THE BLOG
07/31/2014 05:54 pm ET | Updated Sep 30, 2014

Fighting Poverty Requires Unorthodox Business Practices

It may seem axiomatic that solving intractable problems requires disruptive leadership. But places plagued by persistent poverty rarely give rise to innovation.
In my role at the helm of Hope Enterprise Corporation, I have learned that disruptive leadership is absolutely necessary in our work to create economic opportunity in places like the Mississippi Delta and New Orleans' Central City.

In recent history, American society has responded to social ills such as widespread unemployment, substandard housing, and inadequate health care resources through government programs.

This is not wrong. Pooling our resources in the form of taxes to promote the social good is a primary role of government.

The problem is that government -- federal, state, and local -- is largely inhospitable to innovation. Debate from all sides, built in checks and balances, and rule-guarding bureaucrats all serve to make government slow and deliberate.

If anti-poverty programs produce unintended negative consequences or new problems emerge, even well-intentioned agency staff are ill-equipped to respond. When new programs do make it through legislative bodies, it can take years for the governing rules to be written.

Recognition that intractable problems needed more nimble problem-solving led to calls for solutions that borrowed from the business world. The assumption was that business practices would improve outcomes. Market pressures would push out inefficiencies and people in need would get more help.

At Hope, we see the value in borrowing from business practices, especially considering data in decision-making and minding the bottom line.

The biggest problem with bringing business values to the work of expanding opportunity for people disadvantaged by birth, geography or both is that no one in the business world has figured out how to value incremental improvements in social welfare in bottom-line calculations.

We know from the data that market mechanisms have left large gaps in the capital markets. Profitable banks are closing branches in central cities and rural communities, leaving people few options for home loans and basic checking and savings account services.

This gap is not unnoticed by the for-profit business community. Where the mainline, regulated banks have closed up shop, there is always a proliferation of unregulated, predatory financial companies with exorbitant loan rates. We find this "market solution" unacceptable.

With for-profit corporations, the well-being of the few (directors and shareholders) is being prioritized over the well-being of the many (economically disadvantaged customers and the community as a whole).

So, this is how Hope practices disruptive leadership.

At Hope, our primary financial services provider is structured as a credit union. Hope Credit Union is owned by its 29,000 members and as a group we accept that the spread between what we take in in interest and fees and what goes out in costs will be tighter than a traditionally bank.

So, we go against the grain. After banks closed branches in towns like Utica and Terry, Mississippi, we opened locations to fill the gap. We staffed a micro-branch in the Arkansas Delta with students from the local historically black college. We designed a mobile banking app to bring services to our rural residents whose sole connection to the internet is on a smart phone.

It may be counterintuitive to go into markets that the banks are abandoning, but we do not need to make a profit that will enrich shareholders.

We need to make only enough to survive to provide services another day, another year, another decade so that this generation is the last to find itself squeezed out of the market for affordable financial services.

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