Posts Tagged ‘microfinance’

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It’s All in the Wrist

Wednesday, May 25th, 2011


(credit: JASON ANFINSEN)

Going to Bonnaroo this year? Prepare to wear your credit card on your sleeve. Er, wrist. Concert producers have switched from a paper-based to a microchip-based ticketing system, which means you’ll be wearing your right to be there in a little plastic bracelet on your wrist.

But wait, there’s more! Concertgoers can also choose to embed their credit card information in their bracelets, so they’ll be able to pay for stuff without searching for their wallets. (We all know how much of a hassle that is, right?)

You’ve got to love how easy it’s becoming to spend money. Okay, maybe it’s not such a good thing for our budgets (or our souls) here in the U.S., but think about the implications for people who live in countries with developing economies… Technology like this could eliminate a lot of hurdles to economic participation – kind of like how the invention of the cell phone ended up democratizing long-distance communication in Africa. (In 2005, 1 in 11 Africans had a mobile plan; only 1 in 33 had a land line.)

Broken Windows, Weird Weather, and Lonely Protests… TILE Two-Liners 1.3.11 >> 1.7.11

Wednesday, January 5th, 2011

MONDAY

TUESDAY

  • Microfinance took off in India, then crashed, and is in the process of burning. Extremely high interest rates + lending to people with absolutely no plan for repayment = government crackdown. (NPR)

WEDNESDAY

  • “[Uptown Manhattan private school] Dalton was kind of like that parent who, rather than play with their kid and encourage and grow their curiosity, brings it to the doctor and gets them Adderall instead.” (The New York Times)
  • Even if you don’t have a permit for a protest in Russia, you can still hold your sign up alone. (The Washington Post)

THURSDAY

  • The South Bronx fought hard against urban blight in the 1970s, but the real estate bubble burst and there are more broken windows on the block these days. (The New York Times)
  • Electric car technology now valuable enough to warrant corporate espionage! (The New York Times)

FRIDAY

  • Apparently the definition of “normal” weather changes every so often. In case you haven’t noticed, it’s changing now. (The New York Times)

Microfinance Hits A Wall In India

Wednesday, November 24th, 2010

The great microcredit experiment in India was a wild success… but now it’s on the verge of collapsing entirely.

  • Politicians in India are accusing microfinance institutions of taking advantage of poor borrowers, and encouraging borrowers not to pay back their loans.
  • Microcredit is one of the only ways that poor people around the world can get loans to start small businesses. And in India, microfinance has become a booming industry in recent years.
  • Unfortunately, many people who receive microloans won’t be able to pay them back. So the loans tend to be really small, and their interest rates are really high. That means that entrepreneurs who do pay back their loans cover the cost of those who don’t pay.

Facts & Figures

  • Indian banks have about $4 billion tied up in the microfinance industry
  • In the past few weeks, less than 10% of borrowers made loan payments
  • SKS Microfinance charges a 24% interest rate on its microloans

Best Quote

“The money lender lives in the community. At least you can burn down his house. With these companies, it is loot and scoot.” – Reddy Subrahmanyam, Senior Official of the Indian Government

Kiva Partners With Accion To Microlend In The U.S.

Monday, October 25th, 2010

Poor entrepreneurs are everywhere, so why limit U.S.-based microfinance operations to overseas customers?

  • Kiva.org, an online nonprofit that helps anyone make microloans to foreign businesses via local institutions, is expanding its scope to include entrepreneurs in the United States.
  • Through a partnership with Accion Texas-Louisiana, Kiva will start to offer microloans to new and existing business owners in those states. Kiva’s model is a kind of “crowdfunding,” which allows lots of small donors to make a big impact.
  • Microfinance helps poor entrepreneurs get access to loans. These individuals are usually seen as too risky for traditional bank loans, so microloans can greatly increase their chances of success.

Facts & Figures

  • Accion is the third U.S. microfinance institution Kiva has partnered with since October 2009.
  • Less than 1% of the borrowers featured on Kiva’s website are based in the U.S.
  • The average U.S. microloan is about $7,000.

Best Quote

“Awareness of microfinance is really low here.” – Premal Shah, President of Kiva

They Wanted The World To Change, So They Did It Themselves

Wednesday, October 20th, 2010

Ever been frustrated by how slow things are to change, when people are suffering right now? If you’re anything like the latest crop of social entrepreneurs, you may be able to turn your frustration into something much more meaningful.

