Álvaro Rodríguez Arregui, Impact VC & Top 10 LATAM Leader of the Future
The NextWomen Social Entrepreneurship Theme
Álvaro Rodríguez Arregui is the Co-Founder and Managing Partner of Mexican-based IGNIA, the largest base-of-the-pyramid (BoP) impact venture capital fund in the world; focused on commercial enterprises serving the BoP.
Álvaro also serves as Chairman of the Board of Americas largest microfinance organization, Grupo Compartamos, which is also based in Mexico, with 2.3 million clients, an average loan balance of US$400, approximately US$1 billion in total assets and US$200 million of net income.
He formerly served as Chairman of the Board of ACCION International, a US-based not-for-profit and leading global development organization which has helped build 62 microfinance institutions in 31 countries.
Álvaro also formerly served as Chairman of the Board of Unidos Somos Iguales, a Mexico-based NGO that works to transform society to improve the integration of persons with disabilities into society.
Before joining the social sector, Álvaro had a corporate career, most recently as Chief Financial Officer of Vitro, one of the largest glass manufacturers in the world. Prior to joining Vitro, he served as Chief Executive Officer of Farmacias Benavides, one of the largest drugstore chains in Latin America. From 1999 to 2002 he served as Chief Financial Officer of Grupo Salinas’ retail arm, Elektra, where he was part of the team that created Banco Azteca.
Álvaro holds an MBA from Harvard Business School and a BS in Economics from the Instituto Tecnológico Autónomo de México (ITAM).
In 2005 Alvaro was named Young Global Leader (YGL) by the World Economic Forum (WEF) for his accomplishments and his commitment to shape a better World. Since 2008 he has been a member of the WEF’s Global Agenda Council and in 2009 he was part of WEF’s Global Redesign Project. He is a member of the Young Presidents Organization (YPO), Monterrey chapter. América Economía magazine, in their 20th Anniversary issue, named him as one of 10 “Leaders of the Future” in Latin America. In 2011 he received the PODER-ABC Business Award, which is given by The Americas Business Council, ABC* and Poder magazine. Forbes recently named Alvaro as one of the 30 Top Social Entrepreneurs of the world and in 2012 YPO awarded him with the SEN Sustainability Award on Economic Justice/Community Impact.
We spoke to Álvaro about his move from a corporate career into the social sector; the five most exciting social enterprises funded by Ignia; and the challenges faced by female entrepreneurs in Mexico.
TNW: How did you come to leave your position as CFO of Vitro, one of the largest glass manufactures in the world, to set up IGNIA?
AR: Before and throughout my time at Vitro I had been very involved in the microfinance industry. I always thought that I wouldn't be fully concentrated in the social sector until my “retirement”. But when I left the corporate world in 2007, it felt like the time was right, so instead of waiting until my retirement, I decided to go with what I already knew I had a deep passion for, so at the age of 39 I decided to dedicate my professional life to the social impact sector.
When we started IGNIA the term impact investing did not exist.
Throughout my experience in the microfinance industry and having interacted with hundreds of clients, I had firsthand experience of multiple basic needs that people in the base of the pyramid did not have access to. I saw that they were in need of basic quality products and services and that they were willing to pay for them; they just had no access.
Microfinance has shown that it is feasible to develop a successful business model providing access to a basic need. But in the end microfinance is only addressing one of those needs, in this case the need to have access to quality financial services. They still needed access to other basic needs, such as quality education, housing, health care, etc.
The premise to create IGNIA was that just as there were innovative entrepreneurs that created the business model for microfinance, surely there were creative entrepreneurs who were looking to solve the majority of the population’s most basic needs with business solutions. And what these entrepreneurs needed in order to be successful was, of course, access to capital, but not only that. They would also need managerial and strategic guidance and support in order to increase their probabilities of success. This combination would be achieved through venture capital funds and, because of our social purpose, a social venture capital fund and what later was understood as an impact venture capital fund.
TNW: Which five social enterprises funded by IGNIA are you most excited by and why?
AR: Barared is a Mexican company dedicated to the development of Mexico’s largest branchless banking network through micro-businesses such as mom and pop stores, pharmacies and small grocery stores located at the lowest levels of the base of the socioeconomic pyramid. I am very excited for this company because Barared is addressing one of the biggest obstacles to reach total financial inclusion, which is to develop an ubiquitous network where individuals can perform financial transactions conveniently and at low cost. Everyone talks about the fact that the future in financial services is mobile banking and it is! But the only way individuals will migrate to mobile banking is if they have cash-in and cash-out locations that are close by and in the base of the pyramid there are no such places! Barared will solve that!
Provive acquires, refurbishes, and sells foreclosed homes in low-income housing developments while working with communities to reestablish the social fabric of the community. I am excited about this company because it is a company that demonstrates that by implementing community service in order to rescue the social fabric of a community, huge business opportunities arrive that otherwise would not exist and the organizations that implement the social labor are the ones that are better positioned to take advantage of these opportunities. Therefore the social work is feeding the business model and they are perfectly aligned; while doing a better job, the business opportunity expands. This issue is particularly relevant because the rupture of the social fabric is so deep that today there are not enough philanthropic funds or governmental institutions to solve the problem, so market and business power is required in order to solve these social issues.
