Kruse Kronicle

Kenya’s mobile telephones: Vital for the poor

Economist: Kenya’s mobile telephones: Vital for the poor

AFRICA’S “mobile decade”, when telephones at last reached most corners of the continent, has meant a huge improvement in the lives of the poor. But quantifying it is hard. How useful can a mobile phone be to someone living on less than $2.50 a day, the World Bank’s standard benchmark of poverty? Researchers in Kenya have given a partial answer. They find that people will skip a meal or choose to walk instead of paying for a bus fare so that they can keep their phone in credit. ...

... Still, only 16% of respondents said they were using their phones to browse the internet. The real breakthrough in the Kenyan market has been in people’s ability to send and receive money, with more than two-thirds doing so by phone. East Africa’s biggest success has been M-Pesa, a mobile-based money-transfer system pioneered by Safaricom, a leading Kenyan operator. Its simple interface, which works on any phone, has brought financial services to Kenya’s poor majority, enabling the movement of some $8.6 billion in the first half of this year. ...

There has been a big interest in microfinance in recent years. The aim of many organizations was to make loans available to the poor so they could start businesses and foster economic growth. But Daryl Collins, et al., in Portfolios of the Poor: How the World's Poor Live on $2 a Day, show that business formation is not the highest priority for the poor. They had hundreds of poor families in India, Bangledesh, and South Africa fill out diaries recording their financial transactions for one year. What they learned is that the biggest financial challenge the poor have is cash flow management. Money does not come in in a steady stream across the year. Yet if you save up money is very difficult to keep it safe. Having the money readily at hand also makes it harder not to spend. Banking by phone is proving to be a major impact on financial management for the poor. With increased ability to manage finances will also come a greater capacity for entrepreneurial activity.

Incubating women's businesses in the Palestinian territories

Christian Science Monitor: Incubating women's businesses in the Palestinian territories

Tomorrow’s Youth Organization based in Nablus, on the West Bank, helps promising new women's businesses survive.

... TYO’s Women’s Incubation Services for Entrepreneurs (WISE) brought back six businesses that had developed a foundation from their initial women’s entrepreneurship program—Fostering Women Entrepreneurs in Nablus, and recruited nine additional female entrepreneurs by running advertisements in local newspapers, radio, and on Facebook. The requirements were simple—businesses had to have a foundation or business plan already completed, and had to be based in the northern West Bank.

Candidates who responded to ads underwent two rounds of interviews, designed not only to determine the entrepreneur's eligibility for the program, but also to assess her strengths and needs moving forward. Partnering with the Small Enterprise Center, TYO sent their final 15 candidates to one-on-one coaching early in the process in order to set their women up for targeted support and success. Additionally, the year-long incubation project will provide marketing, access to capital, and financial-growth trainings, as well as business English and social-media training facilitated by last year’s Palestinian TechWomen delegation.

When planning for an incubation center, TYO kept in mind that the conservative culture in Palestine often limits businesswomen’s opportunities to participate in meetings, classes, conferences, and other development programs. Furthermore, the psychosocial environment at times leaves women discouraged when they do not see immediate growth or results in their efforts to propel their businesses forward.

By planning programming in the mornings and weekends, TYO is able to work around many of the restrictions on women’s mobility. Not only that, but establishing the TYO center in Nablus as the base for WISE, they are able to fill a gap by being the only business incubation center in the northern West Bank geared to women, and provide support to women who may not be able to travel all the way to Ramallah, where such programs are more common. By serving as a support system to the businesswomen, Samin and Inas Badawi—a local Palestinian—provide examples of female-to-female support that is uncommon in Palestine, and try to foster the same sense of encouragement between the women they work with.

It is this model of American-Palestinian cooperation that sets TYO’s WISE program apart from other entrepreneurship trainings in Palestine. ...

Extra credit

Boston Herald: Extra credit

Program lets students lend a hand to local entrepreneurs.

College students looking for real-world experience and a way to make a difference have a unique opportunity to immerse themselves in the world of microfinance. The Campus Microfinance Alliance is a nonprofit coalition of student-run microfinance groups that have lent more than $150,000 to disadvantaged entrepreneurs. Their new website (campusmfi.org) lets students apply to their internship program. If selected, they learn to help other students create microfinance organizations on their campus.

“The idea is we match selected students with one of (our members),” said Vanessa Carter, director of College Microfinance Alliance. “Students spend the summer learning hands-on skills and then receive support from us to go back (to their school) and start their own group.”

Andy Posner, co-founder of the Capital Good Fund, a microfinance organization he started at Brown University while completing his master’s degree in environmental studies, said starting his own microfinance organization was “experiential learning” at its best.

The mission of the Capital Good Fund is to provide small loans to struggling entrepreneurs as a way to “empower people to move out of poverty and become leaders on environmental issues,” Posner said. ...

Urban homesteaders plant seeds of change in Kansas City

KansasCity.com: Urban homesteaders plant seeds of change in Kansas City

Jason and Candy Fields’ backyard in the Lykins neighborhood — one of the most blighted areas in Kansas City — is a patchwork quilt of urban farming ventures.

There are a vegetable garden fertilized with nutrient-rich fish waste and a lush swath of bamboo stalks waiting to be dried and used to stake tomato plants or to build a tree house or a lightweight bicycle.

Towering sunflowers wear paper grocery sacks draped over their heads, an effort to keep the birds away so the mature seeds can be roasted, then eaten as a snack. There’s a playhouse-turned-chicken coop for heritage breed hens.

On the driveway, tilapia swim in an aquaponics system fashioned from recycled, food-grade plastic drums that takes up as much space as an average living room. Fragrant basil grows in rock beds above the drums, cleaning the water for the fish while the nutrient-rich fish waste fertilizes the basil, all without the use of soil.

Nearby, duckweed grows in kiddie wading pools. The inexpensive, high-protein, easy-to-grow food for fish resembles green pond scum. A biodigester constructed from more plastic drums converts 800 pounds of restaurant and household food scraps into methane that could heat a greenhouse.

Word of these innovative, low-tech farming experiments has traveled rapidly through local food circles. One steamy weekend in late June, almost 300 people milled around the “Myrtle Plot” at the corner of 12th and Myrtle streets. The plot was a featured stop on the Urban Farms and Garden Tour sponsored by Cultivate Kansas City, a nonprofit that helps people learn how to grow food in urban settings.

Much of that grassroots popularity is a result of social media. Using his iPhone, Jason Fields routinely posts cleverly produced how-to or slice-of-life videos to www.theurbanfarmingguys.com. More than 8,000 people “like” the website and Facebook page, and their “Farmin’ in the Hood” video has gotten 47,000 views on YouTube since its debut last spring.

The idealistic newlyweds decided to ditch their comfortable suburban lifestyle, if not their sense of humor, in 2008. Only half-joking, they recall how they worried that the drug-dealing squatter came with the foreclosed property they bought for $21,000. ...

... These urban homesteaders are mostly white 20- to 40-somethings. Most also are members of the Rock, a nondenominational Christian church founded in 1999 with loosely affiliated networks of house churches in Kansas, Missouri, Montana, Wyoming, Texas, Ohio, Michigan and North Carolina.

The Rock’s mission is to “plant” house churches throughout the inner city so members can live in and work with the communities they are trying to serve. On the face of it, their tactics for revitalizing a racially mixed, economically depressed neighborhood are simple: walk the neighborhood streets, make eye contact and open your heart.

“The biggest problem in this neighborhood is fear,” Jason Fields says. “There’s a spirit of hope and community when you decide not to hide from this and own it. … Something happens when you’re in something together. You meet people you wouldn’t have met otherwise, and it turns into really deep friendships.” ...

Sewing Her Way Out of Poverty

New York Times: Sewing Her Way Out of Poverty

I came to Kenya partly to help make a PBS documentary about empowering women as a way to lift families and communities — men included — out of poverty. And I promptly met a prostitute-turned-businesswoman who epitomizes that theme. ...

