Craig Pollard [00:01:02]:
Welcome back to the Fundraising Radicals podcast. I'm your host, Craig Pollard. My conversation with Irene Arellano was just too full and rich to fit into just one episode. So we're going to roll this into this second episode. A quick reintroduction. This conversation is with Irene Arellano, who is the head of innovation and business development at CARE Peru. During this episode, we're going to talk about social innovation, selling impactful consultancy services to companies in Peru. And we're going to dive into the details of just how CARE Peru is establishing a new impact investment fund and how social justice and climate justice link via circular economies and much, much more. Now, I restart our conversation by asking Irene about how important the people and relationship side is for building an effective social innovation programme and income stream.
Irene Arellano [00:02:02]:
I think it is great. Sorry, it's not great in terms of, yeah, it feels great, but I think the pressure. I talk about this in the good pressure that the corporate sector is feeling in terms of not only doing no harm, you need to go farther. Even within the organisation. It can get lonely.
Craig Pollard [00:02:29]:
Solitary.
Irene Arellano [00:02:30]:
Yeah, solitary place to be. So when we find in the other side, right, the person that is super excited about this, we become a team. Like, we are working for this to be successful because success means we are creating impact. You are doing your work better, you are creating change, you are moving KPIs within your organisation. We are creating impact for the communities that you serve and of course getting resources. So we see each other as a team and I have few experiences about we even talking together how to get bigger projects. We become a team. Actually, it's great.
Irene Arellano [00:03:24]:
It's not a common relationship, but I have a few cases that is like that and that's unique. That's amazing. It's a great feeling when you find that.
Craig Pollard [00:03:39]:
But this is interesting, right? Because I think the relationships within these sort of come downstream of the original partnership. And those personal relationships sort of make those partnerships more resilient. But it has to be at multiple levels. Do you have other people within CARE Peru involved at different levels?
Irene Arellano [00:03:57]:
Yeah. As I said at the very beginning, if you want to start trying any innovation in terms of service fund, blended finance, I don't know, impact investment funds, whatever you think, it's something you can try within your organisation, you need the support of your CEO, your director and the board. So. Yes, I know I can tell my CEO I need you to speak with this person in this meeting. That's our client. They are all engaged in this. So fortunately that was not a complex part of the relationships that we want to start building. It was there already.
Irene Arellano [00:04:50]:
So that was kind of easy for us at that level.
Craig Pollard [00:04:54]:
Yeah. There's always a lot of choreography involved when you're in your sort of position. Right. It's sort of working across and making sure people have the information and are equipped to move the partnership forward. You mentioned the impact investment fund.
Irene Arellano [00:05:07]:
Yeah.
Craig Pollard [00:05:08]:
Can you tell me a little bit more about that?
Irene Arellano [00:05:11]:
Yes, sure. I'm super excited about this one.
Craig Pollard [00:05:15]:
Can you explain what an impact investment fund is that might be helpful actually, to start with and then tell us how?
Irene Arellano [00:05:22]:
Sure. Yeah. So in terms of investment in general, on one end you have the investment that purely only wants to make returns, financial returns doing harm, no harm, doesn't matter. Right. At the other end we have philanthropy of the spectrum. Let's imagine on the spectrum, at the other end you have philanthropy that the only purpose is to create impact. Right? Like, no expecting financial returns. The value or the return is the impact at the middle.
Irene Arellano [00:06:02]:
Nowadays is a huge trend. Even in. Not even, I mean, worldwide type of investment that wants to promote financial returns as well as creating impact and promoting conservation, biodiversity, social and environmental impact. So this is called impact investment. Investments that goes to a social enterprise. Projects can be nonprofits also that can promise to the investors some sort of return, financial return that usually is below market and a strict report of the impact that this is creating. So almost four years ago, we started one programme focusing financial inclusion. With the support with the partnership of a financial institution in Peru, we created a financial product especially for women.
