External links:

• Hong Kong Red Cross
• St James’ Settlement

Behind its red wooden door, however, lies the headquarters of Wokai (“I Start” in Chinese), a non-profit micro-finance service, registered in Oakland, California. Its mission is to provide small loans to China’s poor in an effort to help them lift themselves out of abject poverty. An estimated 200 million Chinese survive on less than US$1.25 a day.

Dubbed the “Facebook for Farmers,” Wokai has raised US$167,414 from 976 contributors to help 341 recipients.

Inspired by the Nobel Peace Prize winner, Muhammad Yunus, who founded the micro-credit institution Grameen Bank in Bangladesh, Wokai is one of a growing number of micro-finance initiatives in China.

“Seeing China today, you have cities that are growing at such a quick rate, and the countryside is basically stagnant,” Casey Wilson, co-founder and CEO of Wokai, said in an interview. “The only way to start addressing poverty in China is to create sustainable ways of building the countryside, and I thought micro-finance is one of the only tools to do so.”

Wilson describes Wokia’s methods:

With four chapters outside China and an office in Beijing, Wokai relies on its web site for its peer-to-peer loan matching structure that allows potential lenders to browse through the profiles of pre-screened borrowers and select those they wish to help. The minimum donation is US$10.

Wilson launched Wokai in 2007 with Courtney McColgan, a fellow student at a Chinese language programme at Beijing’s Tsinghua University. The two 25-year-old Americans shared a common interest in economic development in China, and Wokai emerged as their joint vision to empower the poor through micro-loans.

“You have about 100 small micro-finance institutions (MFI) of which many are doing great work in China, but they don’t have capital to expand to more clients and increase their impact,” said Wilson.

“We thought what if we can work with these institutions and connect borrowers to contributors around the world.”

The industry benchmarking service, MicroBanking Bulletin, estimates that of the 1,084 MFIs it tracks globally, the median asset size is US$6.4 million with an average borrowing balance of US$525 and an average lending balance of US$145.

Wokai offers loans averaging approximately US$300. This, it said, it sufficient to make a difference when it comes to meaningful investment in simple business improvements or entrepreneurial ventures, such as buying additional livestock or new products.

Most of the targeted loan recipients reside in Inner Mongolia and the quake-affected Sichuan province, and nearly 90 percent of the contributions come from the U.S.

Borrowers are charged an annual interest rate of 15 to 20 percent, which is significantly lower than the International benchmark of 30 to 40 percent.

The repayments are subsequently re-distributed, according to donors’ wishes, to help others in need, and are eventually pooled into a long-term investment fund to generate new loans after three years.

“Careful field partner selection, internationally proven micro-finance best practices and detailed diligence have all been crucial in keeping the default rate low at 0.5%,” said George Xiangwen Zeng, co-president of Wokai’s Hong Kong Chapter, in an interview.

Although a pioneering venture founded on a marriage of altruistic drive and business savvy, Wokai is kept at arm’s length by the Chinese authorities.

It is prohibited from registering as a foreign non-profit entity in China and so operates under a foreign business status that allows it to solicit funds from overseas donors for distribution by the domestic field partners — but prevents it from raising funds directly within mainland China.

Despite China’s gradual relaxation of lending regulations in rural areas, grassroots micro-finance institutions have experienced only moderate success. Some industry experts have identified the lack of government involvement as the root of the problem.

“The role of government is essential to business survival in the mainland, and it’s no different to any NGO efforts,” said Clare Pearson, overseas executive editor of the philanthropy magazine, Charitarian, the only privately-owned English-language publication with official publishing licenses in both China and Hong Kong.

To tackle the access problem, Wilson is seeking a domestic NGO partnership to allow Wokai to tap the domestic donor base.

It is not alone. Other financial institutions are seeking government approval to operate within the micro-finance sector — and to raise funds within the mainland. That includes Grameen China, a joint micro-finance initiative between the Grameen Trust and e-commerce solution provider, Alibaba Group.

This is good news, Daniel Goodman, co-President of Wokai’s Beijing Chapter, said.

