Innovating The Brick-and-Mortar Injustice Infrastructure

This week's post is by Andy Posner, Co-Founder & Executive Director of Capital Good Fund (CGF), a non-profit microfinance organization targeting the root causes of poverty through innovative micro-loans and personal financial coaching.  In a world filled with Pay-Day lenders that ruin lives, CGF is starting to making a difference by innovating the basic business model.  Maybe you can help! 
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Go into any low-income neighborhood in America and you are almost certain to come face-to-face with a cabal of bright neon signs and welcoming storefronts proclaiming fast cash, no credit required.  This is the brick-and-mortar infrastructure of a $100 billion/year industry—check cashers, pawn shops, payday lenders, refund anticipation lenders, rent-to-own stores and other sub-prime lenders—that profits handsomely off the backs of the poor.  As the Co-Founder & Executive Director of Capital Good Fund (CGF), a non-profit based in Providence, RI that uses financial services to tackle poverty, I am all-to-aware of the damage these companies do to the fabric of communities and the families that reside therein.  Take, for instance, payday lenders: a study by the Insight Center for Community Economic Development found that in 2011 “the burden of repaying [payday loans] resulted in $774 million in lost consumer spending and 14,000 job losses.[1]”

Traditional economic theory dictates that market forces should spawn more affordable alternatives, but they haven’t.  America’s poor are forced to choose between the 260% payday loan and mainstream financial products and services from which they are often excluded due to poor credit.  Few for-profit alternatives exist because small, risky loans aren’t highly profitable if they aren’t accompanied by high interest rates, and few non-profit alternatives have scaled because of the limits of philanthropic dollars. 

Recognizing that this paradigm is untenable, at CGF we are using business model and other innovation to scale a solution that is affordable and financially viable for us as an organization. From the outset we knew that our solution had to compete with existing options in terms of ease-of-use, customer service and turnaround time; we also knew that our model had to be about more than just making loans and collecting loan payments—we needed a way to obviate the need for expense financial products to begin with. 

In order to meet these requirements, it became clear that having a physical presence in the communities we serve would be critical, but expensive.  To solve that, we are partnering with a local non-profit, within whose office we will house a loan officer.  After running the numbers, we have a realistic target: the program will be self-sufficient if we can close 240 loans per loan officer per year while maintaining a repayment rate of 93% (and charging 36% APR).  Of course, we have to acknowledge two things: first, that people don’t wake up in the morning and say “Boy, I wonder if there’s a non-profit alternative to the local payday lender,” and second, that the established players have a lot of marketing clout.  With that in mind, we are running an aggressive advertising campaign, from billboard ads and bus shelters to flyers, community presentations and door-to-door visits.  In concert with that, we are working to ensure that it takes no more than two days to go from loan application to loan closing—slightly longer than with the predatory firms, but still within reason. Finally, we require that every borrower also avail him or herself of at least one session of individualized Financial Coaching, focusing on budgeting, managing debt and opening a bank account so that they have the tools the need to achieve financial success.  Already, our average clients saves $1,100 / year thanks to our program, and we have disbursed over 340 loans to low-income families.

Taken together, these program components—a community storefront, an affordable, customer friendly product and an aggressive marketing campaigned married to Financial Coaching—have the potential to, at scale, put the predatory financial services industry out of business.  Of course, lending and Coaching alone aren’t enough to cover all the costs of running each of these ‘micro-branches,’ so we need to explore alternative streams of revenue.  Grant funding, to be sure, is an option, but an unreliable one at that.  We don’t yet have all the answers, but we are considering a few possibilities.  For instance, suppose we were to partner with a forward-thinking, ethical grocery store chain and turn our micro-branches into micro grocery stores.  This would address several issues: healthy, affordable food is notoriously hard to come by in low-income neighborhoods; the more products and services sold at our branch, the more we come to be seen as a community hub; and we can earn a percentage of sales, thereby increasing our earned income.

What I want to emphasize is the importance of thinking out-of-the box, for on the one hand, the for-profit mentality says it isn’t worth doing if the profits won’t be large, and on the other, the non-profit mind doesn’t want to do it without grant funding.  By thinking hard about our customer’s needs, understanding our competition, and thinking creatively about how to solve an endemic problem that takes a drain on our country on both the macro and micro-economic scale, we are building something that can truly make a difference.  It’s time for us to finally put poverty out of business for good.

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[1] http://www.huffingtonpost.com/2013/05/05/payday-loans-cost-economy_n_3211597.html

Will You Leave a Mrk?

