Funders Can Give More than Money

Harvard Business Review

In 2012 the world's problems grew more complex, but America's top 400 charities saw very little growth in their resources to address them. A forecast issued late in the year by The Chronicle on Philanthropy projected their collective growth at just 1 percent. The outlook is only marginally better for endowments, with returns on their invested capital hovering around 5 percent—as they did in 2011. And while some foundations bucked the trend and made double-digit investment gains in recent years, the average foundation in Chronicle's analysis netted out 14.9 percent lower than its value in 2007.

With the country still dangling from the fiscal cliff, charitable organizations like ours are finding that the individuals and foundations we depend on are more discerning than ever in their choices of how to spend their philanthropic capital. Some seek stricter accounting of ROI based on objectively measurable goals and achievements. Many others simply want a more visceral sense that their dollars are being spent effectively.

At Opportunity International, where the focus is on providing loans, savings, insurance, and related training to clients in the world's poorest communities, our major donors like to see the work up close. They want to experience first-hand the process by which their dollars are put to work breaking cycles of poverty and building cycles of financial security. Moreover, some of them also have relevant knowledge and are excited by the challenge of designing solutions. Rather than wait to see the end result of our approach, they want to collaborate from the very beginning.

Fielding calls from donors with ideas is nothing new, but truly listening—even when their ideas challenge the status quo—is a paradigm shift in how nonprofit executives engage with their donors. When presented with a surprising idea, smart organizations will bravely listen, because what comes next might just be game-changing innovation.

At Opportunity we see experienced, resourced entrepreneurial donors as a major asset for our organization. More broadly, it seems to me that learning to see donors themselves, and not only their checkbooks, as critical assets is part of what turns a nonprofit into a social enterprise.

Six years ago, David and Donna Allman approached Opportunity with an idea that fell outside our traditional microfinance model: to build a Community Economic Development (CED) program in Nicaragua. A CED strategy starts with an asset assessment rather than a needs assessment of the poor, recognizing that even the poorest families have assets to contribute to their own development. CED programs then mobilize the key strengths of a community, so the community itself is working hand in hand with the organization to achieve economic growth and security.

The Allmans' passion was palpable, and the funding model they suggested was different from our norm but completely viable. It called for leveraging the profits of the global microfinance institution, and coupling them with private investments from the Allmans and their donor network. With the leadership of Opportunity's Geralyn Sheehan, a CED specialist, we forged ahead, investing resources to build programs in four areas: agriculture financing, training, and processing; artisan training and product distribution; a rural technical high school and community infrastructure; and leadership development work.

Our CED initiatives start with the community itself identifying the need, then partnering with us to achieve the desired result. Together, we've constructed school libraries, repaired churches, built roads, and, crucially, ensured clean water through new aqueduct systems.

Opportunity's investment in an agricultural processing plant, which enhances the value of poor farmer's crops and provides year-round access to new markets, achieved 30 percent higher yields and an average income increase of 50 percent over last season for our farming clients. Each farmer now employs an average of five field workers, creating jobs in remote areas of Nicaragua where few employment options exist.

It has always been true of Opportunity that we dare to believe in those who dare to dream. Twelve-year-old Roger Ruiz was expelled from his public school in rural Nicaragua. He was labeled a troublemaker and, without access to education, was destined for the poverty cycle, living in a region where less than 10 percent of youth finish high school.

Roger's mother begged Opportunity to enroll him in our technical school, where we focus on tourism and agriculture—the region's most promising industries—and run several agricultural and tourism small businesses, providing both a vehicle for a "learn by doing" environment to our students and revenue from sales of goods and services to cover the cost of operating the school itself. Today, Roger is president of the school, elected by his peers. On a recent trip, he briefed me on his business plan and on the school's operations with the maturity and confidence of a seasoned entrepreneur.

And what does President Roger want to be when he grows up? An engineer, he says, because engineers help other people solve problems.

It's vital, too, that we dare to believe in donors who dare to dream. Our partnership with the Allmans proved to our organization that community economic development works, and is a logical step forward for our microfinance institutions. We know that microfinance alone will not break the poverty cycle. Across the world, Opportunity's field operations couple our financial products with training, preventative health education, and much more. The Allmans' dream taught us that community development, powered in part by microfinance, accelerates Opportunity's impact on the communities we serve.

Innovation does not only come from professional staff or consist of honing historic strategies. As we seek to catalyze new business solutions to chronic issues, we need to be open to utilizing all the assets available to our organizations. When a donor is engaged for ideas and counsel rather than just dollars, the case for capital need is built collectively, the motivation is felt in the soul, and the sense of achievement spreads far beyond a tax exemption. A deep and lasting partnership is forged between the donor, the organization, and the communities we support together.

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