Nonprofit Chronicles

Journalism about nonprofit organizations and their impact

villagenterpriseVillage Enterprise is a small NGO. Its annual budget? About $3.5m. Number of employees? Fewer than 150, with all but seven based in East Africa.

Yet Village Enterprise is about to test a big idea that has the potential to insure that money spent to fight global poverty has real impact. It’s known, inelegantly, as results-based financing.

Based in San Carlos, CA, Village Enterprise has been around since the late 1980s. For most of its history, the organization was run primarily by volunteers, working with individual donors and churches in the US to make cash grants to the poor in Africa.

Since 2010, when Dianne Calvi became the nonprofit’s first outside chief executive, Village Enterprise has grown. Today, the NGO provides cash, business training and mentoring to extremely poor people in rural Kenya and Uganda to help them start small businesses and join savings groups. Typically, they raise livestock, farm, keep bees or open a small store. It’s one of a number of NGOs, both large (BRAC) and small (TrickleUp), that practice what’s known as the graduation program, an anti-poverty program that has been found to be cost-effective and sustainable by randomized controlled trials (RCTs) involving more than 10,000 people in Africa, Asia and Latin America, as Science magazine reported in 2015.

Village Enterprise’s particular spin on the graduation program has been shaped by evidence. Its work is the subject of a pair of randomized controlled trials (RCTs), one by Innovations for Poverty Action that is nearing completion, another by IDInsight that will begin next year. Its work has also been evaluated by ImpactMatters, which praised Village Enterprise for its commitment to learn and improve. Few small nonprofits have been studied as intensively.

“Having solid evidence is important,” says Calvi, who worked in the corporate world and in international development before joining Village Enterprise. “So much money has been spent (on anti-poverty programs), and yet some of the problems have persisted or gotten worse.”

[A quick aside: Please keep this in mind next time you get a fundraising pitch from a bigger, better-known NGO, like CARE or Save the Children, whose work has not been as rigorously evaluated.]

Dianne-Calvi.square-1024x1024Last week, I got on the phone with Dianne Calvi to learn more about Village Enterprise and its venture into results-based financing. The organization got my attention because of the review by ImpactMatters and because it has been selected as one of the best charities by The Life You Can Save, which promotes effective altruism.

Recently, Village Enterprise was chosen to be part of a $5.26m development impact bond supported by three major donors–US AID, DFID, which is the UK’s international aid agency, and an anonymous foundation. The idea behind a development impact bond is that NGOs are rewarded only if they deliver measurable results. The mechanics of the project are complex but they matter, so let me try to explain.

US AID, DFID and the anonymous foundation are what’s known as “outcome payors.” They will pay Village Enterprise if–and only if–its program delivers agreed-upon outcomes, notably increases in consumption and savings incomes for those being helped. IDInsight, a nonprofit that does research on global poverty, will evaluate the program. (See my 2016 story about IDInsight for the Chronicle of Philanthropy.) Better outcomes will mean higher payments to the NGO, which in turn will repay its own funders.

To provide the working capital to run the program, Village Enterprise is raising money from so-called investors, who can choose to provide conventional donations, to make low-interest or no-interest loans or to make actual investments, which could generate returns of up to 10 percent, according to Calvi. If all goes well, Village Enterprise will tap into the growing but still nascent field of impact investing, where investors, including foundations, seek social or environmental along with financial returns.

The appeal of this approach to governments should be obvious. “USAID and the DFIDs of the world would rather pay for results than pay for activities or outputs,” Calvi says. Conventional foreign aid spending does not always deliver results, it’s fair to say. The results-based approach is a way of “transferring the risk (of development projects) from the public sector to the private sector,” Calvi says.

Brian Boland, a Facebook executive, and his wife Katie have agreed to make a $1m investment in the project. They are longtime supporters of Village Enterprise, and last year visited Uganda to meet the people carrying out the work; they were impressed. “They’re very strong leaders, great visionaries and passionate people,” Brian Boland told me.

Private impact-investing funds or foundations that do mission investing have expressed interest in supporting the bond. Calvi says she’s confident that Village Enterprise will be able to raise another $2m or so by spring.

