Social Enterprise Pioneer Scofield Created the World Bank for the Poor
STANFORD GRADUATE SCHOOL OF BUSINESS — Social entrepreneur Rupert Scofield says people in the world's poorest nations can relate to what's driving Occupy Wall Street demonstrators to the streets of the United States.
"Their basic message is: 'This system doesn't work for us anymore. It's not creating jobs. The distribution of wealth is completely out of control,'" said Scofield. "That's always been the message in developing countries."
Scofield is president and chief executive officer of the Foundation for International Community Assistance or FINCA, a nonprofit nicknamed "the World Bank for the Poor" because it acts as a lender to impoverished entrepreneurs in developing nations. FINCA has more than 880,000 clients spread across 5 continents, and a loan portfolio of more than $470 million. The average loan was about $600 last year, according to the organization's website, and the nonprofit reported a 97.7% on-time loan repayment rate.
FINCA's social venture covers 21 countries in Latin America, Africa, Eurasia, and the Middle East.
Scofield, who cofounded FINCA in 1984 and has served as its top executive since 1994, spoke to a student audience November 29 during an appearance sponsored by the Stanford Graduate School of Business Public Management Program and the student-led Social Venture Club.
Social enterprises hold the most potential "to effect the kinds of changes our society needs right now," Scofield said. "I think if we can reach the point where every enterprise is a social enterprise — not just in name, but in action — then maybe we'll get the world we want."
He wasn't always such a social enterprise advocate, having stumbled into the sector in the early 1970s while he was in his twenties and serving as a Peace Corps volunteer stationed in Guatemala. Scofield's job then was to help rural farmers get $50 worth of fertilizer to boost their crop yields.
He said he would never forget the jubilation from the cheering farmers when he delivered their fertilizer. "This small amount of capital had a huge impact relative to its size," he said. "It was a really life-changing event for them."
After returning to the United States just as the nation entered an economic stall, Scofield managed to find a sales position at a vocational school — a job he didn't like very much. While addressing one high school class, the teacher suggested that rather than speak on vocational training, he instead tell students about his Peace Corps experience. "I began to talk about that, and all the old feelings, all the enthusiasm came back," Scofield said. "I realized that this was my passion, and I somehow had to find my way back to that."
He went to graduate school and, while finishing up master's degrees in agricultural economics and public policy at the University of Wisconsin-Madison, noticed a job posting for an ex-Peace Corps volunteer who was fluent in Spanish to take a consulting position. Scofield applied and a week later received a letter with a plane ticket to the Dominican Republic, a check for $1,500, and a note saying: "You're hired. Meet me in Santo Domingo."
The position was working for John Hatch, a Fulbright scholar committed to advancing Latin America's poor with small business loans. The pair soon partnered to found FINCA in 1984 as a means to break the cycle of poverty.
Back in the 1980s, Scofield said, capital for the poor was so scarce, micro-entrepreneurs in the developing world often had no choice but to borrow from loan sharks charging interest rates of 10% a day.
While their microloan program did grow, Scofield admitted the pair made critical mistakes. In 1994, his first year as CEO, the nonprofit discovered a $1 million fraud in El Salvador, had their program "hijacked" in Guatemala, and experienced "a diversion of funds" in Mexico.
It was a "traumatic year, which nearly killed the organization," Scofield said. While dealing with those crises, other microfinance organizations grew and knocked FINCA from its position as the top micro-lender in several countries.
They regrouped by beefing up internal controls and diversifying their product line to include savings plans, remittance programs, and micro-insurance policies. They have also embraced idea sharing with other micro-lending groups. For example, they are members of the Microfinance CEOs Working Group, a coalition of microfinance networks that focuses on best practices for ways to make sure their clients fully understand loan terms and don't get in debt over their heads.
The microfinance coalition will also strive to measure what he calls its hardest goal — measuring the impact of microfinance by gathering data on clients' income and expenditure levels.
He urged students to follow their heart when choosing a social enterprise career by asking themselves these questions: "What do you care about? What great injustice in the world — what big, scary problem — really engages you to the point where you want to devote your life to it? Passion is the really important thing."