“Wokai functions as a capital raising intermediary with the goal to raise funds for rural poverty alleviation in China,” he said. “The entry of additional players and the further growth of micro-finance will help strengthen the industry and increase the number of potential partners we can work with in the future.”

Wilson expects the company to have recruited 10,000 donors by the end of 2010, and to hit a sustainable donor base of between 50,000 to 100,000 in the next three to five years.

“Up until now we’ve been almost exclusively volunteer-based and obviously that’s not sustainable,” said Wilson, “we’d like to reach sustainability off the revenue coming in from our web site when contributors have an option to donate an additional 10 percent to support our operating costs.”

“I had worked in India and Europe, and after I came back, I realized that Hong Kong students lack creativity, and had no interest in anything outside of Hong Kong,” he said. “That is why I set up the institution.”

The workshop is voluntary at the Pentecostal School

Law founded his Inter Cultural Education Centre (ICE) in August 2009. In the ensuing months it has conducted “creativity workshops” in two secondary schools and three universities.

Its goal is to deploy a broad range of trainers – drawn from overseas, from among Hong Kong’s local ethnic minorities and from the ranks of the disabled – to organise workshops for students to broaden their vision and encourage them to become better global citizens.

At the Pentecostal School, an Anglo-Chinese secondary school located at Ho Man Tin in Kowloon, 17 students attended the workshop on the first day. The course started on February 10 and was due to last for two months.

Few of the students demonstrated much awareness of Law’s mission.

Many said they hoped it would help them improve their English. Only one anonymous student wrote down: “I hope I can learn more knowledge about the world”.

The workshop was composed of various games and group activities.

It started with the youngsters dividing up into two rows: boys on one side and girls on the other.

Their first challenge is to ensure they got around the group and talked to every individual.

Each received a sheet of paper with questions starting: “Have you ever … Do you like … Is it true that you … “.

Their task to find out more about their fellow attendees within minutes –- and to talk to everyone in the room.

Each task is different. One requires them to form groups, design a group logo and chant, and share their values and ideas.

They have to communicate in English. They need to perform on stage. This session is conducted by a trainer from Britain and there are guests from Africa who played musical instruments.

There is no formal grading. No As, Bs or Cs.

They have to communicate in English. They need to perform on stage.

“I like this workshop, it is very different from the ordinary classes I have, but [is] full of games and fun,” said participant Thomson Chan Long Sung.

Law graduated from the Hong Kong Polytechnic University in 2007. His partner, Susanna Yu Shu-hui, who is also a director of ICE, graduated from the Hong Kong University of Science and Technology in 2009. Many of the ICE management team are still at university.

ICE has yet to turn a profit so Law and Yu work part-time to support themselves – Law teaches English and Yu works as a management associate and wealth planner at ING Life Insurance Company (Bermuda) Ltd.

Law is worried about money. Revenues from the workshops barely cover basic costs including trainers’ salaries, website development, company registration, and marketing. “I haven’t gone shopping for a long time, neither do I socialise with friends much,” said Law.

The pair regard ICE as a social enterprise, which means a business that has a mission beyond merely making profits: either helping the underprivileged, or tackling social problems. Both Law and Yu think that ICE is working to solve one of the biggest problems in the education system in Hong Kong, which is a lack of global vision.

Their efforts have won recognition. ICE emerged as Hong Kong Social Enterprise Challenge (HKSEC) champion in early 2010, beating out 215 other teams.

“They (the ICE team) will definitely bring changes, not necessarily to the whole education system, but the learning attitudes of the Hong Kong local students,” said Mingles Tsoi, project director, HKSEC.

Yu said the social enterprise concept is not well-recognized in Hong Kong, although a public opinion poll conducted in February 2009 by The University of Hong Kong’s Public Opinion Programme shows that 59% of respondents were aware of the goals of social enterprises and were willing to pay more to support this kind of business..

Their first client, the Tung Wah Group of Hospitals Lo Kon Ting Memorial College, is Law’s alma mater, and it referred the ICE to the Pentecostal School.

