Turning a Dream into a Reality

Maria Pacheco has a Dream:

Maria Pacheco

“That all communities have houses…that all houses have a window…that from all windows a garden may be seen…that in all gardens there is a ball…that all balls belong to girls and boys that go to school…that all the schools have PTA’s with parents that work…that all who work, may reach the markets…that markets multiply houses with windows…that in the new windows birds and trees are multiplied…so the sky may be blue and the sun bright for everyone!”[1]

Maria has been working for the better part of her life to turn this dream into a reality. Her aim is to provide these communities with a source of income, enabling them to invest in their own futures. Maria spent years working with various communities, trying out a variety of ways to help them produce income. In 2003, she combined the lessons she learned from her many projects, partnered with the talented Queta Rodriguez and Ligia Chinchilla, and founded Kiej de los Bosques, a social enterprise with the goal of connecting rural artisans to the global market, thereby creating a sustainable source of income.

Wakami Jewelry [2]

In order to create lasting impact within the communities, Kiej partners with the NGO, Communities of the Earth. The NGO serves as a business incubator, providing the training necessary to turn a group of rural women into a legalized business. The incubation process takes 2 years and costs a total of $25,000. Communities are selected based on a vision and desire to make money and change their own lives.The training begins with dream workshop where the women share their dreams and visit successful business women. Kiej then sends in a fashion design team to teach the women how to make Wakami branded products which Kiej sells in national and international markets. Over the course of the 2-year incubation period the companies are aided by local technicians and provided with periodic business training courses.

As soon as a community begins to make and save money, they begin the Wakami Village Methodology, a 3 part combination of goods and services to transform their lives.[3]

  1. Wakami Family: 5 important indicators are monitored: income generated, taxes paid, weight and height of children, school attendance, banking and savings accounts.
  2. Wakami Home: sustainable products that can significantly improve health, the economy, and the environment are presented to the communities at affordable prices. These products include: Ecofiltro water filters, Onil stoves, rain water collecting systems, Quetsol solar lighting systems, and organic garden kits.
  3. Wakami Community: programs are created to encourage community participation. These include: solid waste management programs, recreational parks programs, participation in local decision making spaces, girls clubs, school improvements, and medical and dental missions.

Kiej currently works with 17 rural companies (16 in Guatemala and 1 in Panama), 12 of which are comprised of mothers and 5 of young people working to pay for their education. The Wakami products are exported to more than 14 countries around the world.

This rural development project seems great on paper but it wasn’t until visiting one of the villages and hearing the leaders of the rural companies speak about how their lives have been changed that I was able to truly appreciate the incredible level of sustainable development that Maria and her team have instigated. What stood out most, as the business leaders spoke, was the new-found sense of empowerment and pride they had in themselves, their skills, and the life-changing products they were able to provide for their families.

Francisca

Francisca, the leader of the San Rafael based company, dreams to own her own land someday. Although she cannot read or write, she has a very keen business sense and was elected to lead the Wakami company in her village. She had never worked before because she had to stay home to care for her family. At first, she told us, she thought the idea of starting a business was much to difficult. She was also wary of the idea because she had seen so many development projects come and go. However, she took the risk, and as soon as she earned her first paycheck she began to believe in the project. She is able to work from her home and is currently learning to read and write. She also takes a bus into Guatemala City once a week to deliver the finished products, pick up new supplies, and learn how to make new designs which she then teaches to the rest of the women in her company. She told us, with tears in her eyes, that her company’s paycheck last month (for 4 women) was 7,700Q, almost $1,000.

Maria

Maria, the leader of the Ixil based company, admitted that in the beginning she didn’t believe in the business. The women in her community were accustomed to staying at home all day and no one wanted to do extra work. However, she said that as soon as they began to make a little bit of money they became encouraged. Now they all want to work so much that they stay up all night when a big order comes in. Before they started their company, none of the women had ever been to the bank and had no idea how to deposit checks. Now, Maria proudly proclaimed, dealing with money is easy for them and most have their own savings accounts, separate from their husbands. Last months paycheck for the Ixil company (for 16 women) was 49,000Q, almost $6,300.