...  In Jamii Bora, Jane was pushed to save for the future, to lean forward. There is growing evidence that the most powerful element of microfinance is not microlending, but microsavings, and that’s how Jamii Bora starts: it encourages members to save small amounts, perhaps just 50 cents a week. Then members are coached to use those savings, coupled with loans and training, to start tiny businesses. ...

Can microinsurance protect the poor?

Guardian: Can microinsurance protect the poor?

Low-cost insurance that covers the lives, health and property of the poor could provide protection against natural disasters.

... Microinsurance, low-cost insurance policies that cover the lives, health, crops and property of the most vulnerable, are being seen as a central way of providing social protection to the increasing numbers of people affected by natural disasters such as hurricanes, flooding and drought.

A recent report by the German insurance giant Munich Re calculated that 2010 was the second worst year for disasters since 1980. It reported that 950 global catastrophes had amounted to overall losses of around $130bn. Of this, only around $37bn was insured. For example, only 1% of the $14bn of property damage caused by Haiti's massive earthquake was covered by insurance.

At the Bonn climate change talks in 2008, microinsurance was touted as a central component of climate change adaptation measures in Africa, Asia and Latin America. ...

... Yet despite the buzz surrounding microinsurance, the industry's reach is still limited. The 150 million people currently holding policies represent only a small fraction (around 5%) of a potential market of up to 3 billion.

Unlike microfinance programmes that provide people with instant cash, the insurance industry has so far struggled to overcome the simple problem of trying to ask poor people to pay for something they might never use.

Richard Leftley, the chief executive of UK-based MicroEnsure, one of the leading microinsurance companies, says that it has all but scraped the idea of trying to sell policies direct. He says turning up in towns and villages and asking poor families to buy insurance simply doesn't work. "Trying to explain to someone with no prior experience of insurance that if you pay even just a little bit every month then someone will pay you back if your crops failed or your child is hospitalised is often met with a perfectly understandable 'yeah right' response," he says.

Instead, the industry is evolving, with many policies now being sold as add-ons to products and brands that people already use and trust. For example, MicroEnsure says it is now conducting most of its business in Africa through partnerships with mobile phone companies.

Phone companies trying to get people to stop using multiple sim cards and stay loyal to one air-time provider are offering life or health and disaster insurance as an incentive. People who buy credit for one month get a month's worth of insurance at no extra cost. ...

Donuts, genocide, and the American dream

BoingBoing: Donuts, genocide, and the American dream  (HT: Cameron Horsburgh)

Most visitors to Los Angeles and the west coast are struck by the number of donut shops, but few know that the vast majority of local donut shops are owned by Cambodian refugees who fled the killing fields of Pol Pot's Khmer Rouge. This is also the case in many other parts of the west. Through an interesting set of circumstances, Cambodian families got a foothold in the market, then helped other families through traditional loan systems and sharing of knowledge so they could earn their own piece of the American dream. These are people who have experienced unspeakable atrocities in their immediate families, and bust their asses (often 364+ days a year) to make a better life for their children in North America. So go enjoy a decadent donut sometime soon, and be extra friendly to the remarkable people who make these deceptively quotidian treats. The best documentary on the subject is Cambodian Doughnut Dreams , although the hygiene-averse dude in The Darkside of Donuts teaser trailer best articulates my own relationship with that quintessential American delight. [Video link]

The video is an excellent look into the immigrant entrepreneur experience. Check it out below.

Micro-loan portal Kiva celebrates 5 years

SFGate.com: Micro-loan portal Kiva celebrates 5 years

... Micro-asset financing is a relatively recent innovation in micro-finance - which is best known for small loans issued to people trying to escape poverty by starting a business - and is an example of how the field has explored different loan models.

Kiva, celebrating its fifth anniversary on Wednesday, took that experimentation to a new level in 2005 when it coupled the Internet and large numbers of individual lenders with needy borrowers.

Using a Web portal, Kiva facilitates loans from individuals who can log onto its site and read borrowers' stories. Kiva partners with lending organizations in developing countries, which take the no-interest loans from Kiva and distribute them locally.

Kiva lenders are paid back if the borrower succeeds, but do not earn interest. Interest charged by the local lender typically goes toward operating costs and salaries.

In recent years, with the help of Kiva, micro-finance as an anti-poverty tool has quickly grown in popularity. But it also has developed critics. Some note that at least half the field is now occupied by private banks, which in the best case are seeking profits along with positive social impacts, and in the worst, are simply looking to make a buck off the poor - even from minute loans.

Others have complained that Kiva overstated the connection between its online lenders and needy borrowers.

Kiva and others in the micro-finance field agree that there have been bumps along the road. But they point to the growing number of websites modeled on Kiva as well as new programs - such as the asset financing helping Ndung'u in Kenya - as proof that the industry is evolving and is likely to continue influencing economic development worldwide. ...

What's Better For Helping The Poor -- Greed Or Charity?

NPR: What's Better For Helping The Poor -- Greed Or Charity?

Listen to the podcast here.

Say you want to make loans to millions of poor women in the developing world, to help them climb out of poverty.

Is it OK to raise money from rich investors, who expect to make a profit?

Muhammad Yunus, the father of microfinance, says no. If you have investors who expect profits, you'll ultimately turn into something more like a loan-shark than a do-gooder.

Vikram Akula, founder of SKS Microfinance — a company that had an IPO earlier this year — says raising money from profit-seeking investors is the only way to spread microfinance quickly around the world.

On today's Planet Money, Akula and Yunus hash out their differences.

The podcast is adapted from a panel discussion that Adam Davidson moderated at last week's Clinton Global Initiative.

For more on the Yunus-Akula debate, check out this blog post from David Groodman, who's working on a book about microfinance.

Here's the panel in its entirety:

Watch live streaming video from cgi_plenary at livestream.com

Can microfinance be both moral and profitable?

Fortune: Can microfinance be both moral and profitable?

FORTUNE -- There's a debate brewing in the world of do-gooder banking, pitting the father of microfinance Muhammad Yunus against a few entrepreneurs who have put an unlikely spin on Yunus' model of lending to the poor.

Earlier this week, India's biggest microlender, SKS Microfinance Ltd., made its debut on the Bombay Stock Exchange. Shares surged 18% on their first trading day.

An IPO is a rare and controversial step for a major microfinance company to take, since these lenders typically rely on donations, governments and international organizations such as the World Bank for funding. Only a handful have raised public money on the idea that helping small entrepreneurs like farmers and basket weavers gain access to financing is not only the right thing to do, but also a profitable venture.

But after SKS's strong reception, others will likely follow its lead to the public market. SKS founder Vikram Akula says going public is perhaps the only way to shore up more capital to serve more of India's poor. He wants to prove critics wrong, including Yunus, who argues an IPO would essentially mean profiting off the poor. The Bangladeshi banker and economist has been credited for pioneering microfinance, and in 2006, his founding of Bangladesh's Grameen Bank earned him and the bank a Nobel Peace Prize.

"Microcredit should not be presented as a money-making opportunity," he told The Wall Street Journal in July. "It is an opportunity to make an impact on poor people's lives."

The industry faces a sticky dilemma: to pursue morals or profits. But public microlenders argue they can have both. ...

A better mattress

Economist: A better mattress

Microfinance focuses on lending. Now the industry is turning to deposits.

IT IS hard for people in the rich world to imagine what it is like to live on $2 a day. But for those who do, the problem is often not just a low income, but an unpredictable one. Living on $2 a day frequently means living for ten days on $20 earned on a single day. The task of smoothing consumption is made more complicated if there is nowhere to store money safely. In an emergency, richer people might choose between dipping into their savings and borrowing. The choice for the great mass of the unbanked in the developing world is limited to whom to borrow from, often at great cost.