Pentecostal School students allows students to decide for themselves whether or not to register.

Tsoi of the HKSEC said that the ICE project was feasible because of its inexpensive start-up costs, its rooted values and Law’s international network.

Yu does not let its financial teething problems get her down. “Definitely we are going to expand, first greater China, and then go global,” she said.

McCaig (pictured right) is CEO of Cafédirect, a company co-founded by the British charity, Oxfam, and other alternative trading organizations, to aid coffee growers affected by the global collapse of coffee prices in 1989.

Addressing a rally of about a hundred people on a Saturday in March, McCaig spoke of her experience in building up one of the largest Fair Trade companies in the world, and encouraged Hong Kong’s partners to strengthen their grass roots.

“Back in 1991, when we started, we sold our products in churches and small market stalls,” she said, “that is where the Hong Kong’s Fair Trade movement is at the moment.”

Cafédirect helps small coffee producers in developing countries by ensuring a fair price for their products.

McCaig said the fundamental idea behind Cafédirect is to maintain a direct relation with the growers. “We are working with a quarter of a million small-scale farmers in 40 different developing countries,” she said.

Producers own shares in the company and get over half of the profits back to reinvest in their businesses.

McCaig said Fair Trade products had become mainstream in Britain, influencing the policies of  major corporations. “Very large brands like Starbucks or Cadbury [have] adopted a 100 per cent fair trade approach,” she said.

Fair Trade Hong Kong was established in 2008.  It unites local producers, NGOs, retailers and corporations in Hong Kong. According to the group’s website its members “pledge to use Fair Trade products and to promote the concept of Fair Trade in their own profession or industries.”

Leung Pui-fung Leung, director of Fair Trade Hong Kong, said that when she first started promoting Fair Trade in Hong Kong four years ago, few people were listening. “Just a bunch of NGOs and volunteers would come to the meetings,” she said. But the strong turnout to the Saturday rally shows “the seed has matured.”

Antony Chui, director of Hong Kong Fair Trade Power Ltd, said that Hong Kong people needed to change their habits as consumers. “It is crucial that they think about who produces the goods, and how they are treated,” he said.

“Consumers should not base their decision solely on price.”

Hong Kong Fair Trade Power is one of 26 Fair Trade retailers in Hong Kong, which include coffee shops, producers’ cooperatives, and farms. To trade in Fair Trade certified products, businesses are usually required to sign a contract with the licensee of their country.

But Hong Kong lacks an official licensee. Retailers wanting to sell Fair Trade products need to obtain them from Fair Trade wholesalers overseas.

McCaig defined Hong Kong’s stage as both promising and exciting. “Being small is great,” she said, “you have the real potential to impact people’s lives. Be proud of it,” she added.

Some highlights of McCaig’s speech.

A Short History of Fair Trade in Hong Kong (Courtesy of Oxfam Hong Kong)

1950s – Oxfam in Britain sources Fair Trade handicrafts from Hong Kong – one of the first suppliers of Fair Trade items for the European market

1977 – Oxfam Hong Kong opens its first second-hand shop. Fair Trade items are sold periodically

2002 – Oxfam International launches a 64-city “ Make Trade Fair” campaign, which includes Hong Kong; Oxfam Hong Kong promotes Fair Trade coffee.

2003 – Just Java, a supplier licensed by Transfair, beings selling Fair Trade coffee in Hong Kong

2005 – Oxfam co-organises the Asia Fair Trade Forum (AFTF)

2006 – Oxfam Hong Kong promotes Fair Trade in a major awareness-raising campaign, and commissions first Fair Trade market research in Hong Kong - Oxfam’s shops start selling Fair Trade products - First Fair trade stores, selling various Fair Trade items

2007 – Ten local organisations mark the first World Fair Trade Day in Hong Kong. Oxfam Hong Kong, together with six local and overseas fair trade groups, operate a Fair Trade pavilion at Hong Kong Food Festival

2008 – More than 10 members set up FAIR TRADE HONG KONG, a non-profit making group to promote Fair Trade. Oxfam Hong Kong is a member.

