2,9 MM in its Inclusive Markets strategy in 20 initiatives in 7 countries and 8 regional investments.

NextBillion.net: What sets Latin America apart in the social enterprise space? What makes this market unique?

Daniel González: In terms of need, Latin America is the region of the world with most economic inequality based on income. 46% of its 586 million inhabitants live in poverty (CEPAL, 2007). Poverty should be understood in a more comprehensive way than just income, but these figures are helpful to understand the scale of the solution that is needed.

Now, in terms of opportunity, SMEs are responsible for 25%-40% of employment as well as 15%-25% of the total production of goods and services in Latin America (CEPAL, 2007). Some publications conclude that if micro, small and medium enterprises are considered, they represent 99% of all businesses and 70% of employment in the region. The Johns Hopkins Comparative Nonprofit Sector Project estimates that 53% of revenues in civil society organizations in the world come from fees, and this situation is more present in Latin American countries where social entrepreneurship is thriving. The potential of the Latin American market and the current role of communities at the base of the pyramid, social enterprises, and micro, small and medium sized enterprises in the economy suggest a large enough potential and scale to impact tens of millions of people currently in poverty.

Social and technological innovations in social entrepreneurship, 'new' or knowledge-based economics, connectivity among others are also emerging from Latin America. Because the region has a wealth of natural and social resources, low population density, basic infrastructure, rule-of-law, and strong institutions that are developing inclusive businesses and markets, Latin America is a unique place to demonstrate that it is possible to generate wealth in a equitable, accelerated, innovative and sustainable way. The value chains that will be more competitive in the 21^st Century will leverage technology and provide solutions to climate change, migrations, poverty, population growth, generation changes and other barriers to sustainable economic development in the world. Some of these value chains have to do with ecosystem services, remittances, tourism, services, sustainable energy, food production and other promising sectors where Latin America has potential or advantage.

Another way to get a glimpse of the potential is observing the projects already being developed by many companies.  Basic services and needs represent a billion dollar opportunity in Latin American markets, according to The Next Four Billion (2007).

NextBillion.net: Please describe one or two examples of social enterprises in your country and the impact they are having against poverty and/or environmental degradation. Preferably, they would be supported by / linked to yours.

Daniel González: Business development or scaling-up social enterprises is only one of three objectives in AVINA's Inclusive Markets strategy. Between 2007 and 2009, AVINA has strengthened over 100 inclusive businesses in Latin America. To generate a demonstrative effect that can influence decision makers, AVINA provides "tailor-made" services to 4 high-potential businesses and will reach 10 of these in the next three years. Two of those four businesses are Guayaki and Inversor.

Guayakí produces organic, shade grown and fair trade yerba mate - a powerful rainforest tree - in the Atlantic Rainforest of Eastern Paraguay, Southern Brazil and Nothern Argentina, with small farmers and indigenous communities. The company's mission is to restore 60,000 hectares by the year 2020 with a profitable business model. They are working presently with 6,000 hectares and have become the largest providers of organic yerba mate to the US market in the last 10 years, providing inclusive employment and income to 250 Latin American families. Guayaki has received numerous awards and certifications for its environmental and social impact. Its income has grown at a rate of 35% and its sales for 2009 are at an estimated US$10 million dollars.

Inversor is a Venture Capital Fund focused on developing the Impact Investing market in Colombia. It looks for financial returns while creating social impact investing in Small and Medium Sized Enterprises (SMEs) in Colombia. Inversor invests in sectors like basic services, infrastructure, supply chains employing low-income producers, inclusive businesses and clean energy, among others. The Fund expects to raise up to USD $20 million and make investments in the range of $125K - $1M. The fund's preferred return will be a 9% annual rate over capital disbursed by investors.

Corporación Inversor, the General Partner (or fund manager), was created after analyzing lessons learned in a previous micro-capital fund. During the first five years of this pilot, the fund generated 515 new direct and indirect jobs with expected gross IRR of 7.3%. Moreover, 19% of the total capital invested (USD $115 K) are returns and paid loans re-invested.

Based on the success of that pilot, leading national and international firms partnered to found and  strengthen Corporación Inversor. The first step to scale up the project was to incorporate it within the formal financial system and regulatory measures regarding venture capital funds in Colombia. Inversor has raised around US $2 million dollars and will begin its investments later in 2010.

AVINA is interested in collaborating with other organizations that operate successful business models that can be scaled-up in the next 2-3 years and that have the potential to change the status-quo of the value-chain they operate in because of their triple bottom line results.

NextBillion.net: Looking forward, what do you see as the biggest challenge for social enterprise to take off in the region?

