We regularly interview our amazing Guarantors to learn more about their lives and motivations. In this Guarantor Spotlight, Stasi Baranoff, MCE’s Fellow, has a conversation with Jim Davidson, who is not only a Guarantor, but also serves on MCE’s Board of Directors and chairs MCE’s Small and Growing Business Advisory Committee.
Tell us about your background and how you came to be so involved with MCE.
I’ve always been interested in what we now call “social ventures.” I started my working life in technology software and online technology, and was in that industry for 10 years. I ended up at a “small” company called America Online, which, over the course of time I worked there, grew immensely. I ultimately became the CTO of DigitalCity, the internet’s first hyper-local portal, as well as the VP of Web Services and Publishing.
As I navigated my career, I became increasingly passionate about leveraging my experience toward social good. I co-founded a company called LaborFair, an online site that connected people who were searching for jobs with people who were looking for day laborers. Around that same time, I ran into Jonathan Lewis, MCE’s founder. I immediately understood and connected with the model, and I signed up as a Guarantor 2 weeks later. I think I was Guarantor number 22 or number 23 out of what is now more than 100, and I’ve now been with MCE 8 or 9 years.
What has been your impression of the trajectory of MCE over the years?
When I first started serving as a Guarantor with MCE, there was this sense of “if we could just get to 100 Guarantors,” we will have achieved a large part of our mission. This was based on the belief that, with those guarantees, we could robustly support microfinance, which is an important tactic to help people lift themselves out of poverty and gain the freedom to make financial decisions about their lives. It was also in our interest to share the risk among more Guarantors, broadening the pool and enabling riskier loans.
Now that we’ve surpassed $100M in loan guarantees, our ambitions have only grown. We knew we had built something unique with our Guarantor model, and continued to leverage that unlocked capital toward the unbanked populations in the world. The international financial system still is inefficient – there are so many people who are ready and eager to provide for themselves and their families, but don’t have access to finance.
While there are also a lot of players in this marketplace, we at MCE can take comfort in that we were early, helped build the market, and proved the efficacy of our model to avail capital from financial institutions toward riskier loans.
Can you tell us more about MCE’s new Small and Growing Business Fund?
MCE is planning to replicate its loan guarantee model and launch a new loan guarantee pool to fund flexible, customized, affordable loans to Small and Growing Businesses (SGBs) in Sub-Saharan Africa and beyond. Our SGB Fund is the first new product we have launched based on our existing platform of guarantee-based borrowing and lending. The overall mission of MCE is to help as many people in poverty as possible: we aren’t limited in technique, but using loan guarantees is our core competency, and we’re excited to see what else we can accomplish.
Why is unlocking capital for SGBs so important?
One of the other efforts that I’m involved in is Dev Equity, where I am a partner. Dev Equity makes SGB investments in Central America, soon to include Sub-Saharan Africa. This is a deeply connected venture fund where we work very closely with companies that are building business solutions to economic growth in their communities. It’s hard; there are a lot of speed bumps (literally pot holes and slow internet connection). In this environment, and with these businesses, there are real opportunities for putting people to work. Not everyone wants to take out a loan; some people just want a job. SGBs can be job creators, but they can also be job destroyers if they don’t have appropriate financing.
At MCE, we have been facilitating finance all across the board: income smoothing for the household, or for a farmer in a middle-income country. Investing locally, with, through, and for people in the communities will be really interesting to us as it fills an existing gap in the financing marketplace.
What do you do as a member of the MCE SGB Fund Advisory Committee?
The SGB Advisory Committee was formed just about a year ago. We wanted to explore how we could get into funding SGBs, and in particular help brainstorm and validate some ideas the MCE staff had already come up with. We also serve as an interim group on an ongoing basis to vet the deal pipeline. We all come with different expertise and experience, so we can weigh in on a wide array of topics and industries. We put together recommendations for the Board, and since the committee had really done our homework the Board knew they could support our recommendations.
Then, when MCE applied to USAID, USAID really saw that the Guarantors were behind this idea of leveraging their balance sheets for low-cost capital, and that played a huge part in USAID’s decision to give MCE a $1 million grant.
What is the significance of the USAID grant?
Our partnership with and grant from USAID’s Partnering to Accelerate Entrepreneurship (PACE) Initiative is absolutely critical, and completely catalytic for us. First of all, I’m a big fan of these types of partnerships – I see a strong role in our public institutions in development in moving us toward a just world. It’s important that we take the time to thank our public servants because they work really hard. I’m thankful they’re giving us their trust. Also, the dollars make a huge difference: it changes our ability to have a Loan Loss Reserve. It’s also validating: when we tell people we are starting this program, and adding that USAID supports it, that makes a big difference. I think if we had not had that validation, it would have taken a few more years to get this program off the ground, and we might not have been that confident that we were on to something – it helped us get to “yes.” You can learn more in the article MCE just published, “USAID, MCE, and Partners: Unlocking Private Sector Capital for Small and Growing Businesses.”
What is it about MCE that brings together these committed Guarantors?
I think Guarantors share strong values, which draws them to MCE’s model. There’s a sense that they’re global citizens; they care about the lives of people, whether those people are close or far. There’s a shared belief that people around the world should be clothed and educated. Also, these Guarantors are the type of people who like something innovative, and we continue to attract that type of person to the group. Especially important now is the launch of the SGB Fund – the way we are leveraging our existing core model toward another product inspires Guarantors to think about other innovations we can try using this same core model, and that’s really exciting.