Category Archives: microfinance

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.

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.

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.

Impact of financial crisis on microfinance

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How is the financial crisis impacting microfinance institutions (MFIs) and their clients? What can the microfinance industry do? These were the questions addressed at the virtual conference hosted by CGAP between Nov 18-20. There were 600 MFI managers, central bankers, investors, and advisers from 34 countries and the150 entries submitted by these participants provided a vivid and powerful picture of what is going on. According to the summary sent out by Elizabeth Littlefield, Director and CEO of CGAP,

“The dominos of the crisis-credit crunch, inflation, currency dislocations and global recession- are hitting microfinance in very different ways, depending on location, funding structure, financial state and the economic health of their clients. While many places seem unaffected today, there is little doubt that there will be impact: integration of microfinance into the mainstream does have costs.”

Other salient points from the summary report were;
-deposit taking MFIs are well-insulated from the crisis
-immediate concern is how the global liquidity contraction will affect the cost & availabilty of funding to non-deposit taking MFIs
-institutional investors in microfinance are not seeing significant redemptions but they do expect fundraising to become more difficult in the coming months
-advice to MFIs included: increase reserves, cut back on growth and focus on portfolio quality, make sure loan officers are informed and attentive to client needs and communicate early and often with lenders and investors
-concerns about overreaction by policymakers
-amid the anxiety some optimism…as some markets had become overheated so slower growth, tighter credit more conservative policies, better products and even consolidation of weaker institutions may be beneficial in the long run
I logged in during the 3 day conference and one positive impression was how the industry of microfinance (the players) continue to be willing and passionate to share and give information for the improvement of the whole industry, an attitude that the mainstream should learn from microfinance.

Hapinoy Stores: a promising microfranchise (microventure) from the Philippines

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Hapinoy envisions to become the largest chain store (franchise) of small convenience stores (known as sari sari stores or variety stores in the Philippines). Their aim is to empower microentrepreneurs and help them grow their business. There are roughly 700,000 sari-sari stores in the Philippines and the idea is to convert some of these stores into Hapinoy branded stores. The microentrepreneurs who join this franchise will have access to microfinance (business loans) as well as training for standarized operating systems. Another benefit would be the opportunity to increase sales through new businesses and services brought in by Hapinoy through partnerships. Hapinoy works closely with MFIs (CARD-MRI, TSKI, Kasagana-ka, LMPC) and also partners with manufacturers and service providers (Nestle, Unilever, Colgate-Palmolive, Smart Communications etc).
Hapinoy is the first venture by MicroVentures Inc, a social business enterprise founded by Philippine leaders from the social development sector and the business sector. MicroVentures seeks for positive change in the Philippines through empowering microentrepreneurs and pushing the social business enterprise agenda believing that making profit and creating positive change can go hand in hand.
Hapinoy is a promising venture that one should keep an eye on. I learned about Hapinoy as I met Markus Dietrich who will be working for Hapinoy as a consultant based in Manila for one year starting this October.

Citi and Ashoka’s Changemaker launch a global competition “Seeking Financial Solutions for All”

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Ashoka’s Changemakers and Citi have launched a competition titled ” Banking on Social Change- Seeking Financial Solutions for All” to invite entrepreneurs from around the world to find and create innovative projects that will enable everyone to have access to financial services. Entries are accepted until October 1st.
Ashoka is a leading innovator for social change as it finds, fosters and connects the world’s leading social entrepreneurs-men and women with system changing solutions for the world’s most urgent social problems. Changemakers, an initiative by Ashoka, has been building the first online “open source” community that co-creates and implements the best solutions for social problems through collaborative competitions. Changemakers hosts competitions on a wide spectrum of social problems where innovative solutions are desperately needed. The current competition was launched in mid-July and in the first 4 weeks 34 entries from 11 countries have been submitted. Anyone can view the entries, enter a discussion or nominate a project. If you would like to showcase your innovation, share your insights or simply learn about solutions go to Changemakers.

A hot dialogue/debate on “Philanthrocapitalism”

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A lively debate has been sparked by Mike Edward’s new book “Just Another Emperor-The Myths and Realities of Philanthrocapitalism” where he challenges the increasing use of business thinking in philanthropy and the current hype about it. It is in fact a controversial topic but certainly a healthy debate. I got to know about this topic as I follow Nextbillion where now the whole team is writing their comments on this subject.(highly recommended read). Also there is an on-line debate on this subject hosted by Global Philanthropy Forum. Here you can read comments from Matthew Bishop from the Economist who coined the word “philanthrocapitalism” and has written a book with Michael Green titled “Philanthrocapitalism: how the rich can save the world” coming out this fall.
I believe strongly that today there is a powerful movement of making the world a better place (the subject of my latest book) which has been accelerating due to the converging business (for-profit) and social (non-profit) worlds. Both worlds offer principles and methods in different areas that they ought to learn from each other. It is important to sort out what can be used most effectively from each world. I think that this is a timely debate and look forward to see the outcomes.

Learning more about microfinance: training programs/field visits/conferences

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Where can one go to learn more about microfinance? Is there enough capacity (trained staff and managers) to cope with the explosive growth of the microfinance industry? Of course there is no limit (only one’s own time) as to how much one can learn through the internet (ie CGAP, mixmarket, microfinance gateway or the UNDP Microfinance Distance Learning Program) but, there are also an increasing number of institutions that offer training programs around the world.
For programs/courses: Boulder Institute of Microfinance(creating a platform for dialogue and critical thinking in microfinance), Microfinance Center (programs for practitioners in Eastern and Central Europe), School of Applied Microfinance (provides 2 week training courses for MFIs in East Africa), Harvard Business School & Accion Program on Strategic Leadership for Microfinance (executive education for directors of MFIs), and Frankfurt School of Finance and Management which runs the Micro Banking Summer Academy. One excellent institution, Microfinance Management Institute (MFMI) is building a community to foster development of human resources for the microfinance industry through the creation of learning tools and programs. They also provide courses for funders as well as integrating microfinance courses into the curricula of premier graduate management programs in developing countries.
If one’s interest is to get familiar with microfinance by going to the field there are many microfinance institutions that provide visitors programs. I have visited 2 of these which were excellent. BRI in Indonesia and BRAC in Bangladesh.
For international conferences the easiest way to see these are on the website of the microcapital, the top newsletter of microfinance investments.
So don’t wait if you want to learn more about microfinance get started now!