Category Archives: microfinance

Thank you Professor Yunus

AtGrameenBank_2.jpg On May 12th, Nobel Laureate Yunus Muhammad resigned from Grameen Bank after a two and a half month battle with the Bangladesh government which was determined to remove him as the head of the successful bank he created. It is a sad and unjustified chapter for Prof Yunus but this shall not discredit what the microfinance movement has accomplished and its continuing positive impact. Prof Yunus addressed his colleagues a letter on his departure, asking them to to remain strong and united.davos 2010 001.JPG I thank Yunus for his wonderful and inspiring work which lead me (and many others) to move from mainstream into the world of social enterprises. I have no doubt that he will continue impacting lives through his work in creating social businesses.
IMG.jpg Just two days before, on May 10th, I attended an exhibition on “How I can make a difference” by the 5th graders at the Inter-Community School in Zurich. This is a programme that requires that students engage in a collaborative, transdiscipplinary, inquiry process that involves them in identifying , investigating and offering solutions to real-life issues or problems. Connor Frey, one of the bright 5th graders (and the son of my friends Ali and Markus) had chosen “microfinance” as his topic. A month ago I was interviewed by Connor on this subject. I was very impressed and moved to see Connor’s exhibits about microfinance, the history, about Yunus Muhammad and the pamphlete he made on the dos and don’ts on investing in microfinance. He is passionate about the subject and spreading the word! Great job, Connor. I could not stop thinking that Yunus would have enjoyed seeing his exhibition.

Skoll Forum 2011

A belated report on the Skoll Forum 2011. This year’s main theme was “Large Scale Change” . Lots of content. I recommend the selection of superb blogs, and in highlights you can find all the sessions and plenaries as video or podcasts. It was nice to have been able to attend Skoll forum for the 5th time in a row as initially I planned to be in Japan teaching social entrepreneurship for the YES Japan Creating Drivers for Sustainability program (which was understandably cancelled due to the triple disaster). My takeaways: of course the optimistic, positive energy that always flows at Skoll Forums, networking, the interactive meetings at Oxford Jam and last but not least connecting with Shino (Japan Research Center), Ichi (Social Media) and Patrik Meier (Crisis Mapping, Ushahidi) to discuss and share information on how to support Japan in the wake of the recent triple disaster.

The microcredit crisis in Andra Pradesh, India

The microcredit crisis in India has been unfolding since mid October when the state of Andra Pradesh issued an ordinance to crackdown on microlenders. The ordinance required that all microlenders cease disbursing and collecting loans, register to the authorities and declare the interests charged. The state was concerned with the explosive growth of loans and around 50 suicides reports by rural men and women that were attributed to overindebtness. Although some of the MFIs have been able to resume their activities this kneejerk reaction by the state of Andra Pradesh has sent the industry into a crisis and is more likely to do harm than protect the poor borrowers. Shares of SKS Microfinance which had a successful IPO in August this year has been plunging and is currently less than half of its peak in September.The Indian microcredit industry is the largest in the world. The state of Andra Pradesh is the center of microcredit in India and home to India’s largest MFIs such as SKS, Spandana, BASIX and Share Microfin as well as the government nurtured Self-Help Groups or SHGs. There has been excellent writeups on this subject and background which I can highly recommend.
- Indian Microfinance Crisis of 2010: Turf War or a Battle of Intentions? Intellecap White Paper
- Who is the Culprit? Accessing Finance in Andra Pradesh, CGAP
- India’s Microfinance Crisis is a Battle to Monopolize the Poor, Vineet Rai, HBR
- Backgrounder on India’s Microfinance Crisis, David Roodman

A great debate on microfinance at CGI

This I believe will become a “classic” or the debate between “who should benefit from microfinance”. My humble opinion…I think that both have valid points and there is enough room for both ideals as there are so many people in need for basic services at the BOP or bottom of the pyramid.

