How Business Fights Poverty: Stories from a Global Network

by Lauren Rahman

Business is uniquely positioned to respond to the needs of this world.  The Partners Worldwide global network works every day to leverage this truth for change. We recognize that business is a calling to do God’s work by creating flourishing economic environments in all parts of the world.

In places where poverty devastates communities and robs individuals of their ability to realize their full, God-given potential, we work to catalyze entrepreneurs and job-creators. Through business, these local leaders are fighting poverty and the various effects poverty has on communities and individuals—physical, emotional, spiritual, social, and environmental.

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The most obvious form of poverty we encounter is physical poverty—a lack of material things that contribute to our well-being—shelter, food, clothing, medicine. Business gives families access to these things, both through income from jobs and by providing the goods and services needed to flourish. Read more

Do Economic Incentives Matter? A Nosey Economist on BAM Financing

Interview with Dr. Steve Rundle

Steve, I know you have been doing some interesting research on BAM in the last few years, can you briefly describe what you have been looking at?

As an economist, I’ve always been interested in the relationship between the structure and governance of a company and its performance. Since the 1990s, when I first started meeting people who were combining business and missions, I naturally asked lots of nosey questions about the company’s financing, revenues, profits, and so on. I was especially intrigued by the role venture capital might play in funding businesses that were not only extremely risky, but were being managed by people who, in many cases, admitted that they weren’t too concerned about profits and that in fact they would be satisfied with just breaking even. I was not surprised to discover that no venture capital firms existed in this space, at that time. Most of these businesses were either donor funded, or in some cases funded with the help of one or two “Angel Investors.”

But this raised lots of new questions about the performance of these businesses. What are the expected outcomes, and how are practitioners incentivized to achieve those outcomes? Practitioners who are affiliated with a missionary sending organization may be discouraged from being too serious about business for fear that it will distract them from their ministry goals. One way to remove that distraction is to require the practitioner to raise donor support, in which case they will not be dependent on the business for income. This might sound logical at first, until you start meeting other BAM practitioners who are entirely dependent on their businesses for their salaries who are having an incredible impact. So I wanted to look at this more carefully by comparing the outcomes of people who drew 100% of their income from donors with those who are 100% business supported. Read more

Capitalizing Growth-Stage SMEs: Profile of a BAM Investment Company

Excerpt from the recently published BAM Global Think Tank report on Business as Mission Funding

Transformational SME – BAM Investor Profile

Transformational SME (TSME) was established in 2001, after two and a half years of market research and business plan development. Their goal is to capitalize growth-stage SMEs with patient, strategically integrated financial, intellectual and human resources to achieve economic, social, environmental and spiritual impact in the Arab world and Asia. 

TSME is a BAM company, composed of an investor-capitalized fund, which operates as a Bare Trust under UK law, and a professional fund management company registered in Canada. TSME provides primarily mezzanine loans to carefully screened, Christian-owned and managed SMEs which through genuine business as mission seek to achieve the so-called “quadruple bottom line”.

In addition to mezzanine finance, TSME provides mentoring and coaching to investee companies and a variety of technical advisory services, for example, pre-investment consulting to start-up companies, and a range of input to strategic mission partners such as mission agencies wishing to engage in BAM. They also engage in strategic talent search for key professional roles within BAM companies. Read more

5 Funding Models for Your Kingdom Startup

by Mike Baer

Post first published on the Third Path Blog, reposted with kind permission.

The still famous line from the movie Jerry McGuire is “Show me the money!” Some of you have been thinking that as you’ve read the rest of this series. How do I get money to launch my startup? I’m going to outline several “programs” you can consider:

The “Missionary for a Moment” Model

I have to tell you upfront that I have rejected this model for years. However, recently a close brother whom I respect greatly challenged my thinking and got me a little closer to acceptance than I was before.

The Momentary Missionary Model essentially uses raised donations or support to cover living, travel and certain startup expenses just like a normal missionary would raise support to cover living, travel and ministry expenses. What makes this work is that you are committing to your “donor-investors” to be off their giving roles within a specified period of time, to have your business profitable and to live off it.

Your donor audience in this scenario is sympathetic although they may not be the most investment savvy. Be careful to not take unintentional advantage of that sympathy. This is business. Read more

Bootstrapping your Business vs Seeking Outside Investment

What would you say were the most important things to prepare or think about as I approach a BAM investor? What are some typical pitfalls or mistakes I could avoid?

Before you walk down the road of approaching an outside investor, why not consider the possibility of self-funding – also known as “bootstrapping” – your company? If you decide to bootstrap, you may be surprised at how differently you approach your business, as well as the funding process. Bootstrapping can create a healthy foundation from which to begin your business, and can provide invaluable lessons to entrepreneurs. Lessons learned from bootstrapping can include:

  • Tests your business plan – A bootstrapped business that can bring a product or service to market, develop a customer base, and create a revenue flow will help you identify the strengths and weaknesses in your plan. You now have the solid proof you need to affirm your ideas and build on them. You will have determined if the market needs or wants your product, what the market is willing to pay for your product or service, and what will be required to put the business on a path to profitability. In addition, you will have a better sense of true costs, not just cost of goods, but hidden costs that are usually not considered or may not be known when a plan is developed. Bootstrapping will also force you to consider how the product or service is being developed, and it may cause you to re-consider aspects of product development as being unnecessary for product or service launch.
  • Provides incentive for a low burn rate – Limited financial resources will greatly influence the decisions required to operate your business, while at the same time maximizing efficiencies. This may include hiring employees that can function in more than one role, outsourcing certain roles until you can afford to bring them in-house, minimizing overhead like office space (know anyone with a spare garage?), as well as using a creative approach to marketing.
  • Skills and values development – Self-funding can be a useful mechanism in helping you gauge your true passion and commitment to your business. It will help you develop a higher level of accountability as well as resourcefulness, resilience and courage. It will most certainly test your risk aversion.