Irene Arellano [00:07:15]:
This is not new. I mean, in the world there is a lot. However, this was tailor made for a specific type of woman entrepreneur that is at the base of the pyramid most of the time. The woman that I don't know needs to sell few things. It has a little store or maybe. Yeah, any kind of business. And it's business that is led by a woman. So we designed this financial product with the support of the financial institution and we created this financial product for women.
Irene Arellano [00:07:51]:
And in the course of four years we gave over 40,000 micro loans to women.
Craig Pollard [00:08:02]:
Sorry, how many? I didn't.
Irene Arellano [00:08:03]:
40,000. 40,000 loans?
Craig Pollard [00:08:06]:
40,000? Yes, micro loans. Okay. And what sort of size are those?
Irene Arellano [00:08:10]:
$700 to $1,000 each. It was around $70 million that we put in the market as loans, as credits. The great aspect of this is we didn't only create the product, the financial product, but we also create what we call the wrap around services, which means if you give money to this female entrepreneur, she needs also to understand how to manage their accounts, improve their business idea, use the social platforms to increase sales, do digital marketing. You need to train this woman so her business can improve, so she can request bigger loans and pay them on time and pay the interest and so on. In four years our default rate was less than 1%, which is a huge success. It's huge. I don't have the comparison, but it's not any other financial product for other group of consumers has bigger default rates. So it was a success.
Irene Arellano [00:09:34]:
We thought we need to keep doing this. We have the knowledge, we need the funding, we need the money to be invested. So we are exploring to create an impact investment fund that we can manage as a nonprofit. So in, let's say the ecosystem of impact investment, you have the investors, you have the organisations that receive the investment and provide the returns, the financial returns and report the impact. And in the middle you have what we call what is called the management of this funding or the administrators of this funding. So we are exploring. Hey, can care be the administrator, the manager of this funding specifically for investment that wants to reach women entrepreneurs. Can we do this? So we are exploring how can we create this? And we might be running a pilot in the second semester of this year.
Irene Arellano [00:10:45]:
Not quite sure yet which one is going to be, because we have two options. We can create this impact investment fund for the women entrepreneurs in the Amazon because we have a bigger project going on in the Amazon right now.
Craig Pollard [00:11:03]:
Where? In Peru.
Irene Arellano [00:11:04]:
Where in the. Oh, we are neighbours of Brazil. So it kind of goes from the north to almost the south of the country. Like the Amazon goes all the way. So that's one potential pilot and the other one is to do an impact investment fund for women with enterprises or business ideas in circular economy, in cities, in the urban areas of the country, specifically around.
Craig Pollard [00:11:37]:
What do you mean? And what sort of areas do you mean in terms of the circular economy?
Irene Arellano [00:11:40]:
So businesses that create products from what could otherwise be waste, like from creating clothes with materials that was used from another things, or it could be anything. We are exploring at what stage of development of the idea should we invest in for the development companies that are around three to five years or maybe late, maybe more? That's the part that we are exploring and why we are exploring this for two things, because there are more and more and more funding in the world for impact investment. However, Latin America is only receiving less than 4%. But because of the agenda, international agenda, engendering climate change, there is an opportunity to invest in these topics and we are experts on those topics too. And of course, if we manage this fund, we get the fee for managing this fund. So once again, we want to explore this idea to create impact, but also as a way to get unrestricted funds or being paid for administrating this kind of impact investment funds in the country.
Craig Pollard [00:13:10]:
It's really interesting, sort of strategic evolution of the traditionally perceived northern, well, NGO. I'm really interested in how you'll have to sort of adhere to all sorts of financial regulations and I guess that's all part of your scoping and you'll need new expertise and everything from sort of risk management through to sort of the management of the whole programme. Just undertaking that as a feasibility. The feasibility of that is quite a big undertaking.
Irene Arellano [00:13:47]:
Yes, it's true. Fortunately, I have once again the support and the vision is shared with the decision makers in the organisation and also we are not trying to risk, we are piloting. So why I mentioned these two potential pilots in impact investment, because there are two projects that are going to run for five more years. So we can do this as a complement of this already opportunity already this project that has already been implemented and these two projects are going to start this year. So it's timing and it's allowing us to do this. Of course, these new ways of investment is not a window of opportunity because right now in Peru, because we as our nonprofits, and maybe it's different for any other country in the world, as nonprofits, we can run for profits projects, we can sell something, we can sell services, sir clothes if we want.
