Editor’s note

The barriers to development in Uganda are manifold. Charities need to work smarter. Democracy has to work better. But at the end of the day, it is a thriving private sector that will enable Uganda to realize its potential.

Private investment in Africa has focused mainly on microfinance and commercial scale capital. Small to medium size enterprises (SMEs), often the engines of economic growth and job creation, have been mostly overlooked, creating what is now known as “the missing middle.”

These businesses are starved for growth capital in the range of 5,000 USD – 100,000 USD, the respective ceiling and floor of microfinance and commercial banks. Loans in this range are hard to access, have prohibitive collateral requirements, are expensive (average 20% APR), and impatient, often strangling cash flows with immediate repayment requirements. Though an SME can have a competitive business model and stable revenues, they may not have years of audited financial statements or formalized business processes, and thus fall outside of the financial system.

SMEs are not only underserved, but are critical for development beyond dependency. Uganda is the youngest country in the world and youth unemployment hovers around 83 percent – thousands of jobs must be created to fill this gap. In the United States, small firms account for 64 percent of all new jobs, and employ approximately 51 percent of the nation’s workforce. In Uganda, the data is even more striking: small businesses account for 75% of GDP output and 66% of non-farm private sector employment. According to a recent reportby the Summit Development Group, a dollar invested in an SME creates three times as many jobs as a dollar invested in a microenterprise.

Uganda is also a promising frontier market for investment. GDP growth has averaged 8 percent over the past five years and is projected to continue in the future. Economic liberalization, regional integration, a stable currency, the recent discovery of oil, rapid urbanization, and a growing middle class create the conditions for sustained economic progress in Uganda. The Ugandan businesses that will drive this economic growth are just now being born, only now being discovered. Who will invest in them, who will accelerate the growth of their enterprises?

This is why we are building Flow Equity – to create thousands of jobs in Uganda, participate in the renewal of a region, and capture significant economic growth for investors. Flow Equity is a new social investment fund making growth stage equity investments in promising SMEs in East Africa. We look for entrepreneurs in competitive sectors who have a blended value proposition, that is, they pay fair wages, protect the environment, and realize above market-rate returns. Beyond capital, we work with entrepreneurs to formalize processes, build brands, develop long-term strategies, and find markets for their products, making them more sustainable, credit-worthy, and competitive in the long-term.

Flow Equity is trying to help the world think differently about Africa. Though partially true, we cannot carry on thinking that Africa is suffering and needs our help. This perspective is not only degrading, but dishonest. If we want Africa to be more than a second-class global citizen, a recipient of our charity, we must invest more than annual donations and volunteer stints. We must invest in its entrepreneurs and believe in its economic future.

(Photo by weesam2010)

And poverty is just one of many challenges humanity faces.

Philanthropy will never solve these challenges.

Let me clarify: Traditional philanthropy will never solve these challenges. Traditional philanthropy, composed solely of donating time and money to charitable causes, will never solve challenges of this magnitude in anything close to an acceptable time frame given the extent of human suffering they represent. As William Easterly argues in great detail in his book, White Man’s Burden, it’s unclear whether the billions of dollars poured into aid by governments and NGOs over the years have had any kind of sustainable positive impact on the lives of the people they were intended to benefit.

So, if traditional philanthropy isn’t the answer, what is?  Well, it probably isn’t too surprising that I’m going to suggest that we need to find ways to be more inclusive of business and government and find ways to leverage the strengths of those sectors, along with the nonprofit sector, to create social change.

Some might question whether the activities of business and government can really count as “philanthropy.”  But let’s look at the etymology of the word: it comes from the Greek philanthropos, a combination of philos, or “loving” in the sense of benefiting, caring for, nourishing; and anthropos — “humankind”, “humanity”, or “human-ness”.  So: “love for humanity.” Business and government may not always express a love for humanity, but they certainly can in some cases, so let’s take full advantage of that where we see an opportunity.

