Tuesday, June 7, 2011

Great Paragraph on Social Enterprises

Rent-to-Own has been used as an example in a Next Billion Blog by Mark Hand of First Light Ventures.

I think he accurately identifies an inherent tension found in a lot of CSR-type activities, including the one-for-one model that Tom's Shoes operates under.

"Serving two masters isn't easy. When social enterprises sell goods and services that directly benefit the poor, they align their social and financial missions. Rent-to-Own, for example, finances the purchase of agricultural tools by rural Zambian farmers. The more plows Rent-to-Own finances, the faster it grows and the more families it reaches. Profit maximization also maximizes impact, and the sale of services directly to farmers creates a feedback loop that prevents Rent-to-Own from providing shoddy product. The financial and social missions of one-for-one models, however, are diametrically opposed: every dollar spent on ensuring the social impact of a donation is one less dollar of profit, and every dollar spent on driving sales is one less that can be spent benefiting the poor. This tension may be healthy and creative at first, but it is a long-term time bomb."