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Under Fire, Microfinance Faces Falling Out of Favor

Harvard Business Review

Microfinance has come under fire in the past 18 months, triggered in part by SKS Microfinance's IPO. Critics complain that the institutions supporting microfinance have become too greedy, and many are using this as an argument to deeply regulate or, even more, cut support to microfinance operations. Dr. Muhammad Yunus introduced the concept of microfinance in 1983; in 2006, he won the Nobel Prize for his pioneering efforts.

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

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.

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.".

It's Not All About Growth for Social Enterprises

Harvard Business Review

One way to tell the story of mothers2mothers' growth is as follows: since 2001, the organization has expanded its operations to nine countries with an approximately $20 million operating budget. Successful examples of this approach are still rare; most people point to microfinance.

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.

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

Harvard Business Review

Business cost structures in low-income markets are daunting: Operational expenses such as distribution frequently dwarf the costs that companies face in developed markets, while customer acquisition and retention often demand unusually intense — and costly — levels of consumer engagement. The microfinance industry is a rare D and E success story.

The Smart Way to Make Profits While Serving the Poor

Harvard Business Review

This combination of higher margins and higher price points boosts the contribution — the amount of money that goes to covering fixed and operating costs — generated from every transaction. Cosmos Ignite's MightyLight integrates a portable radio, and the company is considering adding more functionality, such as the ability to run battery-operated devices and water purifiers.

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. 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. 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 Takes a Village to Raise an Entrepreneur

Harvard Business Review

These hybrids pursue a social mission while engaging in commercial activities that generate revenues that help them sustain their operations. Frogtek and many other hybrids sell goods and services, and rely on revenues to sustain and scale their operations. Multiple pressures to perform on both social and operational dimensions require extra attention to building a sustainable culture.