MichaelGowin.com/blog

This from the BAM Network:

“My basic theory was this: “Charities” raise funds and redistribute them. By nature, value is destroyed in the process. You hope a well run charity might take your $1 donation and turn it into 80 cents of giving. A for-profit company, however, creates value. An investor expects their $1 to generate income over and over again. What if you created a for-profit business, then used the resources created for ministry?”

An interesting question.  World Vision, a ministry I admire for their theological commitment and compassionate humanitarian services, began funding microbusinesses in 1993 and now helps entrepreneurs in 40 countries around the world.  Money given to the microenterprise program is distributed to small business owners as loans.  Loan receipients are given training and business coaching to help ensure the success of their businesses.  As the businesses grow, the loan repayments are pooled and used to fund further business development in the region.

For me, the main thing missing from this model is the return for the original investors.  Kiva does this and I wish World Vision did as well.  Contributions to World Vision’s efforts are helpful at tax time–and certainly helpful for the receipients of the loans–but there’s less incentive for investors since they receive no return on their investments: they are donors, not investors.

Back to the BAMN quote above–how much value in the original investment/donation to a charitable microenterprise effort gets eaten by administrative overhead?  Wouldn’t a more efficient, for-profit model be more beneficial?  Are there some organizations doing this already?

Filed under: Business, Church/Ministry by Michael