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Imagine that you're a 13 year old, the oldest of seven kids, growing up in Pakistan in a poor family.  As you try to fall asleep each night, you wonder whether you'll have something to eat the next day and your back hurts because you spent the last week lifting and pushing wheelbarrows to help your mother and father with their work.

Rather than dream about one day becoming a professional athlete or a world famous musician, you look ahead and expect that you'll be doing back breaking work like your mother and father for the rest of your life.  Life isn't terrible though; you have a very loving, happy family and wonderful friends.  Despite that, you know that your parents are fighting a daily battle to make ends meet and you have a growing sense of responsibility to help provide for your younger siblings.  If you're struggling to picture the desperate scenario I've described, just think of young people in gangs across the U.S.; this situation is not so different from what a lot of poor people in America face.

In their 2009 publication, 'Emerging Markets, Emerging Models', Monitor describes how many children find themselves in a condition of poverty across the developing world.  The report goes on to portray an economic environment that would be very challenging for poor families to navigate: "...current low-end markets are informal, inefficient, exploitative, and often dominated by monopolists, quacks, or crooks."  As you would expect, parents in situations like this want nothing more than to offer their children a life better than their own.  In fact, Monitor reports that parents are willing to spend a large portion of income on education for their children:

Even in one of India's poorest states, Bihar, parents earning over Rs. 3,000 ($60) per month (or $2 per day) are willing to pay more than 10% of monthly income to send at least one or more children to private school.  

Unfortunately, families in desperate situations are prime breeding grounds for the next generation of terrorists.  Al-Qaeda, FARC, Hezbollah and others that have been labeled as terrorist organizations are generally among the most influential and powerful groups in their local geographies. 

As noted recently in the Washington Post, terrorists are often recruited from poor families trying to break out of the cycle of poverty: "For poor people in countries where economic prospects are bleak, jihad can be one of the few jobs available...Of the 25,000 insurgents and terrorism suspects detained by U.S. forces in Iraq as of 2007, nearly all were previously underemployed."  For instance, many in the Arab world perceive Hezbollah to be an organization focused on social development.  Similarly, in Pakistan, the Taliban often offers parents the best chance for their children to receive a decent education.  In Colombia, the FARC recruit fighters from a very young age. 

These groups have so much money (The Middle East Forum reported that, "the Saudi government has admitted to spending more than $87 billion over the last decade in an effort to spread Wahhabism") in areas where many people are struggling to get by, that they can recruit members by offering them a better life.  Families that face desperation and degradation are willing to make difficult choices in order to end their despondency. 

The situation is further aggravated in countries and regions that have been torn apart by wars and natural disasters, which may add to the financial and emotional desperation that some families face when trying to get by. In his book, Capitalism at the Crossroads, Stuart Hart describes what drives individuals to join terrorist organizations:

It takes a lifetime of neglect, despair, dashed hopes, thwarted opportunities, or worse-intimidation, exploitation and humiliation-to drive most people to such extremes.

Individuals facing severe poverty often feel an intense sense of desperation and are therefore willing to do almost anything to escape their scenario.  Though terrorist organizations are usually led by religious fanatics and fundamentalists, their member base generally comes from disenfranchised poor families who seek a better life.  Hart, who is known to be a thought leader on this subject, goes on to say, "Terrorism, in short, is a symptom; the underlying problem is unsustainable development."

The Solution

It is clear that in the long run, the solution to terrorism is to deconstruct the life circumstances that encourage members to join organizations like the Taliban.  This is not an easy task, but social entrepreneurs are working diligently to help.  In the same way that social businesses are just a part of the solution to global poverty, they cannot fix terrorism in isolation.  Social enterprise, while critical, is only a piece of the puzzle; the severity of the problem requires solutions to a number of challenges, including social, government and economic reform.  Still, the work of innovative change makers is crucial and important.  As an industry, we are working to create solutions for those who don't have all the tools they need to help themselves.  We are providing access to proper education, health care, sanitation, energy, water, financial tools, and so on.

Though nearly everything social entrepreneurs do is meant to contribute to more sustainable development, two sectors of work stand out especially in terms of their ability to combat the seeds of desperation that lead to terrorism: education and financial tools.  Education expands the potential of young people to improve their family's life and financial tools help families to better manage their money, thus alleviating situations of financial desperation.  

