Investing In Potential: How Two Social Enterprises Work With Migrants & Refugees To End Poverty
I was born into poverty in the Philippines. Through the entrepreneurial spirit and courage of my mother – who migrated to Western Australia to marry my father – I won the opportunity lottery.
This meant that, instead of reinforcing the poverty cycle, I got educated and could gain meaningful employment. Half of the world who live in poverty haven’t had the same luck. I reflect on that often.
It is now 2020. Like others, it doesn’t escape me that we have 10 years left until 2030, the year the United Nations Sustainable Development Goals (UNSGDs) aspire to be achieved.
The Social Enterprise World Forum (SEWF) was held at The United Nations Economic Commission of Africa in Addis Ababa, Ethiopia in October 2019. It was a privilege to share this experience with 1200 delegates from 70 countries, including 63 Australian delegates.
The nations, cultures and insights gathered at the SEWF reinforced to me how fortunate I am to be working towards alleviating poverty in some way with Grameen Australia – a social business that is replicating the Grameen Bank model of microfinance in Broadmeadows, Victoria, as a way to address financial exclusion.
In this post, I explore two social enterprises represented at SEWF working with migrants and refugees to tackle poverty and exclusion – Grameen Australia and The Entrepreneurial Refugee Network (UK).
Grameen Bank – redesigning the financial system
Grameen Bank was founded in the 1980s by Professor Muhammad Yunus in post-revolution Bangladesh. Despite teaching traditional economics at university, in the real world Professor Yunus saw people dying of starvation in the streets.
With no jobs and no money, poor people did not qualify for bank loans. They had no assets to use as collateral. Banks thought that poverty was caused by the bad character of the poor. Even if they showed potential, banks deemed them “un-creditworthy”. The poor were, by design, financially excluded.
However, Professor Yunus witnessed the industrious nature of the poor. The ones he saw were mostly women. They had micro-businesses making and selling bamboo furniture. To do this they needed to buy materials, so they would borrow money from loan sharks who charged usurious interest rates. This meant the women had no money left over when they sold their furniture and repaid their debt.
Investing in potential
Unable to tolerate this situation, Professor Yunus decided to run an experiment. He once said:
“The poor are very creative; they know how to earn a living, even how to change their lives. All they need is the opportunity. Credit brings that opportunity,”
Professor Yunus believed that poverty wasn’t created by the poor, but by the systems humans designed for themselves. He believed that every human is a born entrepreneur and that this spirit is high amongst the poor who have to find new ways to survive every day. He wanted to design a system that unlocked the potential of the poor.
He started out by lending $27 USD between 42 women micro-entrepreneurs who used the money to buy supplies for their bamboo business. Instead of losing all of his money he got paid back at a rate of 100%. Unlike a traditional bank that seeks to protect itself from the borrower’s credit risk, Grameen Bank was designed to unlock the poor’s credit potential.
How does the Grameen-microfinance model work?
Professor Yunus lent to borrowers in groups. Each borrower was accountable to each other to repay their loans or they would let the group down. He included training and peer-support meetings so that the group could crowdsource ideas to solve repayment problems.
Importantly, savings were built into the model so that borrowers could build assets and lift their livelihoods. The alternative to asset collateral was discipline and accountability – “social collateral”.
In 2006, Professor Yunus and Grameen Bank won the Nobel Peace Prize for their work in alleviating poverty through microfinance.
What started out with $27 in loans has grown to $27 billion to over 10 million people with payback rates of 97% worldwide. The Grameen model has been replicated over 100 times including in America. Its success in a developed nation is what leads us to believe it can work in Australia.
The Entrepreneurial Refugee Network (A UK Case Study)
The SEWF reinforced to me just how much every human is a born entrepreneur. In particular, the entrepreneurial capacity of refugees.
One of the social enterprises that captured my interest was The Entrepreneurial Refugee Network (TERN). TERN is a UK social enterprise supporting refugee entrepreneurs to create and develop their businesses.
According to TERN, 70 million people are forcibly displaced globally, 13.8 million were newly displaced in 2018 and 1 person forcibly displaced every 2 seconds. 25 years is the average length of displacement.
Yet despite this, societies are failing to include them. Two in five refugees are unemployed and 80% of refugees are living in poverty. So they are building their own solutions:
There is a 20% self-employment rate among refugee communities
73% have actively considered self-employment
10,000 businesses were established since 2011 in the largest refugee hosting country in the world – Turkey.
According to TERN, when refugees create businesses they will employ up to 6 people in their businesses. Yet the UK government is not investing in this potential. In 2018, $37 billion was spent on forced migration – yet less than 1% was spent on investing in displaced founders and entrepreneurs.
Charlie Fraser, co-founder of TERN and speaker at SEWF, reports that many refugees have been successful entrepreneurs. Yet when they arrive, they are often put in areas where there is a labour surplus, and it can take a long time for them to access finance because they have no credit history. TERN aims to address these hurdles.
Their mission is “to enable refugees to thrive through the power of their ideas”. Their UK Goal is to enable 1,000 refugees to launch businesses by 2025 and enable migrant communities to get fair access to networks, knowledge and finance.
When founders who escaped war in their home countries describe their routes to enterprise, each story involved tremendous hard work and perseverance.
This quality is present in displaced business owners whether they are in the UK, Turkey or Australia.
Grameen Australia – microfinance pilot in Broadmeadow
Grameen Australia recognises the resilience and entrepreneurial spirit of migrant and refugee communities. Accordingly, we have chosen to pilot the Grameen-microfinance model in Broadmeadows, Victoria.
Broadmeadows has an unemployment rate of over 20% and, as at 2016, over 46% of its population were born overseas. The outcome of any pilot is uncertain, however we believe it is more likely to succeed in disadvantaged communities with high migrant populations.
Once we learn from the pilot and prove it is viable and scalable, then we can extend the program to non-migrant or refugee demographics.
We are working towards formally launching the pilot in 2020 – in time for Professor Yunus’ 80th birthday, the man who believes that poverty can be solved if we redesign our systems.
I was given an invaluable opportunity when I came to this country. Hopefully by 2030, more people who migrate here will be able to realise their creative talents through entrepreneurship and access to opportunities.
About Katrina Dunn
Kat Dunn is the CEO of Grameen Australia, a social business inspired by the work of Nobel Peace Prize Winner Professor Muhammad Yunus. Kat started her career as a lawyer and before working at Perpetual Limited where, in 2016, she was the youngest executive to serve on the senior leadership team. She has the advised the Financial Services Council and Commonwealth Treasury on regulatory reform. Kat is on the board of food innovation catalyst, Food Frontier and created F-OFF: Fear of Failure Forum a movement to say "F-OFF to your fear of failure and grow your potential".
