Author Archives: microfinance

Room to Read selected as FT’s Seasonal Appeal 2009-2010

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Room to Read (RtR), a social enterprise that has been providing educational opportunities in a sustainable way in the developing world has been selected as the Financial Times seasonal appeal for 2009-2010. This is not about microfinance but RtR is an amazing organization that I have followed and featured in January 2007. Last year thanks to the sponsorship of many of my friends we supported RtR to build a school in Laos. We were impressed by the management lead by John Wood who designed a scalable and sustainable model (by partnering with the local communities) to provide education to the world’s poor children by building schools and libraries, girls’ education programs (10 year scholarships) and local language publishing programs. In less than a decade since inception RtR has built 832 schools, 7526 libraries, awarded 8786 girls scholarships, published 334 local language books and distributed 6 million books, benefitting 3.1 miliion children. John initiated RtR with a vision to provide educational access and opportunity to 10 million children in the developing world. Looks like he will reach his goal earlier than he thought. FT carried a full page article in today’s edition describing the achievements and goals of RtR. Congratulations to John and the whole team of RtR !

Kiva’s growing pains

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Today’s NY Times article on Kiva describes the recent online debate started a month ago by David Roodman’s blog titled “Kiva Is Not Quite What It Seems” which criticized Kiva’s misleading marketing on person-to-person microlending. Matt Flannery, Co-Founder of Kiva responded and reacted (by updating and improving on how Kiva explains itself to its user) to David’s blog and to the NY Times article in an admirable way. As a supporter, promoter and lender to Kiva I believe that these online debates are healthy as it promotes transparency and makes innovative enterprises like Kiva an even stronger organization. Kiva has been a poster child for social entrepreneurship and in only 4 years have been able to create a platform that facilitates individuals (over 580,000) of all ages to participate in alleviating poverty with USD 25 (just recently crossed the USD 100 million mark). The phenomenal growth and its success also attracts attention. Constructive criticism is healthy, bad PR is harmful. I believe and trust that Kiva will emerge stronger from these controversies.

Kiva loans surpass USD 100 million!

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On Oct 31st, Kiva lender loans surpassed the USD 100 million mark! Congratulations to the Kiva team especially Matt and Premal for achieving this milestone. That is a lot of 25 dollar bits. I went back to check my first entry on Kiva when I congratulated them on getting their 501(c) status which was in Sept 2006 . Kiva has achieved so much in 4 years inspiring more than half a miilion people in the world to get engaged to empower people in developing countries.

What is Impact Investing?

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“Impact investments aim to solve social or environmental challenges while generating financial profit. Impact investing includes investment that range from producing a return of principal capital to offering market-rate or even above-market financial returns. Although impact investing could be categorized as a type of “social responsible investing” (SRI) it contrasts with negative screening which focuses primarily on avoiding investments in “bad” or “harmful” companies -impact investors actively seek to place capital in businesses and funds that can harness the positive power of enterprise.” (source:based on GIIN)
I first heard this expression in spring 2008 at the Skoll Forum in Oxford described by Antony Bugg-Levine of the Rockefeller Foundation. (I thought I finally found the proper word to describe what I do, I am an impact investment advisor) A year later at the 2009 Skoll Forum, the Monitor Institute presented an excellent report titled Investing for Social and Environmental IMPACT and also A. Bugg-Levine announced that the Global Impact Investment Network (GIIN) was being formed. In Sept at the SOCAP 2009 in San Francisco one could confirm that “impact investing” had become the widely accepted expression by the rapidly growing social capital investment industry. On Sept 25th 2009, GIIN was officially launched and announced its 25 founding members of the GIIN Investor’s Council at the Clinton Global Initiative. A recent article in the Economist also profiles impact investing.
Over the past few years many new expressions have been created to describe investing for social and environmental impact and financial return. These include double or triple bottom line investing, blended value investing and BOP investing. Needless to say microfinance investments is one of the leading and successful examples of this type of investment. All these expressions are valid in their own right; however, it confuses the investors and makes it difficult to build the market mechanisms for this nascent industry to efficiently grow. It is great that we now have a clear terminology and definition and an institution such as GIIN which is dedicated to increasing the effectiveness of impact investing. Other great initiatives in this area include The Global Social Investment Exchange (GSIX) and Nexii, the electronic transactions and communication platform for the social and environmental markets.

