March 22, 2010

A Three-Day Discussion Regarding Social Venture Capital and Social Enterprises

Through the efforts of the Florida Association for Volunteer Action in the Caribbean and the Americas, Inc. (FAVACA), a Florida-based nonprofit organization serving the needs of the people in Haïti and throughout the Caribbean for over 25 years, I had the pleasure of attending the Social Venture Capital/Social Enterprise Conference Miami (SVC/SE, Miami 2010), which was held in Miami Beach, Florida from March 17-19, 2010. Part of the SVC/SE, Miami 2010 conference was the Sustainable Haïti conference, referred as a “conference within a conference,” which brought together social entrepreneurs and social investors, U.S. government officials, nongovernmental organizations (NGOs), Haïtian Diaspora, Haïtian government officials, faith-based groups, and corporations with a presence in Haïti. The purpose of SVC/SE, Miami 2010 was to promote economic development within Latin America and the Caribbean by utilizing social venture capital and social enterprise. Over 700 people attended from 30 plus countries and approximately 240 speakers participated on 110 panels and workshops during the three day event. I participated on two panels: Social Entrepreneurship in Post-Earthquake Haïti and Social Venture Capital as a Tool for Growth.

There were several excellent discussions that took place as a result of well-planned presentations or through side conversations during session breaks. I made several points during my two presentations, but the one that garnered the most responses is the failure of the NGOs’ ability to achieve long-term solutions. (I recognize that not all NGOs are ineffective, but those operating with clearly defined deliverables and benchmarks for success are too few in the world.) While many NGOs attending the conference agree that the aid model is largely ineffective, I find their reluctance to reform their respective operating model very disturbing. To become effective in eradicating poverty in the developing world, NGOs should partner with the private sector in implementing a long-term sustainable solution. For small and medium-sized enterprises (SMEs) with operations in a developing country, I recommend that NGOs collaborate with these businesses by providing job training, education, health and essential life skills that will ensure that workers remain healthy and properly trained to participate in a formal economy. These skills will pass from generation to generation, thus breaking the cycle of poverty.

While I have addressed my criticisms of the microfinance model implemented by most microfinance institutions (MFIs) in this blog, I focused my presentations on the need for job creation in addition to supporting entrepreneurship through microfinance. I recognize there are several benefits of microfinance in some of the world’s most undeveloped regions, but there are not enough measured results to justify the amount of money invested into MFIs. Microloans provide short-term debt financing, but does not necessarily create long-term enterprises. In addition to providing working capital to entrepreneurs, investments in developing nations should focus on job-creation through equity financing (microcapital). Moreover, I recommend that MFIs work with businesses in industrialized markets by creating a partnership strategy to open an office or plant with local populations in developing nations, thereby establishing a partnership that many underserved entrepreneurs. (Photo: Benjamin Wilkinson/HAITI ONWARD)

SMEs in industrialized markets should receive microcapital from MFIs to help stimulate business expansion into developing nations. Three conditions must be stipulated with these investments: SMEs must use local populations and provide fair compensation, implement microsavings mechanisms for the employees, and establish a health insurance program with NGOs or for-profit insurance providers. The number of employment opportunities in developing nations will grow exponentially with strategic partners located in industrialized markets.

Other speakers and panelists talked about the need to establish a bond market in countries like Haïti to finance infrastructure development, credit ratings for investment instruments to help developing countries modernize their financial systems and compete globally, and establish full currency convertibility measures. One of my fellow panelists noted that every developing country has a blue-chip company. More collaboration among the governments of developing nations, NGOs, and the local population should take place to attract additional blue-chip enterprises. Furthermore, there should be a better focus on establishing business incubators to create small and medium-sized enterprises and NGOs and the private sector must work together in establishing a legal framework that includes a judicial process for business disputes, fair employment laws, and regulations to protect natural resources.

I want to thank FAVACA for their generous sponsorship of the SVC/SE, Miami 2010 and I want to express my gratitude and appreciation to John Rosser of DVK L3C for organizing this important event, which was very timely considering Haïti’s devastating earthquake that occurred this past January. I am pleased to be a participant and honored to share the podium with a distinguished group of speakers with a wide array of knowledge and experiences.

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