MiCel is an innovative pioneer in the delivery of affordable and accessible mobile internet access to the large unbanked population in Mexico. MiCel is a company which you have to be excited about; because everybody in the world is talking about how smart phones and mobile banking are going to revolutionize the world. Most of these solutions depend on a smart phone, but nobody is talking about how 90% of telephone users are going to get a smart phone with internet access. This is where MiCel plays a big role, by putting smart phones in people’s hands!
Agua Natural en Red pre-installs an independent and proprietary thermo-infused food-grade water grid in new housing developments in order to provide purified water directly to client homes. Mexico is the top bottled water consumer per capita in the word, even though bottled water is 30% more expensive and people sometimes have to walk miles in order to get to it. Agua Natural is really a life changing product, where you receive a superior and cheaper product at your kitchen sink.
MeXvi is a company that builds affordable houses on a customer's own land in rural and semi-urban areas in Mexico. MeXvi also partners with microfinance institutions to facilitate access to long-term credit for the payment of its houses. In this industry, Mexico currently has a market of owner-constructed housing of about 400,000 houses per year. These houses are often not safe, they are not cheap to build and on average they take up to 5 years to self construct them. In MeXvi we offer a better service by building houses which are safer, up to 40% cheaper and on average it takes us 3 month to build. This is a clear example of a demand for a better quality service at the base of the pyramid which is not being satisfied by the current market.
TNW: What are the most common pieces of advice that you give to social entrepreneurs seeking funding from IGNIA?
AR: Four of the most common pieces of advice I would usually give are:
Use business tools and discipline; a social business is a business after all and for its success you need to use business acumen.
Careful with the romanticism that goes with social businesses.
Careful with businesses that require a fundamental shift in consumer or supplier behaviour.
Careful with businesses where the story is based on the ideal of the way the world should operate. Worry about the way the world is and create innovations that will improve people’s lives within that framework.
TNW: How has the nature of social enterprise in Mexico changed since you launched Ignia in 2007?
AR: I believe there have been three major changes that have impacted the social enterprise in Mexico.
Entrepreneurs have gotten a lot of support from industry leaders like ANDE, Ashoka, and Endeavor. These efforts give entrepreneurs in Mexico the tools and information for a chance to build a better and much more successful business model.
Another major change is local presence by industry leaders, people are thinking global but at the same time acting local. ANDE has made the effort to operate at local levels; it has opened a hub in Mexico and Central America.
Today, social enterprise is at the top of the minds of all the big corporations and influential political leaders in Mexico.
There have been a lot of forums concerning the social industry, like the Foro Latinoamericano de Inversión de Impacto which will take place in Merida, Mexico for the 3erd consecutive time.
TNW: As innovators, do you believe that entrepreneurs have a heightened social responsibility? Which global social issues would you like to see entrepreneurs tackle in the next five or ten years?
AR: For the first question
I believe that we are all social entrepreneurs. The only big difference is that some do it better that others; by definition entrepreneurship is about bringing economic development to a region.
Regarding the second question I would mention poverty and inequality of opportunities.
TNW: What do you think will be the big trends for social enterprise in 2013?
AR: I believe that a new and important development for 2013 is the aligning between different capital providers at different stages of the social ventures. This industry is always in need of new and different forms of capital (equity, debt, philanthropic grants, etc.) for it to reach true innovation and make an actual impact in the world. A problem we have recently faced is getting the different capital providers to work together and offer their different services to developing projects. By solving the necessities of all the parties involved we will create a smother linkage between social entrepreneurs and capital providers.
TNW: ‘Social Enterprise’ is such a buzzword at the moment. Is there anything about the huge rise in, and trendiness of, social enterprises which concerns you?
AR: Three things that concern me are:
The industries lack of tolerance towards risk, and how very intelligent people with business acumen seem to check their brains at the door when dealing with Impact Investing, when this industry should have the most tolerance for risk, given the objectives it is trying to accomplish.
Social enterprises that seem very beautiful in pen and paper but at the end of the day the business does not make sense and could never reach scale.
Projects where people seek to change people’s behavior rather than improving their current behavior.
TNW: What are the particular challenges faced by female entrepreneurs in Mexico?
Female entrepreneurs in Mexico face a lack of support system for them to develop their career to a full potential and at the same time fulfill their responsibilities as mothers.
They also experience a shortage of role models for them to believe that it is possible to be a successful entrepreneur. But I think the biggest challenges are, and these are going to be controversial:
- To believe that they can be successful entrepreneurs as well as good mothers.
- Another challenge is the acceptance by many women that they don’t have to be perfect at everything: perfect entrepreneurs, perfect wives, perfect mothers, and perfect lovers, look beautiful all times, be fit, etc. That is impossible! That is way too high of a bar! And
- That they need to take the chip off their shoulders of “I can’t do this because I’m a woman”.
TNW: Do you have a favourite motto or quote?
AR: Simple is beautiful.
A more equitable world.
“My willingness to fail gives me ability to succeed”
Don’t take yourself seriously, take what you do seriously.
Swing for the fences, that is the only way we will achieve change.
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