If all goes according to plan, this first bond will deliver Village Enterprise’s graduation program to 13,800 households, who will start about 4,600 business in roughly two years. The Village Enterprise model differs from other graduation programs because three people work together to start and run each business. About two-thirds of those who sign up for the program are women.

One problem with impact bonds is that setup costs are high. Making sure that everything is on the up and up evidently requires not only an evaluator, IDInsight, but also a project manager, Instiglio, which specializes in results-based financing and a trustee, Global Development Incubator. They’re all non-profits but you can be sure that each will take a slice of pie, which means less money and support for the extreme poor. In fact, nearly $1m of the $5.26m budget for the project is expected to be spent on evaluation, overhead and management.

That sounds like a lot–heck, it is a lot–but Calvi says that once the structure is established and the program is proven, more money can be poured into it without substantially raising administrative costs. It’s like a building a factory: Once constructed, you can ramp up production and capitalize on economies of scale.

Besides the Bolands, Village Enterprise’s major funders include the Cartier Foundation, the Greater Impact Foundation, Geneva Global, the Younger Family Fund and the Segal Family Foundation–none of them among the US’s biggest foundations, which tend to be risk averse.

But Calvi hopes that, by building up a solid base of evidence and pioneering the development impact bond, Village Enterprise will be able to bring on bigger partners and inspire others to build upon its work. “More and more funders,” she says, “are interested in organizations that can demonstrate impact.” Let’s hope she’s right.

ST-BANNER2Carbon offsets have delivered many millions of dollars to finance cookstoves, for better or worse–probably, alas, for worse. Since the Global Alliance for Clean Cookstoves was formed in 2010, so-called clean cookstoves distributed to poor people in the global south have been paid for, in part, with carbon offsets purchased by companies, western governments and private donors. You, for example, can buy carbon offsets generated by cookstoves in Rwanda.

But what are you buying? Carbon offsets are strange. They are, in essence, the certified absence of a colorless, odorless gas — CO2 — or of other greenhouse gases, like black carbon, that cause climate change. The thing is, it’s hard to know whether a cookstove actually prevents the emissions of CO2 or black carbon. Was the cookstove used as directed? Did it last as long and operate as efficiently as expected? Maybe, but quite likely not. That’s unfortunate for the poor, who get broken or subpar stoves, and for governments or wealthy donors, whose well-intentioned efforts to help go for naught.

This is a problem that a small nonprofit called Nexleaf Analytics has begun to solve, by using Internet-of-things technology — low-cost sensors and cloud computing — to find out whether cookstoves are actually being used as directed.

Uh-oh! Early signs are that cookstove usage is often lower than expected at first, and declines from there.

Meantime, and more importantly, Nexleaf has come up with a business model to support cookstoves that will deliver revenues from carbon offsets directly into the hands of poor families who use the stoves. They will cut out some of the middlemen in the arcane carbon-finance industry and give users a financial incentive to cook in a way that’s better for the planet, and for their own health. Continue reading

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David Bonbright has been called the Johnny Appleseed of feedback

David Bonbright traces his belief in the power of voice back to a peaceful revolution. Decades ago, while living and working in South Africa as a human rights lawyer, a grant-maker with the Ford Foundation and a founder of nonprofits, Bonbright was deeply moved by the way the anti-apartheid movement was accountable to its members and their ideas.

“I saw the power of voice,” Bonbright says. “It was so inclusive. It was so beautiful.”

He’s been obsessed ever since. Bonbright subsequently came up with a simple and powerful idea called Constituent Voice, which calls upon organizations and governments to listen to and be guided by those they aim to serve. He started a London-based nonprofit called Keystone Accountability that has helped nonprofits, foundations and governments improve their performance by obtaining feedback from their constituents. He’s been described as the Johnny Appleseed of the feedback community, a loosely-organized network of nonprofits and foundations that want to improve their performance by listening.

The seeds he’s planted for years are bearing a bountiful harvest.