Craig Pollard [00:15:06]:
But that's so exciting as a lesson from this that you can do that, and I think that's really heartening for others who are the barriers to doing this are not real. You can do this stuff and I think that's what you're providing. It's such an inspiring example that you can do this. And the ambition and the scale is really just brilliant.
Irene Arellano [00:15:29]:
The opportunity, the ambition. Yeah, I'm right. Yeah. I mean, I am convinced because of the funding gap. And maybe I'm going to say this, I'm not sure that everybody's going to like it, but to be very honest, when I meet with my colleagues from nonprofits in the US or in UK or some other global north office, they say their numbers, right? Like, hey, I ran through a campaign, I raised this by individual donors. I raised nothing. It's challenging to raise in Peru. To fundraise in Peru is so challenging.
Irene Arellano [00:16:09]:
So that's why for us, in the next ten years, there is no other way to do it. We need to start trying. Because that's something else. As I didn't mention before, I'm not doing this because we as organisation depend on these innovations next year. No, we know this is going to take time. Right? Like we expecting at least 5% income, or, sorry, 15% income from consulting and we are running a scenario in five and ten years.
Craig Pollard [00:16:44]:
So that's your ambition in five to ten years, that half of CARE Peru's income will be from consultancy and the fees of the impact investment, et cetera.
Irene Arellano [00:16:54]:
Or is that social innovation?
Craig Pollard [00:16:55]:
Yeah, social innovation.
Irene Arellano [00:16:56]:
Some other business models, yeah. But not donations. Not only philanthropy or not donations. Institutional funding. Not only the institutional funding. We need more from other sources. Yeah. That's the vision.
Craig Pollard [00:17:10]:
That's incredibly exciting and empowering. The foundations of this are you and the team in care Peru building this brand new stream of income that is going to be crucial to the sustainability and the continuation of your impact and your work, and building these incredibly rich partnerships with other sectors as well.
Fundraising Radicals [00:17:37]:
If you're enjoying this conversation and would like to hear other global perspectives on fundraising and leadership in the nonprofit sector, then please do subscribe using the links in the show notes. If you want to find out more about our work, please do visit our website, fundraisingradicals.com. Now back to the conversation.
Craig Pollard [00:18:00]:
So that comparison in some ways with sort of the north american fundraising, which my personal view is that it's pretty toxic, is this idea that you need to have a database of 100,000 people and they're all automated and these are mature fundraising markets. The ecosystem for fundraising is so conducive and people are going to get annoyed about this as well, is that fundraising in North America and Europe is easy because everything is set up, it's easy to facilitate it, whether that's tax, whether it's charity, lawn, it's all taken for granted and the idea that it's the only way to do it. And I guess coming back to the idea, this dominant idea that I just feel like it's so refreshing to hear sort of how and very specifically and very modestly as well and creatively that care Peru is addressing this and exploring a whole different, tailored, grounded in your own experiences, your own partnerships and the culture and context of Peru.
Irene Arellano [00:19:11]:
Thank you. Thank you for that. I mean, I agree with you. I don't think it's undermining to say that it's easy, but it's easier, maybe for other realities, to fundraise specific ways. For countries like Peru, it is a challenge and it's not enough. What we are doing is not enough. So our goal, our purpose is to improve the life of women and girls so they can achieve social justice. We are all convinced, I mean, maybe not everybody, but my team, the CEO, the board knows that to achieve that, to really, really get there, we need to go faster and we need to scale our impact by only institutional funding or specific types of fundraising.