Alejandra

Alejandra, the leader of the Candelaria based company, said that in the beginning her husband was not happy about her work. During the first four months of training, he was angry that she spent so much time working but had nothing to show from it. The husbands in her village expected their meals at a certain time and the chores to be done a certain way. They were not used to their wives being busy and it took a while for them to become more flexible. As soon as Alejandra began to make money, her husband started to appreciate his wives job. In the community of Candelaria, the income earned from the company was especially important because the husbands worked on a coffee plantation and had little or no source of income for the majority of the year. Alejandra said she felt empowered that she was able to play such an important role in providing the main source of income for her family during the non-coffee season. With the money, she has been able to purchase a water filter, a solar energy system, and a stove. She no longer has to burn wood to purify water or to cook, purging the 1-room, dirt floor home that her 6 person family shares of harmful smoke. Now she also has a source of light so her children can study in the evenings and she can work to produce jewelry.

The visit with these incredible women ended with a circle of light in which everyone linked arms, lit candles, and listened to the inspirational words of Maria Pacheco,

“An individual dream is very powerful but you can’t stop a collective dream from coming to life.”

___________

[1] http://www.kiejdelosbosques.com/kiejDeLosBosques_dream.html

[2] https://www.facebook.com/photo.php?fbid=10151165456283868&set=o.10406620986&type=3&theater

[3] http://www.comunidadesdelatierra.org/metodologiaDeTrabajo_en.html

Measuring Impact

Measuring impact is one of the most important as well as one of the most difficult aspects of social business. Social and environmental impact has been measured for years, so why is it still so problematic? Why hasn’t anyone created a formula or database that spits out a list of simple metrics based on categories of data? The answer is that impact goes far beyond numbers or anything that can be calculated or inputted into a computer.

Violeta is 2nd from the right

Byoearth (How Worms Can Change You Life) is a great example of a social enterprise whose impact cannot merely be measured numerically. I had the opportunity to speak with Violeta, a member of the female co-op that owns and runs one of Byoearth’s vermicomposting plants in the rural community of San Bartolome, Guatemala. When I asked her how working at the vermicomposting plant has changed her life, she told me it is a distraction from the other hardships she has to deal with. She said although it provides a source of income, she does not see it as a job; it is a place where she and her friends can come and work together. In less than a year, Violeta told me, they had built a community and a network of support. In addition, working at the plant gives them hope for the future. The women are currently in the midst of planning multiple projects, including expanding the vermicomposting plant as well as a community-wide bottle recycling program.

Byoearth’s impact could easily be portrayed by the amount of trash turned into fertilizer, the acres of soil restored to health, and the number of local Guatemalans employed. However, it is stories like Violeta’s that depict the true impact of Byoearth. Even in the socially-aware world of impact investing and social enterprise, these types of stories are not always heard. In the current age of technology, business-people have become accustomed to an incredibly fast-paced work environment where information is reduced to twitter-length fragments and e-mails are responded to within seconds. The Mulago Foundation, a well-known social impact focused foundation recently published a guide to thinking about impact. Their advice focuses on concise messaging, carefully chosen indicators, accurate numbers, impact-related data, and honest cost calculations. Although these are all incredibly important aspects of measuring impact, it is important to realize that numbers do not show the whole picture.

Personal antectodes are what truly matter in the world of social business. They add a humanistic element to a topic generally depicted solely by numbers and help forge an intimate attachment to the matter. Just because these stories make impact much more difficult to measure does not mean they should be ignored.  We must take a step back from our fast-paced lives, accept the fact that social and environmental impact cannot be measured by a simple spreadsheet, and listen to the stories of women like Violeta that depict the true impact created by social enterprise.