Watch live streaming video from cgi_plenary at livestream.com

Kiva.org extends it services and start (pilot) offering student microloans

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Kiva.org, the world’s first microlending website announced today its entry into the education field by offering a pilot for student microloans in 3 countries. So beginning today anyone can make a loan starting at USD 25 to students that are selected by Kiva’s first 3 education field partners; Fundacion Paraguaya (Paraguay) IMPRO (Bolivia) and Ameen s.a.l. (Lebanon). Kiva.org an innovative social enterprise created a movement to connect people around the world through lending to alleviate poverty. In only 5 years, Kiva.org has provided over USD 160 mn in loans to 415,000 microentrepreneurs around the world and these loans (which are as little as USD 25) have come from close to half a million lenders spread in 206 countries!
“The pilot was born as a natural extension of Kiva’s mission to connect people, through lending, to alleviate poverty. Kiva Student Microloans give recipients the opportunity to gain new knowledge and skills through higher education or vocational training. As a result, these individuals will be better positioned to find jobs, support their families and grow their communities — and ultimately make a real difference in the relief of global poverty.” (source: Kivablog)

New interesting publications on microfinance

Some interesting reports/studies have been recently published. This was brought to my attention by Microcapital.
Microfinance’s Midlife Crisis from the Wall Street Journal , Assessing the Role of Microfinance in Fostering Adaptation to Climate Change by Shardul Agrawala and Maëlis Carraro, and Microfinance and Inequality by the Macrothink Institute written by Hisako Kai and Shigeyuki Hamori.

Revisiting the impact of microfinance

A number of studies and articles have been appearing since last year questioning the impact of microcredit – microfinance. One of the most recent reports “Does Microcredit Really Help Poor People?” written by the seasoned microfinance expert Richard Rosenberg provides an excellent overview of the studies and his view on this subject. According to this report the claim in doubt is whether microfinance (or the microloans) is the cause for the economic improvement (increase in income and consumption, moving people out of poverty) as well as positive impact in health, education and social empowerment. The problem being that scientific testing of the impact of microcredit is very difficult (and therefore proving the claims are difficult). Rosenberg ends the report with the following words;

“Small one-time subsidies – leverage large multiples of unsubsidized funds – producing sustainable delivery year after year of highly valued services that help hundered of millions of people – keep their consumption stable, finance major expenses, and cope with shocks – despite incomes that are low, irregular, and unreliable.
All and all isn’t this a pretty impressive value proposition, even if we eventually find out that microfinance doesn’t raise income the way some of its proponents have claimed?”

In retrospect, it is very likely that in the past years the rising popularity of microfinance and its impact had become over-blown. Proponents of microfinance (including this author), in their quest of raising awareness of this powerful and effective tool to improve the life of the BOP, have been too enthusiastic and most likely also helped create the overhyped state. So the recent critical articles are deflating the overly high expectations that were built on microfinance and its impact. This is a healthy sign. I thank David Roodman and his excellent open-book blog which has been providing a critical view on the many issues surrounding the impact of microfinance.

Book: Microfinance and Beyond: Introducing microfranchising and social businesses

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This book introduces innovative social/business models that provide sustainable solutions to the problem of poverty and portrays the insipiring people behind them.You can find an update on microfinance, BOP (base of the pyramid) initiatives, and microfranchising all which are improving the lives of the 4 billion people living at the BOP. VisionSpring, an innovative social microfranchising enterprise with the mission to reduce poverty and generate opportunity through the sale of affordable reading glasses is featured as a model case. The aim of this book was to share my insights on 1) how the business and social worlds have been converging, setting the stage for these innovative models to emerge, 2) how these models, together with the advent of Web 2.0, are creating a strong and positive movement towards a more responsible, sustainable and kinder world and 3) how all of us could make a difference.
This book is the updated English version of the German book that was published last year. I used lulu.com to publish this and I can recommend it.

Kiva’s growing pains

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.