Over the past few weeks a number of people have asked about legal and sustainable alternatives to the “Gifting Circle.” I have been hearing rumors about new “circles” that are “less illegal” and offer a lower entry fee. Yet, these are still based on exponential growth through recruitment of new members and promise a profitable return . . . which still makes them illegal investment pyramids and financially unsustainable.
What would a sustainable alternative look like?
There are a myriad of options that address three main concerns of the “Gifting Circles”:
- How to make the circle legit (legal)
- How to make it sustainable – survive longer than a few years and reflect a true giving culture
- How to make it economically empowering for women
How to make the circle legitimate
A) Offering – Identify a good or service that you intend to provide (either for free or for a fee). This can be leadership training, economic empowerment seminars, spiritual awakening, financial services (like a bank) or even producing a product, etc. What you ultimately decide to make as your offering is really important to how you structure the organization. The key thing to remember, is that if the purpose of the group is to make money by adding more members, this is illegal, so this means that you have to design it to have value independent of recruitment.
B) Incorporation and Taxes – If you do intend to have money part of this system, then you will need to define your business structure (either profit or non-profit), you can even set up a business as a religious organization, an educational organization, or as a sole-proprietor and use your social security number instead of filing with the govt for a tax id number. If you incorporate and file for non-profit status, the money given to the group can be tax deductible and the group will not have to pay corporate tax (individuals that work for the organization or receive money from the organization are still are liable for their own taxes). Whether or not you pay taxes on something has no bearing on whether or not it is legal. If there is any exchange of money, there will need to be a way to keep track of that exchange and account for it. Remember, the money exchanged has to be in payment for a tangible good or a service that can be quantified.
How to make it sustainable
A) Growth – The key issue around sustainability is the growth model . . . It’s okay to have rapid growth of something for a little while, but then the growth has to taper off into something that can be sustained over a long period of time. Think about what sized garden you would need to feed your family – if a family grows too fast for the garden, you will starve, if the family grows too slowly, you won’t be able to keep up with the work of gardening. It’s about a balanced relationship between resources and consumption. This isn’t difficult math, but it does take some calculation. Essentially, look at how quickly your (population or resources) multiply. If the financial viability requires the business growth to multiply faster than your resources (people, raw goods, new members, etc), it isn’t sustainable.
B) Appropriate Life-Span – Everything has a beginning and an end. Nothing can continue infinitely. It’s important to understand the life-span of any organization or entity. Sometimes the goal should be to work yourself out of a job . . . like with the plastic bag campaigns. The campaigners had the goal of working themselves out of a job – getting legislation passed, so that it was no longer relevant to advocate for plastic bag bans. The idea is to create a structure that truly meets the goals you have in mind – economic empowerment of women may take a life-time or two, but understand that there is an end-point, what is it? When is it? What is the impact at that point?
How to make it economically empowering for women
A) Cooperation – I have spent the past 15 years exploring this topic through various lenses and have concluded that cooperation and collaboration are the keys to economic empowerment for women. This looks like cooperatively owned businesses, lending organizations, unions or financial advocacy groups. As an extreme example of women’s economic empowerment, I spent six months in Ecuador studying the economics of sex work (prostitution). While I was there, the sex workers organized and formed the Sex Workers Federation. They marched 400 naked women in front of the mayor’s offices in Quito, protesting the closure of brothels in the historic district. Through their cooperation and self-organizing, they not only won the right to reopen the brothels, but they gained police protection, health benefits and childcare. There are a number of other examples, such as women’s sewing cooperatives, cooperative food clubs, childcare coops, etc.
B) Education – Women need to understand money in order to have power around it. Most people are afraid of it and feel ashamed that they don’t understand the numbers. I think that this is where the bulk of the work needs to happen. Not only do we need to educate women on money, but we need to teach economics in schools in a way that makes it fun and interesting. I have yet to see easy to understand and approachable education on money. Maybe something to work on . . . also for readers, if you have any links to good resources in this area please post in the comments.
C) Access to Money – It takes money to make money. The key to achieving any long-term financial success is starting with something. This is why the gifting circles are so compelling. We all need a financial launch-pad. There are a few sources that women in gifting circles can turn to such as: Mission Asset Fund, Kiva, or Indigogo. Also, you can start your own saving/lending club (like the Women’s 13 Moon Giving Circle) or your own bank!