Daniel González: Two of AVINA's objectives to develop inclusive markets respond to some of the biggest challenges: a shift in paradigm and business development.

In terms of paradigm shift, we realize that no individual person or institution has the solution or 'the right' perspective to build successful companies in the 21^st Century. Moreover, individuals and institutions from diverse backgrounds and interests need to build new symbols and meanings for the role of business in society. This will only be achieved with examples of what this means, rather than speeches and papers. In order to reduce cultural, ideological, educational and other social barriers to inclusive businesses, it is critical to influence the way in which the industry and markets behave through communication and mobilization strategies. Based on hard evidence and proven business models, some of these strategies can include institutionalizing inclusive business in business school curricula, mobilize thousands of practitioners through the Internet, influence millions through mass media outlets, and mobilize key decision makers in workshops, meetings and events. 

In terms of business development, the participation of more and more companies is needed to develop and change markets, even though important international and national institutions have already identified and systematized hundreds of inclusive businesses. Evidence is the main tool to mobilize decision makers, financial resources and influence public policy, so high-potential businesses need to be accelerated to generate a demonstrative effect and other promising business models need to become visible to reach critical mass. In addition, many organizations struggle with the process of identifying, evaluating and supporting businesses. If leading organizations agree on standards to present and share knowledge about each company, inclusive businesses will have a better chance of success.

NextBillion.net: Are there any exciting new projects that you're working on and can tell our readers about?

Daniel González: Society and life, complex and dynamic as they are, find their own way to evolve from emerging forces and patterns. AVINA's Inclusive Markets strategy considers macro conditions, emerging solutions, the voices of every stakeholder it's linked to, and its own capabilities to design  its strategy and role in a collaborative process with internal and external actors. We need your help to do so! Since managing complexity is a challenge, we invite other institutions to helps us design and implement one of the three objectives of our inclusive markets strategy.

In fact, no single organization can develop an opportunity for systemic change in Latin America. Even if a single organization could strengthen thousands of single businesses, macro, policy and other efforts to improve the business environment are also necessary. Further collaboration, coordination and partnerships are needed to improve the business environment in areas like:

• Design strategies for sector innovation and development (like impact investing, housing, recycling, water, energy to name a few).
• Mobilize hundreds of millions of dollars to inclusive businesses or impact investing funds, that help micro, small and medium enterprises grow
• Formalize partnerships to promote and develop inclusive businesses and markets at a national and regional level, focusing on collaboration on the ground and going beyond knowledge exchange and building social capital
• Influence national or municipal public policies

With many of our regional and national partners and contacts we are carrying out conversations to further our role in inclusive market development. We hope to hear from the NextBillion community.

Editor's Note: The Miami Social Enterprise Conference kicked off today in Miami. Stay tuned for updates, an interview with its founder and a wrap up later this week. In the fifth entry of Latin America in the Spotlight, Agora's Ben Powell explains why next week's ANDE Latin America Conference marks a landmark for the industry in the region. 

On March 24 - 26, over 100 representatives from over 50 organizations across Latin America are convening in the colonial city of Granada, Nicaragua for the Aspen Network of Development Entrepreneurs' (ANDE) inaugural regional conference, a venue that holds huge promise to put entrepreneurship on the development agenda in some of the hemisphere's poorest communities.

The setting is auspicious. After Haiti, Nicaragua is the second poorest country in the Western Hemisphere, and there are few places where innovative entrepreneurs are more needed than in this country. With investors and development organizations looking for new models to support sustainable capitalism throughout all of Latin America, the meeting is timely.

The conference aims to build the entrepreneurship movement in Latin America by bringing together development organizations, fund managers and funders. While microfinance and large-scale businesses in these countries have markets that function reasonably well and are supported by professional industries, the same cannot be said for the small business sector.  The ecosystem that supports small and growing businesses is on life support in places like Nicaragua throughout the hemisphere.

These communities need a serious injection of energy, coordination, investment, trust, and partnerships to lay the foundation for entrepreneurship to flourish. They need a professional class of local men and women who can work together to create a self-sustaining environment that encourages innovation, risk taking, and entrepreneurial vision.

As new pools of impact capital form to invest in companies whose contribution to society extends beyond the bottom line, there is increased urgency to find, train, invest and support those (too few) entrepreneurs who run formal economy businesses that, through their success, address social and environmental problems (we call these people "impact entrepreneurs"). Supporting this key group means also creating conditions conducive to their success - regulatory reforms that support small business creation and investment, a media and culture that celebrate entrepreneurs whose businesses improve society, and local angel investors who support entrepreneurs outside of their own immediate family.  In short, we need to create a viable ecosystem that supports impact entrepreneurs in the most difficult environments on the planet.