But it’s not enough to simply open our hearts and our minds to accepting a broader definition of philanthropy.  We need full-bore, pedal-to-the-metal commitment to finding what works and doing whatever it takes to make our vision of the world a reality.  We need people like Dan Pallotta, who started Pallotta Teamworks, a for-profit event management that produced multi-day fund raising events such as AIDSRides and Breast Cancer 3-Days, raising over half a billion dollars and netting over $300 million for those causes in nine years.  We need people like Kjerstin Erickson, Saul Garlick, and Jon Gosier, three young social entrepreneurs who have formed the Thrust Fund to offer up a percentage of their future earnings in exchange for the unrestricted capital investments they need to scale their ventures right now.  Basically, what we need are people who take a no-holds-barred, everything-is-on-the-table approach to philanthropy, where the two questions that matter are “Does it work?” and “Does it work better than whatever alternatives are available?”.  We need, as I like to think of it, Full Contact Philanthropy.

To quote Deng Xiaoping: “I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.”

Let’s all stop caring about the color of the cat and focus on how we can best identify and nurture the cats that demonstrate that they can (or someday will be able to) catch the most mice.  And if you’ve got a dog or a wombat that somehow manages to catch even more mice, heck, let’s find a way to nurture those too!

(Photo by sselbein2007)

About six million Americans receiving food stamps report they have no other income, according to an analysis of state data collected by The New York Times. In declarations that states verify and the federal government audits, they described themselves as unemployed and receiving no cash aid — no welfare, no unemployment insurance, and no pensions, child support or disability pay.

The growing number of people receiving SNAP, but living without any cash income exposes a troubling hole in our social safety net.  TANF, the primary cash aid welfare program design to aid poor families, has strict asset requirements and is only meant for families with dependent children.  The newly poor victims of the recession are people who are too asset rich to receive cash aid welfare, and therefore are subsisting only on food stamps.

(Photo by fancypicnic)

The book is a quick, entertaining read, although I was disappointed that Venkatesh, writing for a wider audience, provides little academic analysis. The most useful takeaway from Gang Leader is that the residents of the housing project documented in the study view the gang as a part of the community, and not a solely negative one at that.  The gangs, while clear purveyors of drugs, act as a police presence for a community that has a poor relationship with the formal police force.  The gang also generates a lot of the community’s economic activity and actively donates to political causes and celebrated social service organizations.

In no way does Venkatesh come across as a gang sympathizer.  Rather, he is a realist, arguing that gangs play several roles in the community.  While I would recommend Gang Leader to someone looking for a fairly light read, I’m currently reading another Venkatesh book, Off the Books – the Underground Economy of the Poor which thus far seems to be a better blend of compelling ethnography and substantive analysis.

Assuming the purpose of social media is simply to raise funds, then it seems engaging Facebook over Myspace makes sense. Facebook users are wealthier, and applications like Causes help non-profits raise funds within Facebook. But if we are to use social media to actually reach out to help people, Boyd’s research indicates that MySpace is a more logical forum.

Boyd likens the divergent demographics of MySpace and Facebook users to suburban white-flight. She argues:

Whites were more likely to leave or choose Facebook. The educated were more likely to leave or choose Facebook. Those from wealthier backgrounds were more likely to leave or choose Facebook. Those from the suburbs were more likely to leave or choose Facebook. Those who deserted MySpace did so by “choice” but their decision to do so was wrapped up in their connections to others, in their belief that a more peaceful, quiet, less-public space would be more idyllic.”

If indeed Facebook is akin to the wealthy suburbs, then non-profits focusing on elaborate Facebook profiles is perhaps as logical as building a shelter mega center in Beverly Hills. As low-income youth engage technology through sites like MySpace, the non-profit sector should expand it’s use of technology past fundraising to provide direct services to people in need.

(Photo by swanksalot)

In any economic downturn, the first jobs to get shed and last to return are low paying service sector jobs, the very jobs low-income families rely on to survive. The 1996 TANF reform was predicated on the misnomer of the “culture of poverty” myth, an argument rejected decades ago by social scientists. The policy architects essentially argued poor people choose welfare over employment and therefor punitive measures were necessary in welfare legislation to compel people to work.

