Making Microfinance More Effective

Harvard Business Review

A major challenge for international development efforts is determining which financial tools provide durable buffers against such setbacks. The Grameen model of microfinance gained a great deal of attention in the international development field after early data showed that it was associated with high repayment and low default. In developing economies, market failures and distortions are so strong that all five conditions often fail at once. For the 2.5

Learning from Microfinance's Woes

Harvard Business Review

A few weeks ago, I attended a lecture about microfinance, and got sucker-punched. Expecting to hear a litany of pros and cons about the business, and an exploration of good and bad models, I was instead greeted with a knockout punch: Microfinance doesn't work, at least not in the way we think it does. The pugilist-presenter was David Roodman, a fellow at the Center for Global Development and the author of a new book, Due Diligence: An Impertinent Inquiry into Microfinance.

Innovating The Brick-and-Mortar Injustice Infrastructure

Mills Scofield

This week''s post is by Andy Posner , Co-Founder & Executive Director of Capital Good Fund ( CGF ), a non-profit microfinance organization targeting the root causes of poverty through innovative micro-loans and personal financial coaching.

Women as Microfinance Leaders, Not Just Clients

Harvard Business Review

We're a network of microfinance organizations; we exist to share practices and develop the leadership skills required by a sector that has grown up fast. And as you might be aware, microfinance is a phenomenon that, while it did not set out to be "for women," has mainly turned out to be. It's vital to reverse the trend and help microfinance institutions attract, train, and retain talented women. Diversity Gender microfinance WWB

The Microfinance Contagion Scenario

Harvard Business Review

So far, the Andhra Pradesh (AP) microfinance crisis has largely been viewed as a local issue, with relatively little impact beyond AP or India's borders. Other microfinance crises, in Bolivia, Nicaragua, Nigeria, and Bosnia, have not spread beyond the borders of a particular country. In a recent paper, Jonathan Morduch and Jonathan Conning explain the role of debt and equity financing in the microfinance industry.

How One Startup Developed a Sales Model That Works in Emerging Markets

Harvard Business Review

Experiment #5: Microfinance Institutions. In emerging markets, microfinance has been a key economic engine in helping low-income households fund businesses and other important purchases in daily life. Prem, a BioLite Burner on our West India team, gives a HomeStove demonstration to a group of customers at a microfinance branch in Rajasthan.

Guest Post: An Entrepreneur's Thoughts on Market Incentives & Foreign Aid

Mills Scofield

One of his main tasks was to structure a hedging derivative that negated foreign exchange risks so that Microfinance institutions could take safer loans from the developed world. This is a guest blog by Chia Han Sheng, Brown University '14, co-founder of MedInternational.

What is the best way to make a difference in the world?

CO2

My solution was to found a microfinance organization that puts women in a position to create their own destinies and achieve their full potential. It seems that oftentimes when people work in developing countries, they find that the work itself is a journey of self-discovery.

How Large NGOs Are Using Data to Transform Themselves

Harvard Business Review

Army staffers now develop individual strategies to overcome these barriers, connecting families to community services to achieve self-sufficiency. A critical part was adapting a proven model in a related field: microfinance.

Entrepreneurship Needs to Be a Bigger Part of U.S. Foreign Aid

Harvard Business Review

” In less mature economies and fragile regions of the world, entrepreneurs are just as, if not more, critical to livelihoods and development. government agency, purpose-built (or purpose-modified) solely for economic development work, would be a good first step.

Funders Can Give More than Money

Harvard Business Review

Six years ago, David and Donna Allman approached Opportunity with an idea that fell outside our traditional microfinance model: to build a Community Economic Development (CED) program in Nicaragua. A CED strategy starts with an asset assessment rather than a needs assessment of the poor, recognizing that even the poorest families have assets to contribute to their own development. We know that microfinance alone will not break the poverty cycle.

Businesses Serving the Poor Need to Get Over Their Unease About Profit

Harvard Business Review

And their intuition isn't baseless: As the bottom-of-the-pyramid concept shifted into the public eye and attracted the criticism of the development sector, the standards for judging the impact of a venture aiming to serve low-income consumers seemed to get a lot tougher. The microfinance industry is a rare D and E success story. Microfinance banks, which provide desperately needed loans to low-income consumers, draw mainstream investors because of their attractive returns.

Scaling Up Without Losing Your Edge

Harvard Business Review

Without economies of scale, they argued, developing societies would never develop the efficiencies needed to modernize. To address the needs of youth in developing countries, BRAC launched a girls' empowerment program, Empowerment and Livelihood for Adolescents (ELA), in 2008.

Can Technology End Poverty?

Harvard Business Review

Calling himself the ICT4D jester (using the development jargon for "information and communication technologies for development"), he has no shortage of material. At the program's peak, 700 pumps covered 27,000 acres, with the loans constituting 9% of BRAC's total microfinance portfolio.

Can Technology End Poverty?

Harvard Business Review

Calling himself the ICT4D jester (using the development jargon for "information and communication technologies for development"), he has no shortage of material. At the program's peak, 700 pumps covered 27,000 acres, with the loans constituting 9% of BRAC's total microfinance portfolio.

Global Entrepreneurs Need New Funding Models

Harvard Business Review

For me, it has been a problem of finance until LEDFC," he says, referring to the Liberian Enterprise Development Finance Corporation that offers Liberian-owned firms desperately needed small business loans. The goal is "to develop sustainable banking products which are more accessible for qualified candidates and women in general." The goal is to raise $100 million over three years from development banks, commercial banks, and high net worth investors.

