Employ a Strategy of Adding Knowledge for Your Stakeholders

Add knowledge-development to help people directly, and you have a much more vibrant strategy. For example, immigrant communities in developed countries often pool excess funds to stake entrepreneurs to start small businesses, which often employ some of these same immigrants. Think of these pools of capital as being like fish ponds.

In the process, immigrants learn entrepreneurial and work skills that provide them more ways to earn a living. The successes the borrowers and their workers enjoy with this learning create even more funds, which can be reinvested for other purposes and other harvests.

More recently, this capital-and-human-talent-improvement-pool concept has been applied within some rural parts of the developing world by the Grameen bank in Bangladesh to provide micro credit. To get some sense of what is involved, begin by realizing that a typical loan is less than $100. That size was way too small for the overhead of an existing bank business model to afford. How could such small sums be profitably provided?

The bank was founded in 1976 as an experiment, and went on to become regularly government chartered with ownership held 90 percent by the saver/borrowers and 10 percent by the government. Local community savers are happy to provide the time and expertise to decide who gets the loans and to oversee their repayment, much like the dolphin experiment volunteers do for Earthwatch.

Often, farms and homes are improved with these loans, and local businesses are established as well. These investments in turn help not only the borrowers, but also those who are employed by the borrowers or sell goods to them. Because the decision to give credit usually involves most of a village or small community, borrowers are most anxious to repay both because of social pressure and their desire to be deemed creditworthy in the future.

As a result, default rates have been unexpectedly low considering that these are almost all "character" loans without collateral. According to the Grameen bank, the default rate has been as low as 5 percent. A default is counted after the loan is more than 2 years delinquent in payments. Bangladesh is subject to horrible floods and storms, and default rates usually grow after these natural disasters occur.

Not being satisfied with the single harvest that providing capital makes possible, the Grameen bank seeks to teach its borrowers and owners how to ensure future economic success in other ways. For example, borrowers are encouraged to plant more vegetables than their families can eat and sell the excess.

The bank's other principles relate to important lessons for better living such as encouraging the use of clean water and sanitary facilities to limit disease; repairing and building better homes; helping one another when trouble arises; avoiding capital-draining dowries; and keeping family size and expenses down.

Most significantly, the bank puts a high emphasis on helping children acquire and pay for an education so that new kinds of human and economic harvests can be created in the future. In essence, these educational activities are also indirectly providing a base for finding and implementing new business models in the future that will provide multiple harvests as well.

With all of these ways to cast bread upon the waters and build a better tomorrow, you can see that there exist many opportunities to create hybrid business models from these successes. Consequently, these new business models will ensure even larger harvests by expanding the community of those who can imagine better ways to create them.

Copyright 2009 Donald W. Mitchell, All Rights Reserved