Effective Giving: Social Entrepreneurs

The holidays are finally over. Yesterday Epiphany (or Three Kings’ Day) brought an end to the twelve days of Christmas. We decided to really go for it this year, giving little presents to our kids most every day of the mini-season. (Bonus: the stream of stuff really helped to alleviate school vacation boredom.)  But according to family tradition, on Christmas Day we gave not to each other but to Jesus, since it was His birthday. This year we chose to fund social entrepreneurs whose organizations serve the poorest of the poor, which we explained to the kids are just the kind of presents Jesus most wants (Matt 25:31-40).

Why social entrepreneurs? In recent years foundations and philanthropists have emphasized investing in promising local startup NGOs (nongovernmental organizations) in order to help them scale up. Just as business entrepreneurs have changed the marketplace through innovation, social entrepreneurs around the world have combined their creativity, commitment, and knowledge of local culture to more effectively impact those who experience poverty and injustice in their communities. Perhaps the best introduction to this phenomenon is David Bornstein’s How to Change the World, which tells the stories of social entrepreneurs who tackled issues like electrification in rural Brazil, home-based AIDS care in South Africa, and empowerment of street children in Indian megacities. Many economists claim that local organizations are often more effective and efficient than bureaucratic government programs or bloated international agencies with offices in Geneva.

However, as is the case in for-profit investing, the problem is figuring out who to fund. India alone as over a million locally founded NGOs.  Until relatively recently, we’ve given primarily to large, established, international organizations simply because I don’t know how to find smaller, local NGOs that I’m confident are effective. But this year we found that the three organizations we’ve been most excited about supporting are all in the social entrepreneur category.  My next couple blog posts will profile them. I hope they serve as a mini-How to Change the World, helping us give more effectively in this new year.  How about you? Do you prefer giving to the Fortune 500 of poverty relief, or smaller start-ups? Why?

Not Just Business as Usual

When we think of giving to the poor, what first comes to mind is non-profit organizations like the Red Cross, the Salvation Army, or World Vision—groups that do disaster relief, economic development, or child sponsorship.

But people are beginning to realize that for-profit organizations (AKA businesses) also have an important role in empowering the poor.  Ever since C. K. Prahalad’s groundbreaking book The Fortune at the Bottom of the Pyramid, a growing number of entrepreneurs and established corporations have begun to notice the nearly half of the world that lives on less than $2 a day.  As  this month’s Wired magazine points out,

those companies make cheap, useful products to sell to the world’s poor, who will use them to become less poor, and everybody wins.

For example, one of our friends, Alex Shih, has co-founded an intriguing startup called Global Cycle Solutions (GCS).  GCS markets affordable technologies that can turn a bicycle into a corn sheller or a cell phone charger.  With GCS’s products, small farmers in in rural areas without electricity can shell their corn forty times faster or make extra income charging their neighbor’s cell phones .

So if you’re looking to invest your money in ways that benefit the poor, and not just the super-rich on Wall Street, I’d encourage you to learn more about companies like Global Cycle Solutions.