Making Microfinance More Effective

Harvard Business

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. For the 2.5 billion people who live on less than $2 per day , shocks such as illness, crop failures, livestock deaths, farming-equipment breakdowns and even wedding or funeral expenses can be enough to tip them, their families, or even an entire community below the poverty line.

Can Impact Investing Avoid the Failures of Microfinance?

Harvard Business

Impact investing can learn from the history of microfinance — the provision of debt and other financial services to the poor — an industry that was at a similar stage 15 years ago. Fortunately, impact investors have the opportunity to think more creatively over the next decade, as long as they learn from past mistakes in microfinance. Lessons from Microfinance. First, does microfinance help people, and if so, how much? Erik Dreyer/Getty Images.

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Peer-to-Peer Microfinance: A Sustainable Solution to Poverty

Modern Servant Leader

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.

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.

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

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. Business Model Innovation Capital Good Fund Innovation Leadership Micro Loans Microfinance Poverty

Lessons for Social Entrepreneurs from the Microfinance Crisis

Harvard Business Review

The microfinance industry has in just a few years gone from making headlines for the Nobel Peace Prize to stories about limited impact, allegedly abusive tactics, client suicides, government crackdowns, major lenders struggling with insolvency and the forcible removal of Mohammed Yunus as Managing Director of Grameen Bank. But we shouldn't ignore how the microfinance industry made itself vulnerable to attacks with a political motive.

I'm a bank - well, with the help of Kiva.org!

Jason Womack

Intercontinental Ballistic Microfinance from Kiva Microfunds on Vimeo. What happens when 620,000 lenders fund 615,000 entrepreneurs, students, and other microfinance borrowers around the world? Ok for the first 3 people to suggest loan recipients, I will loan to entrepreneurs at www.Kiva.org. If you'd like to recommend someone I loan to, simply @ me over at Twitter: @ JasonWomack. Over the past 3 years, I've made over 170 loans.and, I'll continue doing so!

Microfinance Is Good for Women, but It's Only Part of the Solution

Harvard Business Review

Career paths are not one-size-fits-all, yet in emerging markets, it's often assumed that microfinance — the use of small loans to foster self-reliant small businesses in a community setting — is the only path for women seeking economic opportunity. Microfinance has accomplished tremendous things and helped millions of women launch their own businesses; however, it is not a complete means of economically empowering women. Microfinance was one issue that we considered.

How Can I Start My Own Business?

Strategy Driven

Microfinance organizations provide small loans in order to help entrepreneurs get their business off the ground in the beginning. For more information on microfinancing, consider this article on: what is microfinance ?

Book Review: The Social Entrepreneur’s Handbook

Chartered Management Institute

Rupert is the CEO of the foundation for International Community Assistance, a leading microfinance institution. The Social Entrepreneur’s Handbook by Rupert Scofield is written to guide the aspiring social entrepreneur through the full range of activities of starting, building and running a social business. Review by David Stephens FCMI. You are not watching this post, click to start watching

Banking on Women and Girls: Key to Global Poverty Alleviation

Harvard Business Review

On this 100th International Women's Day , it is right to reflect on how women have become the heart of the microfinance industry. It is easy to forget that the initial motivation for microfinance roughly 30 years ago was, to a great extent, gender neutral. The pioneering microfinance institutions sought to provide credit to poor entrepreneurs who had no assets to pledge as collateral and, consequently, were denied access to capital by the formal banking sector.

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. In 2006, Chingwell Mutombu founded First Step Initiative , a microfinance organization that provides small loans to women in the Democratic Republic of the Congo, enabling them to start and grow their own businesses. This question is at the heart of Jacqueline Novogratz’s inspirational book, The Blue Sweater.

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. I think that microfinance is one of those rare game changing social initiatives that manages to use market forces to drive social change. This is a guest blog by Chia Han Sheng, Brown University '14, co-founder of MedInternational.

Why CEOs have Liberal Arts Degrees

Mills Scofield

She's spending the summer in Dhaka doing microfinance. Some of today's top CEOs were history, political science, sociology, chinese and music majors in college. They are leading global airline, chemical, healthcare, pharmaceutical, and financial companies, among others. There are very practical reasons for a Liberal Arts degree, and Samanee Mahbub (Brown '18) thinks the reasons are crystal clear. Let's hear it from her. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

CEO 116

How Large NGOs Are Using Data to Transform Themselves

Harvard Business

A critical part was adapting a proven model in a related field: microfinance. By increasing or jump-starting these institutions’ housing microfinance lending, Habitat aims to create robust markets for this financing that can continue on their own. The fund has disbursed almost $50 million to 31 microfinance institutions in 20 countries, helping almost 50,000 families secure decent, affordable housing.