That they can borrow at all is partly due to the rapid growth of microfinance, which specialises in lending small amounts to poor people. Several big microfinance institutions (MFIs) also offer savings accounts: Grameen Bank in Bangladesh is a prominent example. But the industry remains dominated by credit, and the ability to save through an MFI is often linked to customers’ willingness to borrow from it. Of 166 MFIs surveyed in 2009 by the Microfinance Information Exchange, a think-tank, all offered credit but only 27% offered savings products. Advocates of a greater variety of financial services for the poor argue for more balance.

This may be on the horizon. More MFIs are becoming interested in the potential of savings, thanks partly to the global financial crisis. A majority of more than 400 MFI managers surveyed last March by the Consultative Group to Assist the Poor (CGAP), a microfinance group based at the World Bank, said that they had faced liquidity problems during the crisis (see chart). This, together with rising financing costs and exchange-rate fluctuations for those MFIs that rely on external finance, has prompted many “credit-only” MFIs to warm to the idea of funding at least part of their lending activity using local savings. ...

Reaping what they sew

Presbyterian News Service: Reaping what they sew

Nicaraguan tee-shirt co-op gives women employment, empowerment.

MANAGUA, Nicaragua — The Nueva Vida sewing co-op here is bustling with activity. Sewing machines are whirring, scissors are clipping and a light breeze moves through the building’s open windows and doors.

It’s a Friday morning, the last day of the work week. But the end of the week doesn’t mean the end of work for the co-op members, who often stay late to discuss business issues or hold board meetings. Saturdays are spent studying up on business practices.

But all that hard work is worth it for the co-op members, said Julia Yadira Vallejos, a co-op member.

Nueva Vida provides a tranquil, safe, consistent job and environment for its 33 employees, Yadira said.

Those are valuable qualities for the employees of the co-op, which was founded by a group of women in 2001 as a response to 1998’s Hurricane Mitch. Many of the founders and their families lived on the edge of Lake Managua, which flooded after the hurricane. They moved to a new neighborhood after the storm and eventually got help from a U.S. faith-based organization, Jubilee House Community.

The women decided to sell T-shirts after conducting market research and finding that the products seemed to be a sustainable business. ...

...One such client is the Presbyterian Church (U.S.A.), which often purchases large quantities of T-shirts from Nueva Vida. The 2007 Presbyterian Youth Triennium T-shirts were made by Nueva Vida. ...

... To order Nueva Vida T-shirts in any quantity, visit the Presbyterian Distribution Service.

Microfinance: An Economic Development Failure?

Social Edge: Microfinance: An Economic Development Failure?

Microfinance doesn’t clear land mines, save rain forests or stop global warming.

... Today, many armchair economic development experts, trained economists and sideline pundits have started to wonder why microfinance is not the next Industrial Revolution.
 
Since I usually agree with myself, I quote here from my speech to a domestic micro-enterprise conference: “Microfinance is about more than money. None of us in this room would accept living in a community with bad schools, little healthcare, no electricity, and filthy water – but with a great bank. Economic justice means the poor must have the power to speak up, speak out and speak for themselves.”
 
For a seriously impoverished woman, empowerment is pretty simple. A little bling and, all of sudden, she is empowered to feed her kids, stand up to an abusive partner, thatch a roof or pay a medical bill. Ask any woman what financial independence means.
 
The hoi polloi of funders, metric mavens, think tanks and policy wonks need to explain microfinance as quantifiable economic development because that is THEIR obsession with spread sheets and snazzy graphics. At the one-dollar-a-day subsistence level, microfinance is about giving a woman a choice and a chance, no more and no less. ...

Wealth of Opportunity: Microfinance in Person

Unitus: Wealth of Opportunity: Microfinance in Person

"We are pleased to present  the complete 15-minute film, Wealth of Opportunity: Microfinance in Person. The production, completed in the fall of 2009, features African and Indian borrowers whose lives and futures have been transformed through microfinance. The project is a co-production by Unitus and NonFiction Media."

Wealth of Opportunity: Microfinance in Person from Unitus on Vimeo.

The success of the family firm

BBC: The success of the family firm

They may survive ten generations - but they can be destroyed by infighting.

If your family business survived the French Revolution, a common or garden recession ought to be a breeze. Or so you'd think.

The French group Wendel has been around for more than 300 years; it used to make steel, nowadays it invests in various businesses, including the construction group St Gobain.

It's probably one of the longest-lived companies in the world - maybe because, generation after generation, it's had the stability of the family behind it. ...

Interesting short interview with Randy Carlock of International Centre for Family Enterprise:

United Prosperity Microfinance

I recently learned of a new online microfinance operation called United Prosperity. It is similar to Kiva in that it links individual lenders with individual businesses. The difference is that United Prosperity collects an amount that then becomes a collateral for a larger loan from a bank. It leverages financing power of the individual lenders.

For more on the details you can read there how it works page.

The Women’s Crusade

New York Times: The Women’s Crusade

(This lengthy piece was brought to my attention by Dana Ames. It is three weeks old but since it is such a powerful article I'm linking it belatedly.)

IN THE 19TH CENTURY, the paramount moral challenge was slavery. In the 20th century, it was totalitarianism. In this century, it is the brutality inflicted on so many women and girls around the globe: sex trafficking, acid attacks, bride burnings and mass rape.

Yet if the injustices that women in poor countries suffer are of paramount importance, in an economic and geopolitical sense the opportunity they represent is even greater. “Women hold up half the sky,” in the words of a Chinese saying, yet that’s mostly an aspiration: in a large slice of the world, girls are uneducated and women marginalized, and it’s not an accident that those same countries are disproportionately mired in poverty and riven by fundamentalism and chaos. There’s a growing recognition among everyone from the World Bank to the U.S. military’s Joint Chiefs of Staff to aid organizations like CARE that focusing on women and girls is the most effective way to fight global poverty and extremism. That’s why foreign aid is increasingly directed to women. The world is awakening to a powerful truth: Women and girls aren’t the problem; they’re the solution. ...

Yes, Microfinance has Positive Effects on the Poor.

Next Billion: Yes, Microfinance has Positive Effects on the Poor.

Microfinance in its simplest form involves extending loans to a group of borrowers (usually called self help groups) who agree to help each other by means of group savings and informal support. The typical self help group consists of 10 to 20 people who meet regularly to discuss social issues and activities and deposit their savings in a joint bank account. Once enough savings have been accumulated, group members can apply to internal loans within the group or apply for loans through a commercial bank.

Even though microfinance is estimated to have directly reached 100 million customers in 2008 (for more details see my previous post) there is still plenty of debate about whether it has a significant impact on the lives of the poor or not.  ...

Kiva to make microloans inside the U.S.

SFGate.com: Kiva to make microloans inside the U.S.

The San Francisco non-profit has arranged microloans for borrowers in Africa and other parts of the developing world since 2005. Now it will also serve borrowers in the U.S.

Kiva's lenders loan small amounts of money -- the average loan size is $416.09 -- to entrepreneurs who post their profiles on Kiva's Web site.  ...

Microfinance Heats up in East Africa

Defeating Global Poverty: Microfinance Heats up in East Africa

With BRAC's (Bangladesh Rural Advancement Committee) recent announcement of their successful raise of $62M for their Africa Loan Fund, a new benchmark/milestone has been reached for the potential growth in microfinance in East Africa. For the underdeveloped East Africa microfinance market, this is a huge amount of commercial debt capital to support BRAC's ambitious goal of reaching 700,000 microfinance clients (families) in Tanzania, Uganda and Southern Sudan.

BRAC is a microfinance NGO based in Bangladesh which has recently started expanding their presence outside of their home country to other regional markets including Pakistan, Afghanistan, Sri Lanka and a number of sub-Saharan Africa countries. They position themselves as the "world's largest private human development organization" (mainly based on the number of employees they have in Bangladesh microfinance operations) and leading a new kind of development effort ... a southern hemisphere organization serving another southern hemisphere developing market. BRAC has been much more aggressive in expanding beyond its home borders than the much more famous Bangladeshi microfinance bank, Grameen Bank, which in 2006 jointly received the Nobel Peace Prize. ...