Creating this ecosystem is a tall order but in Latin America it will receive a major push from the Granada gathering. Tagged "Connect, Collaborate, Build the Field," the conference will give the staff and leadership of ANDE organizations operating in Latin America the training, networking, and intellectual give-and-take necessary to build that ecosystem.

To scale and become institutionalized like microfinance did, people at all levels in the industry must know one another and have a certain degree of trust, of shared definitions, assumptions and agreements on best practices.  Even if they are competitors at one level, they must be able to work together towards a common purpose. Most importantly, they must see that they are playing a pivotal role in something greater than themselves, and then take personal ownership for making the movement a success.  This is what Granada is all about.

If impact investing is to become the force so many of us hope it will be, it is going to require local, trained professionals to find and inspire the kinds of entrepreneurs the planet so badly needs. One of the biggest constraints to the impact investing industry, the lack of entrepreneurial human capital, will be solved not by investment funds but by the men and women coming to Granada and others like them across the globe who are building the industry from the ground up.

Granada is also important because the conference is taking the case for entrepreneurship directly to regional banks, governments, local development organizations, and critically, the regional media, aside from helping train and build trust among regional staff and leaders.

For the entrepreneur movement to reach its enormous potential, its members will need to extend their culture and know-how far beyond the halls of Washington or Amsterdam to the regional leaders, staff, entrepreneurs and policymakers who are ultimately responsible for the model's success. To build the field, conversations between industry leaders in the north and the south are vital, as are the conversations between the movement's leaders in the south and entrepreneurs, banks, development institutions, and governments.

Through the Granada conference, these conversations just got a much larger megaphone.

Part 4 of Latin America in the Spotlight features Jimena Betancourt, Enterprise Development Manager at NESsT. Make sure t cath up on Parts 1, 2, 3, and stay tuned for updates from the Miami Social Enterprise conference, which starts this afternoon.

NextBillion.net: Please describe your organization and the partners you work with:

Jimena Betancourt: NESsT is an international nonprofit organization working to solve critical social problems in emerging markets through the development of social enterprises.

We take an engaged approach to developing social enterprises. Our main initiative, the NESsT Venture Fund, is a philanthropic investment fund providing long-term capacity building, technical assistance, and financial support to social enterprises instart-up and expansion phases. The Fund has adapted tools and process of private equity funds to the development of social enterprises in emerging markets. Our portfolio currently consists of more than 50 social enterprises to which we have provided long-term (5-7 years) capacity and grant investments. In Latin America alone we have a portfolio of more than 20 social enterprises, including a pipeline of more than 70 organizations. The NESsT Venture Fund operates in Argentina, Brazil, Chile, Ecuador and Peru.

NESsT also operates a consulting arm, NESsT Consulting, that provides professional training and consulting services in social enterprise development to clients worldwide. We work with foundations, nonprofit organizations, international organizations and corporations offering training and technical assistance on a variety of social enterprise topics, as well as in organizational sustainability and venture philanthropy.

Lastly, we involve hundreds of emerging market business professionals each year to provide volunteer advice and expertise to our portfolio of social enterprises. The NESsT International Business Advisory Network (IBAN), for example, is a group of individuals -- many with personal and/or professional ties to the regions in which NESsT operates -- that provides pro bono advice and assistance to NESsT on a strategic level.

NextBillion.net: In your opinion, what sets Latin America apart in the social enterprise space? What makes this market unique?

Jimena Betancourt: There are interesting contradictions related to social enterprise in Latin America. On the one hand, there are no regulatory or legal frameworks recognizing social enterprises, and social enterprise is generally not part of any public policy debate. Although civil society organizations can sell products and services, they often have to pay income tax and there is no recognition of the many positive effects brought by them

Furthermore, social enterprise lacks visibility and is generally not well known or understood.

However, there are great demands on the part of Latin American civil society organizations for social enterprise development support. They recognize the need for training, technical assistance and financial support to develop enterprises and ensure that they enhance their social mission. This fact is evidenced in the results of social enterprise competitions announced by NESsT which draw hundreds of applicants at a regional level.  

Another interesting element of LA is the diversity among countries. Colombia and Brazil have sophisticated social enterprise sectors, while other countries less. In countries like Ecuador, social enterprise is not generally widespread among CSOs. In Central America it is a new concept that NESst is working to develop.

NextBillion.net: Could you share sha one or two examples of social enterprises supported by NESsT and the impact they're having?