Read more

Approaches to Business as Mission Funding

Excerpt from the recently published BAM Global Think Tank report on Business as Mission Funding.

The word ‘funding’ refers to the spectrum of financial resources required for a business venture through the normal life-cycle phases of every business: start-up, growth, maturity, and decline. It includes a range of monetary sources, each with attributes unique to each stage of growth. Funding takes on many shapes and sizes, from self-funding to crowdfunding, microcredit to bank loans, and seed funding to venture capital.

Broadly speaking, the subject of funding includes sources, structure, application and management of monies in all areas of the business. In the context of business as mission, perceptions and actions relative to both the business and the capital should be informed by Biblical principles.

In a broader context, funding is distinguished as being financial capital – such as debt or equity – alongside other forms of capital input, such as intellectual, human, social, spiritual, infra-structural and natural.

BAM funding models

Traditional sources of business as mission funding parallel those in typical business funding. In the majority of cases, profitability is the key issue that drives capital to those companies most likely to achieve viability. For most investors, profitability is a non-negotiable measure of success. Read more

How to Prepare for Investors

What would you say were the most important things to prepare or think about as I approach a BAM investor? What are some typical pitfalls or mistakes I could avoid?

Funding for your new business is obviously crucial – no cash, no business. So let’s think about this from an investor’s perspective. What is it that interests him or her? What does he or she want to see? What questions answered?

Here’s what I’d be asking:

  • What exactly is the product or service that you intend to sell? Don’t assume that I understand it. Make it simple for me.
  • What is the market demand for this? Is it a cool idea, a “me too,” or is there a real demand? In other words, do people really need/want your product or service?
  • Who will your competitors be? How is your idea better than and different from theirs?

This first set of questions is about your viability in the market place. Is this a real business? This second set of questions is about you. Can I count on you? Read more

25 Years of Business in China: Interview on Tackling Corruption

Interview with Dwight Nordstrom

Dwight, you have been in business for 25 years in China, and not just any business, you’ve been involved in manufacturing in big industries, like chemicals and telecommunications, regularly importing supplies and exporting products. How big has the issue of corruption been?

Well let me just start by saying: This is real! This is not hypothetical stuff, it’s a big issue for us. I would say I have to deal with about 25 cases a year of substantial corruption-related situations. To put that in perspective with other common issues faced by businesses, in last 20 years, across our operations of about 5000 people in Asia, I have had zero illegal drug issues, a couple of alcohol related issues, I have had two sexual harassment issues of a serious nature to deal with, but the major issue by a long way is corruption which I have had to deal with at least twice a month. Corruption is a big issue.

Can you give us an example where you’ve had to deal with someone trying to bribe you?

We’ve had situations where we’ve lost business over refusing to pay a bribe. We had a speciality chemical and the representative in a wholly-owned German company asked for a 5% kickback, with 1% going into a personal account. That was a million dollar plus account per year and I don’t even know now six years later if we’ve ever recovered the value of the account. Read more

Doing Business in Kazakhstan: Economic Implications of Worldview

by Kevin White

Kazakhstan is one of the top ten fastest growing economies in the world. This multicultural developing nation is home to 140 various ethnicities and 17 religious groups. The capital city Astana is slated to host the Expo 2017. Kazakhstan’s ambitious 2050 plan is to become one of the top thirty most developed economies in the world. In this vein, Kazakhstan is engaging in unprecedented efforts to attract foreign investment. Recent legislation is offering investors 30% government subsidies on their investment and up to ten years tax free. This offer has been marketed to Western audiences through canny ad campaigns in popular media venues such as Euronews.

Yet in spite of these sincere efforts, corruption behind the scenes is still all too prevalent. A spokesman for the Dutch embassy, who wished to remain anonymous, stated that recently a Dutch company took Kazakhstan up on its attractive offer. However, shortly after completion of their new facility, Kazakhstan “inspectors” found a piece of machinery in violation to some obscure code. As a result the Dutch company had their investment subsidy rescinded and were fined 40% of their investment for a penalty. Similarly, a German businessman stated that German companies are still hesitant to invest substantially because of the routine problems of corruption and bureaucracy.    Read more

The Challenge of Corruption

Corruption is defined as the misuse of power by someone to whom it has been entrusted, for their own private gain. The most common form of corruption is bribery, which is defined as the giving or receiving of money, a gift or other advantage as an inducement to do something that is dishonest, illegal or a breach of trust in the course of doing business.1

Corruption is one of the biggest issues that business people face globally today, and is a highly relevant topic for business as mission practitioners – Joseph Vijayam, Director of Olive Tech, a BAM company in India and the USA.

Bribery and corruption not only represent a significant risk for your company, but keep millions in poverty.

“[Corruption] constitutes a major obstacle to reducing poverty, inequality and infant mortality in emerging economies” according to Daniel Kaufmann, the World Bank Institute’s director for Governance.According to World Bank Institute (WBI) research, more than $1 trillion dollars (US$1,000 billion) is paid in bribes each year. This US$1 trillion figure is an estimate of actual bribes paid worldwide in both rich and developing countries and does not include embezzlement of public funds or theft of public assets. WBI research also shows that countries that tackle corruption and improve their rule of law can increase their national incomes by as much as four times in the long term, and child mortality can fall as much as 75 percent.2

Christian Aid predicted in 2008 that illegal, trade-related tax evasion alone will be responsible for some 5.6 million deaths of young children in the developing world between 2000 and 2015. That is almost 1,000 a day.3 However, corruption is not just happening in the developing world. Read more