June 10, 2014 by Alex Counts
A little over a year ago, Susan Davis, and former Chairwoman of Grameen Foundation said to me, “In the wake of 9/11, there was a lot of talk about developing partnerships with progressive groups in the Middle East, but few actually took the risk and did anything. Grameen Foundation took a big risk and did jump in. At the time, microfinance was tiny there. Now it is much bigger, and clearly we had something to do with that. So take some credit for your boldness and the results!” (I should mention that around the time we got going in the region, Susan was also bringing Ashoka to the Middle East and made a lot of powerful connections for us along the way.) So how did we even begin talking to the Jameel family and its representatives? Our Chairman prior to Susan was the late, great Jim Sams. As a proud Lebanese-American, he wanted us to work in the Arab World. I was open, but skeptical. We were a very small organization then but within weeks Jim had connected me to one of the most prominent Saudi philanthropists, Muhammad Jameel.
When a friend of Jim’s heard that Muhammad Jameel, the patriarch of the family, was interested in microfinance, he made some calls and next thing I knew, I was on my way to speak at the Jeddah Economic Forum in January 2002. I gave one of my more forgettable speeches at that conference, but the real value was spending many hours with Zaher Al Munajjed, an advisor to Muhammad Jameel who was tasked with figuring out how the two organizations might work together. We paced back and forth in a hotel lobby and explained how our respective organizations operated, and explored various partnership structures. Zaher, now the Chairman of Grameen-Jameel, proposed a joint venture. I was not familiar with such an approach at the time, though in time GF would start several. So I balked at the idea. Furthermore, I said that while we knew microfinance well in general, we had little knowledge of what existed in the Arab World so we would need to do an assessment, and they would need to pay the costs. While on that trip I also meet Muhammad Jameel and two of his sons, and their personal commitment to making this work made a big impression on me. Zaher and I spent the next five months negotiating an interim agreement and signed it in New York in May 2002.
Building an Organization
During the following year, we learned a lot about the needs of the Arab microfinance sector, and saw ways we could add value. By the fall of 2003, it was time to decide whether we were going to move into action, and if so, how. At our request, we tabled the idea of a joint venture. ALJ gave us a large grant for the first three years of our work together, to be supplemented by other funding we could mobilize from organizations like the Mosaic Foundation. ALJ convinced us to go slow on actually financing microfinance institutions (MFIs), perhaps worrying that our lack of regional knowledge would lead us to make an embarrassing mistake in partner choice, so we initially focused on training, technical assistance, translating key documents about best practices into Arabic, and industry building through support of the regional network Sanabel.
We hired Joe Phillips, a young American with a can-do attitude who spoke excellent French and tolerable Arabic, to be the point person from the GF side. We soon began a tradition that continues to this day of having leaders from both organizations gather quarterly to review progress. Within a year or two, we hired Heather Henyon from Standard and Poors with excellent knowledge of the region to take us into a new era. (Joe went on to be the country director of AMIDEAST, a post he continues in to this day.)
Our First Partner and Our First Investment
To make our work more tangible, let me describe how we began working with our first partner in the region, Al Tadamun, an microfinance institution based in Cairo, Egypt whose CEO, Reham Farouk, we had met through Susan Davis. At the time they had 3,000 borrowers and had just spun off from Save the Children. We didn’t know until later that they were financially on the ropes, as they had to pay back a foundation in Kuwait and barely had enough money to do so. We stepped in by providing some badly-needed financing, along with some assistance that enabled them to build their capacity. First, we set them up with an Arab mentor and benefactor. Second, we set them up with the Arab World’s leading microfinance consultant who led a business planning workshop for them that culminated in setting a goal of reaching 100,000 clients. I am pleased to say that they later reached this goal, though the recent convulsions in the greater Cairo area have forced them to contract and consolidate somewhat.
In 2005, Grameen Foundation launched what would be its signature financing program globally: Growth Guarantees. We initially had $31 million in pooled guarantees provided by nine wealthy families, and the issue arose whether we could use them in the Arab World and if so, how. We did not know whether the local banks would lend, especially if we insisted that they bear some of the risk. Also, GF had agreed not to operate independently in the region, but only through the “Grameen-Jameel Initiative” and its evolving governance structure. Still, we both sensed a big opportunity and decided to not let bureaucracy get in our way.