Jimena Betancourt: Examples of two social enterprises in Chile that are supported by NESsT, under the NESsT Venture Fund later-stage portfolio are:

ONG Forestales, for instance, promotes the conservation sustainable management of native forests in Chile. Their social enterprise Ingenieros Forestales, which developed a firewood certification program and buys certified firewood from small producers for a fair price and resells it to customers in the southern city of Valdivia. The enterprise, currently being replicated in 5 other Chilean cities, contributes to the local economy and helps to improve air quality and educate consumers about damage caused by illegally harvested wood.

NextBillion.net: Looking forward, what do you see as the biggest challenge for social enterprise to take off in the region?

Jimena Betancourt: I see three mayor challenges: The first and biggest one is the lack of support and awareness of social enterprise as a financially sustainable tool. The lack of education among the CSO community of social enterprises as self-financing alternatives is something that needs to be seriously addressed.

There is also very little donor funding available for social enterprises in Latin America.  Unlike Europe, where the European Union is actively promoting and supporting social enterprises, funding for Latin America seems to be totally off the radar screen of international cooperation assistance and national governments.  

Lastly, a major road block is that social enterprise is not integrated into the region's public policy agenda.                       

NextBillion.net: Are there any exciting new projects that you're working on and can tell our readers about?

Jimena Betancourt: We continue to work with the social enterprises we support under the NESsT Venture Fund initiative.

We're currently running Social Enterprise competitions in five countries simultaneously,expanding the Fund to the Brasilian State of Bahiaand also advancing RAMP in Peru.    

Also, in response to the tragic events following the earthquake in Chile, NESsT has established the Levantando Chile Fund to support local Chilean organizations that are channeling assistance to communities on the ground. Levantando Chile will support both immediate assistance and long-term reconstruction efforts in Chile.

Through NESsT Consulting we're developing consultancy in venture philanthropy for donors and corporations; we're also developing social enterprises to serve BoP markets and to support the financial sustainability of environmental conservation efforts. We also work on several capacity building projects that have a focus on social enterprise development as self sustainability strategy.

And although NESsT is growing in an organic manner, we don't to spread our resources too thinly when it comes to broadening our horizons beyond Central and Eastern Europe and Latin America.

In 2007 we added Romania, which is now our biggest program, and we added Brazil and Argentina last year. The goal now will be consolidating and growing our existing markets.

Part 3 of NextBillion's Latin America in the Spotlight features Francisco Mejía, a principal at the Opportunities for the Majority initiative introduced by Manager Luiz ros in Part 2 of this series. Mejia´s remarks shed additional light on some of the innovative ideas and projects supported by OMJ throughout the region.

Make sure to catch up on Part 1 and Part 2 of this series.

NextBillion.net: Francisco, what would you add to the description of OMJ provided by Luiz Ros in his interview?

Francisco Mejía: The OMJ initiative started three years ago and made the IDB the first multilateral organization with a dedicated team and dedicated resources to support market based solutions to poverty.  Our project portfolio (currently over USD100 million) and client base is very diverse.  We are supporting entities that range from small community financial institutions in rural Peru, to large corporations.

We can provide debt (senior and subordinated), structured finance products or partial credit guarantees where we share the risk with our clients.  In addition, we can provide non reimbursable resources to finance pilot projects, feasibility studies or impact metrics. 

NextBillion.net: In your opinion, what sets Latin America apart in the social enterprise space? What makes this market unique?

Francisco Mejía: In Latin America and the Caribbean,  the poor are located primarily around urban areas; in average they are younger than a decade ago, and informal in their business activity.  From a BoP strategy perspective, this means our targetpopulation lives in denser areas and has more access to publicly provided services than is tipically available in other regions. Hence, reaching them at scale is possible by tapping into existing networks and distribution channels that already permeate the slums, barriadas and favelas.

We have called this a "platform" strategy which can also be extended to less dense regions in the rural areas leveraging their own network capillarity and reach.  For instance, in India, the success of Grameen Phone cannot be disentangled from the reach of the Grameen microfinance network.  In Bangladesh, the scale for Visionspring's reading glasses could not be achieved without BRAC's network.

NextBillion.net:  Please provide one or two examples of projects OMJ has supported recently

Francisco Mejía: As evidenced in "Portfolios of the Poor", low-income populations do have access to financial services, albeit informal and very expensive.  In Colombia, for example, informal lenders charge rates as high as 280% p.a. Although acquiring a credit history is beyond the reach of the under and unbanked poor, the large majority have long payment histories with utilities or cell phone companies, transaction histories with suppliers. 

Our financing of the "Social Financing" program of the local utility in Medellin (EPM) uncovers this hidden and dead asset and transforms it into formal credit, providing an innovative channel to bank the unbanked, while giving access to home improvement opportunities. (Editor's Note: A detailed explanation of this model is provided by Luiz Ros here.)

