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Gillespie DiasporaBusinessSupport

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					Diaspora Support for Business
   Development in Armenia:
Examining Paradigms of Social
      Entrepreneurship


         Kate Gillespie
       Anna Andriasova
The University of Texas at Austin
“I believe that Armenians in the
    diaspora should invest in
Armenia and not just donate to
      Armenian charities.”
       Social Entrepreneurship
Not-for-  Establishing new not-for-profit
 Profit organizations
Sector      – Lincy Foundation
              – Izmirlian Foundation
           Engaging in for-profit businesses to
          support charitable programs
              –Izmirlian Foundation

 For   Operating to enhance the well-being and
Profit benefit of the larger community in which the
Sector business is embedded – in addition to
          generating wealth to the business owners
              – Armenian Business Corporation (ABC)
Lincy Foundation Loan Programs

   Lincy Foundation
    – Kirk Kerkorian
    – No interest loan to the Armenian Government
      1998 – 2004


   SME Loan Program
    – Armenian government would loan funds to Armenian
      banks at no more than 3%
    – Banks would make loans to SMEs in amounts of
      $100,000- $1,000,000 for no more than 15%
    – No Lincy employees involved in program administration
    Lincy Foundation (continued)

   Project Adjustments
    – SME loan program scaled back significantly and funds
      transferred to infrastructure projects
    – New loan/equity program initiated targeted to
      majority-owned foreign investments


   Results
    – $20 million allocated under SME program
    – No allocations under FDI program
    – Programs not renewed
Izmirlian Foundation Loan Programs


   Izmirlian–Eurasia Small Business Loan
    Program

    – $3 million commitment in 1999 to augment relatively
      successful Eurasia Foundation Small Business Loan
      Program
    – Administered by Eurasia via Armenian Banks
    – Loans up to $125,000 for two years
    – Low defaults
    Izmirlian Foundation (continued)

   Project Adjustments
    – Bypass banks to establish proposed
       Izmirlian–Eurasia finance company

    – 2003, joint venture with Black Sea Trade and
      Development Bank
        $125,000 – 500,000 loans

        Profits accruing to the Izmirlian Foundation will be
         used to support philanthropy in Armenia
Armenian Business Corporation

   Armenian Business Forum, 1991
    – Charged with finding investors for Armenia
    – Establishes ABC in 1994

   Armenian Business Corporation (ABC)
    – For profit ordinary joint-stock company
    – $320,000 capitalization
    – Diaspora businessmen from 17 countries
    – Primarily made loans to local businesses
    – Most defaulted and collateral proved to be overvalued
                ABC (continued)
   Project Adjustments
    – Restructuring: Shareholders are given opportunity to
      withdraw at value slightly less than face value.
      Number of shares drop from 32,000 to 821
    – Model changes from loans to equity investments
    – Broader participation encouraged
    – ABC listed on Armenian Stock Exchange
    – 2003—ABC actively involved in 7 joint ventures
    – Eighth venture in legal quandary
    – No dividend yet
Project                   Control Set           Input Set                  Output Set
Lincy Foundation
   SME Loan Program      Armenian Government   Lincy Foundation           Medium-Large Armenian
                          US Government         Armenian Government        Businesses
                                                Armenian Banks             Armenian Banks

Foreign Investment       Armenian Government   Lincy Foundation           Foreign Investors
Loan/Equity Program       US Government         Armenian Government        Local Partners of Foreign Investors

Izmirlian Foundation
   Izmirlian-Eurasia     Armenian Government   Izmirlian Foundation       Small-Medium Armenian
    Small Business Loan   US Government         Eurasia Foundation         Businesses
    Program                                     Armenian Banks             Armenian Banks


   Proposed Finance      Armenian Government   Izmirlian Foundation       Small-Medium Armenian
    Corporation           US Government         Eurasia Foundation         Businesses

   Izmirlian – BSTDB     Armenian Government   Izmirlian Foundation       Medium-Large Armenian
    Joint Venture                               BSTDB                      Businesses
                                                Netherlands Management
                                                Cooperation Programme
Armenian Business Corporation
   Pre - 1999            Armenian Government   Armenian Business        Small–Medium Armenian Businesses
                                                Forum                    Larger Diaspora Investors
                                                Diaspora Investors
                                                Armenian Government
   Post - 1999           Armenian Government   Diaspora Investors       Small–Medium Armenian Businesses
                                                                         Larger/Smaller Diaspora Investors
     Performance Propositions
P1: The greater the homeland government
 interference with agent or service selection, the
 lower the performance of the DBS project.

P2: The use of a host government as agent
 decreases the performance of a DBS project.

P3: The greater the home government
 interference with service selection and
 governance, the lower the efficiency of the DBS
 project.
     Performance Propositions

P4: Agents from cultures with strong governance
 institutions will encourage more openness with
 diaspora investors resulting in better
 performance.
P5: The greater the participation of diaspora social
 entrepreneurs in governance, the more effective
 the project.
       Performance Propositions
P6: Services congruent with target client needs will
 increase performance of DBS projects.
P7: The more homogeneous the SME clients, the
 better the performance of the DBS project.
P8: An agent with more experience in SME
 support/creation/or management will provide better
 services resulting in better performance.
P9: The greater the interaction of diaspora social
 entrepreneurs or their agents with SME clients, the
 better the performance of the clients and,
 consequently, the better the performance of the
 DBS project.
     Performance Propositions

P10: : The more transitional the macro-
 environment, the lower the performance of the
 SME project.

P11: The greater the cooperation among DBS
 projects, the greater their impact on the macro-
 environment, and consequently the greater the
 performance of the diaspora social entrepreneur.
    Performance Propositions


P12: The greater the perseverance of the social
 entrepreneur, the better the performance of
 the DBS project.

P13: Contributors will exhibit less perseverance
 with DBS projects than with other philanthropic
 efforts.
Armenian Diaspora SME Support Project Performance

           Lincy    Izmirlian Foundation   ABC
   P1       --               +             --
   P2       --               +             +
   P3       --               +             +
   P4       --               +             --
   P5       --              --             --
   P6       --               +             +
   P7       --               +             +
   P8       --               +             +
   P9       --              --             --
  P10       --              --             --
  P11       --              --             --
  P12       --               +             --
Performance Model of Diaspora Business-Support Projects


                 Homeland                     Client SMEs
                Government

                                   Services
                                                            Social Goals
  Diaspora
   Social         Agents
Entrepreneurs
                                                            Return to
                                  Governance                Stockholders




                       Home
                     Government                  Macro
                                              Environment

				
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posted:2/23/2008
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