Can we Compete with Business?
When I visited Afghanistan for the first time in 2003 with the U.S.-Afghan Women’s Council (a public/private partnership formed by the State Department to implement economic activities for Afghan women), I was struck by the impoverished conditions for women and children.
I knew that I wanted to leverage the private sector practices I learned through my 20-year career at Goldman Sachs, where I was a Partner and Managing Director, and utilize employment opportunities for women in Afghanistan.
My goal was to create sustainable solutions in a country destroyed by over 30 years of war and constrained by cultural limitations on the freedom and empowerment of women.
From that visit I also knew that the path to peace in Afghanistan can only be found in sustainable, local, low-tech, low-cost, entrepreneurial, and economically based solutions. Soon after, ARZU STUDIO HOPE was born.
ARZU which means, "hope" in Dari, is an innovative model of social entrepreneurship– organized as a 501(c)(3) non-profit– that empowers destitute but highly-skilled Afghan women by providing fair-labor, artisan-based employment and access to education and healthcare in remote rural provinces where little opportunity exists.
Beginning in 2004 with only 30 weavers, ARZU has since developed into a thriving social business enterprise, impacting the lives of tens of thousands of villagers due to the ripple effects of broad-based community development programs. Women artisans are employed to weave high-end, award-winning ARZU STUDIO HOPE rugs and chic, affordable Peace Cord bracelets.
Central to ARZU’s approach is our Social Contract with weaver families. ARZU agrees to pay women the market rate for weaving plus up to a 50% quality incentive bonus. In exchange for the extra income, families must agree to send all children under the age of 15 to school full-time, to allow women in the household to attend ARZU literacy classes and to allow ARZU to assist pregnant women and newborns in obtaining pre-and post-natal care.
The result: a livable income, education, health care and, ultimately, an investment in a peaceful future for Afghanistan.
Traditional non-profits rely solely on philanthropy (grants and donations) and face the classic problem: when the funding stops, the projects stop. ARZU is different: our objective is to become self-funding, and therefore economically sustainable, from the export and sale of our fair-labor artisan products.
The cornerstone of ARZU’s innovative and holistic model is artisan-based employment that empowers women and prohibits child labor. All net proceeds from the sale of rugs and Peace Cord™ directly fund ARZU’s innovative grassroots programs that drive transformational change.
While a for-profit business measures ROI by its return to investors, ARZU defines ROI as the return to beneficiaries in the form of income and vital social programs providing access to education, healthcare, clean water and community development. ARZU’s earned income from rug and Peace Cord™ sales now covers 50% of all operational costs, including production, distribution, social benefits and community development projects.
As ARZU strives to achieve a 100% earned income model, I am confronted with the challenging reality: can a for-benefit company with a small budget, and even smaller staff, compete effectively with for-profit competitors with significantly larger resources? This query seeds more questions:
- What product characteristics are critical in order for a social-business to compete in a world of mass-marketed products?
- How can a for-benefit company with little budget effectively use social media and traditional marketing techniques to build its brand?
- How should a for-benefit define success? Should it be in scaling to serve the largest number of beneficiaries? Or is success measured by achieving economic sustainability, even if this means limiting the scope of new social projects?