NextBillion.net:  Looking forward, what do you see as the biggest challenge for social enterprise to take off in the region?

Francisco Mejía: The challenges are twofold. First, changing a mind set in the development community that sees poverty and the private sector as two terms impossible to utter in the same phrase; in fact, enterprise solutions can complement and enhance public sector solutions.

Secondly, changing a mindset in the private sector that sees low income markets as too risky, characterized by low margins, and financially unviable because of the need for low prices.  Finally, understanding that poverty is too big of a challenge for any actor to go at it alone is necessary. 

NextBillion.net: Any new projects you're working on and can tell our readers about?

Francisco Mejía: Let me share an example of the cement industry: In the developed world, most cement is sold in bulk while in Latin America evidence shows the opposite: cement is bought in bags, sometime as small as 20kg.  At the same time, more than 60% of homes in Guatemala, for instance, have dirt floors.  Cement might be boring: after all a bag of cement is a bag of cement, but having a cement floor has a huge social impact.  The healthier environment provided by a permanent cement floor is associated with 36% increase in children's cognitive standardized tests.
Providing access to cement floors and recognizing the incremental nature of most housing in Latin America represents a significant challenge for any cement company.  One of the largest cement companies in the region is addressing this challenge and we are supporting them in this effort.

Part 2 of NextBillion's Latin America in the Spotlight features Luiz Ros, an advisor to NextBillion and Manager of Opportunities for the Majority (OMJ), an innovative initiative led by the regions's most prominent multilateral organization, the Inter-American Development Bank. Make sure to read Part 1 of this series featuring Paula Cardenau from Ashoka.

NextBillion.net: Luiz, please share with our readers a bit about OMJ and the partners you work with.

Luiz Roz: The needs of the low income population in Latin America and the Caribbean are so extensive that new investment approaches are required from the public and private sectors. In an effort to find new market-based strategies that improve the lives of those left behind, the IDB launched the Opportunities for the Majority Initiative (OMJ) in July of 2007.  By "majority" the IDB refers to some 360 million people - around 70 percent of the Latin American and Caribbean population - who live on less than US$300 per month.

OMJ promotes and finances private sector business models that develop and deliver quality products and services, create employment, and enable low-income producers and consumers to join the formal economy. This process in turn has a multiplier effect in stimulating overall economic growth and raising the incomes of this long-ignored segment of society. In only two years of operation, the initiative has surpassed $100 million total in approved loans and guarantees. Our target is to invest 250 million dollars in over twenty projects by the end of 2010.

We have also brought a diverse group of partners to the IDB, as clients and also as co-funders and advisers. For example, we organize annual Strategic Partners' Dialogues, hosted by IDB President Luis Alberto Moreno, at which leaders in the BOP sphere, including multilateral development institutions, business executives, NGOs, academics and investors learn from each other and form new alliances. Last year we launched a virtual version of this dialogue, MajorityMarkets.org, which offers information about the most effective projects and business models engaging with the BoP in Latin America and the Caribbean. 

NextBillion.net: In your opinion, what sets Latin America apart in the social enterprise space? What makes this market unique?

Luiz Ros: The legacy of serious difficulties faced by low income Latin Americans can also be perceived as something unique about LAC as a market for Base of the Pyramid strategies, in the sense that it represents an opportunity for collaboration among public and private sectors and civil society to make a positive impact. The pioneering work of institutions such as Ashoka, AVINA, and The Rockefeller Foundation to promote the emergence of social entrepreneurship in the region is now proving valuable; their initiatives have generated projects that have grown to fruition and reached scale.

Similarities in culture and language across the region also set it apart in a favorable way, if compared to other developing regions, as do the diverse business environments we find from Mexico to Peru, from Guatemala to Chile, which create great opportunities for sustainable business models. Lastly, Latin America has reached a relatively stable political scenario that is advantageous to overcoming common coordination failures.

NextBillion.net: Please tell us about one or two examples of social enterprises or projects supported by OMJ?

Luiz Ros: Several of the projects supported by OMJ represent new directions for microfinance. For example, Peru's highly effective microfinance networks are supplementing public solutions to the persistent housing shortage there by offering mortgage and home improvement loans. El Salvador's state-run low-income housing fund, FONAVIPO, is working through microlenders to make home ownership attainable for a segment of the population that never would have been eligible for traditional mortgages. Also in El Salvador, FIDEMYPE is reaching microenterprises that are so small they were not previously able to access microcredit services. And "Mejora tu Calle", devised by Mexican cement company CEMEX, allows residents of low-income neighborhoods to pool their microloans together to help pay for paving their streets.

