Business as Mission and the End of Poverty

Adapted and excerpted from the BAM Global Think Tank report on BAM at the Base of the Pyramid.

The Call to Poverty Alleviation Through Business

Business has a role in alleviating poverty. Christians in business have a unique opportunity, and responsibility, to address the suffering and injustice of the 2.5 billion people who live on less than US$2.50 per day. 

The call to bring poverty-alleviation back as a central focus and purpose of business as mission (BAM) is built on several foundational understandings:

1. We are all created in God’s image: equal, creative, and imaging God in our work

Every person on this Earth is created in God’s image, from those our world defines as the most humble to the greatest, we are equals. This foundational Christian understanding of who we are has profound implications for our understanding of work, of business, and unemployment. Timothy Keller in his new book, Every Good Endeavor: Connecting your Work to God’s Work, provides a fresh perspective on work, starting with Genesis and God’s work in Creation, to Christ’s humble role as a carpenter, and each of our own unique vocational callings in this world. On the definition of calling in his book, Keller states, “Our daily work can be a calling only if it is reconceived as God’s assignment to serve others.” (Keller, 2012 p66) Read more

Poverty, Inc.

As we introduce this new series on ‘Business Fights Poverty’ on The BAM Review blog, we want to recommend the documentary Poverty, Inc. as a great resource to understand more about this issue. We believe enterprise is the way God designed communities to rise out of poverty and develop. Business is integral to human flourishing.

Yet business does not stand a chance in many communities because of a dependence on aid. The unintended consequence of good intentions can often be the destruction of the local economy.

Aid versus trade is just one of the issues around the topic of ‘business fights poverty’. Through this theme we want to be thinking holistically about addressing physical, social and spiritual poverty. We want to grow in a Biblical view of what human flourishing means. Read more

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.

determiner bfp

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

Ask a BAM Mentor: Hiring Dilemmas

Once a month, our panel of mentors answer your practical business questions. Send us your questions!

 

Dear BAM Mentor,

One of the purposes of my business is to create jobs in an area where there is a lot of need. I am feeling the tension between hiring more people who are particularly vulnerable and desperately in need of a job versus hiring people with more skills. Have you got any advice as I try balance making good business decisions alongside fulfilling this core mission of the company?

Hopeful Hirer

Dear Hopeful,

This is a very common concern in our community, so thanks for asking! BAM has great potential in poverty relief, but most of us don’t get there, largely because we fail to ask this sort of question at the beginning.

I would start by changing the challenge from finding the right balance to managing the tension. That’s a healthier way to look at this and a lot of issues. On one side of the tension is the pressure to hire lots of people who are unemployed, many of whom likely lack skills and have a less than optimal work ethic. On the other side of the tension is the need to keep the business alive. If the business fails you won’t be able to hire or help anyone. Look at profitability as a necessary precondition for fulfilling your objective and hiring and training the vulnerable and desperately in need. Profit is like oxygen. No one worries about breathing unless it’s a problem, and then it becomes their entire focus. So make sure you structure and grow your staff so that the business has enough profit so that you are able to give to and equip the vulnerable and needy. Read more

How They Were Funded: Three BAM Stories

Dreaming is the easy part of starting a business. Putting the pen to paper, turning ideas into action, and getting others on board to believe in the vision with you is where the real work begins. Getting financing for the business is at the crux of turning ideas into reality, where the vision grows legs and gains momentum. This is true for a startup or for recapitalising a growth-stage business.

Every business is financed differently and it can often look a bit messy. Here are three sketches that represent a small cross section of how BAM practitioners have financed their business, both in the startup phase and long term.

Garment Manufacturing – Donor-based Startup, Crowdfunded Growth

Peter and Marit and their business partners began with a vision to create jobs for an exploited and underserved segment of the population in Nepal. In 2013 their business was born, an ethical garment manufacturing business in Kathmandu. The Nepali Government requires foreign-owned businesses to invest a minimum of $50,000 per partner in business startups. To invest their $50,000, Peter and Marit opted to involve their wider stakeholder community and raised donations for the startup capital. Eighteen months into operation, the business is self-sustainable and able to keep moving towards their growth goals. The donor startup capital approach has given them freedom to take some calculated risks, which has been key in determining the direction they have taken as a company. Read more

Friday Links: Posts and Resources on Social Enterprise

Every Friday we connect you with some of our recent favourite links. This week:

Posts and resources from the social enterprise movement

10 Lessons From 10 Years as a Social Entrepreneur – Huffington Post

Ten years ago, I shipped the world’s first fair-trade avocados from small-scale farmers in Mexico to Europe – and my social enterprise was born. At the time, I’d never heard of a “social entrepreneur”. I just wanted to use my business skills to help small-scale farmers transform their lives. Now, I identify as a social entrepreneur down to my bones, and my enterprise has scaled around the globe and impacted thousands of farmers in many countries. Our mission is far from complete, but the anniversary is an occasion to reflect on the key lessons learned during 10 life-changing years.

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

Lessons from the Edge: Investing in BAM Companies

Insights from a BAM Practitioner

Peter has lived and worked in a professional and business capacity for over 30 years throughout Asia, Europe, the Middle East, South and North America and is a pioneer in the business as mission movement. He currently consults on business as mission all over the world and is the CEO of a global investment fund for BAM enterprise in the Arab world and Asia.

Financial capital is only one of many kinds of patient capital needed by business as mission companies 
There are seven forms of capital which need to be strategically integrated into a BAM business over a long, patient, persistent timeline in order to achieve the sweet spot of optimal impact. These seven forms of capital: human, intellectual, financial, social, spiritual, infrastructural and natural capital, all need to be strategically integrated in a balance that will be variable for your context. If you are not paying attention to all of these forms of capital, you risk being knocked off the sweet spot and your impact will be diminished.

Return on investment from BAM companies is possible
Although not easy, it is possible to invest with modest expectations of financial return into even the most difficult environments and, risk of loss notwithstanding, see a full return of capital and a modest return on investment. One challenge is finding companies that are investor-ready and able to meet the rigorous standards necessary. However we have found that relationships, based on integrity and trust within the Christian community, bring remarkable risk-reducing benefits. Company owners generally are admirably open and honest in their applications and conduct of their business affairs, and often make significant personal sacrifices in order to serve Christ, and to honor the loan obligations of their companies.

Competent mentoring can make a vital difference for BAM companies
There is a compelling value proposition for BAM companies and their investors in receiving competent, wholistic mentoring. The mentoring provided has been vital in building relationships of trust with the companies, which then facilitates growth and even greater acceptance of advice. Responsiveness to experienced input has enabled companies to grow and develop into better-managed and effective models of Christ-honoring business. Mentoring has been instrumental in early recognition of looming problems, with timely solutions protecting against financial and other loss.

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