Social Entrepreneurs as Responsible Leaders: ‘Fundación Paraguaya’ and the Case of Martin Burt

Abstract

A country known for its longstanding struggle with corruption and dubious governments may not be the obvious venue for a socio-economic revolution that is expected to play an important role in the elimination of global poverty. However, Paraguay, an ‘island without shores’, as the writer Augusto Roa Bastos once described it, is home to one of the world’s most innovative social enterprises—the Fundación Paraguaya. While its achievements and success are the result of a team effort, its remarkable development can be largely attributed to Martín Burt, the founder and chief executive. We study the case of Fundación Paraguaya—the first and longest-running non-governmental organisation in Paraguay—with two primary research objectives: (1) to analyse the organisation’s pioneering way of solving social problems under difficult socioeconomic circumstances and its increasingly global outreach to eradicate poverty; (2) and to analyse the responsible leadership of Martín Burt.

Appendix

Organisational Chart

Financial Information

 

	In local currency	In USS
Balance sheet per December 31, 2009
Assets
Current assets	75,313,207,627	15,815,774
Cash and banks	12,030,173,119	2,526,336
Loans with financial institutions	3,122,619,955	655,750
Loans	58,574,414,074	12,300,627
Other credits	1,586,000,479	333,060
Non-current assets	6,747,66,358	1,417,004
Loans with financial institutions	–	–
Loans	2,624,498,487	551,145
Investments	411,594,748	86,435
Fixed assets	3,578,115,668	751,404
Deffered charges	133,427,455	28,020
Total assets	82,060,843,985	17,232,777
Liabilities
Current liabilities	42,955,614,108	9,020,679
Financial sector obligations	36,222,498,073	7,606,725
Other debts	6,021,325,789	1,264,478
Provisions and previsions	711,790,246	149,476
Non-current liabilities	11,990,270,105	2,517,957
Financial sector obligations	11,990,270,105	2,517,957
Total liabilities	54,945,884,213	11,538,636
Reserves	13,576,575,754	2,851,081
Surplus of income less expenses	12,021,402,771	2,517,957
Prior years	1,516,981,247	2,517,957
Current years	13,538,384,018	2,517,957
Total difference between assets and liabilities	27,114,959,772	2,517,957
Profit and loss statement 2009
Microfinance unit
Income	25,303,632,153	5,313,763
Interest and commissions of non-financial loans	24,046,987,541	5,049,867
All other income	1,256,644,612	263,895
Expenses	(23,489,207,869)	(4,932,734)
Salaries and social charges	(9,626,467,945)	(2,021,558)
Transport expenses	(1,053,847,444)	(221,308)
Office expenses	(852,985,247)	(179,127)
Interest and commissions paid	(5,725,205,364)	(1,202,293)
Leases paid	(512,389,420)	(107,602)
Bad debt provision	(1,880,504,782)	(394,906)
Professional fees	(556,851,785)	(116,939)
Foreign exchange loss on assets	(516,133,706)	(108,388)
All other expenses	(2,764,822,176)	(580,613)
Operations surplus
IBD agreement
Net surplus	274,842,289	57,717
Leapfrog agreement
Net deficit	(400,000)	(84)
Net surplus	2,088,866,573	438,662
Agricultural School Unit
Teach A Man to Fish Programme
Teach A Man to Fish Programme	(624,130,775)	(131,067)
Skoll Project	115,859,474	24,330
Peery Project	–	–
Nike Project	–	–
Seep Project	–	–
Net deficit	(508,271,301)	(106,737)
Agricultural School San Francisco do Asis Campus
Income	1,757,943,989	369,168
From hotel	452,134,703	94,948
From technical assistance	577,922,997	121,364
All others	727,886,289	152,856
Expenses	(1,696,803,543)	(356,329)
Salaries and social charges	(579,733,328)	(121,744)
All other expenses	(1,117,070,215)	(234,585)
Net surplus	61,140,446	12,839
Net deficit	(447,130,855)	(93,897)
Junior Achievement Unit
Income
Donations received	289,713,097	60,840
All other income	552,080,522	115,937
Expenses
Salaries and social charges	(396,330,846)	(83,229)
All others	(286,749,935)	(60,217)
Peasant project
Net deficit	(11,896,266)	(2498)
Net surplus	146,816,572	30,831
Total resources before income tax	1,788,552,290	375,596
Income tax	(271,571,043)	(57,030)
Total resources after income tax	1,516,981,247	318,566

Exhibit 1

Revenue split per division (2008, in US$)

Employee Structure

Awards for Martín Burt and Fundación Paraguaya

Awards for Fundación Paraguaya

2009

The WISE (World Innovation Summit on Education) Award 2009)

• Given out by the Qatar Foundation for Education, Science and Community Development

• Chosen from among 588 participants from the global education sector for its self-financing education model

(Templeton Award in the category of “social entrepreneurship”)

• Given out by the Atlas Economic Research Foundation

• Chosen from among 130 participants from 47 countries in the category of “Social Entrepreneurship”, acknowledging Fundación Paraguaya as one of the leading 16 innovative institutions that has done excellent work on issues related to the advance of understanding freedom