  • Today’s social entrepreneurs are taking on the world’s problems a bit at a time. Their successes show that it’s not necessarily the biggest, wealthiest organizations who make the small incremental changes that matter.
  • These individuals tend to identify specific problems and then do whatever they can to meet the need. One invented microfinance. Another is focused on making menstrual supplies available where a woman’s period causes her to miss school and work. And another pressures U.S. companies to stop buying from African warlords, effectively funding terrorism and horrific violence directed at women in Congo.
  • They’re often naive at the beginning, expecting too much and consulting with local people too little. And success is never assured. But the rewards are real – both for entrepreneurs and the relatively small number of people whose lives they are changing.

Facts & Figures

  • DoSomething.org provided $100,000 to help 23-year-old Maggie Doyne build a school in Nepal.
  • Lisa Shannon carried 45,000 pennies to Intel’s headquarters, offering to pay the extra penny it would cost Intel to source their materials outside of Congo and avoid 45,000 more violent deaths at the hands of warlords.
  • $300 sends a Nepalese child to Maggie Doyne’s school, with health and dental care included.

Best Quote

“If your own children were born orphans in Nepal, you wouldn’t wait for the U.N. or the government to do something about it while they were hungry and cold and breaking rocks by the side of a riverbed.” – Maggie Doyne

Becoming A For-profit Organization Is No Cup Of Tea

Friday, August 13th, 2010

Transforming a nonprofit into a for-profit company is a tricky and lengthy process that many organizations are willing to undertake.

  • The majority of micro loans dispensed around the world come from for-profit microfinance institutions. However, it is rarely known that many of these organizations began as nonprofit NGO’s.
  • Transforming a nonprofit into a for-profit organization is a long process and involves attracting investors, obtaining regulatory approval and getting a financial institution license.
  • Many organizations struggle to achieve for-profit status while maintaining their social mission – it is difficult to keep the founder, investors and stakeholders equally satisfied.

Facts & Figures

  • SKS Microfinance was funded by three rounds of venture capital and grew from nonprofit to have 4.7 billion borrowers in 2009.
  • SKS just raised another $358 million in an IPO.

Best Quote

Grameen Bank reaches 7 million clients and that’s amazing. On the other hand, it took Professor Yunus [Grameen Bank's founder] 35 years to do that… Can you imagine how many generations it will take to reach 150 million poor households in India if we took that approach? We have to scale more rapidly, and only commercial capital will meet our huge funding requirements. – Vikram Akula, Founder, SKS.

Beth Rhyne On Fighting Poverty with ACCION

Wednesday, July 21st, 2010

beth-rhyne.jpg Beth Rhyne is a true microfinance expert. In her career, she’s overseen microenterprise development at USAID and spent eight years in Kenya and Mozambique, consulting on microfinance policy and operations. From 2002 to 2008 she was the senior vice president of ACCION International, and today she’s the managing director of ACCION’s Center for Financial Inclusion. Beth earned both her master’s and her Ph.D. in public policy from Harvard, and she’s written five books on microfinance (so far). We’re impressed, and really lucky to have her answer some of our questions. You can learn more about ACCION and donate on their cause page.

TILE: What exactly is microfinance?
Beth: Microfinance is about providing financial services to poor and low income families. When people have access to microfinance they can get loans, maintain savings, buy insurance, and send money safely to loved ones. We take these services for granted, but imagine what our lives would be like if we couldn’t do that. (What would your family’s life be like without a bank account, home mortgage, car or health insurance?) Even basic services make a big difference for poor people, and today more than 2 billion poor people worldwide lack access to them.

TILE: Why not just give the money away instead of lending it?
Beth: When you give money away, it gets spent and that’s the end of that. When you use it to make a loan, it gets used over and over. We care about the dignity of the person, and making loans promotes that. When someone becomes a valued customer of a bank, they gain a pride and a sense of worth that does not come from a handout. Unlike pure charity programs that treat people as passive and unable to care for themselves, we believe that people are their own best agents for working their way out of poverty.

TILE: What motivated you to get involved with Accion/ fighting poverty?
Beth: I got involved in microfinance while living in Kenya 25 years ago. I saw microfinance as a way to create a world in which the benefits of financial services would be available to everyone, not just the elite few. I was very happy to join ACCION 10 years ago because I had watched ACCION’s pioneering work in building microfinance into something that would make a long lasting difference in Latin America. I wanted to help bring that difference to Africa and Asia.