Muhammad Jameel pledged $50 million in guarantees for use by GF in the Arab World, and that transactions would be done with half of the guarantee coming from the GF pool and half from his personal commitment. We worked out the procedures, and with Heather taking the lead, we closed the first guarantee for the global program in Tunisia, with our flagship partner ENDA, in January 2006. And we would go on to place $24 million in guarantees leveraging $56 million in commercial bank lending to leading MFIs in the region. There has not been a single default (though we did have one close call).
In the early days of the partnership, the Jameels expressed a desire to start the first microfinance institution in Saudi Arabia. They wanted it done the right way, including serving 100% women clients. Grameen Foundation tasked the great Malaysian microfinance consultant Professor Sukor Kasim to do an initial assessment of starting a microfinance program in the Kingdom. After he completed a business plan based on that assessment, we identified an expert from Bangladesh who came and worked with a Jordanian microfinance consultant with an excellent reputation. Within a short period, the “Productive Families Program” was launched, and it has been providing microloans to low-income Saudi women ever since. It is now run by Abdul Latif Jameel Community Initiatives.
Changing Mindsets
We prepared detailed semi-annual reports for the Jameels that in time grew to hundreds of pages each. During one meeting, when we were reviewing progress with Muhammad Jameel, the staff presented the case of a woman who had benefitted from micro-loans provided by a GJ partner. MJ, as we came to call him, became very animated and told us how important it was for the Arab public and policy-makers to see how entrepreneurial women can be in the region, if only they are given a chance. So, on the spot he committed to financing a series of advertisements about individual female entrepreneurs that would be aired on satellite TV reaching millions of Arab viewers. These were not fund-raising ads – they were meant to open minds to new ways of seeing women in a small business setting.
By this point, we had set up a office in Beirut inside the Jameel Group’s international operations office there. Heather was working there and assembling a small team. When war broke out between Israel and Lebanon, we needed to evacuate quickly. Heather and her husband somehow found their ways across the border to Syria. Everyone got out safely, but it was a harrowing experience.
We hastily set up an office in Dubai so we could get back into action. By this point the original three-year grant had run its course and the Jameel proposed we go with a joint venture from that point onwards. Despite some skepticism amongst my senior staff, we incorporated and launched Grameen-Jameel Pan-Arab Microfinance Ltd, which we renamed after we began operating in Turkey in 2010.
By 2007 we were largely winding down the trainings and translations, and ramping up our direct and indirect financing and customized technical assistance functions. Industry building, mainly through support of Sanabel, remained constant throughout our decade of work together.
It would be impossible to summarize all of our accomplishments, but the graph below showing the growth of microfinance from 1998 to 2012 and that marks the establishment of our alliance is illuminating. (The decrease since 2009 is the result of the global financial crisis, which caused some clients to be wary of taking on debt for their businesses, a new awareness – and subsequent discouragement – of overlapping clients who borrowed from more than one MFI, and the dislocations brought by the Arab Spring, the Syrian civil war, and turmoil in Yemen.)
Certainly GJ did not cause this growth all by itself. But we did a lot. Key outcomes include:
• Establishing alliances with 18 leading MFIs in 9 Arab countries and Turkey
• Client growth in those MFIs of 2.1 million (gross) and 900,000 (net)
• Placing $24 million on guarantees leveraging $56 million in commercial lending to MFIs
• $15 million in direct loans from GJ to MFIs
• $2.5 million in grants to Sanabel for industry-building
• $3.5 million in technical assistance (not including GJ staff time)
• 142 training scholarships to MFI staff (half for travel to Bangladesh to get trained on Grameen Bank’s methodology)
• Translation of two books, one training video, 12 newsletters, 2 articles, and one entire website
• Installation of the Mifos management information system at two leading regional MFIs (with more to come).
Furthermore, we feel very well positioned to build on these accomplishments in our second decade, and to branch out into new areas such as micro-insurance, clean energy, agriculture, health and impact investing. The active involvement of Muhammad Jameel and his son Fady, who sits on the Board of Directors of GJ, has been and will continue to be essential.
Here are ten “lessons learned” from our decade of partnership.
1. Invest in Long-Term Relationships by Taking the Time to Build Trust. In retrospect, I see the early years of this partnership focused on making a “down payment” for future impact by taking pains to build trust and mutual understanding. Many of the things we did would not make sense from a purely “cost/benefit” standpoint related to achieving short-term goals. They only made sense when you considered how they enhanced trust and understanding. This is especially true given the high levels of distrust and misunderstanding that pervaded so much interaction between the Arab World and West in recent years.