The Girl Effect

Danny Gamache put me on to this campaign to end poverty. Great Stuff! Considerable wisdom shown here beyond bumper sticker politics and economics.

Official Website: The Girl Effect

Conflicts of interest (Microfinance)

Financial Times: Conflicts of interest (If you have trouble accessing the article try clicking through at the post at the Marginal Revolution.)

Bob Annibale's corner office, high up in one of London's few real skyscrapers, overlooks the Thames and the Millennium Dome from one window, Greenwich Park and the Royal Observatory from another. It is the kind of enviable perch you'd expect Citigroup's senior treasury risk manager to enjoy. But that is the job Annibale left three years ago; now he is Citi's "global director of microfinance".

Microfinance, the system of providing tiny loans and savings accounts to the poor, seems an unlikely and somewhat ironic candidate for Citigroup's attention. It was because banks weren't interested in serving the poor that the pioneers of microfinance saw a gap to be filled, back in the 1970s....

... Karlan and Zinman wanted to know what value there might be in expanding access to credit. ZaFinCo was no dewy-eyed social business, but a hard-nosed, profit-minded company, charging 11.75 per cent per month on a four-month loan, or 200 per cent APR, much more than Compartamos was generally judged to have been charging.

Despite the high rates, the results were astonishing. "We expected to see some good effects and some bad," explained Karlan, who checked in with the experiment's participants six to 12 months after they had filed their initial loan applications. "But we basically only saw good effects."

Most strikingly, those "treated" by the experiment - that is, those for whom the computer requested a second chance at a loan - were much more likely to have kept their jobs than the control group. They were also much less likely to have dropped below the poverty line or to have gone hungry. All these outcomes were recorded well after the loan had been taken out and (usually) repaid, so this was not measuring a temporary debt-funded binge.

This seems mysterious. How can a loan at 200 per cent APR help people to stay out of poverty? One answer is that most people turned down for a 200 per cent APR loan would be able to get one at 300, 500 or over 1,000 per cent from an informal moneylender. More important is that these loans were not used to start businesses but to help people keep jobs that they already had. If a smart new blouse or a spare part for the family moped is what it takes to stay in work, then who is to say that an expensive loan isn't a wise investment? ...

Mobile Banking for the Poor

Conde Nast Portfolio.com: Mobile Banking for the Poor

At a press conference this morning in Mumbai, mobile-banking company Obopay announced an alliance with Grameen Solutions -- an alliance with an extraordinarily ambitious goal. In ten years' time, the companies said, they would like to see 1 billion of the world's poor -- people living on less than $2 a day -- receiving banking services via their mobile phones. It probably won't happen, but it would be amazing if it did.

Mobile banking is not new, of course, although it is still young. What sets this particular initiative apart are three things: its global ambition, its emphasis on the poor, and the central role of microfinance institutions (MFIs).

Mobile banking is of course banking, and banking is regulated nationally, not globally. As a result, it's hard to scale mobile banking across borders -- but that's precisely what Obopay and Grameen are trying to do. They're starting in India and Bangladesh, with a small core team of engineers looking carefully at what works and what doesn't in the real world. They will then offer that expertise to anybody in the world who wants it, and plan to entrench themselves as a "center of excellence". If MFIs in Congo or Nicaragua want to team up formally with Grameen and Obopay, that's fine; if they just want to talk to them to get advice on how to proceed on their own, that's fine too. ...

California Dreams

Christianity Today: California Dreams

How one West Coast ministry reaps kingdom profits by planting businesses.

...Main Place Christian Fellowship, which operates the thrift store in Tustin, California, and the rehabilitation center in nearby Santa Ana, traffics in the hope that encourages Will to try to change his life. As a plant of Saddleback Church 20 years ago, Main Place's ministry has burgeoned, planting seven churches of its own and expecting to birth a dozen more by 2020, says pastor Rich Mathisrud. As a church planter, Main Place spends much of its time running businesses to locate and serve the downtrodden. Its church-planting abilities surprisingly come from starting nonprofit businesses.

"We want to use resources to reach as many people as possible," says Mathisrud. "We're just a little church with a big vision trying to honor our great God."

In two decades, Main Place has started a total of six businesses in Orange County and planted seven churches. Its businesses include the thrift store, half of which sells office supplies; a bookstore; an elementary school; and two theaters, Curtain Call Dinner Theater and, most recently, the Village Theater. Its seven churches are scattered across the West Coast in Tustin, Irvine, Orange, Garden Grove, Santa Ana, and Los Angeles, California, and in Tijuana, Mexico. Main Place's businesses invest in alcohol- and drug-addicted men to provide the finances necessary for church planting and community work; then it puts its profits back into some of the most crime-filled communities in the county. Is this any way to run a church? Actually, it is. ...

What Microloans Miss

New Yorker: What Microloans Miss

Excellent article on both the benefits and limitations of microloans.

... Microloans make poor borrowers better off. But, on their own, they often don’t do much to make poor countries richer.

This isn’t because microloans don’t work; it’s because of how they work. The idealized view of microfinance is that budding entrepreneurs use the loans to start and grow businesses—expanding operations, boosting inventory, and so on. The reality is more complicated. Microloans are often used to “smooth consumption”—tiding a borrower over in times of crisis. They’re also, as Karol Boudreaux and Tyler Cowen point out in a recent paper, often used for non-business expenses, such as a child’s education. It’s less common to find them used to fund major business expansions or to hire new employees. In part, this is because the loans can be very small—frequently as little as fifty or a hundred dollars—and generally come with very high interest rates, often above thirty or forty per cent. But it’s also because most microbusinesses aren’t looking to take on more workers. The vast majority have only one paid employee: the owner. As the economist Jonathan Morduch has put it, microfinance “rarely generates new jobs for others.”

This matters, because businesses that can generate jobs for others are the best hope of any country trying to put a serious dent in its poverty rate. Sustained economic growth requires companies that can make big investments—building a factory, say—and that can exploit the economies of scale that make workers more productive and, ultimately, richer. Microfinance evangelists sometimes make it sound as if, in an ideal world, everyone would own his own business. “All people are entrepreneurs,” Muhammad Yunus has said. But in any successful economy most people aren’t entrepreneurs—they make a living by working for someone else. Just fourteen per cent of Americans, for instance, are running (or trying to run) their own business. That percentage is much higher in developing countries—in Peru, it’s almost forty per cent. That’s not because Peruvians are more entrepreneurial. It’s because they don’t have other options.

What poor countries need most, then, is not more microbusinesses. They need more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation....

Taking Internet Finance to the Next Level, Part 2: A Case Study

E-Commerce Times: Taking Internet Finance to the Next Level, Part 2: A Case Study

Peer-to-peer consumer lending sites are shaking up the world of Internet finance. Be it the Internet or broadband wide-area networks, growing capabilities and increasing standardization are changing the way finance organizations do business, as Part 1 of this series discusses.

The Net is also a key enabler facilitating the rising prominence of the microfinance, as well as the corporate social responsibility and ethical investing movements. It is also democratizing philanthropy by making it possible for everyday people to contribute small amounts of money to people and aspiring entrepreneurs in Third World countries.

In the wake of microfinancier Muhammad Yunus being awarded the Nobel Peace Prize for his work to establish the microfinance world's Grameen Bank, the Net is the vehicle of choice for the growing number of new organizations turning to microfinance as a means of promoting sustainable socio-economic development in developing and poverty stricken regions and countries around the world.

Perhaps the most significant thing of lasting value that Jessica and Matt Flannery brought home with them after working for a nonprofit organization doing community development work in Uganda in 2004 wasn't an overwhelming sense of poverty, despair or corruption.

Rather, it was an appreciation for the quiet dignity and perseverance of underprivileged people striving to make good in an environment where even the most basic resources are hard to come by, and public or private sector services and support are starkly in absence. It was that which led them to start Kiva.org, said public relations director Fiona Ramsey. ...