Irene Arellano [00:20:11]:
The way is going to be super, maybe steady, maybe at some point critical is not only for our existence, it's for our purpose. If we want to really achieve our purpose and get closer to our purpose, we need to start trying new things. Not only for the financial sustainability or general sustainability of the organisation, but because the communities, the families, the people that we serve, they need the support, they need opportunities today. Right? Yeah. That's some kind of the motivation. Yeah, the motivation. The discomfort.
Craig Pollard [00:20:53]:
I don't know, it's fantastic.
Irene Arellano [00:20:55]:
The push.
Craig Pollard [00:20:56]:
Yeah, the discomfort is super important. Right. But it feels like this is completely within your control. Okay.
Irene Arellano [00:21:06]:
Yes.
Craig Pollard [00:21:07]:
You're lessening your own vulnerability. As an organisation and I think working with vulnerable communities, we have a duty to reduce the vulnerability of our organisations, but to changes in policy. In USAID funding, for example, it's within your control and there's a sort of resilience to building these new innovative income streams.
Irene Arellano [00:21:30]:
Yeah, that's true. That is in our control. And also, I think we were, thanks to the leadership of the organisation. I mean, if this is not approved by the leaders, I cannot do anything. But they see the opportunity. They see this window where we can do things. Yeah, maybe in the future. Hopefully not.
Irene Arellano [00:21:59]:
We cannot do for profit activities. You never know. This can change, but this is an opportunity. However, I don't believe that this is going, something like that radical is going to happen because once again, even the public sector now is seeking ways to increase funding to do public, to serve people, to serve communities. So these other ideas of blended finance or impact bonds, these are things that are going to continue being developed. And if you are not, at least as an organisation, I'm saying if you are not, at least in those conversations, understanding that when the opportunity comes, you will miss it. And that's what I think it's super important for any organisation, whether you want to run social innovation activities or projects or not half an ear on these conversations, on these innovations, be aware of what is happening and why don't at least speak about it with your team, share that with your team and maybe there's an opportunity that you can catch sooner than later.
Craig Pollard [00:23:25]:
My brain is sort of worrying there's so much more I could talk to you about it. It's interesting because what I'm getting from this is this idea that within that philosophy that partnerships are not seen as. It's not about funding, right. It's not having that narrow definition of how corporate partnerships can add value and support social justice. It's not that extrinsic view of partnership, it's really this intrinsic view of partnerships that there's so much rich value within the partnerships themselves. Cash is part of it. But there's also that adds to the resilience within this ecosystem of having that network of influence, all of that sort of complex, integrated. So it's sort of an insurance policy if things do change, or to having sort of a louder voice together to make sure that this can continue as well.
Irene Arellano [00:24:33]:
That's true. Yeah. That's a great way to. I mean, that's a great reflection. Yeah, it is true. It is true. And I think my belief. No, sorry, it's not my belief.
Irene Arellano [00:24:49]:
There was a survey made for, I think, 500 companies in Latin America and they said that experts and companies and for profit nonprofit, and they said who are the ones that need to have, who are the roles, who should be pushing this conversation of sustainability forward? And there was governments, of course, then the corporate and then nonprofits. They need us. I don't know how to say it. We need to be in those conversations. That's the only way they need us. And I think with that mindset, it gives you more bravery with that mindset. It's not that I'm bringing you here peanuts. The value I bring for you as a corporate sector and for your future, I have a lot to bring and I think that's important to remember too.
Craig Pollard [00:26:03]:
I think that's absolutely wonderful in terms of other countries. You said you spoke to other organisations in other countries. What sort of places did you draw the evidence from that this is how it should be done, this is why it should be done, et cetera. Which other innovators in other countries did you approach and have conversations with?
Irene Arellano [00:26:24]:
Yeah, so I think one of the most important and respected organisations in the world is BRAC, Bangladesh. Their structure of income is amazing. They mainly get their resources from micro loans first and then they have a university, they have the consulting unit, I mean they have everything and every year they get to be the most innovative organisation. I also spoke with Crisales in Sri Lanka. They are great gender focused organisation and they believe the same and they have faced the same challenges that now I'm facing and it's great, their experiences, it's great. They actually started as a consulting firm and now they are expanding as a nonprofit. I also spoke with the offices of care that has these units. Some of them are not units only, maybe small teams in Egypt, in the UK.