Other projects show how existing institutions can serve as distribution channels for additional services. The Global Partnerships Social Investment Fund 2010 will use the network of microfinance institutions in the region to move beyond working capital loans and provide needed health, education, and insurance services to their clients. In Mexico, Mi Tienda, a network of stores in low-income, rural areas, is able to offer job training and a variety of services along with basic food and household products.

OMJ is also supporting projects that serve as incubators for entrepreneurship in Latin America and the Caribbean. Peru's Mibanco is reaching out to support female entrepreneurs through loans and training. Chile's Banco de Credito e Inversiones is helping microentrepreneurs by innovating in the use of non-financial information available through suppliers' distribution networks, to build credit histories and gain access to a wide array of financial services. And the IGNIA Fund is leading the way in demonstrating that investing in companies that serve the BoP can be profitable and socially responsible.

These projects are unique in many ways, but they have something in common: the demonstrated the power of partnerships. Each individual project also adds to the priceless store of knowledge and experience OMJ is developing on what works best when engaging with the base of the pyramid.

NextBillion.net: Looking forward, what do you see as the biggest challenge for social enterprise to take off in the region?

We need for efficient ways of reaching thousands or millions instead of hundreds. Scale is crucial when we are talking about close to 360 million people in poverty. On the search for scale, we at OMJ have found platforms.

This strategy takes advantage of existing platforms provided by utilities, conditional cash transfer programs, cell phone providers, logistics companies, or even NGOs, to massively provide additional goods and services that serve the needs of the BoP. To illustrate the possibilities here, there are over 300 million cell phone subscribers in Latin America, and in Brazil alone the conditional cash transfer program, Bolsa Família, benefits over 11 million families.

Another great example is the program Financiación Social. It is sponsored by Empresas Públicas de Medellín (EPM - Public Enterprises of Medellin), the second largest provider of electricity in Colombia as well as supplier of water, sewerage, natural gas, and telecommunications services. Analyzing its 1.7million customers, EPM concluded that many of its low-income clients were underachieving in terms of economic and social advancement: they paid their bills on time, but were excluded from credit markets and the formal banking system. Lack of access to formal financing was a handicap for 75% of the population of the city and forced many citizens to resort to informal loans to buy basic necessities like refrigerators or home improvement supplies.

So EPM established a trust, Financiacíon Social, managed by two large Colombian banks. The trust screens and evaluates the credit profile of customers based on their utility payment records and other available data, and those who qualify receive a credit line to purchase goods like refrigerators, computers or building materials for home improvements. A network of 170 retail outlets has agreed to honor the credit line, and customers using the credit option receive bills for their purchases along with their monthly EPM utility bills.

Its target is to bring an additional 190,000 households into the credit markets by 2015. The IDB is supporting the program with a $10 million loan from its OMJ financing facility and the IDB's Multilateral Investment Fund is expected to provide a grant to support refinements in the credit rating system so it may be applied to customers with very low incomes, who traditionally represent a high risk for financial institutions.

NextBillion.net: Are there any exciting new projects that you're working on and can tell our readers about?

Luiz Ros: We have a strong project pipeline for 2010, and at the end of the first quarter we already have 14 projects on track for approval by the end of the year.  These projects include support for new fortification techniques in El Salvador, incremental housing in Guatemala, community infrastructure in Ecuador and innovations on contract-based agriculture and an educational credit program both planned for Mexico.

A number of strategic themes are emerging as core topics for future work.  For example, the Corporate Leaders Program that will begin later this year marks the first step in a more deliberate and targeted approach to working with large corporations, who are in a unique position to help scale up BOP activities if the right solutions can be found to meet their highly specific needs.  We also see important opportunities opening up in the field of nutrition and food security, and expect new projects to arise in this area as a result of our current work with the Global Alliance for Improved Nutrition and the FEMSA Foundation in the program Mapping of the Potential of Private Sector Nutrition Solutions in Latin America and the Caribbean, the results of which will be available soon.  Lastly, we're exploring the role of market-based strategies in crisis response and longer-term crisis recovery, which is also emerging as a  topic of great importance after the earthquakes in Haiti and Chile.

NextBillion.net: Thanks Luiz for sharing OMJ´s news with the NextBillion community.

If you have any ties to the Spanish/Portuguese speaking world and have an interest for social enterprise, then I'll bet you're as excited as I am about the conferences taking place this week and next: The Miami Social Enterprise Conference and the ANDE Latin America Conference. NextBillion is a partner to both, and we'll bring you Latin America in the Spotlight, a series of interviews and articles that introduce some of the most active players in the region's emerging social enterprise industry.  

