Dale Dawson was impressed. His guest was warm and charming, a short, solid man with a quick smile and easygoing manner, who had traveled to Little Rock, Arkansas, from the mountain country of northern Rwanda. Beneath his navy blue suit was a purple shirt topped with a starched white collar. A large gold cross hung from his neck. Dawson’s guest was John Rucyahana, the Anglican bishop of Shyira.
The two men sat with their wives in Dawson’s living room. The couples chatted as the sun began to set on a beautiful October afternoon. Dawson described how he was losing enthusiasm for his work, and how much he craved a new challenge. The conversation drifted to other topics. Rucyahana detailed his hopes for a school he had just started. It was 2002, less than a decade since the Rwandan genocide had left 800,000 dead. Rucyahana was in the States fundraising for Sonrise School, a boarding school intended for children orphaned by war or AIDS.
“But,” said Rucyahana, “if Rwanda doesn’t have a vibrant economy, it won’t matter how good the school is. If Rwanda cannot provide opportunities to work, to build businesses, then all of these students, our best and brightest, will move to Europe or North America. You’re a businessman. You’ve built businesses. Why don’t you build businesses in Rwanda?”
Dawson was impressed. He had been impressed by the bishop’s intelligence, and warmed to Rucyahana’s enthusiasm. But he sensed something else, something more elemental.
Dawson sensed he was in the company of a fellow entrepreneur.
Accounting for Success
“I remember thinking, ‘My dad is the hardest-working man in this town,’” recalls Dawson. “That was pretty cool.” Dawson spent many mornings with his father, starting at 3:00 a.m., delivering milk throughout the town of Snyder, Texas. By his daily example, Dawson’s father taught all three of his sons the virtue of hard work. But he was also teaching them something else. As an independent contractor, he was teaching them how to harness their talent toward the creation of value. It was a lesson in entrepreneurship.
Dawson eventually went on to the University of Texas, where he became (in his words) “a Jesus-freak hippie.” He grew out his hair, lived in a group house, and studied psychology. All that changed one day, as he listened to some clean-cut fraternity brothers complain about how hard their accounting classes were. (What really caught Dawson’s attention, though, were the attractive young ladies alongside them.) Dawson decided to cut his hair and switch majors. In 1975, he graduated with a master’s in accounting.
Dawson moved to Dallas and took a job with Peat Marwick (later KPMG). He was fascinated by the complexities of corporate insurance tax, and immersed himself in the subject. In the early 1980s, Dawson’s practice surged as a result of a series of mergers and acquisitions within the insurance industry. Eight years into the job, he was made national director of KPMG’s insurance practice. But he felt himself starting to get restless. At that point, when Dawson was in his early 30s, one of his clients approached him with an offer. Would you, he asked, be interested in joining us?
“I was not a philanthropist in any form or fashion . . . But I was looking for something to get excited about.”
The client was Jackson T. Stephens, a legendary figure in Little Rock. Jack Stephens was the chairman and CEO of Stephens Inc. Under his leadership, Stephens became one of the nation’s 10 largest investment banks, and the largest off Wall Street. (“The Lazard of the South,” says Dawson, “a quiet, behind-the-scenes powerhouse.”) Stephens worked closely with Tyson Foods, Alltel, and J. B. Hunt Trucking. In 1970, Stephens underwrote the initial public offering for Wal-Mart.
For years, Jack Stephens had been advising friends and associates about potential merger and acquisition opportunities. “But,” smiles Dawson, “he always felt awkward about handing them a bill. That’s why they hired me.” Dawson started at Stephens in 1985, building Stephens’ M&A advisory practice. Business boomed. A year after Dawson started, Stephens led Tenneco through a $1.5 billion divestiture. Three years later, with Stephens’ guidance, Tyson Foods acquired Holly Farms in a $1.5 billion hostile takeover. Dawson’s position within the firm rose. He was soon head of the investment banking practice.