How Worms Can Change Your Life

For the past month I have had the pleasure to work alongside an incredible social entrepreneur,  Maria Rodriguez, who is often referred to as the “worm lady”. Maria started a vermicomposting business called Byoearth in 2007, at the age of 21. Vermicomposting is the practice of using worms to transform biodegradable waste into 100% organic fertilizer. Maria stores her worms at a production plant which she built herself at her family’s coffee plantation. The worms are fed coffee pulp and cow excrement and the fertilizer they produce is sold to farmers and to NGOs who distribute it through various projects. Maria also runs programs in which she works with rural women and the impoverished women who live near the trash dump in Guatemala City and teaches them how to feed the worms themselves and produce their own organic fertilizer. These programs provide a sustainable source of income for many women.

Maria has utilized many of the resources that the world of social enterprise has to offer in order to help Byoearth develop and succeed. In 2009 she participated in Santa Clara University’s Global Social Benefit Incubator. In 2011, she was accepted into the Unreasonable Institute’s fellowship program and in 2012, she participated in Agora Partnership’s Impact Accelerator program.

The following is an interview I conducted with Maria Rodriguez:

Why worms? “I think that we owe part of our ability to survive to worms. Worms are the most magnificent and important creatures in the creation of topsoil and therefore in the creation of everything we grow and eat. Worms are the only animals that produce vermicompost, a product that provides many benefits to agricultural soil, including increased ability to retain moisture, better nutrient-holding capacity, better soil structure, and higher levels of microbial activity (among others).[1]

How has creating Byoearth impacted your own life? “Creating and developing this business has radically changed my life in every possible way. Not only it has given me independence to build and live my dreams but also a way of contributing to my country’s development. Founding a business has helped me to learn so much about economic and social development in Guatemala and around the world, it has opened my eyes and heart to different cultures and it has given me the responsibility to be a good example for others. Byoearth and worms have introduced me to a new way of thinking, to a world where anything is possible, where dreams come true when you work hard and surround yourself with positive minds.”

What do you say to the women who are grossed out by the worms? “I usually say: “No! But look at their beautiful yellow tail!!” and that seems to get women’s attention and notice that they are not the regular earthworms. Most of the time I find myself in the task of communicating the greatness of worms because they are immediately associated with slimy ugly creatures.”

How does it feel to be a female entrepreneur in the male-dominated field of agriculture? “I think it’s a great challenge to have and a way of differentiating me from the usual masculine figure in agricultural business. Female participation in agriculture is increasing every year and that gives me a lot of hope. Nevertheless, I am prudent and cautious not to expose myself in any situation that can be dangerous; I recognize that there are some security challenges that Guatemala has to overcome.”

What do you feel is your role in the impact investing ecosystem? “Entrepreneurs are a very important part (but not the only) in the impact investing ecosystem. Personally I like to participate in spaces related to impact investing. Entrepreneurs can learn a lot from investors and field experts and vice versa. As an entrepreneur I feel the responsibility to share insights and field work experience and also the need to ask for help to the different actors in the ecosystem.”

How do you balance the social versus the financial returns? “Social impact builds economic returns and vice versa. The more fertilizer we sell, the more social and environmental returns there are and that creates more demand. Vermicomposting has the virtue of building strong social, environmental and economic impact. Worms really do all the work and they don’t ask for a raise…. (joke!) Worms add so many beneficial bacteria and nutrients to waste, they add a lot of value and that produces cost effectiveness and high margins, unlike many other products.”

What is your advice to aspiring entrepreneurs? “I would advise them to work hard everyday with joy and passion and in the hard times to be patient because when you do things the right way there are always great outcomes. Also I would advise to never be afraid of asking for help, to build and integrate values into your business and just enjoy the ride. Social entrepreneurship is the best adventure in life!

What does the future of byoearth look like? “I envision Byoearths production model and programs in Latin America and the rest of the world. In Guatemala, we are getting ready to scale up our production plant, to develop more products, to reach the most remote subsistence farmers and to introduce vermicomposting as a sustainable practice in urban and rural communities.”

Doing Good and Making Money: too Good to be True?