Taking Internet Finance to the Next Level, Part 1

E-Commerce Times: Taking Internet Finance to the Next Level, Part 1

Internet banking and stock trading was all the rage during the late 1990s. Now, two emerging areas of e-finance -- peer-to-peer lending and microfinance -- are disrupting the status quo even further and moving their markets into a new stage of development.

Facilitators of peer-to-peer borrowing and lending, such as Prosper.com, GlobeFunder and Lending Club, are taking advantage of the networking and online application processing power of the Internet.

These companies are doing business mostly overlooked by their more established brethren -- enabling individual lenders, borrowers, entrepreneurs and investors to find and connect with each other directly.

Similarly, the Net is also key to the rising prominence of the corporate social responsibility and ethical investing movements, as well as the extension of philanthropy well beyond the wealthiest individuals who have traditionally been the source of charitable donations. ...

The World's Top Microfinance Institutions

Forbes: The World's Top Microfinance Institutions

Microfinance has become a buzzword of the decade, raising the provocative notion that even philanthropy aimed at alleviating poverty can be profitable to institutional and individual investors. Instead of merely writing a check (then writing it off), why not make a tidy profit from a short-term, high-interest loan, most for under $200, so that a Mexican seamstress may buy a new sewing machine? Or so a Moroccan farmer can buy chickens so he may sell more eggs? Billionaires, global leaders and Nobel Prize recipients are hailing these direct loans to uncollateralized would-be entrepreneurs as a way to lift them out of poverty while creating self-sustaining businesses.

That promise has had a magnetic effect on private capital sources. Microfinance funding from private investors more than tripled to $2 billion in 2006. The field has attracted sterling banks and fund managers, including Citigroup (nyse: C - news - people ), blue-chip venture capitalists like Sequoia Capital, tycoons like eBay (nasdaq: EBAY - news - people ) founder Pierre Omidyar and Oscar-winning screen stars such as Robert Duvall--they've all joined the chase for returns in microfinance. Today, there are upward of 12,000 microfinance institutions issuing loans.

To help investors parse them, Forbes compiled its first-ever list of the Top Microfinance Institutions. ...

Here is the listing to the Top 50.

Profit And Poverty: Why It Matters

Forbes: Profit And Poverty: Why It Matters

Through the ages, we have come to associate profit with greed and serving the poor with self-sacrifice. Accordingly, now that the outstanding performance of leading microfinance banks has inserted banking at the base of the pyramid as an integral part of emerging-markets finance, socially conscious investors are starting to agonize over earning returns while serving the poor. By focusing on their motivations in helping the poor rather than on poverty itself, they have obscured the pragmatic realities of the problem they wish to address.

Any intervention that seeks to meaningfully roll back poverty--whether it is microfinance, education, primary health care, housing or access to basic services such as water and energy--must fulfill four basic conditions.

The first is scale. When there are three billion people surviving on $2 or less a day, reaching a few thousand is like aspirin in the face of a raging cancer. The second is permanence, an assurance that the intervention will be present not only for today's poor but for their children and their children's children. In turn, this requires that the intervention outlast the finite lives of its current champions. The third is continuous efficacy, the ability of the intervention to become better and better through time. The fourth is continuous efficiency, the capability of the intervention to become cheaper and cheaper with each passing day.

.......

In fact, humanity has found only one way to deliver consistently and simultaneously the four attributes of scale, permanence, efficacy and efficiency, and it is through private enterprise.

Web sparks person-to-person lending around the world

Christian Science Monitor: Web sparks person-to-person lending around the world

Social-networking principles have spawned a lending marketplace that lets individuals make loans to almost anyone.

Every morning, as soon as Diane Reese wakes up in her Saratoga, Calif., home, her first steps lead to the family computer. She can't wait to find out whether her 782 debtors are making their payments on time.

For Ms. Reese, an IBM engineer, the revenue stream from loans she's made at 0 percent interest through www.kiva.org isn't as important as what the payments represent. They mean her hand-picked business partners – a barber in Uganda, a fish saleswoman in Vietnam, a school principal in Kenya – are lifting themselves out of poverty.

"We're peers now," Reese says. "I'm investing in their small enterprises.... I'm not being the beneficent Santa Claus or something. I'm a partner with people who are working to improve things. It's a very satisfying way to invest money."

As Christmas arrives with a seasonal reminder to look out for the less fortunate, investors are finding a growing range of options for helping without a handout. Thanks to creative intermediaries and new avenues on the Internet, they're lending to specific individuals or operations that tug at their heartstrings. And they're usually getting their money back, sometimes with a respectable interest rate.

For would-be lenders with a social agenda, options are proliferating at a rapid clip. In February, Prosper (www.prosper.com) debuted with a claim to be America's "first people-to-people lending marketplace." In May, LendingClub launched a direct lending site (www.lendingclub.com) that uses a social-networking database to link lenders with suitable borrowers on the basis of a lender's preferences and risk tolerance. Next year, Kiva plans to begin paying nominal interest to its lenders, who are often drawn to the nonprofit's borrower network of entrepreneurs in developing countries. ...

Kiva vs. MicroPlace - What's the Difference?

World Changing: Kiva vs. MicroPlace - What's the Difference?

As P2P Lending News explains, [t]he big difference between MicroPlace and Kiva...is that loans will be securitized (and therefore potentially trade-able), and lenders will earn interest. Unlike Kiva, lenders on MicroPlace invest in microfinance by purchasing securities. Funds generated by these sales are then invested in microfinance institutions around the world. MFIs, in turn, solicit clients, make loans and collect payments - they do their normal day-to-day business.

.......

First of all, Kiva is a non-profit. As Matt and Jessica Flannery have explained, it's very difficult to become a SEC-registered broker/dealer - even more difficult when you're running Kiva from your living room on the nights and weekends. (See pages 37-38 of the Innovations article for Matt's take on this decision.) MicroPlace, on the other hand, had the institutional and financial backing of EBay, allowing it to go through the complex regulatory application process and to put up the necessary money for the SEC to sign off.

.......

Secondly, MicroPlace adds a level of intermediation that Kiva doesn't have. With Kiva, lenders provide capital to MFIs, who then lend to clients. MicroPlace is a market for microfinance securities, not just requests for loans. Sure, it takes away some of the intimacy, but for the microfinance industry, it's a big step. Securitizing loans helps diversify risk, and allows microfinance investors to reach into the second and third tier MFIs that are having a hard time raising non-donor money.

Are Kiva and MicroPlace competitors? Yes and no. On the one hand, they compete for lenders and have similar models. (Side note - this competition could get bad if the mainstream media screws up the story here. The differences between Kiva and MicroPlace are important, but subtle. Fingers crossed.)

On the other hand, Kiva is filling an unmet need in terms of providing a direct, peer-to-peer portal on which lenders and borrowers can connect. MicroPlace, meanwhile, is more businesslike - it offers a portal where profit-conscious investors can get involved in microfinance without totally compromising on rate of return.

eBay Launches Microfinance Site: MicroPlace

Profy: eBay Launches Microfinance Site: MicroPlace

There’s Kiva. There’s Accion International. There’s Opportunity International. And now there’s MicroPlace, an eBay company.

What are they? Microfinance groups and organizations, spread across the globe, whose purpose it is to offer entrepreneurs and small businesses in places where poverty disables such people and their enterprises of the possibility of growth the ability to expand, invest in more materials, and get hold of new tools in order to increase production, and, generally speaking, better their communities as a result. Sounds like a great thing, yes? Well, that’s because it is a great thing.

Online auction giant eBay is now pushing to use its worldwide recognition to join the fold and make a significant impact itself. Last year, the company acquired a small and virtually unknown entity piloted a Ms. Tracey Pettengill Turner, and after months of development and preparation, both founder (Turner) and investor (eBay) have today announced the official opening of their microfinance effort, which they’re calling MicroPlace. ...