Last week in Washington, Feedback Labs, a hub of all things feedback, brought together nearly 200 people to take stock of how far the community has come and discuss the work ahead. There were reasons to cheer: Dozens of foundations and hundreds of nonprofits are systematically building their own feedback loops to connect more closely with their constituents. There were tough questions to confront, too, about whether the feedback movement is truly devolving power to the people–which is one of its avowed goals–or just tinkering around the edges.

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Gayle Smith

As Gayle Smith, the former administrator of US AID, who now leads the ONE Campaign, put it: “Is it a game-changer or is it a box you check?”

This was the third Feedback Summit. (Here are my posts about the 2015 summit and the 2016 event.) The community is growing: Nearly 200 people attended this year, compared to about 70 at the first confab. More foundations and nonprofits than ever are embracing feedback.

The need for feedback loops should be obvious. They address a fundamental disconnect in the social sector: Nonprofits are typically funded by their donors and not by their clients, so, unlike businesses, they don’t have a financial incentive to be responsive to those they aim to service. Continue reading

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Direct Action Everywhere protests inside Whole Foods

Why is the FBI looking for a couple of sick pigs?

Last summer, FBI agents visited animal sanctuaries in Utah and Colorado, seeking piglets that had been removed from a large-scale hog farm in Milford, Utah, by an animal-rights group called Direct Action Everywhere (DXE). The diseased piglets were rotting to death, says Wayne Hsiung, a founder of DXE, who admits taking them and calls it an act of compassion. Smithfield Farms, the Virginia-based meat producer that owns the farm, says the pigs were stolen, and that DXE violated the firm’s “strict biosecurity policy,” according to The Washington Post.

But the FBI? Really? It turns out that under the Animal Enterprise Terrorism Act, a 2006 law passed by Congress,, a person who “intentionally damages or causes the loss of any real or personal property (including animals or records) used by an animal enterprise” can be charged with a federal crime. Incidentally, Dianne Feinstein, D-CA, was a Senate sponsor of this industry-backed law, which turns peaceful protesters into terrorists.

The FBI investigation is “a demonstration of our effectiveness,” Hsiung told me the other day, via Skype. DXE is growing fast, and its raid on the Smithfield Farm property generated coverage in The New York Times.

“We are an existential threat to Smithfield, one that they have never faced before,” Hsiung says.

A constitutional amendment for animals

DXE stands apart from animal-welfare organizations because it vocally supports the liberation of all animals, ultimately, by passing an amendment to U.S. Constitution granting personhood to animals. (You can read its 40-year roadmap to animal liberation.) This may sound far-fetched — heck, it does sound far-fetched — but social movements to abolish slavery, grant voting rights to women and legalize gay marriage all sounded far fetched, until they didn’t. Interestingly, a 2015 poll found that a third of Americans believe that animals should have the “same rights as people,” about the same percentage as those that supported LGBT equality in the mid-1990s. Continue reading

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Nurse Family Partnership: Evidence shows that this nonprofit’s programs work.

Many foundations try to solve specific problems. They seek to end homelessness, help veterans, protect oceans, or improve K-12 education. All worthy goals.

But what if the programs aimed at solving those problems don’t work? Or cost too much? Or create unforeseen consequences? How can they be improved?

Only a handful of foundations try to address those bigger questions. They want, not just to solve problems, but to improve the way we solve problems. One of the most interesting is the Laura and John Arnold Foundation (LJAF), which was created in 2008 and reported assets of $1.7bn at the end of 2015. The Arnolds — he’s a former hedge fund manager whose net worth is estimated to be $3.3bn — say the LJAF will

systematically examine areas of society in which underperformance, inefficiency, concentrated power, lack of information, lack of accountability, lack of transparency, lack of balance among interests, or other barriers to human progress and achievement exist

and then apply “a rigorous and comprehensive entrepreneurial problem-solving approach” with the “goal of igniting a renaissance of new ideas and approaches applied to persistent problems.” Whew.

Big ideas, to be sure, but this foundation has already made big waves. As part of a wide-ranging criminal justice initiative, LJAF funded the creation of a database that has changed the way judges in numerous jurisdictions, including the states of Arizona, Kentucky and New Jersey and the city of Chicago, decide which defendants will be released before they go to trial. For better or worse–better, in my view–it’s a vivid example of how philanthropy can change public policy, as this story about bail reform in New Jersey explains.

