TOP VIEW Travelers who vacation in a less-developed paradise are often motivated to use their funds and philanthropic experience to help the local citizenry. In many of these locations, a relatively small amount of money can accomplish great things. But benefactors must create local connections to prevent cultural miscommunication from thwarting their efforts.

Rauenhorst, a consultant to Deutsche Bank’s Microcredit Development Fund, also grew up in Minneapolis, where his father, Gerald, founded Opus, a real estate development company, as well as a large foundation. Through a smaller, separate family foundation that he serves as an advisor, Rauenhorst got the Kingston microfinance institution up and running in December 2003 as a partnership with St. Patrick’s Foundation and several individual Jamaican investors. "The idea was that it would be a sustainable for-profit company with a social mission," he says. They chose a structure that made a U.S. public charity the owner of the for-profit company. U.S. tax laws prohibit or restrict U.S. private foundations from owning for-profits, but permit the strategy that Rauenhorst devised. He had to tackle that challenge because microfinance projects are sustainable only if they turn a profit.

"You just have to be as creative as you can with the existing tax laws and legal structures," Rauenhorst says. His friendship with Albert helped the project managers untangle legal and regulatory knots and navigate streets subject to gang turf wars.

"I don’t go into those communities because it would be detrimental for the microfinance organization if it was perceived to be a foreign-owned or an American organization," he says. Well-established in Kingston, St. Patrick’s Foundation was able to work with everyone in the community—from gang members to business owners, who became board members and joint venture partners.

During the early phases of his project, Rauenhorst traveled to Jamaica as often as two or three times a month to recruit key staff members, sign documents and ensure that employees understood the organization’s objectives. He hired managers and loan officers from within the local community. Staff members had to master techniques and software before they could become adept at making projections—and sometimes, Rauenhorst admits, the training dragged on, testing his patience. Eventually, however, the local staffers were more motivated to meet their projections because they created them. "I think if you’re not coinvesting with local people and being as patient as they are or as understanding of the local needs as the local people are, then you’re going to make mistakes," Rauenhorst says.

The institution flirted with break-even performance several times before it finally balanced its P&L in May 2006, taking six months longer than Rauenhorst had anticipated. He says the organization has been profitable ever since, with a loan repayment rate of 99 percent. (Experts peg the industry average at more than 90 percent.)

Brown endorses the strategy of building a sense of local ownership into a charity. "In the end, what you want is for the organization to have the capacity to set its own benchmarks, to have its own goals and an ability to track, because that makes a good nonprofit or a good organization," she says. "It’s not because they need to perform for the funder. It’s because, at any point in time, they need to be able to step back and say, ‘Hmm, here’s our goal. Are we on the right track? If not, what corrections can we make?’ Most of the time nonprofits think of evaluation as something that’s funder-driven and not self-driven."

Looking ahead, Rauenhorst sees potential for expanding the program into Central America. He would revise the Kingston model chiefly by localizing the process even faster, using outside consultants for a shorter period of time and requiring even more local money for the startup organization—instead of providing 50 percent of the seed capital as he did in Kingston. Local investors will have more interest in the success of the project if more of their money is involved, he contends.