Pop!Tech - Interview With Kiva's Jessica Flannery

WorldChanging.com: Pop!Tech - Interview With Kiva's Jessica Flannery

Jessica Flannery is, in many ways, an accidental entrepreneur. Had she not met a guy named Matt at a DC conference in 1999, the entire enterprise she's known for (Kiva.org) might not exist today. I was fortunate to be able to sit down with Jessica for an interview on Thursday here at Pop!Tech 2007, where she agreed to share many of the other fortunate "accidents" that have marked her journey.

The best part about interviewing someone like Jessica Flannery is that I don’t have to tell and re-tell the Kiva story. After all, NextBillion.net was one of the first web sites or blogs to even talk about Kiva, the peer-to-peer microfinance web site that Jessica co-founded with her husband, Matt (ok, that’s a smidge of story, I admit). What’s more, Sara Standish – a former NextBillion writer and current MBA candidate – conducted a long interview with Kiva principals including Matt, Premal Shah, and Krista Van Lewen. And Kiva has been featured in a slew of mainstream media – from Newsweek to BusinessWeek to Oprah to NPR.

Since the basic story of Kiva is well known, Jessica and I decided to focus our conversation on some of the lesser-known aspects of her journey and the business it has spawned.....

Father of microloans sees end to poverty

Seattle Post Intelligencer: Father of microloans sees end to poverty

Envision a world with poverty museums -- places where children would go to learn of a dismal way of life extinct, of malnourishment, illiteracy and premature death.

When 2006 Nobel Peace Prize winner Muhammad Yunus mentioned the concept Tuesday in speeches at the Microsoft campus and later at the University of Washington, he got chuckles from the audiences.

But Yunus was serious.

"We can create this day very soon. It doesn't have to be a pipe dream. It can happen," he said at the UW. "That's the task we have ahead of us."

His idea of lending small sums to the world's poorest citizens has already pulled millions out of poverty. For the 3 billion people who live on less than $2 a day, a loan as small as $50 can jump-start a business such as raising chickens or sewing.

The concept's popularity has grown like gangbusters in recent years, and Seattle has become a hub for the microfinance movement, with several supporting organizations based here.

"Poverty is not created by the poor people. It is not their fault," Yunus told Microsoft employees. ...

Microlenders jump-start entrepreneurs

Kansan.com: Microlenders jump-start entrepreneurs (You have no idea how objectionable it is for me to post a story from a University of Kansas newspaper, but this should symbolize to you my deep devotion to Kiva. :) )

Nonprofit group Kiva lets volunteers lend money to small business owners in developing countries.

After Clinton and the founders of Kiva, Matt and Jessica Flannery, appeared on The Oprah Winfrey Show last month, the Kiva’s Web site posted a message stating that this year, for the first time, every business that applied had been funded. Kiva has loaned more than $11 million, and 99.6 percent of the loans have been repaid. Its donor membership has grown from 75,000 in June to more than 113,000 today.

.......

Kiva has funded 17,000 loans today compared with the seven it started with in March 2005.

Sam Snyder, a Motorola technician and 2006 University graduate, has loaned to 703 people, totaling at least $17,575, since he joined in January 2006.

Bill Clinton Goes 'On the Record'

Fox News - On the Record with Greta Van Susteran: Bill Clinton Goes 'On the Record' I was particularly intrested in this part of the discussion about Kiva.

VAN SUSTEREN: Well, that is a little bit like the one of the organizations you talk about in your book, in the new book "Giving," is, Kiva.org, which, incidentally, we put on our blog yesterday, because we thought it was such a great idea.

CLINTON: Unbelievable.

VAN SUSTEREN: Kiva.org is what? That lets everybody contribute, not just the fat cats.

CLINTON: Kiva.org gives you a chance to do what Muhammad Yunus won the Nobel Peace Prize for last year. And for 30 years he was one of the world's great micro-credit lenders. He made over 7 million loans, 97 percent to village women with a 98.5 percent payback rate.

And over half of the people he loaned money to worked their way above the international poverty line so that per capita income in his native Bangladesh moved from less than a dollar a day to about $570 a year, largely driven by the Grameen Bank and other projects like that in good times and bad.

So with Kiva.org, Greta Van Susteren and Bill Clinton can get on their Web site and we can see people that need money all over the world.

VAN SUSTEREN: How much money are you talking about?

CLINTON: As little as $25. You are talking about a lot of this money is loaned to people in countries with a per capita income of less than a dollar a day. You can see basket-makers and weavers in Africa. You can see a guy in Kabul, Afghanistan, who repaired radios.

VAN SUSTEREN: So if I go on Kiva.org and give $25, I can actually track to see how it changes someone's life?

CLINTON: Yes. If you go on Kiva, you can give as little as $25, almost nobody gives more than $300 or $400. And you may — let's suppose you pick a basket cooperative in Rwanda, and they want to get together after the horrible problems of a decade ago and bring people together across ethnic lines and make baskets and market them.

Let's suppose they need to borrow $400, well, you can either — you can give them $400, but you can give $25 and then eventually, let's say, 10 or 15 together will provide the $400. Then you loan them the money through a local group in Rwanda, and they report back in and pay the money back.

And every couple of weeks you can go back to Kiva and get a report as if you were their banker. They will report in, how are we doing with your money? How is our business doing? Are they repaying the loan?

Then when the loans are paid, you can take your money back or turn around and pick someone else to loan it to.

VAN SUSTEREN: It is an extraordinary program.

CLINTON: Amazing.

(CROSSTALK)

CLINTON: And it is all on the Internet. And it makes you feel like you know these people. I mean, they are — you see their picture. You know the facts of their business. You know what their lives are like.

And you know whether you are doing it alone or — and you can have like a virtual cooperative bank because you wind up — you may be joined by people all over America or all around the world in helping this particular business, whatever you pick.

Social business enterprises can alleviate poverty

Business Daily Africa: Social business enterprises can alleviate poverty

18-September-2007: Despite many advances global poverty persists. Models that rely on government action or capitalism narrowly defined as maximization of financial profit are limited in their ability to put poverty where it belongs – in a museum.

The key missing links are grassroots, private sector approaches that focus on the poorest of the poor, but in a way that is businesslike and allows for preservation of investor capital and financial sustainability over time.

The potential of ‘social business enterprises’ formed along these lines can make a major impact on the global poverty crisis. ...

A Guiness for Kiva

Kiva Chronicles: A Guiness for Kiva Kiva was on a program featured on Tuesday's Oprah Show, where she interviewed Bill Clinton about his book on giving. The response has filled every loan request that Kiva had on its site.

Jess is in Swaziland. My Dad, Mike Flannery, is in town. Last night, Dad and I went out to the Liberties on Guerrero  -- a couple of Irish lads at the local Irish pub. 

After a few Guinness, we were back home.  My laptop lives on my nightstand.  I checked in for one last glance at Kiva stats.   We were out of businesses and there was no way to make a loan.  This is the first time this has happened since January '06. 

Ms. Winfrey, you sold us out.  For you, I thought I would summarize the stats below. ...

..........

I don't have time to explain the strategy that went into creating this chain of events.  Rather, I'll just explain how I feel about it.  I'm ecstatic.  I don't think we made many mistakes this time around. 

At a high level, the strategy was guided by the following beliefs 1)  We  are no longer terrified of running out of businesses and will not sacrifice our best thinking around risk in order to avoid a shortage and 2) We are not going to overspend on infrastructure to handle temporary press events.   These lines of thinking contributed to the situation we are in now -- sold out of businesses with a website that went down a few times for short periods of time, but generally held up.  This is remarkably different than a year ago when we were on Frontline and down for 4 days.

I'm proud of the team. Mike is proud of me. Sam, Zvi and John: You guys are heroes. Same goes for you Ms. Winfrey.