Education

Providing one's children with an education is a desire shared across nearly all cultures and it is crucial for bettering the world and opening new doors of opportunity.  As Monitor reports, "Parents generally prefer to send children to private schools [which are perceived as higher quality than public schools]: between 1993 and 2002, 80 percent of new enrollments in urban India were in the private sector."  Anyone who has read Greg Mortenson and David Oliver Relin's 'Three Cups of Tea' knows about the inspirational work being done by the Central Asia Institute.  The institute is building schools in remote regions of Afghanistan and Pakistan to promote education, especially for girls.  Doing so in the heart of the territory occupied by the Taliban and other extremists, the CAI is directly influencing the life opportunities available to those whom it reaches. 

Another social venture, Vittana, is enabling person-to-person micro student loans over the internet, which makes it possible for the poor to receive quality education and pay off the loan with their earnings later on.  Through two vastly different approaches, the Central Asia Institute and Vittana are providing education opportunities for those at the BoP.

Financial Tools

As is clearly demonstrated in the book Portfolios of the Poor, the world's poorest are always coping with uncertainty, especially with regard to cash flows and the timing of when they receive income.  Financial instability can make life very difficult and can certainly force families to make difficult decisions. 

The work of Grameen Bank and the microfinance industry have provided some of the tools required for families to manage their finances, but more work is necessary.  Currently, M-PESA and FrontlineSMS are building the capability for the poor to store money on their mobile phones and make payments via text message. 

As Rob Katz described recently, M-PESA can be extremely useful for both rich and poor to manage their money and cash flows.  Not only will this enable users to make digital payments and have another way of moving cash, it will allow them to keep more of their money safe rather than stashed at home or with money guards.  For those living in tiny huts in the middle of urban slums, you can imagine how difficult it is to store money safely at home.  Financial security provides stability, which helps enable the poor to avoid the degree of desperation that leads them to join forces with terrorist groups.

Though this post has only touched on social businesses in the education and financial services industries, unsustainable development can only be cured through the collective impact of solutions across all types of needs.  Ultimately, social businesses and entrepreneurs will help local communities rise out of poverty.  When this occurs, terrorist organizations as we know them may cease to exist.

How does one convert "credit" extended to low-income households into tradable "commodities"? Is there a way to use the best know-how of financial markets to transform an industry that makes small loans to low-income households? Is it possible to diversify an organization's sources of funding lowering its cost of capital while at the same time increasing the returns of an investor's portfolio?

Securitization, which typically involves conversion of assets that have predictable future cash-flows (like mortgages, automobile loans, student loans, home equity loans, credit card receivables, etc.) into rated, standardized and tradable securities, promises to offer an answer to all these questions.

Highlighting the recent $10.4 million transaction that involved India's first mutual fund investment (by ICICI Prudential AMC) in the Indian microfinance industry, a recent blog entry by Dr. Nachiket Mor emphasized the importance of securitization as a financing channel for the microfinance industry. His blog triggered an interesting debate that argued how Micro Finance Institutions (MFIs), who have traditionally depended on uneven year-end inflows from banks, could diversify their sources of funding by participating in the assets-backed securities market via "rated" securitizations.

This particular transaction involved the securitization of receivables from over 55,000 micro loans originated by Equitas Micro Finance, a MFI based out of Chennai. It demonstrates that receivables securitization offers an economically attractive alternative to conventional sources of financing for MFIs. So, how does it all work? Securitization converts an illiquid asset into a tradable instrument in the debt-capital markets. In the case of a MFI, the underlying asset comprises of a pool of micro loans that are originated by the MFI and are backed by the future cash flows related to the loans (i.e. the collections from the low-income clients). A structurer, then, performs rigorous due diligence on the MFI by creating strict underwriting guidelines to ensure that only the most credit worthy MFIs are chosen to participate in the securitization process.

A portfolio of loans is then sold to a bankruptcy-remote entity, "Special Purpose Vehicle (SPV)," that is housed in a separate legal entity (usually a private Trust). A rating agency performs due diligence on the MFI and the loan portfolio; in order to acquire a high desired rating for the to-be-issued securities, it is critical for the originator of micro loans (the MFI in this case) and / or the investors, to provide adequate credit enhancement. Credit enhancements, such as subordination (first loss default guarantee by the originator, and second loss deficiency guarantee by the investors), over collateralization, etc. are vital risk-reduction techniques that aid in protecting the securities backed by a pool of collateral (for example, collections from low-income clients in our case) from potential losses arising out of defaults in the underlying assets (the micro loans in our case).