The policy was deemed a success for years because the legislation was passed concurrently with a market boom. Since there were more jobs at the time, people naturally got off welfare and went to work, not on account of welfare reform, but because of a strong economy instead.
With unemployment at a record 26 year high, economist Sheldon Danziger pointed out that

the overhaul of cash welfare since 1996, aimed at pushing single mothers into jobs, “makes sense when unemployment is 5 percent.”

“But if you are out of work, the welfare system in a time of recession doesn’t have anything to offer,” he said.

As the recession persists, and people time-limit out of welfare assistance, the flaws of the 1996 welfare reform will become increasingly clearer. If we are to truly move forward with a progressive, effective national anti-poverty policy, we need to move away from a collective cultural ethos that wrongly believes that poor families choose poverty over prosperity.
(Photo by khalilshah)

I find the intersection of poverty and faith interesting, and on Sunday began what will be a series where I will explore a new church in the area every week. Last Sunday, I attended a small black church called New Hope, sandwiched between two industrial buildings in a mixed residential-business zoned neighborhood.

The New Hope pastor’s sermon essentially raised the question, “Do gangsters go to Heaven?” She preached about how she recently presided over the funeral of a young murdered gang member. Her approach to the funeral was different than other pastors, who she says focus on consoling family members and extolling the better qualities of the deceased. Instead, she took the opportunity as a wake up call to the other gang members in attendance at the funeral. She told them that the deceased had lived an evil life, and surely was banished to Hell.

Now, my point here is not to debate the existence of Heaven and Hell, nor what the final resting place of the deceased is. But, I do see Heaven and Hell, at the very least, to be a useful rhetorical device and her point is well taken that telling people who engage in destructive anti-social behavior that they are guaranteed a spot in Heaven could create some moral hazard.
I think the pastor put it best when she said

When you get to Heaven, God’s not gonna be sitting there with a six-pack and a blunt, wait’n for ya

She had worried about how the crowd would receive her message, but felt strongly in her faith that God would not allow her to lie to these gang members. Her message, she said, was in fact well received and many attendees thanked her afterward for her dark eulogy.

I had never thought about the possible negative consequences of teaching those who engage in destructive anti-social behavior that their spot in Heaven is guaranteed. Whether or not there is any real correlation between church message and gang involvement is unclear, but the pastor certainly did raise an interesting question.

Instead, we have squandered this opportunity, complaining we are light on solutions because we are light on funding. But lack of money is not the reason we have failed in the social service sector to make significant gains in solving social problems. I have no doubt that if we actually knew how to solve social problems, that the American public would give us the support we need.

The reason we don’t have the money we want is because we do not have a track record of success. We have failed to succeed so far because of a collective culture that is anti-competitive, and is deathly afraid that if we started rigorously evaluating the services we provide, that we would discover we aren’t really doing anything.
Therefore, it’s not surprising that as an industry we fail to produce good ideas, considering that we don’t really think.

Other industries use professional journals and online forums to exchange ideas, think critically about what works and what doesn’t, and encourage competition so the best innovations rise to the top, and others get thrashed and left behind, as they should. We in social services however, spend our time patting ourselves on the back, telling one another how great we are, and sharing articles about how there are too many poor people and not enough social services.

It’s time for us to get real. Not every idea is a good one, not every agency has a right to exist, and even if we “keep working together” that does not mean “it is going to get better.” We need a cultural revolution in the social service industry. We need to start taking ourselves as seriously as the problems we work on. So long as we hold back on critiquing ourselves, and one another, our industry will continue on its path to mediocrity.

Food pantries struggle year round to keep food flowing to those who need it for survival. With so many food insecure families, isn’t it a bit premature to focus so much on fancy holiday fare?

With no mean spirited intent, this is the time of year I am least likely to donate food. I’d rather give on the days people in need go hungry and are forgotten. The holidays are a great time for reflection and being thankful, but life is lived year round.

So, instead of peaks and valleys of food donations, if you are planning on giving food this holiday season, think about holding off on that donation and saving it for another day. It is more remarkable to do a generous thing on an unremarkable day. You and I eat every day. Everyone should.

I find this to be a telling example of the dire need American families find themselves in due to the economic crisis. The visual image of 40,000 people ascending on a Colorado farm to pick free food for their families sounds less like a recession and more like a sign of the second American Depression.