Benefits and difficulties of social finance: learning from experiences (Notes from Ashoka ChangeMakers’ Week 2011)

The original blog were I posted it, with more notes on other workshops from the incredible Ashoka ChangeMakers Week 2011 http://ashoka-changemakersweek.posterous.com/)

Benefits & difficulties of social finance: learning from experiences

  • Nicolas Hazard, President, Comptoir de l’innovation
  • Jean-Luc Perron, Délégué Général, Fondation Grameen Crédit Agricole
  • Renee Manuel, Ashoka Allemagne, moderator
  • Michael Vollmann, Directeur Fellowship, Ashoka Allemagne, moderatorr

JLP:
“There is no alternative to micro-finance in many countries, with examples from Armenia, Ethiopia. We had some meetings with Mohammed Yunus and Grameen Bank President to understand better its model, and we develloped The Grameen Crédit Agricole.

NH presents the Groupe SOS: leader in Social Entrepreneurship in France. 4000 employees in many sectors. NH presents then the Comptoir de l’Innovation, new structure of the Groupe SOS to build an impact investing sector. This sector could be defined as being between Philantropy and Socially Responsible Investment (SRI). Precisely Comptoir de l’Innovation is the middle man to help this two sectors collaborating better with Social Entrepreneurship driven organizations.
“We need social entrepreneurs but mainly we need success stories. We need to convince bankers/investors that social entrepreneurship is working.
We need news tools for that, we can’t just transfer the classical ones. Long term capital, patient capital really made for SocEnt.
Social Investors have to understand two things: the market and the model. We have to show that we really are “market based” as any classical company. We have to prove that the economic model between philanthropy and SRI is strong.”

Question from the audience:
“How to pilot your activity between financial return and non financial return.”
NH: “Return will not be 15% but between 1% to 5%. But even by accepting that, investors still need to be convince in the sustainability of these investments.
We have to bring VC. In France you can easily have 15000€ to start a SocEnt, but then when you need to scale up, it is not easy to find the funding.”

Question 2:
“1 to 5% return ? Don’t you think this is low ? Will VC be interested?”
NH: “I’m talking about the French market which is new. UK is more 10% and we will come to it here too. In France we are to the stage of early adopters. We are structuring a market. Maybe later 20-30% for solidarity companies. ”

Question3:
“Do you plan to invest in Europe.”
NH: “Yes we now invest in Spain and Italy. And we will go in Asia later.”

JLP about the Fondation Grameen Crédit Agricole : “What we look at when investing is the sustainability of the project + a return. Which return? A 0% one, based on Pr Yunus model = profit generated stays within community & company.”
At Credit Agricole Grameen we:

  1. Have a Good track record
  2. Quality of management
  3. Approach of positioning an enterprise on social vs financial scale.
  4. We look at the core activity itself of course.
  5. 1.4 millions borrowers of our partners institutions in the field. 90% are women.

Let me develop one example, a Milk factory in Senegal, Bagore Bathily, 300km North of Dakar. The location is an handicap because the capital Dakar is the biggest market. But we decided to support them anyway because 90% of the milk consumed in Senegal came from imported milk powder. We wanted to show that it was possible to start successful a local business. So we took a 10% stake in the company. 4 years after the company has still not break event. As it is “patient capital” “long term project”, we still support them. You can’t act as a traditional VC.

Question from the audience 4, an Analyst from Vancouver, Canada:
“If you are considering supporting an Ashoka Fellow you need to understand if this individual is able to work both on business and social at the same time. Usually not, so what you look at is has he been able to teamed-up with the right people to build a strong business model?”

Question 5:
“Do you measure the grade of innovation?”
NH: “Innovation & scalability are both capital. You can’t build a social impact without innovation. Applicability is important, but innovation is more important. To be sustainable you have to be always innovative. Additionally as the market is always moving, you have to be in the innovation process, from the start.”

Remark from the audience:
“As Ashoka Fellows we create Social Capital. Usually our business are community owned. This approach is hugely different from the traditional business. So when the finance is coming in, its need to consider this framework.”

Remark from the audience 2:
“You may have many different type of structures. Collaboration of different organisations (profit & non-profit), pure local community owned business, traditional business with a social mission, and even more.”

JLP:
“My view of SocEnt = Unique combination of Social Innovation and Social Capital to serve a Social Mission.
Sometimes I heard: your ticket is too small & sometimes it is too big. I think SocEnt and bankers don’t speak the same language. But my position is that if you are seeking for investors you will need to give back to investors. Even if exponential return sometimes doesn’t work, I’m referring to MicroFinance in example.
How many of you have seen an exit in a SocEnt ? Laughs. Yes it is not an easy business !
Most of our work = intellectual property
You need a scale to get equity, before that scale you need first an angel, second a loan or a grant.
Financing a SocEnt : angel → debt → equity

Question 6, an Ashoka Fellow from Hungary:
“What type of guaranties will investors ask ?
We want to build a big centre house for autism, linked to a farm. So we needed 100.000€. I had to guaranty with my own house even if we had, and this is now working, a business model with Youth Hostel.”
JLP: “What you were looking was a loan, this is different, as investors we don’t ask for guaranty.”

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