All throughout college I struggled with the fact that upon graduation, I would have to choose: do good or make money? Should I find a minimally-paying job with an NGO where I could leave the office each day feeling satisfied I had made at least a little bit of difference in someones life but then be stuck at home on the weekends because I couldn’t afford to go out with my friends? Or should I enter the world of banking or consulting where I would count down the seconds until my job ended and my social life began? Lucky for me, while I was dealing with this dilemma in the back of my head for four years, the market was creating my perfect solution: social business.  The three main actors in this new market sector – impact investors, accelerators, and social entrepreneurs – all shared the desire to harness creative talent, serve those in need, and make profit while doing so. These goals combined everything I loved about business and philanthropy, creating a fast-paced competitive environment, constant innovation and improvement, profitability, and best of all – a focus on social and environmental impact. Furthermore, as a liberal arts grad, my mind has been trained to switch between multiple subjects and topics on a daily, even hourly, basis. Since the social business sector is still developing and has yet to diverge into distinct specializations, I can refrain from attempting to figure out exactly which aspect I want to focus on and can continue to stimulate my mind with a multitude of subjects.

After spending the past 3 weeks working with a social enterprise and scouting for a pair of impact investors, I have stopped to ask myself, “is it really possible to do good and make a profit?”. The answer I have found is that it is possible but it is not easy. There is a reason that business and philanthropy have traditionally remained separate. In the developing world – the focus of the majority of the social business sector –  the investments are risky, the returns are low, the market lacks data, corruption is common, and transparency is a major issue. In order to overcome these obstacles entrepreneurs must find a creative and competitive edge, accelerators need to aggressively scout, and investors must remain flexible, patient and dedicated to the targeted impact.

In my experience, I have found that some of the most successful social enterprises are those with the most simple products. Creating something at a low cost does not mean you must forgo quality. Ecofiltro is a perfect example of this. They produce clay filters that make water from virtually any source 100% safe to drink. The product is so simple that Guatemalans were afraid to buy it at first because they did not believe it could work. The product creates an enormous health, environmental, and social benefit and is very profitable. Byoearth is another social business with a very simple product. Byoearth creates impact and profit by feeding garbage to worms who then naturally produce organic fertilizer. Both of these companies have been able to make substantial profits and enormous impact by utilizing creative but simple solutions to very relevant problems in Guatemala. These are the types of organizations that prove it is possible to do good and make money.

Bottom of the Pyramid or Market of the Future?

The Bottom of the Pyramid (BoP) consists of the 4 billion people who live on less than US$2 per day. These people comprise one of the largest and poorest socio-economic groups in the world, and are often poorly integrated, or completely left out of, the formal marketplace. The extent of their participation in the market has been limited to the factory floors of multinational corporations, making insubstantial wages and working in disgraceful conditions. More often than not, they are unable to afford the products they slave to produce.

In the past decade, the market has begun to make an important shift for the people at the BoP. Instead of exploiting the poor and turning them into a cheap labor-force, innovative business-people have begun to look for ways to serve the poor. This shift was motivated by two different but interrelated factors. First, as the economic recession persists, businesses are becoming desperate for new, profitable markets. They are beginning to realize that money can be made by integrating into the market the more than 50% of the world population that has previously been left out. Second, philanthropic aid is continuing to produce less than ideal results and critics of charity are raising their voices louder than ever. As a result, the strong moral values of philanthropists are combining with the profit-seeking determination of business-people and producing a market full of impact investors and social enterprises.

As described in my previous post, First Impressions, more than 1/4 of the population of Guatemala belongs to the BoP. This group of 4 million people can either been viewed as “charity-cases” or as a large un-touched economic market with a multitude of demands. Many business-people tend to shy away from emerging markets, especially those filled with entrepreneurs and consumers who lack collateral and credit history. However, the poor have proven time and time again to be creative entrepreneurs and reliable customers. In 2010, a group of four college students immersed themselves into poverty in the rural Guatemalan village of Peña Blanca to learn about the financial lives of the extreme poor. In a presentation at TEDxBuenos Aires, Zach Ingrasci and Chris Temple presented 3 Financial Secrets of the Poor:

1. “The poor are active money managers.” Money is always on their mind and they are extremely accurate at calculating and budgeting their money.

