Investing, Profiting and Growing Business in Africa
Former Swiss Guard Offers Catholics a Way to Live Faith in Finances
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By Edward Pentin
ROME, JUNE 7, 2012 (Zenit.org).- A former Swiss Guard, who recently wrote a very well-received book on how Blessed Pope John Paul II had inspired him as a businessman, has now co-founded a pioneering new organization for anyone interested in helping Christian entrepreneurs in the developing world.
Andreas Widmer, who served as a guard to John Paul II from 1986 to 1988, is president of The Carpenter's Fund, a for-profit company that invites holders of capital to make five year investment loans to small and medium Christian enterprises in the emerging markets.
"We lend money to Christian businesses, organizations and churches at a competitive rate," Widmer explains. "It depends on the deal but it's usually at about 12% to 15% [interest rate]; our goal is then to make an 8% return on the investment."
The rate offered by the Fund, headed by four experienced businessmen, may still seem high, but it far exceeds the kind on offer by local banks, especially in Africa. Because of the high risks involved, they will usually only lend at 22% to 30% -- a prohibitive rate that is illegal in many Western countries, and naturally deters investment in a sector that is crucial to a nation's growth and prosperity.
Such entrepreneurs are "excluded from networks of productivity and exchange," Widmer explains. "They don't have a seat at our table. We give them our charity, but we don't do business with them. They can't grow their businesses, and in turn pull their economy out of poverty."
But since it began a five-year trial project, the Fund has had significant success in turning this around, making investment loans amounting to $6 million in the Philippines, Brazil and Kenya. "We've had about an 8% return on investment," Widmer says, "with no default, no late payments, and the social return is immense."
So how does it do it? Until recently, Widmer ran what was called the "Seven Fund," a similar organization that supported enterprise-based solutions to poverty and innovative ideas unlikely to be backed by conventional funding sources. As the name suggests, the project had a shelf-life of seven years, based on the belief that businesses succeed only if pressure and risk are applied, thereby introducing competition and innovation.
But it also had a characteristic inspired by John Paul II's example: that lessons in business are no different to those of faith, namely that they are learned not through coercion but through conversion. "Instead of going to Africa and telling people what to do, we would go to Africa and find the best entrepreneurs, hold them up as role models, and then give them support," Widmer explains. The organization, which was run as a kind of secular philanthropic concern, would also offer them a grant.
But it was from this search for enterprising individuals that the Swiss businessman came across an interesting correlation: that these entrepreneurs were almost always Christians. Widmer and his colleagues put this down to the fact that they came from large faith communities where any cheating would immediately result in no further business. "Even if there's no lawyer, he'll tell a cheat he's out of the deal, because they're in a close-knit community that has virtue as its standard," he says. "One doesn't need a state to do that, our Christian law will do it." He adds that other religious communities have similar in-built mechanisms, too, but the ones he mostly came across were "specifically all Christian."
Furthermore, talking to these entrepreneurs, he quickly discovered what they needed most was access to credit. Microfinance has helped many at subsistence level, providing mostly farmers with small loans. But he says these will never be an engine of growth unlike small- and medium-sized businesses. In South Africa, for example, small and mid-sized enterprises are said to contribute to 40% of GDP and 40% of employment opportunities.
And yet loans for these businesses are hard to access. "Lending is the mother's milk of prosperity," says Widmer, quoting Michael Novak, "and you cannot grow a mid-size business employing 20 to 500 people unless you have credit."
More importantly, what allows the Fund to lend this vital capital at a lower rate than the banks is the very fact they are Christian. This makes them much lower risk due to their higher level of local and international accountability, so the Fund sets about identifying specifically Christian communities. It also stresses its selection process is "rigorous" and follows the lending process of leading banks.
Doing business with holiness
Of the five enterprises currently supported by The Carpenter's Fund, one utilizes franchising principles to establish drug stores in Nairobi, providing drugs that can treat up to 90% of the infectious diseases in East Africa. The 10% rate loan offered by the Fund financed the initial working capital needed for the expansion of the stores. For another project, the Fund provided a $2 million loan to a Philippine church to expand its facilities, also at a rate of 10%. All payments have been on time with no late fees or penalties, claims the Fund, which also caters for other confessions, not only Catholics.
But why loans instead of shares? Widmer says it is because it offers the investor an exit market. "Who are you going to sell your equity to? There's no stock market ready to accept companies like this, so it's better to make a loan," he argues. Furthermore, he also noticed that many of these businesses, especially the successful ones, are family-run, with a view to passing them on to later generations. "If an outside investor takes their shares, then he's deluding the very principle of their success, namely they are building the company for their son or grandson," Widmer says.
But what animates Widmer most about this project is that it offers ordinary Catholics a positive opportunity to actively invest in a way that is integral to living out their faith. In his recent book "The Pope and the CEO: John Paul II's Leadership Lessons to a Young Swiss Guard," Widmer laments what he calls a "latent dualism" that leads Catholics to feel it's sufficient to perhaps tithe, or carry out some corporate social responsibility, but then separate other business from a life of faith.
The root of the problem, he says, is that Catholicism has never really been inculturated into the free market, capitalist world, whereas doing business "should be a way of living holiness." "You don't separate the two, none of this is corporate social responsibility," he says. "You integrate this into everything you do, your social responsibility doesn't come at the end of it."
What the Fund does is allow the Catholic investor to take the offensive, to incorporate their investments as part of their faith, not as an act of charity but as an act of solidarity. Whereas Catholic investors will often rightly choose what "not" to invest in, whether it be in companies associated with abortion, alcohol or pornography, he proposes this alternative as a "positive filter," one that actively promote Catholic values. "There is a plethora of investment opportunities in companies that promote these values and do good, profitable work in the emerging markets," he argues.
Looking to the future, the Boston-based entrepreneur sees great potential for the growth of small and mid-sized enterprise in Africa, where many countries are showing signs of significant growth, albeit from a poor base.
"Most African countries aren't going through the crisis we're going through," he says. "Societies go from not having shoes to having shoes, from having a bicycle to wanting a motorbike, and from having a car to flying," he explains. "Many in Africa are somewhere at the level of shoes and the bicycle, so the level of demand, for growth, makes your head spin."
"Yet we tell them they're overpopulated," he says, "when actually we're under-populated, which is why we're not growing."