After purchasing the assets, the SPV then creates investment-grade debt securities, which are then sold to investors in the debt capital markets. The returns that the investors receive are directly affected by the performance of the underlying assets since the investors take in the interest and principal payments on the underlying assets for the duration of the security's life. Also, since the SPV is a legal entity independent from the MFI, the rights of investors to the assets held by the SPV are protected in the event of the MFI experiences financial trouble.

So, why would an investor (in our case, banks, insurance companies, mutual funds, private wealth managers, etc.) like to participate in an asset-backed securities market comprising of micro loans to low income families as the underlying assets? It is because microfinance loans are an increasingly attractive asset class due to the following salient features of Microfinance loans: 1) lower acquisition costs given a loyal client base that results in high portfolio quality and loan repayment rates; 2) high liquidity and solvency given the short tenor of the micro-loans, typically less than a year, thus giving entities such as mutual funds to have an additional short-term investment opportunity; and, 3) high returns and portfolio diversity given microfinance loans' low correlation to the mainstream markets.

On the other hand, securitization helps the MFI broaden its borrowing sources, reduce the cost of borrowings, impart pricing flexibility on the lending side, enhance ROA and other financial ratios, and/or lower leverage and boost financial return ratios. For example, since the securitization process results in the "true" sale of assets, there is generally a corresponding removal of the assets from the balance sheet of the MFI. The MFI can then realize meaningful improved balance sheet metrics (such as Return on Assets, Return on Equity and Return on Capital) and financial flexibility to manage higher growth with existing capital. Specifically, issuing additional debt (bank loans) may have adverse effects on the MFI's balance sheet, as well as undesirable dilutive effects while issuing additional equity.

The term debt, additionally, usually carries covenants that restrict the MFI's financial flexibility (specifically around the timing of the repayments). But, by raising funds through the sale of an asset (that already exists on the MFI's balance sheet) and by receiving cash for the receivables within days of an invoice being issued, the MFI's working capital needs are dramatically reduced. The MFI can then re-deploy these funds to originate and service a larger number of loans, optimize its existing distribution network and correspondingly reduce its operating costs passing on this benefit to the end customer in the form of a reduced interest rate. A lower interest rate for the microloan, finally, spurs demand for microloans and will empower the MFI to fulfill its social mission of reaching more unbanked households.

The Gates Foundation is at it again.  Yesterday it announced $38 million dollars in funding to support programming that will give the poor safe, effective ways to house their savings. 

Six grants will go to 18 MFIs that offer microcredit but will "make savings accounts available to an initial 11 million poor people across 12 countries in Africa, Asia, and Latin America over five years."  Potentially game-changing model?  Check.  Learn by doing?  Check.  Strategic geographic reach?  Double-check.  The grantees, which include ACCION, FINCA, the Grameen Foundation, ShoreBank, Women's World Banking, and World Vision, represent leaders in the field of microfinance.  Notably, the grant to Women's World Banking is the largest it has ever received.

Clearly, this effort focuses attention on an element of access to finance that has been less emphasized.  One of the arguments that Portfolios of the Poor makes is that the poor lack robust, flexible, and effective financial tools.  Perhaps not surprisingly, this lack of resources spurs creative money management among poor households.  Some utilize products in ways that defy their original design.  For example, several borrow money through microcredit as a way to save it for future use.

Interestingly, savings are a key component of the Community Economic Development approach of Nuru International, a relatively new NGO that has applied design and systems thinking to the problems of the rural poor in Kenya.  Granted, Nuru applies microcredit's "group borrower" model to savings.  But their approach definitely prioritizes savings as a tool for community-based economic sustainability.  Perhaps this is just a footnote, but it will be interesting to note whether the Gates funding and the emerging emphasis on savings will result in an inflection point in microfinance.

Additionally, it might be worth observing whether m-banking and savings accounts dovetail at some point.  After all, m-banking emerged from a need to circumvent the hefty fixed costs associated with "banking via brick and mortar branch."  Finally, given the diversity of grantee initiatives-from ShoreBank's distribution innovation (staff members with handhelds and motorobikes) to Women World's Banking focus on financial literacy via social soap opera-we'll all want to know which methods prove most effective and why.