As Dawson approached his 40th birthday, he sensed it was time for a new challenge. In August 1991, Dawson bought TruckPro, a Memphis-based distributor of heavy-duty truck parts. He knew nothing about the industry. “It turned out to be a very poor acquisition,” he chuckles. “But my entrepreneurial streak got the best of me.” Three months after the acquisition, his CFO told him that bankruptcy was a real possibility.
Dawson refused to believe it. He immediately got to work, overhauling entire departments. He re-tooled accounting, inventory management, human resources. He taught store managers how to read financial statements. He scrambled day after day, just trying to keep the enterprise going.
He pulled it off. When Dawson bought the company, annual sales were about $60 million. Within a few years, TruckPro was the nation’s largest independent distributor of truck parts. By 1997, with 43 stores in 14 states, it enjoyed $132 million in annual sales. Dawson knew he had turned it around. In March 1998, he sold TruckPro to AutoZone.
“After I sold the company,” explains Dawson, “I retired for a year or so, but then got bored.” He went back to Stephens in 1999. For the next four years, he ran the investment banking practice while still undertaking private equity investments. “But after I sold the company,” he says, “I mysteriously lost my passion for doing another deal. My learning curve had gone flat. My energy dropped. I felt like I was treading water.”
Dawson once again felt the need for a new challenge, yet had no idea what form it should take. “I was 50 and experiencing what serial entrepreneur Bob Buford calls ‘Halftime.’ Like a lot of businessmen, I reached the point where everything I’ve ever wanted to do, I’ve done at least once. Work was no longer what it used to be. I just lost the passion. So I resigned. I went home and said, ‘Okay, God. What do You want me to do?’”
It was about that time that Dawson met Bishop Rucyahana. “It was one of those conversations that sparked an idea,” he recalls. “I was not a philanthropist in any form or fashion. I didn’t do any mission work. I had never worked with the poor. I had never been to a developing country. But I was looking for something to get excited about.”
Dawson began to think long and hard about the bishop’s challenge. “I started to think quite a bit about how I could use business to do something transformational—even in a place that can seem as hopeless as Africa.” To his mind, the real challenge was finding the right opportunity. What kind of a business would really make a difference? “I thought about going to Rwanda and opening up a game-safari lodge or a manufacturing plant,” he says. “But I didn’t see how the idea could really grow to the point of making significant social progress.”
The question of how to bring jobs to Africa remained at the forefront of Dawson’s mind. A few friends suggested that he look into Opportunity International, a nonprofit that offers financial products to millions of people throughout the developing world. “Just on the spur of the moment, I went to an event that Opportunity held down in Florida,” says Dawson. “I didn’t have a clue who they were or what they did. But that weekend changed everything for me. Right away, I saw the potential good that could come from providing financial services to poor entrepreneurs. It struck me as easily scalable, with enormous, transformative potential. Most importantly, it was something that I knew I could become really good at. It was in my skill set.”
Throughout 2004, Dawson immersed himself in the theory and practice of microfinance. Opportunity International gave him a good, thorough grounding in the subject. He read everything he could lay his hands on. He went to Latin America. He went to Africa. He attended a microfinance seminar at Harvard. He visited several different microfinance organizations in the United States, trying to understand what differentiated them. “By the end of 2004,” says Dawson, “I felt pretty confident that I understood what microfinance did, what the challenges were, what it needed—and what the potential was.”
By late 2004, Dawson started volunteering as a spokesman and fundraiser for Opportunity International. (“It was like being an investment banker on an IPO road show.”) “This was not a tough sell to a lot of guys in business. They would get it right away,” recalls Dawson. “The one question they would often have was why this couldn’t be done by for-profit companies. I think the answer is that building businesses in a developing country carries significantly higher risk, much greater uncertainty, and a prolonged ramp-up period. Charitable donations are a patient form of capital that can deal with those three variables; market-driven capital generally cannot.”