Why CEOs have Liberal Arts Degrees

Mills Scofield

She's spending the summer in Dhaka doing microfinance. Some of today's top CEOs were history, political science, sociology, chinese and music majors in college. They are leading global airline, chemical, healthcare, pharmaceutical, and financial companies, among others. There are very practical reasons for a Liberal Arts degree, and Samanee Mahbub (Brown '18) thinks the reasons are crystal clear. Let's hear it from her. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

CEO 70

Servant Leadership Observer ? November 2010

Modern Servant Leader

Peer-to-Peer Microfinance: A Sustainable Solution to Poverty. Twitter. LINKEDIN. The Modern Servant Leader Servant Leadership & Technology. Leadership. Technology. Resources. Other. Archives. September 20, 2011 Servant Leadership. Servant Leadership Intro. Servant Leader Posts. Assessment. About. About This Site. About the Author. Speaking. Twitter Followers. Comments Policy. Contact. You are here: Home >Not found: Not Found, Error 404. The page you are looking for no longer exists.

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

Harvard Business

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.

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

Harvard Business

” Laudable as these may be, USAID, the State Department, and other government agencies should really be backing programs that stimulate and support scalable, innovative, job-creating businesses – the kinds of companies that are antidotes to mass unemployment and economic hopelessness, not microfinance. These colossal “beltway bandits” work everywhere from Afghanistan to Zambia and purport to offer expertise in everything from microfinance to micro-irrigation.

3 Things Driving Entrepreneurial Growth in Africa

Harvard Business

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.

The 3 Preconditions for an Entrepreneurial Society

Harvard Business

And if you need access to money, crowdfunding platforms and microfinance options make that easier than ever. In 1985 Peter Drucker argued for a shift toward an entrepreneurial society, one where “executives in all institutions…make innovation and entrepreneurship a normal, ongoing everyday activity.” ” This intentionally broad view requires a fundamental change in mindset.

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

Harvard Business Review

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. Mexico-based Compartamos , a microfinance bank that sold 35% of the company for $450 million in 2007, generates a NIM of around 60%.

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. It called for leveraging the profits of the global microfinance institution, and coupling them with private investments from the Allmans and their donor network. We know that microfinance alone will not break the poverty cycle.

Global Entrepreneurs Need New Funding Models

Harvard Business Review

We wanted to do this because we recognize that small enterprises are a very significant engine for development; they create employment, which tends to be more sustainable and better paid than you would find in the more informal microfinance sector," says Oxfam's Nicholas Colloff. Some microfinance organizations are also moving out of the purely micro and toward larger lending.

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.

Can Technology End Poverty?

Harvard Business Review

Shameran Abed, who runs BRAC's microfinance program, explains what happened: "In the first couple months, a lot of our borrowers would send the money through their mobile phones and then physically show up at the branch to check with the accountant that the money had turned up.". At the program's peak, 700 pumps covered 27,000 acres, with the loans constituting 9% of BRAC's total microfinance portfolio. If you believe the hype, technology is going to help us end global poverty.

An Approach to Ending Poverty That Works

Harvard Business Review

Microfinance and other market-based interventions don’t generally reach them. All of us — researchers, policymakers, governments, social entrepreneurs, nonprofit development groups, microfinance institutions, corporations, and philanthropists — have a role to play in bringing them into the widening zone of prosperity. Ending extreme poverty by 2030 is the BHAG – the big, hairy audacious goal – of our generation.

How to Make Room in Your Work Life for the Rest of Your Self

Harvard Business

For example, one microfinance organization that is dually devoted to advancing a social mission and being commercial viable says employees are both “social workers” and “bankers.” VANDAL Photography/Getty Images. Shonda Rhimes, with four television shows simultaneously in production, is an entertainment industry titan.

Scaling Up Without Losing Your Edge

Harvard Business Review

Following Abed's twist on Schumacher — "small may be beautiful, but big is necessary" — it now touches the lives of an estimated 126 million people with healthcare, education, enterprise development, microfinance and a slew of other programs. When demand is spotted — say, a need for financial literacy training and microfinance products tailored for teens, in the case of ELA — the organization doesn't waste time figuring out how to do things elegantly.

Can Technology End Poverty?