(UNESCO and IDB (Inter-American Development Bank) award “Best Practices in Youth Policies and Programs in Latin America and the Caribbean”)

• Given out by the IDB Youth Program and the Social Protection and Health Unit, and the Organization for Education, Science and Culture of the United Nations (UNESCO), with the support of more than a dozen international development organisations, the Government of Mexico and the IDB-managed Korea Poverty Reduction program

• Fundación Paraguaya was selected because of its success achieved in the design and implementation of policies and programs for youth in education through the Self-Sufficient Agriculture Schools developed in the country and replicated today in more than 50 institutions, members of the worldwide Teach a Man to Fish network

(FOROMIC 2009 Excellency in Microfinance Award)

• FP was chosen as one of the three FINALISTS of the FORMIC 2009 Awards for Excellency in Microfinance in the category of Most Microfinance Outreach

• The awards for Excellency in Microfinance “Best Microfinance Institution and Most Microfinance Outreach” acknowledge institutions that are constantly improving their methods and financial products to reach an ever greater number of low-income micro-entrepreneurs and clients. The award is granted to institutions that have adopted appropriate transparency and consumer protection practices, in addition to showing efficiency and profitability in their operations

(MIX Award for Social Performance)

• The award is sponsored by the Ford Foundation, the Michael & Susan Dell Foundation, and the Consultative Group to Assist the Poor (CGAP)

• Fundación Paraguaya was once more acknowledged by Microfinance Information Exchange (MIX) for its reports on social performance in the Silver Level; the Silver Level Certificate is given to the MFI that complies with the minimum core requirements in terms of the dissemination of information of the Working Group on Social Performance

2008

(Clinton Global Initiative)

• The Clinton Global Initiative selected the proposal of Fundación Paraguaya “Self-Sustaining Education” as the key initiative to be promoted in 50 developing countries by 2017

2004

(Junior Achievement Paraguay Received Award for Collaboration at JA World Conference)

• This award recognises the representatives of countries that have carried out collaborative initiatives to generate resources (financial, volunteers) to carry out joint tasks in accordance with the mission of JA

(IDB Award for Excellence in Social Entrepreneurship 2004)

• Given out by the Inter-American Development Bank; this award recognises private sector or civil society leaders who combine social commitment and business techniques to promote microenterprise and community development

(Honourable Mention from World Bank’s CGAP for Financial Transparency (also won in ‘04 & ‘05))

• Given out by the Consultative Group to Assist the Poor (CGAP); this World Bank body has been organising the aforementioned competition since 2004 to recognise those entities that present complete financial reports for the previous fiscal year. The award highlighted Fundación Paraguaya’s disclosure of its financial information and awarded FP for adopting the International Financial Reporting Standards - IAS1 on Disclosure, as well as CGAP’s Disclosure Guidelines for Financial Reporting in Microfinance Institutions.

(Champion in the League of Champions)

• The Microfinance Information eXchange (MIX) and the Inter-American Development Bank included Fundación Paraguaya in the “League of Champions” of the Micro Enterprise Americas Magazine 2004; in the “League of Champions” 2005, Fundación Paragaya was distinguished as the sixth most profitable microfinance entity of Latin America. The article highlights the 10 microfinance entities with the greatest amount of savings, the most efficient ones, the ones with the greatest market depth, the least risk, the first in profitability, the most efficient with loans greater than US$ 500, and the ones with the greatest portfolio growth. Fundación Paraguaya stood out in the latter category taking seventh place with a 73 % growth in portfolio.

Awards for Martín Burt

2009

(Acknowledgement from the DEA)

• Dr. Martín Burt received an acknowledgement from the Directorate of Agrarian Education (DEA, acronym in Spanish) of Paraguay for Fundación Paraguaya’s contributions toward rural education in Paraguay

2005

(Skoll Award for Social Entrepreneurship)

• The Skoll Awards for Social Entrepreneurship support social entrepreneurs whose work has the potential for large-scale influence on critical challenges of our time. Skoll social entrepreneurs are innovators who have tested and proved their approach, are poised to replicate or scale up their work to create equilibrium change and engage others with a message that resonates with individuals whose resources are crucial to advancing these solutions

2004

(Schwab Foundation Award)

• The Schwab Foundation for Social Entrepreneurship based in Geneva, Switzerland selected our founder and general manager as one of the most outstanding social entrepreneurs in the world; out of a group of more than 100 candidates, 13 individuals working in 15 countries earned the designation of “Outstanding World Social Entrepreneur”. Two of these are from Africa, six from the region of Asia, four from Latin America, and one from the United States

(Award for Excellence in Social Responsibility Given out by the Inter-American Development Bank)

Further awards with no date

• “Orbis Guaraniticus Award” from the UNESCO for the promotion of culture

• “Domingo Sarmiento Award” from the National History Academy of Argentina

• U.S. Eisenhower Fellowship Award

• Republic of China Eisenhower Fellowship Award

• Best Social Project Award by the Christians’ Business Association

• Outstanding Young Person of the Year Award from the Junior Chamber of Commerce of Asuncion

Methodology

We studied the case of Fundación Paraguaya and Martín Burt with two primary research objectives: (1) To analyse the organisation’s pioneering way of solving social problems under difficult socioeconomic circumstances. (2) To apply the concept of responsible leadership to Martín Burt’s individual story and approach. In doing so, we relied heavily on both desk research (incl. annual reports, independent audits, interviews conducted by third parties, case studies and information from the website) and primary data collection (incl. workshops, personal interviews and a 6-week field visit to Fundación Paraguaya).