Bringing M&A to Kigali
Mindful of Bishop Rucyahana’s challenge, Dawson wanted Opportunity International to go to Rwanda. Until then, the country had not really been on Opportunity International’s radar. But by early 2005, Dawson had built up enough credibility that the leadership told him if he wanted to conduct a feasibility study for a bank in Rwanda, they would provide him with the staff to undertake it. “Early in 2005, we did a very thorough due diligence,” notes Dawson. “Opportunity was impressed with Rwanda. The business environment was attractive, the government was stable. There was a need for an institution that could provide savings accounts for people. The government was supportive. And there was no dominant player already in the market.”
Dawson wrote a prospectus—“just like I would if I were doing a private placement offering”—and started working with funders. “We were estimating, based on the performance of other banks in Africa, that it would take about three years to get a bank to a point where it was profitable. Between the required initial capital and the projected losses, we figured we would need $5.5 to $6 million.” As funding for the effort came into place, Dawson began to assemble a leadership team. A commercial banker in Little Rock and a CFO at a local private equity firm both volunteered to move their families to Rwanda in 2006 to help Dawson start the bank from scratch. The board of Opportunity International approved the project in mid-2005.
“Now,” smiles Dawson, “being an investment banker with a background in mergers and acquisitions, I always thought that growth through acquisition looked like a good deal. We discovered that there were several microfinance organizations in the country, but none of them were very big, and they weren’t very well-capitalized.”
Soon Dawson discovered a potential bank partner. It was called Urwego, meaning “ladder.” The bank had been started by two nonprofits based in the United States, World Relief in Baltimore and Hope International in Lancaster, Pennsylvania. Together, the two organizations had founded Urwego in 1997. “It had grown to maybe 15,000 loans,” states Dawson, “but it was not profitable. It needed more capital to grow. It needed better information technology. More professional management. It was a lot of help for a lot of poor families. But it lost money. It wasn’t sustainable.”
“In late 2006,” Dawson explains, “just as we launched our bank from scratch, the Urwego people said, ‘Let’s do a deal. Let’s merge these two.’ That took another nine months to work through the negotiations. We discovered that there was no precedent for corporate mergers in Rwanda. We discovered that Rwanda, at that time, used French corporate law and French accounting practices. Everything just took a long time.”
In July 2007, the two parties merged Urwego into the Opportunity Bank, re-launching as the Urwego Opportunity Bank of Rwanda, a for-profit commercial bank. Ownership is divided among three nonprofits based in the United States: 50 percent Opportunity International, 25 percent World Relief, and 25 percent Hope International. “This is a market-driven institution,” says Dawson, “but at the same time, nobody’s interested in taking out dividends or selling the stock. The interest is in continuing to reinvest it back into serving the people of Rwanda, particularly those at the base of the pyramid.”
The ownership arrangement means that, if the bank were to need more capital, it could borrow or raise the money. It allows the bank to think more strategically about its mission. “If you want to develop profitable services and products for people at the base of the pyramid,” says Dawson, “you need to spend money on the front end. You can’t just introduce a product to poor people. You have to figure out how to do it profitably.”
Banking from the Bottom Up
“In 2011, the bank was profitable,” reflects Dawson. “It’s been phenomenal. It’s a sustainable enterprise. It has 40,000 outstanding loans. The average loan is for $300. We have a $12 million loan portfolio; it’s the highest quality portfolio of any bank in Rwanda. Of our loans, less than 1 percent are more than 30 days overdue. The bank employs 235 employees, all of whom are Rwandans—except for the CEO. He’s from South Korea.”
Today, Urwego has eight full-service branches located throughout the country, in addition to loan-production units in each of Rwanda’s 30 districts. With Rwanda’s booming economy, it is now beginning to make larger loans. “We’re now starting to make $5,000 and $10,000 loans,” says Dawson. “We’re moving upscale, identifying the best entrepreneurial talent within our customer base, which is very healthy for the country.”