So off we go with the first interview in the series featuring Paula Cardenau, who leads Ashoka's Social Business Initiative and is also a Staff Writer with NextBillion en Español. A big thanks to Paula for taking the time to answer our questions!

NextBillion.net: Please tell us a bit about Ashoka's Social Business Initiative

Paula Cardenau: Ashoka is the global association of the world's leading social entrepreneurs-men and women with system changing solutions for the world's most urgent social problems. Since 1981, we have elected over 2,000 leading social entrepreneurs as Ashoka Fellows, providing them with living stipends, professional support, and access to a global network of peers in more than 60 countries.

72% of Ashoka Fellows generate revenue that accounts for roughly 25% of their budget. Among them, there's an ever growing group that has decided to start-up social businesses as a vehicle to scale up their innovations and have a wider social impact. Thus, with the invaluable support of Artemisia, we have become an incubator of social business, providing services that range from working out the business idea and business model, providing support for the business and investment plans, opening opportunities with access to capital, and providing support for implementation.

The social enterprises we work with range in size and legal schemes, but they share a common feature: the product or service they deliver brings a direct benefit for low income communities in areas like education, health, energy, sanitation, nutrition, or they include disadvantaged communities in their value chain as producers, suppliers or distributors.

NextBillion.net: In your opinion, what sets Latin America apart in the social enterprise space? What makes this market unique? 

Paula Cardenau: The increase in poverty rates and environmental challenges such as the access to clean water in Latin America are an urgent call of action, and social enterprise has the potential to contribute. An asset we have as a region is Latin America's strong tradition of community self-organization to address social issues, as well as our strong social capital at grass roots levels. Still, we have a long way to walk to build adequate environments that enable the emergence of social enterprises that leverage this asset. Critical barriers that need to be addressed range from the scarcity of human capital that combines a "double" social-commercial profile, the difficulties to access to capital, and the absence of regulations for social enterprises.

NextBillion.net: Could you share one or two examples of social enterprises in your country and the impact they are having against poverty and/or environmental degradation?  

Paula Cardenau: Greg van Kirk says that "Poverty is only a symptom of a wider problem: lack of access to essential services and products". In order to enable this access, he created the MicroConsignment model by which he reaches isolated rural communities with health care-related goods and services. Key to the model is that local women become entrepreneurs who sell those products and services in their communities using a consignment mechanism.

The majority of them are women who had no other opportunities to generate additional household income. Only in Guatemala, 175 local women entrepreneurs have successfully sold over 35,000 products like eye glasses, wood-burning stoves, seeds/growing techniques, water filters and energy-efficient light bulbs- in over 1,800 remote village campaigns at affordable prices, and creating gross revenues of 330,000. The model is being replicated in Ecuador and Nicaragua, and has plans to expand to Argentina and Egypt.

Through Lumni, Felipe Vergara is managing the first profitable education investment fund. His "Human Capital Contract" eliminates the risks to both students and investors that otherwise deter private investment. In exchange for education financing, these legally binding agreements require students to pay a fixed percentage of their income over a pre-determined number of months after graduation. For students, human capital contracts do away with the need for collateral and the threat of burdensome debt associated with traditional loans. The effect makes unemployment and underemployment less ominous, but also allows students to pursue their dreams. As for investors, they essentially purchase equity shares in students' post-college financial success.

Lumni operates as a node, facilitating win-win financing opportunities between Universities, private investors, and students. It provides education opportunities in Chile, Colombia, Mexico, and to Hispanics in the US. The Latin America human capital funds generate an average return of 7,5%. Repayment rates do not exceed 15 % of an annual salary, with the average period for payment set at 60 months cumulative so that a student is not obligated to pay when he or she is not employed. So far, Lumni has worked with around 1,000 students, and they expect to rise this number to 3,500 this year.

NextBillion.net: Looking forward, what do you see as the biggest challenge for social enterprise to take off in the region?

Paula Cardenau: Access to capital that truly meets the needs of social enterprises is one of the main challenges they face. The fact that they are socially driven has direct implications in the way their business model is structured, so they cannot be funded with the same logic of a traditional business. Creative financial tools need to be implemented; among other things, it needs longer time horizons, exit strategies that enables repayment to investors from the cash flow of the business and not from buy-outs, lower return expectations and financial structures that include loss guarantees to mitigate risk and attract traditional investors.

NextBillion.net: Are there any exciting new projects that you're working on and can tell our readers about?