Irene Arellano [00:27:42]:
I love that team. It's called Business With CARE and they have done great projects and work with the corporate sector in the strategy aspect of the business. Then I also spoke, there's a huge experience and examples of this in care impact partners in the US and they are doing great things. Actually I learned a lot from them about what services the approach. So yeah, I only spoke with these organisations and the learning they have in every part of the world, it's super rich for what we can do or you can do in your country. I mean the challenges are not that different. Maybe how to overcome these challenges, that's the part where it's difficult and that's where the creativity needs to come and you need to think about your context and your resources, but the challenges are the same. So I consider because of speaking with these organisations, I saved myself three years of work.
Irene Arellano [00:29:04]:
So that was great.
Craig Pollard [00:29:05]:
Yeah. And I think it's an incredible reminder of the sort of learning from others who have already walked that same path and I think there's such a generosity as well. I know some of those people and organisations and the generosity of sharing these ideas. There are so many brilliant examples to draw from and a lot of them have resources online as well in this space as well and a lot sort of interviews as well with them. Irene, thank you so much. I feel like this has been such a rich and really helpful conversation that I think a lot of people who are considering social innovation and maybe doing it in the early stages will really take some useful lessons from. And I massively appreciate your time. Thank you again.
Irene Arellano [00:29:55]:
Thank you. Thank you, Craig. And thank you to Fundraising Radicals. It's been a space where sometimes it's so hard to stop and just reflect and learn and hear from other people. For me, the fundraising radicals group and the spaces we've had is just a way to reset and think again and learn. And I really appreciate the work you do, the work of my colleagues all over the world. I just want to say that what we do is so crucial to the world and the value that we bring is most of the time, so much higher than what we sometimes maybe believe. So I invite you to be creative, to take some risks and to reach out whoever wants to have this conversation.
Irene Arellano [00:30:56]:
I actually. Sorry, I'm taking too long on this goodbye.
Craig Pollard [00:31:00]:
Not at all.
Irene Arellano [00:31:01]:
But I just realised today that I think the last three months, three to five opportunities came just because I reach out to other people and they reach out to me over LinkedIn and there is amazing. You will be so surprised about just what you can get by asking for help, by requesting an advice, or just connecting. People want to connect. Our ultimate nature, I think, is to share, right? It's not only the brand, but really we care. So you will be amazed about how many opportunities come when you connect to people and fan racing, radicals and other networks and other platforms are that. So let's use that more for our growth and for the work that we do.
Craig Pollard [00:32:04]:
That's a wonderful, wonderful place. Thank you so much, Irene. Massively appreciated.
Irene Arellano [00:32:09]:
Thank you, Craig. I enjoyed this conversation so much.
Craig Pollard [00:32:13]:
Yeah, me too. Me too.
Craig Pollard [00:32:16]:
Thanks again to Irene for sharing her experiences so generously. Today, Irene has offered us a step by step guide for starting and sustaining social innovation programmes and clear tactics that have led to the establishment of a $70 million impact investment fund that drove financial inclusion for more than 40,000 women in entrepreneurship. With that all important wraparound services to support their journeys, Irene and her team have also explored how social innovation walks hand in hand with climate change, pushing towards circular economies. Now, at the heart of this is recognising the evolving expertise of ngos and exploring new ways of leveraging these unique positions to develop new sorts of partnerships, impactful financial products and fees, and funding that is unrestricted. As I said, there's a lot in here. So do check out my blog summary of this conversation at the Fundraising Radicals website.
Craig Pollard [00:33:16]:
I hope you enjoyed this conversation. Please do subscribe on the platform of your choice to make sure you don't miss new episodes of the podcast, which will land fortnightly on the first and 15th of every month. If you'd like to find out more about the fundraising radicals and our work, please do visit our website at www.fundraisingradicals.com. Thanks for listening and for joining our continuing exploration of the global funding ecosystem.