Perhaps the most successful new product that Urwego Opportunity Bank has introduced to the Rwandan market is the savings account. “Rwanda studied the Asian tigers,” Dawson observes. “Rwanda’s leadership realized that getting your population to save helps create a social-safety net that otherwise isn’t available. It allows people to handle emergencies—buying medicine, covering people between jobs.” When Urwego opened its doors, 95 percent of Rwandans had never set foot in a bank. To open a savings account, one needed passport pictures; one needed to be literate. The minimum capital requirement was equivalent to a year’s salary.
“We set up a bank where poor people could come into our bank and open accounts,” says Dawson. “If they were illiterate, we’d fill out their paperwork. We took their photographs using cameras on our computers. We have fingerprint technology that matches their account to their fingerprints. When they come back to the bank, they can go to a teller window, put a finger on the reader, and their picture will pop up. That’s how our teller is able to identify customers.”
The savings account program got underway in 2007, and now enrolls 120,000 people. The average account holds $60, meaning that almost $7 million is now secured in a bank instead of hidden under somebody’s mattress or buried in her backyard. Those assets provide safety and stability to tens of thousands of families—and the security for future loans, future entrepreneurial initiative.
Building Bridges to Rwanda
Following the success of Urwego Opportunity Bank, Dawson has expanded his work on business formation in Rwanda. He now spends half the year in Rwanda, much of it with Bridge2Rwanda, a nonprofit business incubator he launched in Kigali that works to facilitate business development, promotes private enterprise in Africa, and brings American business leaders to Rwanda. “If anything,” says Dawson, “I’ve become increasingly convinced that the most transformational thing we can do for Rwandans is to get foreign investors coming into these countries, building businesses, and training the young people.”
The business development group works to create and scale successful business while expanding the country’s global network of investors. “We helped start a coffee mill and an exporting business,” says Dawson. “We helped start a commercial egg operation. We’re looking at starting a hotel management company.” Entrepreneurship, he suggests, is an easy sell in Rwanda. “I can find hundreds of thousands of young people, particularly young women, who will work harder, longer, and sacrifice more than anybody I’ve ever known. This is a country with enormous entrepreneurial potential.”
Working to capitalize on that potential is the Isoko Institute, funded by Bridge2Rwanda and the SEVEN Fund. Isoko—which means “marketplace” in Rwanda’s native language—promotes enterprise solutions to poverty, from advocating public policies conducive to sustainable private growth to providing business training to aspiring entrepreneurs. It has encouraged and reported on the work of business students from MIT, Rice, Babson, and Johns Hopkins. It has helped bring Rwanda’s best math and science students to American universities.
Cross-cultural interaction is important to Dawson. “I think it’s vitally important that American business people come to Africa and build businesses that are American-owned and operated,” he explains. “I used to believe it was enough to support Africans, that we should serve the needs of the poor by coming over and teaching them. We should be a coach or a philanthropist. Not anymore. Now, I’ve come more to the belief that we have greater impact when we come over and just build successful businesses.”
Every year, Dawson recruits a few young American investment bankers and moves them to Kigali. There they start businesses and recruit some of the most promising young Africans to work in their analyst programs. “If you’re a machine-parts manufacturer or a hotel management company, you can accelerate the progress in these countries by coming over here and just building a for-profit business,” he says. “Do business here. Start recruiting, hiring, training, developing the young people of this continent. Make them into the managers of the businesses that you built. In a generation, those young people will be running those businesses. Then they’ll start their own. And they’ll do it at a level that’s competitive with the rest of the world.”
“I’m an investment banker and entrepreneur,” concludes Dawson. “I’m always looking out for people who I think are inspiring leaders, entrepreneurs, and visionaries. I want to find people who make big plans and actually execute on them. Before I invest in people, I like to meet them, to look into them, into their heart and their vision. These days, I’m invested in Rwanda. I’ve met a lot of entrepreneurs there, starting with Bishop Rucyahana. I was impressed back then, and I’m more impressed every day.”