Some time ago during a BoP conference in Madrid I had the chance to talk with Felipe Acosta, commercial director from Codensa. I remember asking him, “Now that you seem to have figured out individual credit, are you thinking about going for Small and Medium Enterprises (SMEs)?” He replied “You are crazy! It’s so much more complicated that not even many banks get it right!” What Felipe said is the common view about offering financial products to SMEs: fraught with risks and not really profitable. That view, however, is starting to change.

Why are SMEs so important? A firm is normally considered a SME when it has sales below 2.5 (for a small enterprise) and 10 million dollars (for medium enterprises) respectively. According to Ayyagari, Beck, and Demirgüç-Kunt (2003), SMEs account for close to 60% of manufacturing employment in developing countries. Furthermore, SMEs often drive innovation, spur economic growth and facilitate the provision of goods and services – above and beyond other economic actors (Barreiro, Hussels and Richards, 2009).

The problem is that often SMEs have difficulty securing financing because they do not have the necessary systems in place to provide transparent information to investors or lenders and cannot supply the high collateral requirements that banks require for their higher operational risk. In essence, they slip between the cracks of the financial system, because they are too large for microfinance institutions and too small for commercial lenders.

Why are financial institutions perceived as not being interested in SMEs? The conventional view highlights SMEs opaqueness as a crucial factor. As a consequence of SME informality and its lack of full financial reporting, financial institutions find it very hard to ascertain whether SMEs have the capacity or the willingness to pay. The appropriate business model to profitably deal with such opaqueness has been argued to be “relationship lending” which relies primarily on “soft” information gathered by the loan officer through continuous, personalized, direct contacts with SMEs, their owners and managers, and the local community in which they operate, to mitigate opacity problems (Berger and Udell 2006). Nonetheless, relationship lending has a strong disadvantage in the high labor costs required to collect and keep updated such information. Furthermore, big financial institutions are perceived as less capable to process, quantify and transmit such type of information through their formalized communication channels. Therefore, traditionally small or niche banks have tended to take a more predominant role in this market.

This state of affairs has been changing in the last few years as the competitive pressure on most financial institutions in developing countries has increased. Banks have seen their margins in other markets fall due to the intensified competition coming from non-financial organizations such as utilities (like Codensa) or Mobile Phone Banking firms. This reduction in lending margins across segments has prompted banks to increase fee-based revenue and product cross-selling, with SMEs becoming a natural target for expansion. For many large banks, SMEs have now become a strategic client.

How are these financial institutions adapting their business model to serve SMEs? From a purely market-based perspective it is obvious that they should not resort to the relationship lending prevalent at smaller institutions. To facilitate arms-length lending (the opposite of relationship lending), many of these banks have greatly invested in the development of transactional technologies such as credit scoring and standardized risk-rating tools and processes. Moreover, they have started to develop specially targeted products such as asset-based lending, factoring, fixed-asset lending, and leasing (de la Torre, Martinez Peria and Schmukler, 2008).

Some of these technologies benefit from the effects of economies of scale and scope which are present in larger banks. For example, credit scoring models rely on statistical properties to assess risk and need a large number of clients and loans, which tend to increase with bank size. When credit scoring does not adapt to the client (credit scoring tends to work best for micro and very small enterprises), large banks can tap into more sophisticated risk management systems. In this case risk management is done primarily at headquarters by a credit analyst with independence and strong approval and veto powers. Finally, large banks can also take recourse to their service platforms, technical expertise, and IT and back-office infrastructures. These advantages can be very useful with relatively bigger sized (and thus more profitable) SMEs.

Here are stories that caught my eye this week, an event coming up in San Francisco, and an opportunity for bloggers writing at the intersection of technology and poverty:

The Financial Access Initiative out of NYU has concluded in a new report that 2.5 billion people don't have access to a financial institution, including microfinance.  Jonathan Murdoch, FAI's managing director and a professor of economics and policy at NYU, has an illuminating quote: "Until now, the margin of error when considering the world's unbanked was about plus or minus a billion-unacceptable in any other field."  (Except in naming blogs.)

The report, Half the World Is Unbanked, notes that 800 million people living on less than $5 a day currently have access to financial services.  The survey was compiled from existing cross-country data with assistance from McKinsey's Social Sector shop.