Loans to Change Lives

MSNBC: Loans to Change Lives

This morning, correspondent John Larson profiled the Web site Kiva.org, which allows everyday people to make small loans ("microloans") to entrepreneurs in developing countries. WATCH VIDEO

I was first compelled to visit Kiva last weekend, while reading President Clinton's new book, Giving: How Each of Us Can Change the World (he's going to be on TODAY on Wednesday, so I was preparing to produce the segment). I was struck by the simplicity of Kiva but also its potential to impact lives in a meaningful way.

It's pretty simple. You go to kiva.org, look through a list of prescreened entrepreneurs who explain what their business is, how much money they need in loans and how they intend to use that money. If you decide you want to contribute to a particular business, you fill out a form to loan the entrepreneur a minimum of $25 and pay by credit card. ....

Kiva Meets President Clinton and Oprah - Airs Tuesday, Sept. 4

Kiva Chronicles: Chicago

For the past 10 months, we have been operating in a state of suspended reality.  For the past 2 days, it has felt more like delusion.  We just got back from Chicago last night.  We spent yesterday morning at Harpo productions for an Oprah show taping.

..........

We were in the audience.  The show was focused on President Clinton's new book -- Giving.  We assumed our seats in the front row.  The President and Ms. Winfrey entered to great applause.  There we were, in the front row, about arm's length away as the interview began.

We were in the 5th segment.  I think that's right.  The President and Oprah ushered us through 4 segments of emotional conversation and specials.  I could almost touch them.  Even so, it felt like I was watching a movie -- however more frightening because the characters could call on you at any time.  You better be ready.

..........

... I didn't make any big mistakes.  I was serviceable, not incredible.  Since that time, I've replayed the answers in my head, second guessing every word.  I'll probably never get the chance to address that many people again in my life.  Thinking about it too much can drive you crazy. 

She turned to Jess and asked about her inspiration.  Jess got emotional.  It was an emotional moment. She delivered a heart felt account of how we began Kiva.   It was one of the more moving parts of the show.

..........

The show ended.  The President approached us to talk about Kiva and how he could help.  He noted that Jess used to work for World Vision and had apparently read our bios.  Are you kidding me?  Is this really happening?  President Clinton is an immensely personable person.  He would have stayed all day and talked to every single person in the studio if reality accommodated that.   The Harpo people had to remind him to move to the next venue. 

Tactically speaking, this will be a big week for Kiva.  Watch for the show on Tuesday, September 4th.   It's bound to be another order of magnitude shift for our young organization.  We will do everything we can to react.

Couture with a Conscience: New Fashion Line Supports Women Entrepreneurs Across the World

PR Web: Couture with a Conscience: New Fashion Line Supports Women Entrepreneurs Across the World

Shabby Apple Apparel launches fall line in partnership with Unitus

Salt Lake City, UT, and Redmond, WA (PRWEB) August 29, 2007 -- Shabby Apple, a socially responsible women's apparel company, announces the launch of their new fall line of fashions with a conscience in partnership with Unitus, a nonprofit organization dedicated to reducing global poverty by increasing access to microfinance. Through the partnership, Shabby Apple will donate 5 percent of its proceeds to support Unitus's work of empowering women entrepreneurs in India, where the company sources many of its textiles. This innovative partnership provides women an opportunity to connect with and support women's empowerment across the world through their purchase of Shabby Apple products.

"We at Shabby Apple are honored to support the fight against global poverty through our partnership with Unitus," said Emily McCormick, co-founder of Shabby Apple. "We feel that in today's world, businesses can't exist simply to make profits. With more than 3 billion people living on less than two dollars per day, we all need to make a positive contribution. We chose to partner with Unitus because of their impressive track record in helping provide economic opportunity to more than 2 million women and their families worldwide, and because of their large presence in India, where we source our textiles. As entrepreneurs ourselves, we found Unitus to be the perfect partner to help empower other women entrepreneurs around the world."

Each Shabby Apple dress in the fall line will feature a unique hang tag that shares a story of strength and inspiration from the women in India who benefit from access to microcredit. Visitors to the Shabby Apple and Unitus websites can learn more about each featured entrepreneur and/or make a donation or purchase to support this effort. Every $100 donation provides at least 20 women with access to financial services and the chance to live a life without poverty. ....

Help the world with a small loan

Orlando Sentnel: Help the world with a small loan

Got money to burn and want to change the world -- even a little? Then check out Kiva.org, which helps everyday people make small loans to entrepreneurs who are trying to dig out of poverty in developing nations.

Kiva.org lenders can browse through profiles of those in need, whose loan applications were vetted through local, culturally attuned nonprofits or microfinance organizations before being posted on the Web site. The profiles have photos and detailed explanations of their businesses and why they need the loan.

A shoe saleswoman in Mexico. A cement seller and a soft-drink vendor in Azerbaijan. A Kenyan woman in need of a cow. These four people needed loans their local banks could not provide, so Will Nathan, 23, became their lender through Kiva.org. All while sitting on his couch. ...

Is microfinance really helping the poor?

Defeating Global Poverty: Is microfinance really helping the poor?

Very good question from KT on post of my recent interview ... just the kind of questions I like to ask! We need to have an open dialog on the outputs/results we are expecting/hoping for.

Dave, in the interview you mentioned: "microfinance has demonstrated, and it’s one of the few tools that I’ve been able to find historically that has had a large impact on actually lifting people out of extreme poverty on a sustainable basis and at a large volume". Do we have any hard evidence of that? In 2006, Economist magazine concluded that while "heart-warming case studies abound, rigorous empirical analyses are rare". Bangladesh is not one of the development success stories by any standards. Out of 7,000 MFIs around the world, fewer than 100 claim self-sufficiency.

I am not trying to criticise microfinance as such but it looks like the claims that it as a successful development tool are really exaggerated.

Here are a few thoughts: ...

Making Development Less Risky

Scientific American: Making Development Less Risky

Life at the bottom of the world’s income distribution is massively risky. Poor households lack basic buffers—savings accounts, health insurance, water tanks, diversified income sources, and so on—against drought, pests, disease and other hazards. Even modest shocks, such as a temporary dry spell or a routine infection, can be devastating.

These risks have knock-on effects. To take one prime example, the expected economic return on the use of fertilizer is very high in Africa, yet impoverished farmers cannot obtain it on credit because of the potential for a catastrophic loss in the event of a crop failure. Their households cannot bear the risk of a loan, and so they remain destitute. Managing risk is therefore important not only for smoothing out the well-being of these farmers over the years but also for enabling their escape from extreme poverty.

For these reasons and others, financial risk management is likely to come to the forefront of strategies for poverty reduction. Microfinance has already introduced markets for the poor. Microinsurance and other kinds of risk management will likewise yield important tools. ...

Micro coverage a big help for Mexico's poor

Christian Science Monitor: Micro coverage a big help for Mexico's poor

A new plan to promote microinsurance could have a ripple effect in the region.

Mexico City - Adela Amaya Chavez never considered life insurance. In fact she had no idea what it was.

But on a recent day when inquiring about a loan at Banco Azteca to repair the leaky drains in her home in Mexico City, she was told that if she paid an additional $2 a week her family would receive $6,000 if she were to die. Her first thought: the death of her nephew in a car accident in 2003 and the devastation it caused his family. "It was so sudden," says Ms. Amaya Chavez, who cleans office buildings for a living.

She signed up.

Once just a safeguard for the middle and upper classes, insurance is finding its way to all sectors of Mexico. For the poorest, microinsurance policies – often simple plans worth tiny sums of money – are giving protection to those Mexicans who work in the informal economy, often don't have bank accounts, and never dreamed of the luxury of having a Plan B.

Asia and Africa have pioneered microinsurance coverage for everything from death to droughts. But a new government-sponsored plan to promote such micropolicies in Mexico – with its sophisticated banking sector and second-largest population in Latin America – could have a ripple effect in the region, experts say. The plan is the first of its kind in Mexico and will focus first on basic life insurance, and later target health and property. What began as a community-based and nonprofit effort is now moving to a commercial venture expected to grow quickly – and could lead millions of Mexicans one step further away from poverty. ...