An Approach to Ending Poverty That Works

Harvard Business Review

Microfinance and other market-based interventions don’t generally reach them. Discussion abounds in the development sector today about the best ways to empower the poor.

The 3 Preconditions for an Entrepreneurial Society

Harvard Business Review

And if you need access to money, crowdfunding platforms and microfinance options make that easier than ever. In the developed world, at least, the means of the entrepreneurial society are in place — and the developing world is catching up fast.

What Makes Social Entrepreneurs Different

Harvard Business Review

Social entrepreneurs have also been some of the most attentive followers of the academic debate between the likes of Mark Pitt and Jonathan Murdoch about whether microfinance really helps reduce poverty.

The Innovation Mindset in Action: Shantha Ragunathan

Harvard Business Review

Sasikala, a Block Development Officer (BDO), talked to the Kodapattinam villagers about microfinance , only Shantha, of all the villagers, saw the opportunity and took action. To participate in a microfinance campaign, the village had to form a Self Help Group (SHG) of about 20 people, with each member contributing a certain amount of money every month. Undeterred, Shantha persisted until she persuaded the required number of people to sign up for the microfinance project.

3 Things Driving Entrepreneurial Growth in Africa

Harvard Business Review

Or there’s Nairobi’s SuzieBeauty, which develops cosmetics catering to African tastes at quality matching Western levels. Firms are realizing what microfinance has known for a while: Local self-policing groups, or village headmen who police honor codes, can hedge cash flows in far-flung places. Fatigue may be setting in for some Western investors’ interest in African innovation, particularly those that have yet to reap rewards to brag about.

Facebook Presence Is an Important Clue to a Social Venture's Future

Harvard Business Review

It seems to signal that an enterprise's theory of how to effect change resonates with a lot of people and that the organization is developing a "voice" for effectively communicating its ideas to customers — a crucial success factor.

Transforming Rural India Through Agricultural Innovation

Harvard Business Review

Since its inception in 2000, NAF has been involved in a range of interventions—infusion of technology, soil enrichment, efficient farm and water management, improved cattle development, functional literacy, rural sanitation and public health, human resource development, establishment of self-help groups particularly among women, self-employment opportunities and facilitating institutional credit—to address the problem of farm productivity in India.

Making Sense of the Many Kinds of Impact Investing

Harvard Business Review

Currently, impact can mean anything from venture investments in new health technologies to microfinance loans in Peru; from affordable housing in the US to renewable energy in India; from social impact bonds to private equity funds that create jobs.

How Social Entrepreneurs Can Have the Most Impact

Harvard Business Review

And Bill Gates announced he was shifting his priorities from software development to social impact by moving full time to his foundation. Scottish social entrepreneur Mick Jackson, founder of WildHearts in Action , is attempting to forge a generation that marries entrepreneurship to economic justice through microloan-based business competitions across British schools and universities that generate profits for microloans in developing countries. Social enterprise in the U.S.

How to Create Youth Jobs After Conflicts

Harvard Business Review

Across most developing countries, there is a model for job training where youth are assisted to acquire basic skills. Upon graduation, the governments, nonprofits, or (more recently) microfinance companies give them loans to buy tools and opens shops. We developed a very cheap rechargeable lighting system and a model where a youth can operate a charging station using solar, grid, or human energy.

It's Not All About Growth for Social Enterprises

Harvard Business Review

Many in the nonprofit world call this technical assistance or training, while for-profit entrepreneurs might see it as business development, partnerships or even affiliate marketing. Successful examples of this approach are still rare; most people point to microfinance.

Entrepreneurs: You're More Important Than Your Business Plan

Harvard Business Review

The kids develop discipline and focus, but also practical, marketable skills. We are proud to have made early investments in the work of Andrew Youn, who founded One Acre Fund; Wendy Kopp, who founded Teach for America; and Vikram Akula, who founded SKS Microfinance.

It Takes a Village to Raise an Entrepreneur

Harvard Business Review

Take, for example, the issue of economic development. A hybrid approach is exemplified by startup Frogtek, which develops software for local shopkeepers in emerging markets to more efficiently track their inventory, leading to better purchasing decisions and greater profits.

The Smart Way to Make Profits While Serving the Poor

Harvard Business Review

Grameen Bank, the microfinance bank in Bangladesh, is well known for its use of peer groups: Self-formed clubs of five to 10 people, usually women, share responsibility for microloans. If companies wish to launch flourishing ventures capable of transforming the lives of millions of low-income people across the developing world, they must get back to basic business tenets.

Using Games to Get a Handle on Bank Risk

Harvard Business Review

Yet unlike in finance, where distributing risk across institutions is the goal, in drug development the focus is on isolating risk. Although new drugs are developed for those with a particular disease, they are tested in a healthy population before they are distributed and assessed in a vulnerable one. Bank marketing materials focus on the dreams, anxieties and goals of consumers. Risk management processes don't — but they should.

President Obama Can Make Start-Up America Succeed

Harvard Business Review

Do we really want to beat India at developing clean tech, cheap medical devices, and affordable housing? Microfinance (Bangladesh), securitization of revenues (Saudi Arabia), and royalty-pay-back funding (Israel) were all invented overseas.