2. “They manage their money using many different tools” including borrowing from and loaning to friends, creating savings clubs, participating in micro-finance organizations, and accumulating assets for resale.

3. “Flexibility and reliability are benefits the poor are willing to pay for.”

The Living on One team has shown the world that the extreme poor are financially adept and can handle being more than just aid recipients; they are ready to become part of the “Market of the Future”. Although there are a number of obstacles to reach these people and harness and market their creative talent, it is a challenge that many social entrepreneurs and determined impact investors have already begun to successfully tackle.

First Impressions

FIRST IMPRESSIONS: INEQUALITY

I have only been in Guatemala City for 3 and a half days and I have already done about a weeks worth of activities ranging from exploring a craft market near the centro histórico, eating typical Guatemalan dishes, attending a yoga class, and riding on a chiva (party bus) around the city. During these activities the one thing I couldn’t help but noticed was the enormous inequality in Guatemala City. Development in Guatemala City appears to be centrally located with pockets of extreme wealth. I live in Zone 10 which is considered the safest and most touristy zone in the city. That being said, I have seen virtually zero tourists and have been warned not to walk more than 2 blocks alone, not to step foot outside after dark, and to avoid public transportation at all costs. However, within this zone and the nearby residential zones, there are highly developed areas of extremely concentrated wealth. For example, there is a miniature “city within a city” called Cayala. I went to dinner there and it feels like you are in the capital of a wealthy European city. It is full of upscale art gallerias, shops, restaurants, and bars. Zone 10 and the nearby residential zone 14 are full of similar but much smaller semi-enclosed shopping and eating areas. They are full of designer-clad couples texting on their iphones, enjoying expensive meals, and admiring beautiful artwork. These establishments seem somewhat out of place when mere minutes away are Asentamientos, or shanty towns. These “red zones” are controlled by extremely violent gangs and are so dangerous that local police refuse to enter. About 8 murders occur in these zones each day. (http://www.globalpost.com/dispatch/news/regions/americas/110519/crime-murder-guatemala

GUATEMALA STATISTICS

In order to get a better picture of the inequality and other struggles in Guatemala here are some statistics on the country:

  • Human Development Index (HDI) Rank: 131 out of 187 (Lowest in Latin America besides Haiti)
  • Population: 14.7 million
  • GINI Index (measure of equality of income distribution, 0 is perfect equality, 100 is perfect innequality): 53.7 = one of the most unequal in the world
  • Gross National Income (GNI) per capita: US$2,740
  • Chronic under-nutrition (children under 5): 49.8 % highest in region, 4th highest in world
  • Chronic under-nutrition (indigenous areas): 69.5%
  • Population in poverty: 53% (70% of rural, 30% of urban)
  • Population in extreme poverty (less than $1.25/day): 13.5%
  • Population living with less than $2/day: 26%
  • Illiteracy (women 15yrs+): 31% (59% in indigenous)
  • Secondary school enrollment: 58%
  • Labor force with secondary education: 14%
  • Labor force with tertiary education: 7%
  • Income spent on food: 33%+ (70% in rural)
  • GDP spent on crime and violence: 8%
  • Access to electricity: 80.5%
  • Rural population without access to water: 13%
  • Income Distribution: wealthiest 10% of population controls 45% of wealth, poorest 10% of population controls 1% of wealth

(Stats from: http://www.wfp.org/countries/Guatemala/overview, data.worldbank.org/country/guatemala)

PLENTY OF ROOM FOR IMPACT INVESTING!

