Impact entrepreneurship

Investors warm up to the do-good trend

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There have been many philanthropists who have given of themselves and their assets for the greater good. Blake Mycoskie, a footwear maker from Texas, USA, gave out a pair of shoes for every pair sold - he is just one of these philanthropists.

On a trip to Africa in 1990, Peter Scott was moved to tears by the deforestation he encountered. Determined to do something, he spent 15 years as a consultant for governments and non-governmental organisations in the developing world, designing fuel-efficient cooking technologies that didn’t rely on wood. Through his work, he taught people in 20 countries to build and sell more than 400 000 clean stoves, bread ovens and food dryers.

Still, Scott knew he could do more. In 2010, he formed Burn Design Lab, a non-profit organisation that creates sustainable stoves for developing countries to build and distribute. 

Burn Manufacturing set up shop in Kenya late last year and received its first order for 8 000 stoves. The company is on track to build 100 000 stoves by the end of 2013 and aims to build and sell 3.6-million units in Kenya, Rwanda, Tanzania and Uganda over the next 10 years.

"People have misconceptions of Africa, about it being a poor place to invest,” he says, noting high historic rates of return on investments in the continent. According to the US State Department, Africa is home to at least six of the world’s 10 fastest growing economies.

Welcome to the world of impact entrepreneurship, which places as much importance on socially conscious activities as on profit. With consumers increasingly wary of perceived corporate greed, companies peddling products and services that tackle societal and environmental ills are gaining a followership. Incubators aimed at impact entrepreneurship are sprouting up. And investors are warming up to the do-good trend.

Most investment professionals say impact investing is on the rise and becoming more widely accepted by institutions.

“There’s this whole new thing happening where people want to do social good, and they’re recognising the limitations of just straight charity,” Scott says.


TOM Shoes

Mycoskie’s story came up at the Global Entrepreneurs Week held some years back in Lagos, courtesy of the Enterprise Development Centre (EDC) of the Pan African University. A documentary film featuring Mycoskie and his niche business idea was shown to a selected audience of entrepreneurs at the event.


Inspiration

It all started after his visit to Argentina in 2006. There, he saw that children without shoes were not only exposed to health risks, but were not allowed to go to school. The disease they are exposed to is podoconiosis, a debilitating and disfiguring disease. Podoconiosis, according to experts, is a fungus that gets into the pores on the bottom of the feet and eventually destroys the lymphatic system. It is a soil-transmitted disease caused by walking in silica-rich soil. It causes one’s feet to swell, along with many other health implications.

According to the TOMS Shoes website, there are more than one billion people at risk for soil-transmitted diseases around the world, and shoes can help prevent it. Mycoskie emphasises that his company’s goal is not only to give shoes, but to also educate others on the importance of shoes.

Reports have it that over one billion pairs of shoes have been given to children under the ‘One for One’ movement since TOMS launched in 2006. The canvas shoes have been given to children in the US (Louisiana, Kentucky, Mississippi and Florida), Argentina, Ethiopia, Rwanda, Guatemala, Haiti and South Africa. TOMS are sold at more than 500 stores in the US and internationally, including Nordstrom, Neiman Marcus, and Whole Foods, which features styles made from recycled materials.

 

Social entrepreneurship

If you are looking for individuals with creative answers to society’s most pressing social problems, you will find the solution in social entrepreneurs. These are ambitious and persistent beings who tackle major social issues and offer new ideas for widescale change.

They would not leave societal needs to the government and strictly for-profit business sectors. Social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps. They are both visionaries and ultimate realists, concerned with the practical implementation of their vision.

 

Mohammed Yunus

Mohammed Yunus, a Bangladeshi professor of economics, is a celebrated micro-lender with his Grameen Bank, a micro-finance organisation and community development bank, started in Bangladesh, giving small loans to the impoverished without requiring collateral.

The word 'grameen', derived from the word 'gram' ('village'), means 'of the village'. The system of this bank is based on the idea that the poor have skills that are underutilised. A group-based credit approach is applied, which utilises the peer pressure within the group to ensure the borrowers follow credit discipline.

The bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. Grameen Bank is the only business corporation to have won a Nobel Prize, in 2006. Grameen Bank has brought succour to the poor in Bangladesh and Yunus' experiment has inspired similar projects across the globe.

Yunus, who was in Nigeria in 2012, told the Nigerian business chieftains at an event in Lagos, that “social business will be a new kind of business introduced in the marketplace, with the objective of making a difference to the world.”

“Investors in the social business could get back their investment money, but will not take any dividend from the company. Profit would be ploughed back into the company to expand its outreach and improve the quality of its product or service. A social business will be a non-loss, non-dividend company.”

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