SOCAP 2009 at the intersection of money and meaning

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I attended last week SOCAP 2009 (Social Capital Markets conference) in San Francisco which was certainly worth my trip from Zurich. I have attended the Skoll Forum for the past three years and it is the same kind of awesome energy with so many social entrepreneurs, philanthropists, investors, as well as foundations and government people aiming to find solutions together. There were over 900 attendees from 32 countries 40 panels and 100 speakers. The recent article on the Economist titled Capital Markets with a Conscience also refers to this topical subject. The keynote address was given by Sonal Shah, Director of the White House Office of Social Innovation. Topics in the panels ranged from how to measure impact investments, social stock exchanges, social innovation on the web, and the broad spectrum of social capital (from philanthropy to hedge funds). There are many blogs on SOCAP but I would highly recommend the coverage by the team of nextbillion.

A MUST READ- The Blue Sweater by Jacqueline Novogratz

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Jacqueline Novogratz is founder and CEO of Acumen Fund a very successful and fast growing nonprofit venture capital firm for the poor that invests in sustainable enterprises bringing healthcare, safe water, alternative energy, and housing to low income people in the developing world. She founded Acumen Fund in 2001 and by the end of 2008 this firm had approved more than $40 million on investments in 40 enterprises serving the poor, creating through these enterprises 23,000 jobs providing basic services like water and life saving malaria bed nets to millions of low income people around the world. Her book The Blue Sweater -Bridging the Gap between Rich and Poor in an Interconnected World-is an inspiring memoir of a woman who left a career in international banking to spend her life on a quest to understand global poverty and find powerful new ways of tackling it. Many important lessons can be learned just by following her heartbreaking and hilarious stories of starting a microfinance institution and a bakery in Rwanda. Also the book is packed with examples that teach us humility and that good intentions alone are not enough as described through some failed programs of traditional charity that have left the poor people in the same or worse conditions. One also learns about the Rwandan genocide through the stories of the survivors that Novogratz had worked with. The book is inspiring, educational, entertaining and a must read for everyone and especially for those who aspire to make a difference.

Microfinance continues to grow despite the crisis

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Last week as I updated the figures on 2 representative microfinance investment funds, 3 MFIs, and kiva, the online microlending site, I was very pleased and relieved to see that microfinance continues to attract funding despite the current crisis. Although it is a small sample these funds and entities were featured in my book “Kleiner Einsatz, grosse Wirking (small input, large impact)” that was published last April. As I plan to publish the English version soon I thought I shall update some figures. As to the assets managed by the two funds (Dexia Microcredit Fund managed by BlueOrchard Finance and responsAbility‘s Global Microfinance Fund) my text read “the assets of the two funds have ballooned between end of 2004 to Sept 2007. Dexia grew from USD 50 to 207mn and responsAbility’s fund from USD 8 mn to 159 mn” The corresponding figures for July 2009 are Dexia USD 502 mn and responsAbility USD 492 mn! The 3 MFI figures that I updated were: 1) Grameen Bank which had disbursed as of Sept 2007 loans totalling Taka 344 bn or USD 6.5bn. in June 2009, these figures were Taka 458 bn or USD 8.2 bn, 2) FINCA I updated the number of borrowers from 600,000 to 725,000, and 3) Banco Compartamos the figures for June 2007 – loan portfolio of Pesos 3.3 bn or USD 304 mn reaching 705,000 clients. The updated June 2009 figures are loan portfolio of Pesos 6.7 bn or USD 517 mn and reaching 1.3 mn clients. Lastly, Kiva, the online microlending site where anyone with an internet connection can support a microentrepreneur around the world starting with USD 25, continues to register phenomenal growth. In February 2008 Kiva had provided USD 21.5 mn worth of loans from 242,000 lenders. Only 18 months later as of August 2009 Kiva has distributed over USD 85.3 mn loans from 537,000 lenders.
It is a selected group of entities but the growth rates are amazing.