Impact investors are increasingly turning to emerging markets for investment opportunities. Emerging markets around the world are home to the bottom of the pyramid (BoP) (the 2.5 billion people who live on less than $2.50/day). These people desperately demand cheap, sustainable solutions to the most basic services (healthcare, clean water, food, education, housing, etc.). With 53% of its population living in poverty, Guatemala is the perfect place for impact investing. (Source: Impact Investing in Emerging markets, Marco Arosio). In addition, the economy of Guatemala is very underdeveloped (partly a result of a 36-year civil war that lasted from 1960 until 1996) providing a market ripe for the emergence of social enterprises.

As shown in the statistics above, solutions are needed to problems such as illiteracy, under-nourishment, violence, poverty, and inequality. Since the government is plagued with corruption and international aid has been insufficient, local solutions are needed to solve these problems. Furthermore, the Guatemalan economy relies on agriculture, leaving other industries underdeveloped. As a result there is plenty of space for small and medium enterprises to develop and focus on the demand for social and environmental market solutions. There is already a visible network of social enterprises as well as a very wealthy upper-class with expendable income.

In a report published by the World Bank titled, “Doing Business”, Guatemala ranks 97 out of 183 countries in the Ease of Doing Business. This ranking indicates how easy or difficult it is for a local entrepreneur to start a small or medium-sized business. Guatemala ranks just outside the top 50% and ranks slightly lower than the regional average. Although the country ranks rather low in the category of “protecting investors” and costs are very high, it ranks very high in “getting credit”, “getting electricity” and “registering property” which are both very important aspects of conducting business. In addition it only takes 37 days to start a business in Guatemala.

It is time to begin to bridge the gap between the rich and the poor. The market is ready, the capital is available, and the ease of doing business is improving. All that is needed now are investment-ready social enterprises. It will be my job over the next few months to find these enterprises and learn as much as possible from them in order to gain the insight necessary to help the impact investing and social enterprise industry develop successfully.

Impact Investing 101: what is it and how does it work?

Development is a term that is thrown around to describe everything from the creation of new medicine, the mental capacity of a child, the construction of roads in rural areas, and the conception of new technologies. To me, development means empowering people who would otherwise be trapped in the poverty cycle. It means giving people, particularly in poor countries, the opportunity to not only become consumers in the very same economic market that drives the “developed world”, but also to play a meaningful role in that market. Muhammad Yunus proved to the world that poor people, especially women, could be very successful business-people if they are just given the opportunity. The Grameen Bank and Microfinance changed the lives of millions of impoverished people around the world.

So what does all of this have to do with impact investing? Microfinance targets the poorest of the poor and provides them with very small loans to lift them out of poverty.  Once out of life-threatening poverty, these people are able to imagine a future. Many of them become entrepreneurs and start small, community-focused businesses. If these businesses are successful, they look to expand. However, they need more money than can be provided through microfinance but either they do not have the collateral necessary to take out a loan from a traditional bank or they cannot take on the debt because their business is in such an early stage of development. That is where impact investing steps in. Impact Investing “involves making investments that generate social and environmental value as well as financial return” (monitor 2009). Impact investors target these small, growing businesses, “social enterprises” that are making a social impact. They fill the gaping “missing middle” by providing the necessary support (both financial and non-financial) so these entrepreneurs can develop, refine, and test their business models, stimulate demand, develop supply chains, build organizational capacity, and ultimately reach scale. (Monitor report).

How does impact investing work? The field of impact investing is very new and is rapidly growing and innovating. The two impact investing organizations I am most familiar with, Village Capital, and Agora Partnerships, go about it in different ways. Village Capital uses a “peer review” model in which 15 carefully selected social enterprises pay a small fee and enter into a 10-week peer review process. Each week all 15 entrepreneurs meet and work together to help each other develop their businesses. At the end of the 10 weeks, two entrepreneurs are selected by their peers to receive a $50,000 investment to start their businesses. Although the remaining 13 do not receive any money, they all leave with investment-ready business models. Agora takes a different approach to impact investing. They are an incubator, which means they find the social enterprises, work with the entrepreneurs to develop their businesses and then they match them with investors. Both Village Capital and Agora have been very successful with their methods and have become influential in the impact investing world.