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In a recent BusinessWeek article, Economics Editor Peter Coy weighs the merits and risks of financial innovation. "The big problem:" he writes, "it's hard to tell the beneficial ideas from the ones that are self-serving or dangerous." Though concern over the potential harm of poorly understood financial products may lead us toward over-regulation, one benefit of these ongoing conversations is the attention it is drawing to the long-ignored problem of financial exclusion. Currently, an estimated two billion people around the world lack access to appropriate, affordable and safe financial products and services. 

Such was the focus of the second annual Global Empowerment Meeting, a one-day invitation-only gathering of global leaders from business, government, non-profit and academic worlds hosted earlier this month by the Center for International Development at Harvard University. With a focus on expanding the reach of markets the presentations and discussions of the event centered on the question of financial access and how to create long-term financial empowerment for underserved communities. Among the key topics were both the questions of financial innovation and appropriate regulation.

Launching the discussion, Ricardo Hausmann, Professor of the Practice of Economic Development at Harvard University, presented research that supports a new framework for understanding why some economies stagnate, remaining perpetually mired in poverty. Through detailed comparisons of countries worldwide, he has identified that a country's prosperity is directly correlated to its ability to create products of increasing complexity. In addition, as a country's capacity to produce products increases, so does the complexity of products that it produces, and this ultimately leads to increased opportunities for growth. As we think about the possible corollaries in financial services, it is impossible not to wonder whether the same product sophistication that caused millions of honest citizens to be "duped" into transactions whose complexity was beyond their comprehension also enabled the voracious growth of the recent past?

At the same time, the expanding range of available products and services, which should ostensibly be improving consumers' lives, may actually be causing them greater distress. These are the findings of detailed research presented by Dean Karlan, Professor of Economics at Yale University and founder of the non-profit Innovations for Poverty Action. Karlan's research has shown that oftentimes consumers prefer to have fewer choices, and they will actively seek products that force restraint. For example in India, Karlan and his research team discovered that despite being given the opportunity to pay off very high-interest debt owed to a moneylender, many poor people chose not to. These individuals were using ongoing debt as a way of negotiating the complex dynamics of household finance by "pre-allocating" their spending. In the United States, Karlan and his team created www.stickk.com, a website where individuals can sign up to "put a contract on yourself." Through hundreds of voluntary participants, Karlan has observed in practice that people want to limit their own choices and force consequences for their own "bad" behavior.

And at the root of this ongoing public discussion about setting limits for both businesses and ourselves we are all wondering: who should make that call?  Should the government develop those constraints for us, or must we take that responsibility ourselves? Many advocates for government intervention, including those who support Obama's proposal for a Consumer Financial Protection Agency, worry that consumers don't have the tools needed to make informed decisions about which products will benefit them. At the same time, in many countries (including the United States) regulations create unnecessary barriers to expanding access for consumers who would like to have more. At the Global Empowerment Meeting, an expert panel of international regulators engaged the group in a heated conversation about the challenges of reforming financial regulations. Andrés Velasco, Chile's Finance Minister who has been recognized for the most effective macroeconomic stabilization program in Latin America, urged the divorcing of law from regulation.  Laws, he suggested, should be simple and focus on intent with long-term relevance. Regulations, on the other hand, should be more detailed but also structured to adjust quickly as products, services and market conditions evolve.

The potential harm of over-regulation was deeply underscored by the luncheon keynote presented by Lant Pritchett, Professor of the Practice of International Development at Harvard. His remarks, titled "Capitalism without Capitalization," illustrated how excessive and/or inappropriate regulation in many countries has not only caused many entrepreneurs to go underground to work "informally" outside of the legal system, but that this phenomenon has endured for so long and spread so pervasively that countries risk being unable to escape it.  When regulation is so rigid that it prevents the natural flow of market forces, both suppliers and consumers circumvent the official system and, according to Pritchett, a world of "deals" replaces the one of "rules." The long-term consequence, of course, is that entrepreneurs and businesses working in the informal economy are unable to leverage their income for investment or growth. 

In the United States we don't worry so much about an underground black market of financial services. However, the ongoing appearance of "non-bank financial services" demonstrates that demand can and will drive innovation despite regulation, and if consumers want access to products that even the government may have determined are not good for them, the private sector will find ways to provide them. As such it begs the question of whether, like the "illegal" high-rise buildings of Cairo, we are simply avoiding the obvious and prolonging the inevitable? Or, perhaps more harmfully, of whether our regulations perpetuate market exclusion that prevents individuals from capitalizing on their financial success?