Paula Cardenau: With a group of Ashoka Fellows and other partners we are starting to design a Loan Fund for Social Enterprises. It is still in a very preliminary stage so I am not in a position to provide details, but the idea is that this fund will attract soft investors but also grants that can serve as loss cushion. This fund will provide loans with an interest rate below market and a repayment period starting in year 3 at the minimum. 

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This week, we welcomed four new people to the NextBillion team: Maria Zheng, Andrew Eder, Bryan Farris, and Adeena Schlussel.  Watch for their contributions and insights! 

 This week, staff writers took new looks at how enterprises can intervene in education and early childhood to create new security and prosperity into the future:

What Social Businesses are Doing to Fight Terrorism

New staff writer Bryan Farris examines a topic often discussed in the media from a new angle - before education steers people towards radicalism or towards economic opportunity, the education must be paid for.   Credit and financial services for the poor and for student loans offer an alternative to large flows of funding from Islamist sources. 

Reversing the Cycle of Poverty: Targeting Early Childhood Development

Manuel Bueno highlights the critical nature of early childhood in determining long-term individual outcomes - and by extension, economic outcomes.  He asserts that early childhood is an overlooked market for base of the pyramid businesses.

The Bottom of the Pyramid: A Disruptive Force to be Reckoned With?

Mark Beckford argues that base of the pyramid markets are tailore made for the generation of disruptive technologies and approaches.  If it's not seriously cheaper and better than existing products and services, it probably won't succeed.  A powerful insight on why we are seeing so much polycentric innovation.

Feedback from Our Readers: NextBillion Readers' Survey

We're looking for your feedback to make NextBillion better, more responsive to its audience, and a more enjoyable read for you.  Please take a moment to fill out this survey.

We added some great upcoming events to the Take Action page.  Get excited for Sankalp 2010, India's larges social enterprise forum.  Readers of NextBillion know the sheer energy and breadth of new social enterprises in India - be part of it May 4-5 in Mumbai. This week, watch for reports from the Social Venture Capital/Social Enterprise Conference in Miami, Florida!

We also posted some fantastic jobs.  If you missed them:

The Center for Tropical Agriculture in Cali, Colombia has an open-ended call for recent graduates to apply for internships with their global programs on agriculture.  English and a 6-12 month commitment is required.

Ashoka's inspiring Housing For All initiative - tackling one of the biggest, most complex issues out there - is hiring a director for its Brazil program.  The position is in Sao Paolo.

News

This week a we posted a story that caught my eye at the intersection of social justice and market-oriented development.  Waste collectors - individuals that serve as the waste management system in countless urban areas in developing contexts - are vulnerable to their livelihoods being taken away by new modern municipal collection systems and particularly waste-to-energy incineration projects.  It's a thorny question, because large-scale waste management is a clear need.  A situation in Delhi illustrates the role that waste collectors may play in waste management that is a leap ahead of landfill dumping, even - there a friend has been involved in a community effort that has organized waste collectors to separate organic waste and divert this to local fertilizer and compost needs, even Delhi parks.  It saves the city huge fees in trucking organic waste miles (which makes up the vast majority of urban waste in India) out of Delhi.  And even the tiny margins on collecting and sorting organic waste can provide an income stream for waste collectors.  Organic waste in open landfills is a huge source of methane, a serious greenhouse gas, so there is real value being created by diverting organic waste from open landfills.

It may or may not scale, but the possibility for organic waste to join recyclables in the diverted waste streams creates real value.  Or perhaps waste collectors can be integrated into supply chains that sort waste according to highest value - local compost, recyclables, waste-to-energy projects, large-scale landfills with methane capture that can generate carbon credits. 

The venerable Self-Employed Women's Association in Gujurat got its start organizing self-employed people in Ahmedabad, like waste collectors, to give them a semblance of power in the markets that determined their livelihoods. No matter how the waste management systems evolve - through large-scale systems or community-scale sorting - the livelihoods of the waste collectors should be kept in mind. 

Around the blogosphere:

For San Francisco readers, from the Acumen blog: "The San Francisco for Acumen Chapter will be having its Wine Tasting Event on 25th March, at the SNOB Wine Bar & Lounge from 6.30pm - 9.30pm." (ed. note: Lest you get the wrong ideas, SNOB stands for Sonoma, Napa, Or Beyond.)

The Solar Electric Light Fund is partnering with Partners In Health to put solar panels on all of its clinics - including in Haiti.  As noted in the Economist, expect to hear more about solar for Haiti as Richard Branson's Carbon War Room pushes it as a major piece of Haiti reconstruction and development at a UN donor conference later this month. 

And finally, China is to India like Wal-Mart is to Target?  You'll have to read it to see if you agree.