Half an hour before a scheduled meeting at a downtown café last Thursday, she was already sitting comfortably in a corner table, typing furiously on a compact laptop. With her brows locked in a concentrated frown, fingers skipping across the tiny keyboard, and body leaning slightly towards her computer screen, Pearson skillfully segregated herself from the noisy crowd, occasionally turning to her notebooks to flip through pages filled with seemingly illegible scribbles.

It was almost unnerving to disturb her. But Pearson looked up, quickly acknowledged her visitor, and immediately launched into a full-length lecture on philanthropy in China.

“The role of government is essential to business survival in the mainland, and it’s no different to philanthropic efforts,” she said. “The government is your oxygen, and your ability to succeed highly depends on your quality of relationship with the Chinese people.”

In addition to her full-time employment at the law firm DLA Piper, Pearson also works as the overseas executive editor of the philanthropy magazine, Charitarian, the only privately-owned English-language media organisation with an official publishing licence in both Hong Kong and China.

Its objective is to reconcile differences between rich and poor, urban and rural; the Charitarian does not strive to be the ultimate “free media,” but aims to offer a counterbalance to the western media on charity-related issues from an insider perspective.

“The government is pro-NGO now,” said Pearson, “and fund-raising is not difficult if you know how the guanxi system works.”

A system that involves heavy relationship-building, background-investigating, dinner-buying, alcohol-consuming activities, the goal of guanxi is to build up a network of relationships and obligations with the objective to being able to call on favours to some degree, sometime, somewhere along the way.

As an expert on Corporate Social Responsibility (CSR) in China, Pearson emphasised the importance of being pragmatic when proliferating philanthropic efforts, a valuable lesson she learned from both her corporate and non-profit experiences.

“Business in China needs to serve the innate interest of the government, the political sectors and the population,” said Pearson, “and this year the big buzz word is CSR.”

As China adjusts its domestic development strategy to address fast-changing economic, social and environmental challenges, companies have begun to pay more attention on maximizing tangible social benefits to the community. With a mere 0.5 pct of GDP donated to charity in 2007, Chinese government intends to fuel philanthropic developments by encouraging social entrepreneurs, who are expected to contribute 85 pct of the total charitable donations in coming years.

“2010 will be a year of CSR revolution in China, or being a centrally controlled country, a year of GSR or Government Social Responsibility,” said Pearson, “foreign companies that commit resources to non-profits will be welcomed, but you’ve got to understand how differently CSR works in China.”

In the latest edition of the Charitarian, Pearson analyzed the shift of CSR programmes from U.S.-centric to China-focused in the post-recession era.

“Before the credit crunch your client might have been the CEOs of Wall Street firms and your CSR program might have prioritized New York Headquarters and downplayed Chinese government,” said Pearson, “but I would recommend you literally reverse this priority list post-credit crunch.”

And as a result of this fundamental change in the CSR paradigm, the Chinese government, Chinese media and GONGO (Government NGOs) have became the top three strategy-focuses for charities.

“In China any philanthropic efforts or CSR project would fail if it’s not aligned with government objectives,” said Pearson, “for grassroots foreign NGOs, the most sustainable method to executive non-profit projects is to either partner with a GONGO or function as a consulting company – it’s about access, access, and access!”

To maximise charitable efforts, Pearson advises foreign NGOs to keep local residents and enterprises in mind when conducting business.

“When in China, do as the Chinese do,” said Pearson, “so you make friends, not enemies.”

And that means no “sacking” because it leads to a loss of faith; no “squeezing” local businesses because it breeds antagonism; and a lot of “pleasing” to avoid angering the government.

With the highly anticipated “Charity Law” due for release in 2011, the philanthropy landscape in China has rapidly evolved over the last six years as the government assumed a more positive attitude towards the potential benefits to society brought by NGOs.

“Philanthropy in China is definitely flourishing,” said Pearson, “just as what the magazine advocates, ‘everyone can be a Charitarian’.”