The complex question of consumer well-being is anchored in a fundamental tension between the freedom and danger of choice. On the one hand, as billions of individuals still lack the opportunity to choose products and services that may enable them to improve their financial well-being, millions of other consumers suffer from too many choices that they cannot navigate successfully. While one set of governments must throw off the vestiges of paternalistic regulation, ours now contemplates adding further layers for "consumer protection." What we all seek is a market that efficiently provides in an environment of minimal harm, though what we debate is how much responsibility an individual can and should bear and what tools we can best give him to become truly empowered.

Editor's note: Guest Blogger Vinay Nagaraju sent us the following post from a session at the Skoll World Forum titled "Expansion Finance for Social Impact". It was moderated by John Goldstein, Managing Director, Imprint Capital Advisors. Speakers in the panel were George Overholser, Founder and Managing Director of NFF Capital Partners, Jean-Philippe De Schrevel, Founder of Bamboo Finance and Blue Orchard, and Ashish Karamchanndani, CEO of Monitor Group.      

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Philanthropy has too often remained trapped in the 'small is beautiful' world of social innovation - while for-profit-investors have striven to avoid any taint of compromising returns for social goals. A growing set of trailblazers is mobilizing significant pools of capital to deploy for social impact. In the process they are reinventing the way philanthropic and for-profit capital is used for social and environmental benefit.

While speaking of stages in fund raising, Jean-Philippe asked social entrepreneurs to look for angel investors that believe in the ideas and are willing to invest 'small sums' of money - use the initial successes and then leverage to make larger claims. He asked people to speak to private banks and private investors after reaching a scale that can attract investments - that is how you get access to large pools of capital. He said growth by franchising was an option to scale enterprises, a plausible business model social enterprises should consider.

George, from NFF Capital Partners, raises money from a for-profit pool for investments in the non-profit world. He resonated on the challenges social entrepreneurs face and asked the audience to look for funders that can stay for long term and incrementally support ventures. He emphasized that the scale of impact is more important than the scale of the organization. Social Entrepreneurs need to not just have a programme but an enterprise around it.

Ashish, from Monitor Group, said that helping organizations in the non-profit space was a challenge, and could not stress less that the fundamental element of social enterprises was the business model. That is, a model for revenue generation that can cover all the costs to begin with. Speaking of the benefits of micro-finance he said it was fundamentally a different business model to deliver the same product - a personal loan. Commercial viability, robustness  and replicatability were attributes of such a model. He also said that a paradox is that sometimes the organizations may need to be small to build viable models in the low income groups.

In recent times, there are growing number of investors who want to diversify their portfolios and be connected to projects that make grassroots impact. This change has come about with a sudden interest in the well-being of the world given the current financial crisis.

In summary John reminded the audience that there's often great payback for those who take on risks early, in the absence of clarity.

I've always thought that the next major technology disruption would come from the developing world. This could partly be just a bias on my part (most of my career has been developing computer businesses in emerging markets). The underlying logic behind this belief is that disruptive innovations are cheaper, easier to use, and bring some type of end user value that doesn't exist in the current mainstream solution.

Emerging markets clearly require a more affordable solution. They also require something that is easy to use due to higher illiteracy rates and limited skills. Finally, in order for them to decide to use their hard-earned money on something, it has to be useful for them. Take a look at the PC. Even if someone gave PC's away for free, you still wouldn't see PC's sales go through the roof. Sure, there'd be a big bump, but not to the penetration level you see with TV's and other basic household appliances.

Even if a PC was made so easy to use (e.g. streamline and simplify the interface with large, logical icons) so someone that couldn't read or had no computer skills could use the PC easily, they likely wouldn't see that much value in it. The missing element is some unique value for consumers and micro-enterprises at the bottom of the pyramid. I don't think this value exists in PC's today.

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Following is the second of a Two-Part Series written by guest blogger Ryan Gunderson after a recent trip to rural Zambia.

Ryan is a business professional with Medtronic, the world's leading medical technology company.  He earned a bachelor's degree from Brigham Young University and an MBA from the University of Michigan's Ross School of Business. He writes about sustainable, scalable solutions to end global poverty on his blog Riches For Good and is actively pursuing his goal to help 1 million people out of poverty during his lifetime.