Harvard Business Review

Shameran Abed, who runs BRAC's microfinance program, explains what happened: "In the first couple months, a lot of our borrowers would send the money through their mobile phones and then physically show up at the branch to check with the accountant that the money had turned up.". At the program's peak, 700 pumps covered 27,000 acres, with the loans constituting 9% of BRAC's total microfinance portfolio. If you believe the hype, technology is going to help us end global poverty.

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. If Jonathan Murdoch and his collaborators are right in their calculations, then microfinance (in particular, microcredit) does not benefit the poor in the way it should, and a social entrepreneur working in the area of poverty-reduction cannot view the tool as a handy ally in her toolbox.

How to Create Youth Jobs After Conflicts

Harvard Business Review

Upon graduation, the governments, nonprofits, or (more recently) microfinance companies give them loans to buy tools and opens shops. On December 2-3, the United Nations will host a seminar in Sierra Leone on "Strategies and Lessons Learned on Sustainable Reintegration and Job Creation: What Works in West Africa?" It will bring together government, civil society, and private sector representatives from Côte d'Ivoire, Guinea, Guinea Bissau, Liberia, and Sierra Leone.

How Social Entrepreneurs Can Have the Most Impact

Harvard Business Review

Or consider Kwabena Darko of Ghana, who helped found that country’s microfinance sector by forging a collaboration between global NGO Opportunity International , his national startup Sinapi Aba , and a myriad of village- and town-based trust groups. Social enterprise in the U.S. is a fast-growing, but fragmented, movement.

It Takes a Village to Raise an Entrepreneur

Harvard Business Review

Commercial microfinance organizations are perhaps the best-known hybrid organizations, but social entrepreneurs now use hybrid models to address a diverse set of social issues that includes hunger, healthcare, economic development, environment, education, housing, culture, law, and politics.

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. Most companies trying to do business with the 4 billion people who make up the world's poor follow a formula long touted by bottom-of-the-pyramid experts: Offer products at extremely low prices and margins, and hope to generate decent profits by selling enormous quantities of them.

Using Games to Get a Handle on Bank Risk

Harvard Business Review

Popular games also tend to spawn communities who share information and strategies about how to overcome hurdles, suggesting that peer to peer education is also possible (this has been seen in microfinance). Bank marketing materials focus on the dreams, anxieties and goals of consumers. Risk management processes don't — but they should. Most audits and regulations of banks are focused on certifying the integrity of data and controls.

The Conference That’s Trying to Reinvent How We Network

Harvard Business Review

When those in the group that had the job givers question pulled off their masks, they discovered that Muhammad Yunus , a Nobel Prize winner for his microfinance work, had been with them, listening carefully to all their suggestions. C2 Montréal’s outdoor plaza at night. Courtesy of C2. This past May, I found myself at a conference unlike any other I’d ever attended. What made it so different was the way people were interacting.

The Downside of Focusing on Women and Girls

Harvard Business Review

David McKenzie's research in Sri Lanka, Mexico, Brazil and Ghana has shown that urban male entrepreneurs typically earn far higher returns from microfinance than women do (in Sri Lanka average returns on capital for women were 0%, for men 10%). Yesterday was International Women's Day and there were many articles and blog posts championing the idea that anti-poverty philanthropy should focus on women and girls (see, for instance, Mary Ellen Iskendarian's post for The Conversation ).

Transforming Rural India Through Agricultural Innovation

Harvard Business Review

Over 1,900 beneficiaries have established micro-enterprises for which microfinance has been facilitated. With a majority of its population living in villages, rural poverty is a major problem in India. The disparity between the urban and rural incomes is also on the rise. This leads to migration to urban areas resulting in urban blight as well. Therefore addressing the problem of rural poverty assumes urgency.

Give Impact Investing Time and Space to Develop

Harvard Business Review

We allowed microfinance and the venture capital industry the time and space to develop over a few decades. Impact investing has captured the world’s imagination. Just six years after the Rockefeller Foundation coined the term, the sector is booming. An estimated 250 funds are actively raising capital in a market that the Global Impact Investing Network estimates at $25 billion.

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

Harvard Business Review

This makes sense to Milaap.org , a social enterprise in Bangalore that crowdsources low-cost capital for microfinance institutions through its online platform. Fledgling social entrepreneurs may have a lot of passion, but they usually don't have much of a track record, a circumstance that leaves would-be backers to wonder: Which have the potential to become genuine world-changers? Which are likely to achieve significant social impact within an attractive business model?