2. Walk Before You Jog, and Jog Before You Run. By the time you actually move from negotiating a partnership to launching one, there is a temptation to try to do too much. There is a lot of pent-up energy. We saw the importance of doing a limited number of things in a limited number of countries, before branching out. We did not move into financing in a big way until around 2006. We slowly built our partner network to 18 MFIs – we did not start with anywhere near that number. Sometimes, we would retire a certain activity, such as organizing training conferences in Bangladesh with Arabic translation, or translating books and articles into Arabic, when we were branching into new areas.
3. Identify and Leverage Complementary Strengths and Relationships. In humanitarian work there is a temptation to try to everything yourself, and not to rely on others. In partnerships, taking the time to understand and agree on what each side is best at, and then to make sure to leverage rather than unnecessarily duplicate those strengths, is critical. In our case, the Jameels had regional expertise, financial wherewithal and deep relationships with several allies, such as MIT. Grameen Foundation had deep knowledge of microfinance and key relationships with global leaders such as Professor Muhammad Yunus, who ended up supporting of GJ at critical times. Over time the Jameels gained knowledge of microfinance and GF learned more about the region. But we always deferred to the other in respective areas of expertise, and this continues to this day.
4. Acknowledge and Manage Internal Opposition. From the outset, there were people inside both organizations opposed to the alliance, and in our case, to the idea of a joint venture. I suspect this is common in the case of such partnerships. Around the table at GJ board meetings, we would acknowledge this reality openly and help each other to manage it effectively. We knew that some of this opposition was valid, while others were based on misunderstandings or irrational fears. In complex and important partnerships, this opposition will never go away – indeed, to some extent it is healthy – but it needs to be reduced to a manageable level. We have succeeded more times than not, though it has not always been easy.
5. Assume Good Intentions and Be Willing to Compromise. When doing something as complex as supporting poverty reduction through 18 implementing partners in 10 countries in a volatile region, mistakes and misunderstandings are inevitable. So many things about goals, strategies and tactics are assumed – and across these different cultures, the assumptions are often not the same! But we always practiced the discipline of assuming that the other partner had good intentions, even as we spoke candidly about disappointments and unmet expectations. Furthermore, when we reached impasses, it was essential that we were willing to compromise in order to put thorny issues behind us, even when that meant confronting internal opposition who wished for a more hard-line stance. This is only possible if there is a reservoir of trust built up over time (see lesson #1 above).
6. Local Presence, Local Talent, Local Partners. From the outset we realized that having a strong local presence in the region was important, though it took the Jameels giving us a push to move our team from Washington to Beirut – the success of which prompted GF to undertake a global decentralization that led to the percentage of our employees based in the U.S. to drop from more than 90% to less than 35% today. We also realized that having staff who were not only well-trained and diligent, but also mostly Arab, was essential, so we prioritized this. Our current and immediate past General Managers – Julia Assaad and Khaled al Gazawi – are outstanding Arab professionals, for example. Finally, we always prioritized working with locally owned and governed MFIs, rather than those that were extensions of global organizations not based in the region. We wanted to work with organizations that “had nowhere else to go” and were deeply committed to their organization and country. We did not want a situation where some people sitting around a conference table in London or New York could pull the plug on an MFI as part of some global reorganization. That said, it would be remiss not to mention and laud the work of Save the Children, which incubated a handful of high quality regional MFIs in the 1990s and had the wisdom to ultimately spin them all off into independent, locally-managed and governed organizations that ended up making perfect partners for GJ.
7. Build a Community and Support an Ecosystem. While our direct relationships with regional MFIs were, and are, extremely important, we also learned that creating a network of high performing MFIs that partnered with GJ was also essential. Typically, we would gather them together at regional conferences for side meetings that were valuable, and valued. On one occasion we invited them all to Istanbul and had Professor Yunus serve as the chief guest and keynote speaker. In addition, we did not think only about building up our partners but also about how to support the larger Arab microfinance ecosystem. This was the impetus for supporting Sanabel, using leading Arab consultants such as Muhammad Khaled, commissioning translations of various books, articles, and websites, and getting involved with various initiatives launched by others, such as the Islamic Microfinance Business Plan Competition held a few years ago.
8. Trust your Visionaries. Each of our organizations has a visionary leader who hovers over the partnership: for ALJ, it is Muhammad Jameel, and for GF, Muhammad Yunus. They do not typically get involved in the details of what we do, but occasionally they drop in and throw out creative ideas. We have learned that those ideas are often terrific, even if they don’t initially strike us as relevant. For example, when MJ proposed that we do the commercials for satellite television mentioned above, the staff and board saw only the work involved, and could not understand how this could change regional mindsets that held us back in so many ways. In time, we appreciate the wisdom of the idea. But we moved forward immediately. When Muhammad Yunus suggested that we incorporate as the Arab World’s first social business, at a time when his model for this new structure was very nascent, we were unsure but forged ahead and are very glad we did so.
