$50M Microfinance Pledge Is Largest Ever
, September, 20 2006 -
Former entrepreneurs' $50 million gift draws more attention to the practice of granting small loans to help the poor run their own businesses
On Sept. 20, former retail furniture entrepreneurs John and Jacque Weberg of Phoenix pledged $50 million over 10 years to Opportunity International, an Oak Brook (Ill.)-based nonprofit that works to help the poor in the developing world through microfinance, or the granting of small loans to individuals and groups, often women. The goal of microfinance is to help the poor access financial services to help lift themselves out of poverty. It is the largest single private donation to a microfinance organization ever, according to Alex Counts, the president of Grameen Foundation, a U.S.-based microfinance organization.
"Up until now, the big donations were around $5 [million] or $6 million," says Counts. "Whenever there's a large donation, it brings new attention to the field. It causes people to rethink their position about microfinance. This will hopefully elevate microcredit as a viable strategy, because it's not on a chalkboard—it already has roots in every country."
John Weberg, 76, started his first small retail furniture business in Bloomington, Ind., after serving in the Korean War. The business expanded quickly, and with the help of successful real estate investments, Weberg Furniture grew into a small Midwestern empire. Ten years ago, John and Jacque sold the business and began a career in philanthropy.
LENOVO, GATES ALSO DONATE. Weberg, a longtime donor to Opportunity International, says he hopes his donation will benefit the most entrepreneurs that it possibly can. "Watching money that had flowed in to us over the years flowing out to literally thousands of people around this world—people so much like us except for being trapped in poverty—to lift themselves out of poverty with their pride and self-respect intact—and stay out—is a real joy," writes Weberg in an e-mail. "So much better than the 'Band-Aid' of charity."
The donation will form part of Opportunity International's effort to mobilize $1 billion by 2012 to help 50 million poor people work their way out of poverty in the 30 countries where the organization operates. Supplementing Weberg's gift is a $1 million donation from Lenovo (LNVGY) to provide computer hardware, along with $2.2 million over the next three years from the Bill & Melinda Gates Foundation.
In the growing field of microfinance, a sizable donation like Weberg's has the power to help a huge number of entrepreneurs and their families, says Chris Crane, the CEO of Opportunity International. "From one human being's gift, over 5 million families will work their way out of poverty."
Private donor money can also fuel substantial innovation, if used correctly. "Donors can put their money toward things that are very high-risk," says Gautam Ivaturi, microfinance specialist at Consultative Group to Assist the Poor (CGAP), a consortium of microfinance donor agencies. "We have a hope that this free money can be used to push the frontier of what can be done—reaching new customers, remote customers, figuring out new models, and not just growing what already works."
ENTREPRENEURIAL AFFINITY. Weberg joins a group of successful entrepreneurs working to further microfinance (see BusinessWeek.com, 5/2/06, "Microfinance: Services the Poor Can Bank On"). In November, 2005, Pierre Omidyar, founder and chairman of eBay (EBAY), donated $100 million through his foundation to Tufts University to create a fund to invest in microfinance (see BusinessWeek.com, 11/4/05, "Tiny Investments, Big Changes").
Vinod Khosla, founder of Sun Microsystems (SUNW) and partner at venture capital firm Kleiner Perkins, also supports the microfinance movement. In a speech at Stanford, Khosla called it "so important that I can't think of an economic phenomenon after capitalism that's more important than microfinance. I call it enabling the power of ideas and entrepreneurial energy for the other half."
Even with such vocal support from the entrepreneurial community, microfinance is just starting to go mainstream. Opportunity International, which was founded in 1971 by entrepreneurs, is one of the oldest microfinance organizations and has grown by 30% per year over the past five years as it scales up its efforts. "Having savvy entrepreneurs support us is proof of the power of our mission," says Crane.