LJAF stands apart because of its commitment to evidence, both to support its own programs and to improve the work of governments, foundations and nonprofits. In 2015, it launched a division called Evidence-Based Policy and Innovation, which, among other things, funds rigorous evaluations that include, where possible, randomized controlled trials (RCTs) designed to figure out whether programs work. LJAF’s evidence-based policy team is currently funding 41 evaluations of programs on a variety of topics, according to Jon Baron, the foundation’s vice president of evidence-based policy.

These evaluations, Baron told me last week, are “aimed at building the body of social programs with strong replicated evidence of impact on important life outcomes.”

Unhappily, that’s harder than you might think. Continue reading

Inyeneryi rural customer cooking w_2 Mimi Moto stoves

Inyenyeri customers

Thousands of words, including many on this blog,  have been written about the so-called clean cookstove sector. But the fundamental problem with cookstoves has been captured in a single sentence by Kevin Starr of the Mulago Foundation.

“The cheap stoves aren’t good enough,” Starr says, “and the good stoves are way too expensive.”

Yep. Cheap cookstoves–sometimes described as “clean,” “improved” or “efficient”–can save users money, reduce carbon emissions and slow down deforestation, at least when compared to open fires. But they don’t burn cleanly enough to keep users from breathing unhealthy air into their lungs, with terrible consequences for the health of children and adults. If the primary purpose of a cookstove is to prevent disease, then it’s ethically questionable, in my view, to put philanthropic or taxpayer dollars behind “improved” or “efficient” cookstoves that fall well short of World Health Organization standards.

How, then, can philanthropy deliver truly clean cookstoves to the poor?

Inyenyeri has a bold plan. A small company in Rwanda founded by an expatriate entrepreneur named Eric Reynolds, Inyenyeri leases high-quality stoves to poor people for a nominal fee, then recovers its costs and makes a profit by selling wood fuel pellets to its customers at a cost that is less than what they now pay for charcoal. The business model is ingenious, if not original. After all, you can buy a printer for just $29.99 because the profits are all in the ink.

“It’s the razor blade model, right? You make your money from the blades, not from the handle,” says Louis Boorstin,* managing director of the Osprey Foundation. “Because it’s run that way, Inyenyeri can use the best available cookstove. That gets you a health benefit, an environmental benefit and a social benefit–and a more viable business model.”

Mulago and Osprey both have supported Inyenyeri. They want the company to succeed. So do I, for at least three reasons. Continue reading

bg-janah-aboutSocial entrepreneur Leila Janah is a regular on the do-good circuit: She’s been to the Clinton Global Initiative, the Aspen Ideas Festival, the Fortune Global Forum, SOCAP, BSR, SXSW and Tedx. She’s a media darling. She’s got a new book out.

But what has she accomplished? Let’s have a look.

There’s lots to admire about Janah, a 35-year-old graduate of Harvard who is the founder and CEO of Samasource and LXMI, two social enterprises that provide work to poor people in Kenya, Uganda, Haiti and India. By all accounts, she is well-intentioned, energetic and, importantly, committed to measuring the impact of her work.

Samasource is a nonprofit outsourcing company that recruits young people to do digital work for such clients as Google and TripAdvisor. A for-profit business, LXMI — it’s pronounced “luxe-me” and evokes Lakshmi, a Hindu goddess — sells luxury beauty products that are sourced from shea nuts in Uganda.

Both capitalize on opportunities created by globalization to alleviate poverty.

In her new book, which is called Give Work: Reversing Poverty One Job at a Time, Janah writes: “Give work–dignified, steady, fair-wage work–and you give the poorest people on the planet a chance at happiness.”

Well, sure. Wasn’t it Ronald Reagan who said that the best social program is a job?

So what’s not to like?

For starters, the book. Give Work is a mush of well-worn ideas and fuzzy thinking.

Sometimes it reads like a college admissions essay: “We all agreed that our time in Ghana had been transformative.” Continue reading