I love my iPhone case! Do you? How many cases have you gone through? Me, a few...but this one is it.  My nice blue Mrked case is the brainchild of 3 kids - yup, kids. Just your average college kids yet again deciding it's their right to change the world.  15% of the revenues from Mrked goes to teach young girls in emerging markets how to read.  Beauty & Benificence in one. Shahneel shares their story - read it and go get a case!

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Three sets of parents migrated from South Asia in order to provide their future children an opportunity to access better education.  The struggles our parents endured to make it in America motivated us to excel in our academic journeys.  This as well as our want to provide an opportunity for people, like you, to better the world we live in developed into the driving force behind Mrked.

Mrked is a tech accessories company that not only offers quality, fashionable products, but also a chance for you to “Leave a Mrk” on the world.  Fifteen percent of Mrked’s revenue helps support the works of Room to Read’s Girl Education Program.  Educating girls is to most effective and powerful approach to fight global poverty. Educating women will lead to them educating their children, which results in ending the literacy cycle by one generation.  

The idea of creating quality tech accessories came from fellow founder Safin Maknojia after he expressed his frustration with the accessories he saw in the market.  Walking into the Apple store, you may have noticed the vast selection of iPhone snap cases and high-end fashionable cases that barely offered your $500 investment any protection.  On the other end of the spectrum, there are cases on the market that offer great protection, from your waterproof cases to your extreme sports enthusiast cases, but took away from the aesthetics of the iPhone.  Our goal was to create a case that would protect a smartphone from the everyday bumps and dings and allows consumers to express their style through our designs. 

The idea of creating a philanthropic element to Mrked came from my background in international development studies and my desire to create a social enterprise like Warby Parker and Oliberté.  I’ve spent hours and hours throughout my years at Brown University reading about the issues in the developing world – health, education, political, and social issues.  All of which are elements that have led to today’s current state of global poverty.  After researching about the positive impact a proper education can have on a girl’s life in an Asian and African country, we knew this is what we wanted to support.  Finding Room to Read was just the cherry on top in our efforts to Leave a Mrk on the world.  

“But Shahneel, how does combining tech accessories and educating even make sense?”  Yes, Warby Parker’s partnership with Vision Spring does make sense.  And yes, a company like TOMS donating pairs of shoes does make sense.  But, who says everything we do in this world has to make obvious sense.  We wanted to take a product that we use everyday and provide girls in Asian and African countries with a concept that we also use everyday, education.  So is there a direction relationship between tech accessories and education?  Maybe, maybe not, but that debate is what makes our company beautiful and the reason why we wanted to enter this market and cause some disruption. 

After creating the idea of Mrked, we now had to bring it to life.  After sketching out the basic structure of our case, we then started to finalize the materials for the two parts.  We decided the outside layer should be made out of polycarbonate plastic because of its high-impact resistance and durability.  The inner layer would be composed of thermoplastic polyurethane because of its shock absorption, smoothness, and its ability not to attract lint like silicone.  After creating the 3-D rendering of our case, we now moved into designing the cases.  One of our main goals was to offer consumers an array of designs from which they could pick at least one favorite.  This idea led us to create five different categories: one color (Crayon Box), two color (Double Dutch), three color (Honor Roll), trendy designs (CLASSroom), and animal print (Jungle Gym).  Since Safin and I have always been into sneakers and fashion, we started looking through blogs, magazines, and Instagrams to see which color combinations and patterns were popular and trendy.  After creating the designs and getting the approval of our third founder Akil Momin, we finalized the 25 designs that currently comprise the 5 collections.  The final and definitely the most difficult process of this all was finding a manufacturer.  After months of conversations and samples, we were able to finalize our manufacturer.  This was the most draining and scariest process of creating Mrked because we knew our selection would impact the quality of the cases. 

If someone asked me, "Is Mrked worth all the late nights in the library trying to balance school and the company while sacrificing your 'normal' college experience?" I would undoubtedly smile and answer, "YES!"  We were able to create a solution to a problem that your everyday smartphone owner struggles with and accomplish a philanthropic ambition, which will aid young girls in providing a better future for their families and themselves.  My parents migrated to this country to provide me with a better education and give me the chance to do something great.  Attending an Ivy League university was part one. Hopefully, the success of Mrked will help me take steps towards part two: accomplish something worthwhile and Leave a Mrk on the world. 

Education? Innovation? Do - Learn - Do - Learn

Aron Solomon introduced me to Victor Saad and that was all it took.  Victor has hacked his MBA and learned more than he would have in school. Victor’s Leap Year Project “Masters Program” is the wave of the future.  Get on board - start by reading the book (use the code FRIENDS for free shipping), listening to Victor’s TEDxWindyCity talk and checking out his new “school”, The Experience Institute.

