By Olivia Gonsalves
Throughout this past week, I have found myself reflecting on the level of morality and truth that the social entrepreneurs that are studied in ENTR 2206 bring to their profession each and every day. Earlier this week, the Social Enterprise Institute welcomed John Wood of Room to Read and I think everyone who was present at his lecture was feeling the same way: we knew that we were in the company of a truly wonderful human being.
Fast-forward to this week in class, and my fellow classmates and I had the challenge of evaluating and writing about Banco Compartamos, the lucrative microfinance institution in Mexico. At face value, Banco Compartamos shows promise. The two founders, Carlos Danel and Carlos Labarthe are highly educated business professionals who claim to be dedicated to the social mission of eradicating poverty in their home country.
No more than a five-minute Google search will correct your image of Banco Compartamos. It turns out that the IPO charges their borrowers at least a one hundred percent interest rate for each loan they take out. The founders are quick to remind you that a high majority of their borrowers return for more loans. Instead of giving “the two Carlos” a congratulatory high-five on that point,it is imperative that we consider where that motivation of the borrowers might stem from. If Banco Compartamos is giving loans out to many of Mexico’s most impoverished women who live in rural areas, and putting on them one hundred percent interest rates, a heightened sense of anxiety will be created within those women. Instead of looking ahead for their families and possible self-reliance, the female borrowers are tethered to their loan payments to Banco Compartamos. Most of the borrowers do take out additional loans…to pay back their first ones. A newfound dependency cycle ensues.
The in-class discussion and lecture in ENTR 2206 was intense in nature, as it should have been. The founders of Banco Compartamos are guilty of taking advantage of some of the worlds most disenfranchised women, and serve as a reminder to us all that deep research into social enterprises is essential in order to best decide where to funnel potential investments and support. The profits that have been made off of Banco Compartamos’s investors through the IPO process has been unparalleled, and wealthy people have only been able to add to their fortunes with the many paid by the impoverished borrowers. To this day, Banco Compartamos is still a functioning microfinance institution. How do we combat the Carlos’s of this world?
Within the context of social enterprise work, we must demand transparency from enterprises and feel no shame prior to putting self-proclaimed social entrepreneurs on the hot seat. If the enterprise is legitimate, the hot seat won’t seem so hot to the social entrepreneur anyways. Perhaps if someone had done that earlier to Carlos Danel and Carlos LaBarthe, millions of rural women in Mexico would be leading independent lives.
