Microfinance and beyond...

IDEO launches OpenIDEO an online platform where we can design, collaborate and create solutions and social good

Tue, 24 Aug 2010 18:39:55 +0100

Earlier this month, IDEO, the leading global design consultancy launched OpenIDEO, a collaborative platform to design and create solutions to the world's toughest challenges. This platform is cool. It starts with a big question (the challenge that needs a creative solution) and uses the design process; brainstorming, conceptualizing and evaluating to create with the online community innovative solutions. A very interesting point is that anyone that collaborates can get recognized accordingly to one's contribution. OpenIDEO kicked off with Jamie Oliver's challenge "How can we raise kid's awareness on the benefits of fresh food so they can make better choices?" so tackling obesity. The second challenge is "How to increase the availability of affordable learning tools and services for students in the developing world?" by Enterterprising Schools, a project of Grey Matters Capital. It reminded me a lot of Ashoka's Changemakers in that it crowdsources ideas/proposals and let the online community collaborate to create solutions. OpenIDEO is making it easier for everyone to become a changemaker!

Introduction to OpenIDEO / OpenIDEO.com from IDEO on Vimeo.

Turbulent month in the microfinance world: Death of BANEX and the successful IPO of SKS

Thu, 19 Aug 2010 16:33:19 +0100

This month we have seen the death of a large microfinance institution BANEX (formerly Findesa), once the leading Nicaraguan MFI was forced into liquidation by the Nicaraguan Banking Superintendant (NBS) after defaulting on its creditors. Findesa was founded in 2002 had a spectacular growth and a remarkable track record til early 2008. They were granted the banking licence in September 2008 and changed its name to BANEX. The portfolio quality of Nicaraguan MFIs deteriorated very quickly in the past 2 years due to 1)the negative impact of the global financial crisis especially seen by the decline of remittances from Nicaraguans working in the USA, and 2) the "no pay movement" in the north and central parts of the country. Furthermore, Banex was hit by its product mix with high exposure to small and medium enterprises and high concentration in livestock loans. According to the national newspaper, NBS stated that all 3000 depositors of Banex were paid back in full. For more information please read David Roodman's excellent writeup and the short note from Microrate

The good news. The long awaited IPO of SKS Microfinance took place and the shares made an impressive debut on the Bombay and National Stock Exchange of India on Aug 16th. The IPO was over 13 times subscribed and the shares closed the first day with an 11% premium. The valuations are much higher than Compartamos and the topic of MFIs going public is actively debated as industry players are divided in their views.

The Stanford Executive Program in Social Entrepreneurship

Thu, 08 Jul 2010 09:27:19 +0100

From June 20th to July 2, I attended the Executive Program in Social Entrepreneurship (EPSE) at Stanford Graduate School of Business which was one of the greatest learning experiences I've ever had. The courses of this rich and intensive program were interactive and diverse covering topics such as; mission (Jim Phills), strategy and execution (Robert Burgelman), Innovation (Jim Phills), social entrepreneurship by design (Jim Patell) how to change things when change is hard (Chip Heath), building and leading effective teams (Deb Gruenfeld), the power of social media (Jennifer Aaker), role of power and influence for leading large systems change (Jeff Pfeffer), balancing social and business objectives (Bill Barnett). In addition to the inmense knowledge that the class acquired learning from the superb Stanford faculty, the participating 48 social entrepreneurs that traveled from 15 different countries learned so much from each other and formed long-lasting friendships. One such great social entrepreneur and a dear classmate, Ben Stone, from Indego Africa has written an excellent summary of this program. Thanks Ben!

Reflections after 2010 Skoll World Forum

Sun, 02 May 2010 15:39:15 +0100

This year's title (theme) of the Skoll World Forum was "Catalysing Collaboration" and I believe it fully lived up to it. The program reflected and encouraged much more interaction than in previous years. No doubt the OxfordJam programmes running parallel to the forum and the fact that many of us got stranded due to the volcano eruption resulted in further discussions and collaboration. There are many videos and podcasts for anyone who would like to see or hear some sessions. One of the most inspiring speeches was from Caroline Casey delivered at the closing plenary. Blog discussions after the Forum (see socialedge ) are also very interesting to follow. There seems to be an amazing energy and momentum which is expanding the sphere of social entrepreneurship from a "small club of unreasonable people" to mainstream. Perhaps the definition of "social entrepreneur" might not be enough to accomodate the many people that are joining the movement. Call them changemakers (as Bill Drayton refers to them) or maybe a new word like social interpreneurship (see Peter Deitz's blog): what matters is that with more people trying to make a difference and with more interaction and collaboration there is renewed hope to tackle the enormous problems that society faces today.

Socential: a Swiss start-up launches marketplace for social entrepreneurship

Wed, 14 Apr 2010 12:07:23 +0100

(Disclosure: the author is in the management team and in charge of social investment management at Socential)
Socential, a Swiss start-up has launched an online platform to connect social investors to social entrepreneurs projects aiming to empower system changing solutions to the world's social problems. The platform was launched as a pilot in January this year featuring Swiss social entrepreneur's projects and the latest release this April has featured projects from the internationally acclaimed social entrepreneur Bunker Roy from Barefoot College.

New interesting publications on microfinance

Thu, 18 Mar 2010 22:29:31 +0100

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.

Visit to Room to Read school in Laos

Sun, 28 Feb 2010 16:21:36 +0100

On February 8th we visited the offices of the Room to Read in Laos and the Napheui Primary School (90 minutes by car from Vientianne) which we supported to build with some help from our friends in Switzerland. Walking up towards the school building and hearing the children either reading out loud, responding to questions posed by the teachers, or just simply giggling made us smile. By the way, the school building has 6 rooms – 5 classrooms and a library. In Laos, primary school takes 5 years.
Even though we knew that Room to Read works effectively together with the community and the local government, actually seeing how the stakeholders collaborate was a great experience. We were received like “dignitaries” by students, local government officials and senior representatives of the village.

Some statistics that we got from the village chief’s presentation: The population of the village is 891, there are 140 families, 104 children attend “our” primary school. Officially, 57 girls, the rest boys. (p.s. it felt like there were quite a few more girls than boys at least on the day we visited) We are extremely happy that we could be part of such a wonderful project. See more pictures of the visit.

Revisiting the impact of microfinance

Sat, 16 Jan 2010 12:04:26 +0100

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

Mon, 07 Dec 2009 12:15:37 +0100

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.

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

Mon, 23 Nov 2009 11:15:03 +0100

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

Tue, 10 Nov 2009 16:58:03 +0100

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!

Sun, 01 Nov 2009 21:30:19 +0100

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?

Mon, 12 Oct 2009 10:38:06 +0100

“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

Fri, 11 Sep 2009 21:50:26 +0100

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

Thu, 27 Aug 2009 09:49:55 +0100

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.