Interview – José Ignacio Avalos Hernandez

‘When I was young I saw the gaps and differences between rich and poor people,’ explains José Ignacio Avalos Hernandez, when asked how he got started as a donor. ‘I asked my parents why this was but the question was really never resolved. So I understood that I’d have to fight and to work in order to close the divides between rich and poor.’ And that is what he seems to have been doing all his life.

Looking at his CV and the list of organizations he has founded, one might expect José Ignacio Avalos to be being interviewed as a social entrepreneur rather than a donor. He fits the mould of ‘serial social entrepreneur’ nicely – though, except with Gente Nueva, the organization he founded when he was 22, he shows little sign of leaving his early creations behind him as he goes on to found others.

He doesn’t see himself primarily as a donor. ‘In recent times I’ve become a donor,’ he admits, ‘but I’ve always been on the side of those who are asking for money.’ Having said that, he says that he has in fact been a donor since he was 22 when he received his first pay cheque, of which 78 per cent regularly went into social programmes. ‘So I was a small donor but I’ve always been a donor.’

His family has a successful cosmetics business, but not on a scale to allow him to become what he calls an important donor. It was only last year, after Compartamos, the microfinance institution he founded in 1989, was floated on the Mexican stock exchange, that he became a significant donor for the first time. Last year he was able to donate $90 million for education alone.

However, his policy is not to donate to his own projects: ‘I believe there are many other projects that need to be funded, other people who are doing great things. I really am enjoying this part of being a considerable donor to projects.’

Now, he says, ‘I’m playing both balls. I seek money because the commitments I have are way over my possibilities. One of my goals is to eradicate malnutrition in Mexico in 15 years and that is not something I can do on my own.’ In fact he does sponsor his own projects, and he has a foundation that supports them too, but to a limited extent.

It was when he left college at the age of 22 that he founded Gente Nueva (New People), the first of the many organizations he was to establish, whose principal goal is to attract young people to fight to create social justice. But, as mentioned above, Gente Nueva is the one organization he has left behind. ‘I always thought that Gente Nueva should be youth addressing youth,’ he explains.

After Gente Nueva, José Ignacio Avalos started an impressive number of different social programmes: a programme to provide health clinics and hospitals; a rural development supply chain called Mi Tienda with the aim of bringing down prices for people living in remote rural communities; programmes in fields such as reforestation and domestic animal breeding; and of course Compartamos.

Eradicating malnutrition

But his real passion is for the nutrition programme, Un Kilo de Ayuda, which aims to end malnutrition in Mexico, affecting as many as 40 per cent of children at some point between the ages of two and five. There are currently 3.5 million children suffering from the first, second or third degree of malnutrition.

‘Malnutrition in Mexico is a big public concern,’ he says, ‘and it should be worldwide. If a child suffers from malnutrition, the brain will not develop completely and the child will always be disadvantaged. These children are the first to drop out of school, to develop diabetes, to become overweight. They suffer from numerous episodes of diarrhoea.’ For him the key thing in understanding the prevalence and effects of malnutrition is to measure capacities rather than height and weight. Un Kilo de Ayuda uses psychometric scales in order to find out how the brain is developing.

If you are to be successful in eradicating poverty, he says, ‘the first step is to ensure the capabilities of individuals are equal. People are still discussing whether the poverty line should be one dollar a day or two dollars or ten dollars, or the power of acquisition or things like that. I think that the metrics that we have to use to measure poverty are the capabilities and skills of the poor, their access to opportunities, and the infrastructure to support all that.’

But the malnutrition programme is only one aspect of eradicating inequality of opportunity. Mi Tienda supplies 700 stores in rural communities with less than 2,500 inhabitants. ‘Those stores are able to bring prices down by 20 per cent so they’re creating deflation in the rural communities.’ The deflation aspect is very important, but so is access to goods in itself. Avalos gives the example of buying a lightbulb. ‘If a family has one lightbulb in their house and it goes out, it will take maybe 15 days to replace. They may have to wait for the father to come home at the weekend from working in the city to ask him for a lightbulb, because there is no way of communicating, and the next weekend he will bring one back. But the lightbulb may determine whether the children in that house can do their homework or not – that’s how important a lightbulb can be.’

Raising money at 50,000 outlets

He has been extraordinarily creative in raising money, from individuals, businesses and government. Donation cards, launched 16 to 18 years ago, are now to be found at almost 50,000 points of purchase: when people get to the cash register, they can buy a card and make a donation. Or they can buy a yoyo, with some of the proceeds going to a social programme. For three months of the year, people will be asked if they want to round up the amount they’re paying in order to make a donation. Avalos has also pioneered donations through ATMs, working with HSBC to develop the technology to enable people to donate a few pesos on each transaction.

‘We have many, many ideas and projects to raise money,’ he says. ‘When you raise money, you are not only increasing the amount of budget that you have to try to alleviate poverty. You are also creating a concern and facilitating people to commit to a cause.’

Leveraging is also a key part of the strategy. ‘We go to corporations or foundations to ask them to match the money that individuals are giving, and then we go to local government to match that money, and then we go to the federal government to match that money. So there is a big multiplier on the donation each individual makes.’

All these donation schemes also involve working with the relevant companies. Wal-Mart, Scotiabank, HSBC and Starbucks are just a few of those he mentions. He has even tapped the financial markets by issuing bonds on the Mexican stock exchange for Compartamos, now a fully licensed bank.

Are interest rates too high?

Compartamos has been criticized for high interest rates, but Avalos doesn’t feel the criticism is productive. When he started the microcredit programme in 1989, he says, interest rates were very low. At this early stage he spoke to many of the first 3,000 clients, all women, about the interest rates, and they told him to put them up if the programme was in danger of collapsing. ‘If you are selling tacos,’ he explains, ‘it would mean selling one more taco a week if I put the interest up to 6 per cent a month. For the women it didn’t make much difference but it enabled the programme to grow. We were taking money into communities that are perhaps 60 kilometres away from a bank. So the problem was not the cost of the money but the access to it. They were very clear about this.’ Compartamos has been lowering interest rates little by little over the last five years.

Influences along the way

When asked who or what has influenced him along the way, he comes up with a huge list of people he’s thankful to, starting with Mother Theresa and Pope John Paul and going on to his wife and children. ‘I learn from them every day.’ He gives an example of going into a poor community with his eldest daughter. ‘When my children were very young, I would tell them, “if you take a toy into a poor community, the toy has to stay there, you cannot take it back.” One day my oldest girl was fighting over a popsicle with a girl from a very poor indigenous community. I was trying to convince her to give the popsicle to this little girl, but my wife told me, “learn from your daughter, she’s fighting over the popsicle because she’s looking at the girl as an equal. You are making the difference.”’

Next on the list is Peggy Dulany of Synergos, ‘who believed in me and has always promoted what I am doing, always engaging people and linking people’. One organization she helped link him to was the Schwab Foundation, which named him as one of their Social Entrepreneurs in 2005. The list also includes 270 corporations that support Un Kilo de Ayuda in some way.

Motivating people to give and to share with others is very important to José Ignacio Avalos. ‘Now that I’ve been able to donate, owing to the success of Compartamos, I’m very glad because I’m also teaching those who have wealth that the most important thing is to give, and to give substantially.

‘I’m not saying the poor must be rich, but they must have full capabilities, equal opportunities, and for that we need infrastructure. We cannot rest until we achieve this.’

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