9. Evolve with the Market. It is always tempting, once you get good at something, to keep doing it regardless of what is happening around you. There are usually loud voices within organizations telling everyone to focus, to define your “unique value proposition” and ‘core competencies” and so forth. There is wisdom in those concepts, but also traps. As the market evolves, as the microfinance and social enterprise sectors most definitely have in the Arab World, ones “core competency” may become less and less relevant over time. Realizing this, we shifted from mainly training and translation to customized technical assistance and financing, and even in our financing work we shifted from loan guarantees to direct lending, and are laying the groundwork now for convertible debt and equity investing. We have made a foray into micro-insurance, in alliance with AXA. We are studying the applicability of Grameen Foundation’s work in mobile financial service, mobile health and mobile agricultural extension. Finally, we are experimenting with clean energy for micro-entrepreneurs – our first effort was not successful but we learned a lot – and are looking into becoming a leading regional impact investor over time. MIT’s D-Lab is clearly going to be a key partner in our second decade, symbolized by a signing ceremony that took place during our 10th anniversary celebration.
10. Find a Trusted Leader. Strategic alliances have evolved into an important business strategy, so much so that a distinct profession – strategic alliance professionals – has come into being. I spoke at the annual meeting of these professionals recently1. One of the key things I learned there is that it takes a special type of person to sit atop these alliances and make them work. In the case of GJ, dozens if not hundreds of people have played critical roles throughout our evolution. Jim Greenberg, a GF board member who also serves on GJ’s board, has contributed countless hours and his deep regional expertise. Fady Jameel has been very active, and when our Chairman could not participate due to a family crisis, he stepped up in a big way and served in their Chair’s role. Our General Managers have all worked extremely hard. But the lynchpin of the partnership has been our Chairman, Zaher Al Munajjed. While Zaher has always represented the Jameels effectively, at some point he also gained a strong sense of allegiance to the joint venture itself. That gave everyone, especially the staff leadership, a strong sense of confidence. I have effectively served as the Vice-Chairman but I never felt the need to formalize that, due to my implicit trust of Zaher.
So, a decade later, Grameen Foundation has gained a strong sense of comfort working in the Arab World and Turkey, and the AJF company and Jameel family have become very knowledgeable about microfinance. At the same time, we remain steadfast in our commitment to working together and evolving to meet the needs for poverty reduction and employment creation as they exist today.
We have accomplished a lot, even though many things we have tried have not worked. Perhaps one of the most important things we have accomplished is demonstrating that organizations from different cultures, with different strengths, and different structures (for-profit company vs. not-for-profit) and sizes can effectively work together if they put their minds to it. This is especially important as we work to improve trust and collaboration between two great and frequently misunderstood civilizations – Arab and Western.
Hopefully some of the lessons we have distilled are applicable to partnerships in general, but we believe they are especially relevant in the Arab context. We welcome feedback and ideas from anyone, anywhere.
Let me conclude with a story related to the first lesson on “building trust” through taking concrete steps even if they may serve no other purpose than developing positive rapport. About two years into the partnership, ALJ had launched a Saudi microlending program with advice from Grameen Foundation and others. It was not technically within the orbit of GJ, but it was an important outcome of our partnership nonetheless. We thought it would be important, from a trust-building perspective, to highlight this achievement in our newsletter to our donors around the world, though most of them at that time were in the United States.
But we also felt there was some risk involved. What if a sizeable number of our donors – who were probably unaware of our strong alliance with a Saudi company and family learned not just about this effort to help the poor in other Arab countries, but about our involvement in something to help Saudis themselves – decided to withhold their donations in protest?
We ultimately went “all in” and put the article on the front page of one of our newsletters, which at the time was our flagship publication. The response was very positive. We only got one negative letter – a heartfelt plea from a Jewish donor that we pull back from the partnership. Dick Gunther, a Jewish-American philanthropist who was on our Board of Directors at the time, volunteered to respond on our behalf and wrote a beautiful letter grounded in both humanism and Hebrew scripture. Like many things that have happened within Grameen-Jameel, that letter represented one small step not just for the elimination of poverty, but also for advancing mutual trust and understanding among two diverse and proud organizations and cultures.
Notes:
1An association member wrote a nice blog about my speech, which in turn drew on my experiences with GJ.