By Ryan Gunderson

I met Blessings and Francis in October 2008 when I visited the church they both attend in Lusaka, Zambia.  Although some 90 people were in attendance, Blessings and Francis stood out to me for the obvious reason that they were the only two speakers in the main meeting that day. Before Sunday school I introduced myself to all who were present, and I told them I was traveling with a non-governmental organization (NGO) and would be visiting rural farmers in Zambia to help them increase their incomes. 

Intrigued by the purpose of my trip, Francis invited me to his house after church, and I gladly accepted.  Blessings separately invited me to his house; the three of us traveled to Francis' house, where we spoke for about an hour.  I'm pictured below with Blessings (suit) and Francis, and several members of Francis' family.

I shared my goal to help 1 million people out of poverty and asked Blessings and Francis for any suggestions.  They each shared their opinion that many people have ideas for small businesses, but they lack startup capital.  They said that microcredit exists in Zambia but is not widely available.  College loans are also non-existent. After our brief discussion at Francis' house, Francis and Blessings invited me to attend an activity at church the following Friday.  I accepted and looked forward to seeing them again.

While traveling in the countryside during the week, I was busy meeting farmers, as outlined in my previous post.  But in the evenings, as I wrote in my journal, I often thought of Francis and Blessings and wondered how I could help.  They didn't specifically ask me for help.  They didn't need to.  Their circumstances were enough. They are both from Zambia, both are intelligent and articulate, both were full-time volunteer missionaries for two years, and both moved to South Africa after their missions to seek employment.  Additionally, both returned to Zambia within the past year due to family deaths and have struggled financially in an economy with at least 50 percent unemployment.

I reconnected with Blessings and Francis around noon on Friday.  Neither had eaten lunch, and they willingly accepted my offer to treat them.  Over lunch, Blessings humbly told me that he had been thinking a lot about our conversation from Sunday, and he decided to postpone starting a garage door installation company so he could help me lift people out of poverty.  I was overcome with emotion, to the point of tears, and I told him that the way for me to get started on my goal was to help him and Francis to pull themselves out of poverty. 

I told them that once I had helped them, they would be in a position to help others.  I also explained that I have a long-term time horizon and that my best option may entail helping few people at first but building up the capacity to help many more later.  I asked Blessings and Francis to walk me through alternatives for how I might help them.

Their first suggestion was that I help them buy a bus, which would provide employment opportunities as well as cash flows that could be invested in a microfinance institution, which would of course make loans to others.  We discussed the startup costs and cash flows of the opportunity.  I then asked Blessings to tell me more about his garage door installation idea.  He told me that he had given up on the idea for now since it would help only him. 

I asked "couldn't Francis help you install doors?  If you do well, you'll employ others and will earn enough money that you can provide greater opportunities for yourself and others."  He glowed as he discussed his planned garage door business.  He explained that he gained a year of experience working for a garage door installation business in Johannesburg, South Africa, where he marketed and installed doors.  As we spoke, it was clear that he had a real passion for this business opportunity, as well as an entrepreneurial drive.

After we attended an activity at church that afternoon, I hired a taxi and asked Blessings to show me around some of the neighborhoods that will demand garage doors.  This was important, because to this point I had not yet seen any upscale houses and therefore was not convinced there was a demand for the product Blessings so eagerly wanted to supply. 

Blessings had the taxi driver lead me to four different construction sites.  The first had a modest need for six garage doors.  The second had only two.  But the third and fourth each had 20 or more houses under construction, with room to expand, and all units had a place for a covered garage, which would be ideally suited for a garage door. 

Below is a picture from the first large neighborhood, clearly showing a covered garage with an opening for a door.  A second picture shows Blessings and Francis at a second large neighborhood where they hope to earn business.

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Guest blogger Bree Olivari is a second-year MBA candidate at Thunderbird Global School of Management and is a leader of the Net Impact chapter.  At Thunderbird, Bree integrates her interest in sustainable business with her degree in supply chain leadership. Her projects include mapping best practices of supplier codes of ethics, organizing Thunderbird's Sustainable Innovation Summit and greening procurement practices on campus.

During a recent internship Bree helped design the distribution of micronutrient sachets to undernourished children in Mexico.

By Bree Olivari

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