Saturday, 19 October 2013 05:59

Letting Go of Passion, and Empathy too: How the Indian School Finance Company Survives on Stone-Cold Professionalism

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Letting Go of Passion, and Empathy too: How the Indian School Finance Company Survives on Stone-Cold Professionalism

In the social enterprise space passion and empathy hold a sort of holy position. These emotions feature heavily on About US pages and mission statements. Furthermore, possessing these feelings in droves if often used as a hiring screen. Apply for any position and during the interview you will be expected to evidence your passion and empathy or you won’t be getting the job. Social enterprises want to make sure that their employees share their values and their dedication to the mission. Generally this is rational and often absolutely essential to the success of the enterprise. Nevertheless in often overlooked cases, passion and empathy can be both dangerous and detrimental to the survival of the social enterprise. At the Indian School Finance Company the social mission critically depends upon purging the enterprise of passion and empathy, and replacing it with stone-cold professionalism.

The Indian School Finance Company makes loans to affordable private schools. Just like any financial institution that issues loans, ISFC must conduct due diligence to evaluate customer capacity and willingness to repay and then sustain itself on interest payments. If ISFC makes a mistake and lends to a school that cannot or will not repay the loan, then ISFC takes a very substantial financial hit. This loss directly reduces the amount of capital ISFC has remaining to lend to other schools. Additionally the banks ISFC relies on for debt financing lose confidence in ISFC’s portfolio and refuse to issue new loans or dramatically increase interest rates. Thus it is imperative that ISFC conduct the best and most professional credit analysis possible.

At the outset ISFC favored a more passionate approach, management would gush about the lovely schools they visited, the wonderful children and the inspiring teachers. This emotional exuberance only led to management making exceptions to credit policy in order to give loans to ineligible, but heartwarming schools. The result was clear, delinquencies and defaults skyrocketed and jeopardized the long term viability of the enterprise.

ISFC changed tack, today staff are expected to dispassionately and impartially evaluate schools. Subsequently new delinquencies have plummeted and defaults virtually eradicated. The enterprise is thriving and expanding. Despite ISFC’s social mission, jettisoning passion and empathy has been vital to its survival and fomenting stone-cold professionalism imperative to its success.

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