Ecuador moves to cut interest rates for poor

Christian Science Monitor: Ecuador moves to cut interest rates for poor

Banks and microlenders say Ecuador's leftist president may hurt most those he wants to help with 'financial justice' law.

Quito, Ecuador - Ecuador's new leftist president, Rafael Correa, is wasting no time forging his own path toward the "21st-century socialism" championed by Venezuela's anti-US leader, Hugo Chávez.

In April, three months after taking office on promises to wrest control of the country from the hands of a corrupt elite, Mr. Correa kicked out the representative to the World Bank. He blames the financial institution for forced privatization programs that have failed to benefit the poor, he says.

Now he's pushing through a controversial "financial justice" bill to increase state control of the banking sector.

The bill, which is expected to pass into law this week or next, paves the way for a complete overhaul of an abusive financial system, say government officials. It's also the latest example of a populist movement strengthening throughout Latin America.

But this new law could hurt most those Correa hopes to help. As he strives to protect Ecuador's poor from predatory lenders and free the country from the "Father-knows-best" conditionality of international institutions, such as the World Bank, he risks putting microlending groups out of business, preventing thousands of Ecuadoreans from receiving cash loans to lift themselves out of poverty. ...

Association for Enterprise Opportunity 2007 Annual Conference

AEO 2007 Annual Conference
Microenterprise Development:
The Rhythm of Successful Communities

May 15-18, 2007
Hyatt Regency Crown Center
Kansas City, Missouri

Empower your microenterprise development program with the latest tools and strategies to support U.S. entrepreneurs. Join AEO and Conference Co-host, Missouri Asset Development Coalition, in Kansas City, Missouri May 15-18, 2007 for the AEO 2007 Annual Conference.

The AEO Annual Conference is the premiere conference for microenterprise development professionals - learn from the success of others, share your own successes, and develop a professional peer network.

Whether you are new to the AEO Annual Conference or a veteran attendee, 2007 promises a fresh new perspective with workshops designed to be intensive, informative, and interactive. Addressing the changing needs of the field, 2007 will offer more advanced level training than in years past and provide ample time for peer networking as requested by past conference attendees.

Click here for more information

Lining Up the Loan Angels

Newsweek: Lining Up the Loan Angels

April 9, 2007 issue - Fighting poverty has along and divisive history, but nothing's shaken up the pundits, wonks and windbags like microfinance. The United Nations declared 2005 the year of microcredit—small loans for the penniless—and last year's Nobel Peace Prize went to Muhammad Yunus, founder of the Grameen Bank, which pioneered such lending. Governments from Brazil to Bosnia have launched massive microloan programs, and commercial banks like ABN AMRO, HSBC and Citicorp are rushing down-market. Some 500 million poor worldwide have reportedly benefited from some $6 billion in microloans, which aficionados want to ramp up to $300 billion. "One day," Yunus predicted, "our grandchildren will go to museums to see what poverty was like."

That was then. Now a backlash is growing. Critics on the left charge that micro-finance privatizes social safety networks, while conservatives dismiss it as charity disguised as enterprise. Wonks weigh in with studies like "The Myths and Magic of Microcredit" and "Money Is Not Enough." Insiders turn on the industry. Loïc Sadou-let, a former World Bank economist who worked in microfinance in Guatemala, estimates that only about 300 of nearly 25,000 microlenders have reached financial "sustainability," meaning they are able to cover all costs. Now comes "Microfinance Reconsidered," a recent essay from the Cato Institute, a conservative U.S. think tank....

Interesting stuff (though I am undeterred). Never say I didn't give you both sides.

The Business of Global Poverty

Harvard Business School Working Knowledge: The Business of Global Poverty

According to the World Bank, nearly half the world's population—some 2.8 billion people—subsists on $2 a day or less. The number of people living in poverty at the bottom of the wealth pyramid, versus the relative handful at the pyramid's peak, represents what is potentially the most explosive socioeconomic challenge facing the world. Now, with markets in the developed economies experiencing slow growth and with the top tiers in emerging markets relatively small, business is beginning to eye this huge population at the bottom of the pyramid (BOP) as a viable and essential market. Indeed, it is only in the last decade, thanks in part to academic research, that business has come to realize that while BOP individuals may only have tens of dollars a year to spend, that disposable income, multiplied several billion times over, represents significant purchasing power. With this realization have come some dramatic shifts in business thinking, sparking innovative experiments involving marketing approaches, distribution networks, product packaging, and financing instruments to meet the needs and requirements of very poor customers.

As members of the School's Global Poverty Project (GPP), Kash Rangan, John Quelch, and other faculty members have studied and researched the issue of business and global poverty for some time. They believe that in pursuing its own self-interest in opening and expanding the BOP market, business can make a profit while serving the poorest of consumers and contributing to development. As Rangan explains, "For business, the bulk of emerging markets worldwide is at the bottom of the pyramid so it makes good business sense—not a sense of do-gooding—to go after it." Today, market forces, private-sector know-how, and grassroots initiatives such as microfinance are all being looked to as tools to alleviate poverty. Business, once viewed by many critics as part of the problem, is increasingly being called on to be part of the solution. How business can do this most effectively is the focus of the GPP's research and scholarly activity.

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Rangan and Chu's course, now a full-credit offering as of this semester, takes an in-depth look at microfinance, an important and relatively new poverty-alleviating weapon. Introduced about thirty years ago, this system of very small loans to grassroots entrepreneurs such as street vendors, subsistence farmers, or home-based businesses has enjoyed widespread success. Indeed, the 2006 Nobel Peace Prize was awarded to Muhammad Yunus and the microcredit Grameen Bank he founded in Bangladesh more than two decades ago. With interest rates ranging from zero to 20 percent, Grameen's average loan (no collateral required) is $200. Its repayment rate is about 98 percent. Some 7 million poor people, almost all of them women, have Grameen loans; Yunus asserts that microfinance is helping to reduce Bangladesh's poverty levels by 2 percent a year.

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"Poverty can only be truly addressed if you meet four conditions," Chu explains. "You must have huge scale to reach the billions who are in poverty; solutions must be enduring and last over generations; solutions must be truly effective and make a difference; and all this must happen efficiently. Only through a commercial approach can you achieve all those things, and the great power of microfinance comes through its ability to generate profit. There is no contradiction between social impact and good profitability; in fact, profitability is central to that social impact."

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The wealth created by globalization, Rangan declares, requires blueprints from governments to use those resources to help people escape poverty. In the private sector, Rangan sees a positive trend among multinational corporations within industries to set and adhere to minimum standards for labor, the environment, and human rights. Their self-interest—specifically, the need to maintain their moral and literal licenses to operate in these countries—requires it. "Although it may increase their cost of doing business, businesses have nonetheless taken the lead here, and strong governance will emerge," Rangan observes. "But it's a slower process than people imagine. At the GPP, we don't expect change overnight. But we feel that we can help advance the business process in a direction that makes commercial sense and is the right thing to do."

Innovative Microfinance Equity Fund

Defeating Global Poverty (Dave Richards): Innovative Microfinance Equity Fund

Unitus announced last week that they’ve raised a US$23 million private equity fund to invest in microfinance. I was able to catch up with Chris Brookfield, Director of Unitus Equity Fund, last week to find out more about this announcement.

Dave: What is Unitus announcing today?

Chris: Unitus is announcing the closing the Unitus Equity Fund (UEF). UEF is formed just like the other venture funds I have been a part of. The difference is that UEF is committed to investing into sustainable microfinance enterprises. It is our hope that by demonstrating that microfinance can scale rapidly and produce returns for investors that much greater amount of investment capital will follow. By increasing the capital available to microfinance companies, we increase the number of borrowers that can be served. So each new investment dollar in will translate to a new opportunity for a poor person to become an entrepreneur.

The 'close' means that we have exceeded our goal and will now be focused 100% on finding new MFI's to invest into. We closed on $23 million. ...