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I. From patients to students 

I’ve always been hopeful. It probably began at an early age when I saw my family’s relationship deteriorate through a divorce and subsequent challenges. However, a group of teachers, mentors, and friends in my small town of Nixa, Missouri became an incredible support. Their influence was so great that I wanted my career path to follow their footsteps. I told my Middle Eastern parents that I wouldn't be pursuing the traditional routes of doctor, lawyer, or engineer and left home to pursue a degree and work in education.

I began working for a student program at a church in the west suburbs of Chicago and for the next five years, I served on a team focused on building a 40,000 sq. ft. student community center, complete with a theatre, cafe, and hangout space.  

In the meantime, my parents began spending time with the same hopeful individuals who had invested in me, because they were curious about why I had changed so much. As those friendships deepened, my mentors counseled and wooed my parents back together. After six years of divorce, my parents remarried.

It was the most impactful event in my life, and it cemented in me the power of relationships and the hope that brings people together by repairing what seems too broken.

II. Risk: From students to self-made education 

My work with students and the building project made me curious about further education in business, design, and social impact. Over time, the idea of an MBA surfaced. But the more I studied for the GMAT and researched programs, the more I wondered if the options and price tags fit. 

I was curious: could I create my own education? How would I do that?

I started my research by interviewing hundreds of friends, family, peers, college students, and professors, asking droves of questions about learning methods, practices, ideas, and personal dreams.

When I explained I was thinking of creating my own education, people were partly intrigued and perplexed. All of that changed, however, when I ended the interviews with one final question: "If you were me, what risk would you take on something in your life, your community, or your world?"

The question led to several incredible conversations around creative projects, personal goals, family events, and community endeavors. It caused me to wonder what would happen if more people embraced risk to pursue their passion.

I took my findings from the conversations and created a simple format of learning based on spending time in the spaces and with the people I admire in design, business development, and social change: 12 experiences and apprenticeships in 12 months.

I also carried that final question about risk-taking throughout the year. After countless interviews of interviews, I had a system and structure to learn on my own, and a community of people to learn with. I gave my self-made experiential education and the community project a title: The Leap Year Project.

III. Learn: From self-made education to Prototype

I started by a helping Chicago-based design agency, Doejo, explore how to be more involved with cause-based organizations. Then my journey led me all over the world: a journalism trip to Cairo, a stint on the Community Management team at Threadless with the founder Jake Nickell, a startup ad agency with advertising guru Alex Bogusky, an Experience Design Apprenticeship with an architecture firm in Seattle, a business trip to China with a socially conscious clothing company, and so forth.

All of this helped me to learn practical skills in marketing, business development, project and client management, and community building, among other things. I shared valuable experiences with a wide network of like-minded individuals, several of whom are now friends and mentors. And I learned more about myself than I imagined. My hopes turned to action and my convictions matured and grew into values. Afterwards, I staged my graduation at TEDxWindyCity and compiled our community’s leap stories into an end-of-project book.

Throughout The Leap Year Project, I began hearing feedback from employers, mentors, and friends that my self-made experiential education could become a helpful model for others. There is a general, overarching understanding that real-world experiences are incredibly valuable to one’s learning objectives and personal formation, but there are countless questions surrounding how to evaluate, assess, and guide the learning process within such an organic structure. The feedback became so prevalent that, rather than accepting one of several job offers, I’ve decided to explore how experiential education can become a more prevalent and highly regarded route for students ranging from high school to graduate level programs.

Experience Institute is that effort.

The mission is simple: establish experiences as a credible form of education. I believe that people who master this type of education can and will gain the tools necessary to transform our world with an inventive spirit.

The game plan is even simpler: begin with a pilot class of ten students this fall.

I’ve teamed up with industry leaders and partner companies to invite a small group of students interested in design, business development, social innovation, and technology to execute a one-year experiential education. We’ll begin by learning problem-solving processes that we can apply to our apprenticeships, and then prepare to execute three key components that I learned throughout my Leap Year:

Establishing a community and a series of experiences with partner companies.

Documenting experiences through photography, video, newsletters, and blogs.

Presenting lessons and projects through a final product, presentation, and/or portfolio.

As the first class combines a series of apprenticeships around their learning objectives, we’ll research what is missing, what is most valuable, and who benefits most from this type of learning process.

Together, we'll join with others in elevating real-world experiences to be seen as a valuable form of education while providing companies with fresh insights and ideas. I believe this will open the doors for students of all ages and types to find their place in this world in a way that is affordable, helpful, and transformative -- all while building meaningful relationships.

In the words of Eric Hoffer:

The central task of education is to implant a will and a facility for learning; it should produce not learned but learning people...

In a time of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists.

- Reflections on the Human Condition (1973)