Microloans for Housing Projects

The Atlanta Journal-Constitution recently had an interesting article at Habitat for Humanity's plans to start a microlending program to fund building projects. From the Journal:

Habitat for Humanity is looking to grow funds by borrowing a developing-world concept: microloans. The Atlanta-based nonprofit, which builds homes for people in need, is expected to announce Thursday the launch of a microloan program in partnership with the Maryland-based Calvert Foundation. It will allow individuals to invest in — rather than simply donate to — Habitat's philanthropic mission.

Investors can buy a stake in Habitat's microloan program for as little as $100. If the program is a success, investors eventually would receive interest payments on their money.
Microloans are typically used to provide small amounts of credit to people or businesses that do not qualify for traditional loans. The concept has become increasingly popular in the developing world, but it is a first for Habitat, which has subsisted almost entirely on donations, grants and proceeds from home sales. Read the rest here.

What do you think about this plan? Will nonprofits that have the capacity to pay back funds begin fundraising more and more in this way?

Don't forget to enter the 6 word philanthropy memoirs contest here. Entries will be accepted until August 7th.

What Would Kiva Do (WWKD)?

So what happens when you harness Gen X and Y’s idealistic and highly entrepreneurial nature, love of technology, and hunger for feedback and use it to bring resources to people in need? Quite simply, you get the hottest nonprofit on the planet.

Kiva connects individual lenders to developing-world entrepreneurs and in the process gives people access to capital rather than a handout. Their donors are closely connected to their mission because they are helping one individual lift themselves out of poverty. 90% of their lenders recirculate their loans, once they are paid back so the amount of funds available keeps growing and growing. Kiva is so popular that after a recent string of great publicity about the organization, they ran out of funding opportunities and stopped taking donations for a short period of time. They also have to consistantly limit how much each individual can lend so that more people have a chance to participate. How often do you hear about nonprofits capping donations?

At the same time that Kiva has been growing beyond anyone but its founders wildest expectations, there has been a lot of concern in the social sector that there is this insurmountable leadership gap that threatens to ruin the entire nonprofit sector that the idealistic baby boomers so carefully created. Who will be the next nonprofit executive director that works 80-hour weeks and spends 75 of those 80 hours looking for funding to keep the organization afloat? Who will step up to be the Chief Operating Officer that lays off half of the staff when the government grant dries up? Who will be the next Development Director to send the annual appeal letter to 1,000 people who might be interested in supporting your organization because they once supported the World Wildlife Fund? Anyone? Anyone?

I don’t think the issue is “are there enough young people to take over the reins at nonprofits?” There are enough young people that care about the problems and great opportunities in our communities but they are off starting organizations like Kiva, First Step Initiative, and Donors Choose, instead of paying their dues at the Anytown Community Development Center or the National Association for People that Care about the Environment.

The new question is “what are established nonprofits going to do to make themselves more attractive to this demographic?” Remember when Silicon Valley start-ups were tripping over themselves to have the most relaxed and fun office environment so that they could recruit scarce talent? “We have a foosball table in our conference room! Well we let all of our employees bring their dog to work and we will bring in a specially trained dog masseuse in every Friday to keep our staff happy.” I’m not suggesting the nonprofit sector go that far (massages for staff isn’t such a bad idea though), but it is time for the nonprofit sector to start thinking about what it will take to recruit and retain Gen X and Y. Title and salary are not enough to motivate these generations. It is more about how flexible the office environment is, what new skills sets can someone learn in your organization, and what is the impact on the community. Once the nonprofit sector figures that out, maybe we’ll all have to limit how much an individual can donate to us.

Survivor- Foundation Edition

January Giving Carnival Submission

The year is 2035, foundations have faced increased attention because of the extraordinary success of the Gates and Google Foundations in solving pressing social issues. The Federal government intervened and the following changes to the sector were implemented:

990 is used to apply for foundation funding. A combination of a backward looking 990 form and a strategic planning document for the next fiscal year is used by nonprofits to apply for foundation funding. This online document can be accessed by anyone and individuals and foundations choose to support projects and general operations of organizations that meet their interests. This system keeps a running total on how close a project is to full funding, it also gives donors access to clear outcomes for each organization and project. These systems are funded by the federal government because a 2015 study of the nonprofit sector by the Humphrey Institute of Public Affairs at the University of Minnesota found that investments in the infrastructure needs of the nonprofit sector had the best return on investment of any government subsidy. This was a surprise to government officials who thought that sports stadiums had the best return on investment.

Nonprofits are not granted 501(c)(3) status until they have proved the effectiveness of their service model. Nonprofits will begin their existence as a test project of local and national nonprofit incubators. These incubators will be funded jointly by the government and the foundation sectors to support emerging nonprofit organizations. Services of these incubators will include fiscal sponsorship, training, financial services, employee benefits, and administrative support. The role of incubators will be to help these fl edging organizations develop strong programming that will provide a benefit to the community. Ineffective programs will be scrapped or redesigned within two years. (See how this survival of the fittest model could apply to the world of M & M's). Programs that are effective may become a registered 501(c)(3) or more likely will become a program of an existing nonprofit. Matches with existing nonprofits will be made through the collaboration coordinator of the incubator. Nonprofits will be encouraged to take on successful program models because funding for nonprofits will be closely tied to universally accepted effectiveness ratings.

Minimum Foundation payout is not measured in dollars but by return on investment for the community. Once the Federal government understood how much effective nonprofits could save the local and federal government in future spending the 5% minimum payout was reconsidered. A new formula was developed that took into account the return on investment of foundation grants. Foundations that were supporting ineffective programming had an increased minimum payout (15-30%), so that they would spend themselves out of existence. Foundations that made effective grants were then subject to a 7% minimum payout. Foundations then had an increased self-interest in hiring the best training staff possible. Enrollment in philanthropy and public policy master’s degree programs increased exponentially, as did hiring from these programs. Creating a younger and more diverse foundation sector.

New feature on this blog- Questions

I was at a great meeting yesterday about rethinking journalism and how to include the wisdom of the community when covering stories. The organization that I was meeting with said that they had been able to predict interesting trends and get more creative solutions to problems by asking lots of people to share their expertise about a topic. The interesting piece was that they asked people to share their expertise, not their opinions. As new foundation staff we often forget that we have areas of expertise that could be useful to others inside and outside the field. I am going start asking a series of questions about next generation philanthropy issues. I want to see if we can identify trends and new solutions to strengthen the sector.

New Philanthropy vs. Old Philanthropy, a false Dichotomy?

I listened to a variety of very interesting speakers at the Council of Foundations annual conference that have made me rethink my position on old philanthropy versus new philanthropy. In a previous post, “Are Foundations Becoming Obsolete”, I said that successful foundations are using new methods to be more effective. After listening to Melinda Gates describe how the Gates Foundation was developed after doing a systematic study of other successful foundations, I stand corrected. They made a conscious effort to harness the knowledge that had already been developed in the foundation field, instead of throwing the baby out with the bathwater. One of the detriments of being someone that is new to the foundation field is that you don’t have the benefit of history when you are thinking about effective models for moving the field forward. Sterling K. Speirn the CEO of the Kellogg Foundation said “don’t fall into the new philanthropy versus old philanthropy argument, instead take time to read philanthropic history to learn from past innovations.” Through the application of knowledge and the development of fresh ideas, we can change the world.