Neal Keny-Guyer: Social Entrepreneurship at Mercy Corps

December 1, 2007

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    Joni Kabana for Mercy Corps  </span>
    Photo: Joni Kabana for Mercy Corps

Recently we sat down with Neal Keny-Guyer to talk about the agency’s long history with social entrepreneurship – and how he feels about winning Fast Company’s 2008 Social Capitalist Award.

Social entrepreneurship isn’t new to Mercy Corps, is it?
No, it’s not. In fact, it has been the anchor of our culture since I joined the agency in 1994.

Could you explain what social entrepreneurship means to Mercy Corps?
We look at social entrepreneurship in two ways. The first is internal. We want everyone in the agency – whether they’re an accountant or a country director or a donor services representative or, [laughs] for that matter, the CEO – to always be charged with bringing forward new ideas. We want people to think outside the box, to take risks that make us better at what we do. We believe it’s very important to build a culture based on social entrepreneurship. In fact, that may be the most important thing of all.

The second is from the standpoint of our programs. We’re always looking to pioneer, launch and scale-up those ideas that have the best potential for broad impact. We came to this because despite all the aid dollars that have been spent for so many years, it has proven to be really, really tough to solve the serious challenges of our day – eliminating global poverty, transforming fragile and failing states, offering hope to the one billion young people entering the world economy, addressing climate change, turning extremist violence into peaceful mechanisms for change, and dealing with the massive influx of rural people into urban centers.

Now, if these were merely technical problems that could be fixed with enough money and smarts, we would have solved them long ago. But they’re not. Moreover, we recognize that neither Mercy Corps, nor any single NGO, nor even all NGOs working together, can solve the world’s problems. That’s why social entrepreneurship is so promising: it brings together the systems, the methods, the reach, of both the public and private sectors to tackle these very difficult problems.

So how does it feel to win Fast Company’s Social Capitalist award?
First, it’s an honor for all the Mercy Corps social entrepreneurs everywhere. And, second, it’s a ringing affirmation of the role social entrepreneurship and social innovation play in building a better world.

How does social innovation work at Mercy Corps?
We function much as venture capitalists (VCs) do in the private sector. You could say we’re social VCs. As such, we’re committed to bringing economic opportunity, through financial services, to low-income businesspeople and entrepreneurs around the world. Take our microfinance work in the Balkans. There are plenty of successful microfinance institutions, but few have been launched on the front lines of major conflicts. Well, Mercy Corps’ micro-loan programs in the Balkans have jump-started businesses along what used to be a war zone. So the MFI and its services have become pathways to peace. We provided incentives for minority groups to return to their homes. And the MFI’s governing structure is multi-ethnic, so the people of that region are working together to improve the future they share.

Why is social entrepreneurship important to you personally?
Throughout my career, I’ve seen too many aid programs that were well-intentioned, and well-resourced, but they lacked imagination. They weren’t thinking out of the box, and they were not able to leverage or scale their work. They suffered from a shortage of ideas, and that’s an even more serious drawback than any shortage of resources. Seeing that, and recognizing that none of us alone, or even all of us in concert, will solve all the problems of the world, I began to feel that we had to reorient ourselves toward new ideas, new strategies, new partnerships.

I was trained in the business world [Keny-Guyer holds an M.A. in Public and Private Management from Yale University], and there’s real value we can borrow from that world. For one thing, its infrastructure is aligned to support innovation and entrepreneurship – with the VCs and the angels and easy capital and mechanisms like leveraged buyouts. Then there’s the marketplace itself, which rewards successful new ideas.

In our public sphere, that infrastructure is much less developed. Foundations, which could function like VCs, tend to be risk-averse. That’s a shame, and it needs to end. So in the public sphere we haven’t had the financial infrastructure to support innovation.

But now that the old boundaries between public, private, and not-for-profit are blurring, new paradigms for creating social value are emerging. And we have new tools at our disposal to solve the really tough problems. We’re seeing a range of corporate and other private sector entities step up to the plate, and that’s very encouraging. They’re recognizing that building a better, safer world is in keeping with both their near-term interests and their broader mission of serving the public. So we’re seeing these new partnerships to solve the world’s tough problems – and that, in my view, is the most promising advance in the humanitarian world in a long time.

Social entrepreneurship is a hot topic now. How is Mercy Corps’ approach different?
Well, for one thing, social entrepreneurship has been at the heart of our culture for 14 years. And recently we’ve aligned ourselves organizationally to support it even more. We assigned some of our smartest folks to a dedicated social innovation team that’s making sure we’re on the edge of what’s considered a prudent degree of risk. We formed a board committee with a $2 million fund to finance major social innovations, which we hope to leverage with other social investors. Now, as far as I know, no other mainstream relief and development organization is structuring itself around the goal of launching and scaling social innovations.

What’s your social innovation team working on now?
We’re in the process of purchasing a commercial bank that will serve as a wholesale bank to the 50,000 microfinance institutions that serve 45 million people worldwide. This is the missing piece in MFI. They don’t need more well-funded retail institutions. What’s needed is to develop MFI as a real industry that’s integrated with the commercial banks, so there will be a seamless web of financial institutions that serve everyone, from the poorest borrower to the richest, with a full range of products and services. That’s the real home run. It’s the kind of social innovation that’s making Mercy Corps a leader in social entrepreneurship.