TILE: What’s the hardest thing about working in microfinance?
Beth:The hardest thing about working in microfinance is explaining how it works to people who have never heard of it, and raising the money from them to make it work better. The best thing (one of the best things) is having friends all over the world.

TILE: How do you think young people can play an important role in the changing landscape of philanthropy, especially as it relates to poverty?
Beth: Young people can change the face of philanthropy and poverty by nurturing their own passion for social change and by learning about how to make things happen. Some adults have lost the sense that the world can be made better by individual efforts, so when a young person can speak about a solution that really works, like microfinance, it inspires adults to contribute and get involved. And when you connect with your own friends in ways that are both fun and pro-philanthropy, you can influence a wider circle of people.

TILE: What’s the best advice you would give to your teenage self?
Beth: Become a seeker on the trail to answer these two questions: What do I most love to do? How can I use that passion to make the world a better place?

>> TILE brings you exclusive opinions, explanations, and interviews from experts in every industry. To read more, click on Ask the Experts in the TILE Library.

Have a burning question or an expert you’d like to see interviewed? Just Ask TILE!

A Microfinance Company’s Surprise Shutdown

Tuesday, July 13th, 2010

The recent downsizing of one of the world’s largest microfinance companies raises the eyebrows of its staff and supporters…

  • Unitus, a Seattle based microfinance NGO, laid off its entire staff last week despite recent claims of overwhelming success in the field.
  • The company’s unprecedented announcement raised confusion among its staff and supporters. Experts speculate whether or not the decision was a conscious act to preserve Unitus’ philanthropic capital, or whether it cloaks more serious problems within the company.
  • In recent months, experts have become increasingly skeptical about the effectiveness of microfinance. Some are concerned that Unitus’ change in direction is actually a product of a shaky operation that was on the brink of collapsing.

Best Quote

“Microfinance has great promise and a fantastic mission. The question on everybody’s mind is, does it work?” – Deyan Vitanov, Chief Executive, Philanthropedia

If a bank won’t lend to someone, why would you?

Thursday, November 5th, 2009

For a long time, banks and economists thought that the millions of poor people who now use microfinance services simply couldn’t afford loans, and they were right. They couldn’t afford the relatively large loans that banks offer to people in the developed world because even the lowest interest payments on a big loan would be way too expensive for them to make. It wasn’t economical for banks to lend small amounts of money to people who were far away from traditional bank branches and had a limited history of borrowing.

However, as many microfinance institutions have discovered in the last few decades, many of these people can afford a slightly different kind of loan: a microloan. Thus there are nonprofits and for-profit micro financiance institutions (MFIs) that realize it can be profitable to service the otherwise “unbanked” community.  Microfinance is self-sustaining when it attracts new kinds of investors who realize the potential and power in reaching the many more millions of people who desperately need, and want, access to financial services.
While individuals, companies, and governments are beginning to see the potential size and impact of the market, there are still plenty of people that really can’t afford a loan and, for the most part, they don’t receive any. Many different organizations – mainly charities and governments – offer other types of services that don’t charge any interest so that eventually these people might be able to afford microfinance services.

With the support of charitable organizations and everyone who donates to them, microfinance institutions and banks everywhere will be making lots more loans to people who can now afford them.

When is a pig better than cash?

Wednesday, October 21st, 2009

For many of the poorest people around the world, holding onto cash is just as difficult as getting their hands on it in the first place. For one thing, lacking food or basic necessities, there are immediate needs that cash will go to right away. Nothing is invested, which makes it harder for a person to make more money and eventually, escape from poverty. Too many hungry children or parents in desperate need of medicine siphon off cash as soon as it appears, trapped in an endless cycle of poverty.

For this reason, many microfinance and poverty-alleviation institutions are making loans of durable goods like pigs, bicycles, or refrigerators rather than cash. These are called in-kind loans. It’s much harder to give away pieces of a pig (until it’s eventually butchered of course), so it tends to last longer – hopefully long enough to grow from a small, inexpensive piglet to a fat hog that will fetch a good price at the market and allow its owner to repay the loan and, hopefully, reinvest the profit.

This isn’t to say that cash loans don’t help – they can save lives – but it’s also important that the people receiving the loan know how and are able to turn that cash into a durable asset that will reap greater returns and profit in the long term.

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