When one of the authors conducted the 6-week visit to Paraguay, he was based in Fundación Paraguaya’s headquarters in Asuncion. During this time, he conducted two 5-day visits to the Agricultural School as well as three remote villages that are part of the microfinance program. The objective of these field trips was to gain a first-hand understanding of the implementation of two of the three fundamental pillars that Fundación Paraguaya’s approach is based on. The research visit was critical to collect important internal documents only available on-site. During the 6 weeks, a total of 22 interviews were conducted. At Fundación Paraguaya’s headquarters in Asuncion, 12 semi-structured interviews (lasting between 60 and 180 min) were conducted with senior management and other staff members. Another 10 exploratory interviews were conducted with Fundación Paraguaya’s local village level staff during the two field trips. Fundación Paraguaya, specifically the head of the microfinance program, selected the villages for the microfinance trip. The selection was based on accessibility and the possibility to travel alongside Fundación Paraguaya’s staff on their scheduled visits. This non-random sample can be seen as a limitation, but was necessary due to matters of feasibility. During both field trips, interviews were conducted with the assistance of a local interpreter. Additionally, informal open-ended discussions were held with villagers during and after the official tours. Detailed accounts were written up after each visit and kept in a research diary.

Case study data collection sources

Interviews	Archival sources	Observation
On-site with Martín Burt, Executive Director On-site with managers from multiple levels within all three divisions of the organisation Via telephone with professional contacts and former partners of Martín Burt Follow-up via telephone	Annual and quarterly reports to stakeholders Internal memos and presentations Externally audited databases (financial and non-financial) Email exchanges and official correspondence Video interviews with key stakeholders in the organisation Websites	Participation in meetings and direct observation at organisation Direct observation of interaction between operational staff and stakeholders of the organisation (incl. beneficiaries, donors, staff, local government officials) Visit to several sites throughout the country, both of the organisation and of the beneficiaries

Data gathering and analysis stages

Name of the stage	Time period	Description
I. Framing	June and July 2008	Research objectives, timeline and methodology were aligned with Fundación Paraguaya. Public information on the organisation and its management staff were collected
II. Field visit	August to September 2008	Field data gathered during three-month long visit to Paraguay and other Latin American countries. A total of 22 interviews were conducted and transcribed. Important internal documents only available on-site were collected
III. Off-site analysis	October 2008 to March 2009	Case study was drafted, discussed internally and reviewed by all members of the research team. Further needs for analysis were defined
IV. Follow-up	April 2009 to May 2009	Follow-up by telephone and email with Fundación Paraguaya to formulate further data requests and complete case study
	April 2010
	July 2012

Teaching Note

Due to its twofold focus on Fundación Paraguya’s organisational approach as well as Martín Burt’s individual leadership style, the case can be used in different courses in the areas of leadership, CSR, social innovation or social entrepreneurship and, to a lesser extent, even in strategy and organisational development. It is suitable for teaching at bachelor and master levels and also on executive training programs (e.g. for non-governmental organisations).

Case discussions can be facilitated around the following blocks of questions:

For CSR and social entrepreneurship courses

• What is Fundación Paraguaya’s vision and mission?

• What are the characteristics of Fundación Paraguaya’s approach?

• How do they ensure both/inclusiveness and sustainability in their activities?

• To which of the UN Millennium Goals does Fundación Paraguaya contribute?

For leadership courses

• What are the characteristics of Martín Burt’s leadership approach? How has this likely evolved over time?

• What role do you attribute to Martín Burt’s family background and his education abroad? How does this compare to other social innovators you know?

• Use Martín Burt’s case as a way to discuss potential conflicts and tradeoffs between the different roles of a responsible leader.

• How is leadership for a social entrepreneur different from that for manager in a traditional NGO or a for-profit enterprise? What can they learn from Martín Burt?

For organisational development and strategy courses

• How do you judge Fundación Paraguaya’s degree of dependence on Martín Burt?

• How do Fundación Paraguaya’s three core divisions complement each other?

• To what extent do you think that Fundación Paraguaya lacks strategic focus?

• Which challenges do you think Martín Burt and Fundación Paraguaya need to overcome on their way to achieving their plans of

  • inclusive microfinance as explained above

  • the replication of the self-sufficient school model?

• What strategy would you recommend for replicating Fundación Paraguaya’s local success on a global scale? Which resources and partners do they need in your view?