Solar-aid, fighting climate change and global poverty

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SolarAid is an innovative enterprise that aims to combat two of the major threats that humanity faces today; climate change and global poverty. They do so by providing clean renewable energy to the poorest people in the world. According to SolarAid about 2 billion people have no access to electricity-they rely on burning kerosene and wood which are highly toxic and expensive. SolarAid aims to replace these carbon-emitting products with solar power which is more economical and environmental friendly. Their projects include 1) Sunnymoney Micro-franchising (training microentrepreneurs in Kenya to assemble/repair and sell solar products that would reduce their dependency on harmful and expensive kerosene. 2) Solar powered water pumps– this project will test a new solar powered water pump, that will allow families to access clean water for drinking, washing and irrigation 3) electrifying Malawi communities with solar energy.
Although SolarAid is a relatively new venture it is worth keeping an eye on as they are in one of the most interesting areas tackling both poverty and renewable energy.

Framework for a better future: lecture by Muhammad Yunus

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Prof. Yunus, Nobel Laurete and founder of Grameen Bank gave an inspiring lecture titled “A Framework for a better future: the promise of social business” on May 29th at the British Council. He continues to strongly promote the creation of social businesses as these can address and solve the problems of poverty, health care and environment. Prof. Yunus gave examples of social businesses he has been creating in Bangladesh. In addition to the well know Grameen- Danone (joint venture manufacturing affordable yoghurt full of micronutrients for children in Bangladesh) he mentioned Grameen-Veolia (Veolia is a French water company) creating small water treatment plants and BASF-Grameen which will be providing treated mosquito nets at very little cost. He also mentioned the eye hospitals and a healthcare program to create a nursing college as a social business. In the area of environment Grameen Shakti has been providing affordable solar home systems in Bangladesh for the poor.
Prof. Yunus call for social business is very timely as the current financial crisis is forcing us to think how can we improve or rebuild the financial system so that it is an inclusive system that would include the majority of the people. You can see the transcript and videos (youtube) of the lecture.

Follow-up visit to Luisa’s bakery in Guatemala

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On April 23rd I visited the bakery of Luisa and Luis in Tecpán, Guatemala. Luisa is a client of Fafidess, a leading MFI in Guatemala that provides microcredits, training and technical assistance to groups of Guatemalan indigienous women with limited resources. My last visit was back in August 2005. The business has been growing steadily on the back of new acquisitions of institutional clients (hotels and restaurants in the area). Monthly sales have more than doubled from Q 16,000 to Q 35,000 (USD 2000 to USD 4375) during this period. There were two other areas where a lot of progress could be seen. As the business increased its clients to hotels and restaurants that need invoice, the bakery has slowly moved to the formal sector and now they hire an external accountant for bookkeeping. The other change which impressed me the most was on the education of the children. In 2005 Luisa’s 3 older daughters: Angela, Rosy and Carmen (who were then 17,15 and 13) were helping at the bakery so they could only attend Saturday/Sunday school. Nelson the only boy at 9 years old was attending full time school and the youngest girl Sonia, 5 years old was at home. I had asked then Luisa if Sonia would be able to attend full time school next year. Luisa said maybe. During our current visit, Nelson and Sonia came back from school wearing their uniforms. Yes Sonia is now attending full time school. Furthermore, Angela, now 21 has finshed the weekend school and told me she wanted to enroll to University to study business administration! See photos of this visit.