Archive | August, 2010

Starting a virtuous circle with loan guarantees

24 Aug

We initiated repayments on loan guarantees this weekend and have returned nearly $20,000 in repayments to individual loan guarantors. This is a major milestone for us.

During repayments the amount of guarantee that is returned is proportional to the percentage repaid on the loan tranche from the bank to the microfinance institution. Thus in case of the earliest loans of June 2009 the repayment is around 40% of the guarantee amount, while for the latter loans in May/June 2010 the lowest repayment is around 9%. Loans in the intermediate period will have repayments between 9% and 40%.

To many individual loan guarantors, the repayments are a validation of the guarantee model. There is also a validation of the guarantee model at the human impact level that I am most delighted to share.

A year back at the peak of the financial crisis Ajiwika, our first microfinance partner was finding it very difficult to raise funds from banks. Based on United Prosperity’s guarantee support a large Indian bank agreed to lend a little over $200,000 over a course of a year to Ajiwika. Since then the total guarantees we have raised are a little over $100,000 making around $180,000 in loans helping more than 900 families directly. With the guarantee support, Ajiwika built a relationship with this bank and their credit history with the local banking system. Further since a large bank was lending to Ajiwika, other banks looked at them a lot more favorably. This expanded the circle of trust and since then seven other banks have approved $3.1 million in loans to Ajiwika that can be disbursed to around 17,000 entrepreneurs. Additionally Ajiwika, has also been able to reduce its cost of borrowing from banks and has reduced the interest rate it charges from its borrowers.

This is just a glimpse of the ‘Virtuous Circle’ that all of us have together started helping so many entrepreneurs and their families many of them known to us through their stories on the UnitedProsperity.org website and many more whose stories of courage and fortitude are similar.

Thank you for all starting the ‘Virtuous Circle’ making a difference to the lives of so many people.

Aravind Eye Care – The world in the eyes of a Social Business

4 Aug

I have been travelling the last few weeks and I am currently in India attending to some family matters and work. I have been spending most of my time in the city of Coimbatore and I recently visited an eye hospital run by the Aravind Eye care system.

Their mission is ‘To eradicate needless blindness by providing appropriate, compassionate and high quality eye care to all’.

What amazed me was how they were living their mission. The technology they use is very modern. The treatment is amongst the best in the world and Aravind has one of the highest treatment success rates in the world. No patient, however poor is refused treatment and several thousands of patients get free treatment.

Shubha and I visited Aravind with a patient at around 3:00 PM in the evening. We did not have any appointment. We entered the reception area and then we were quickly asked to register the patient. Since several patients come from far away villages for treatment, Aravind has done away with appointments all together. The registration fee is Rs. 50 ($1 and 10 cents). For poor patients who cannot afford to pay, it is waived. Aravind subsidizes the treatment for poor patients who cannot pay by the income it earns from those who can afford to pay. As soon as the registration was complete, we were ushered to the first testing station by a nurse. The patient went through a series of examinations – Refraction,  Preliminary examination, Eye and System examination, Dilatation and a Final examination with a doctor. The doctor then recommended an additional consultation with a specialist. We were done with the treatment by 5:30 PM. We were constantly being ushered from one station to another by the nurse and all steps went through with clock-work efficiency.

In some cases the patients require surgery or additional tests for glaucoma etc. All these are often done the same day itself and each of these additional procedures costs most patients Rs. 100 ($2 and 20 cents) or Rs. 200($4 and 40 cents). (Note: Health insurance is still not common in India, so these are actual costs of the treatment and not the copay amount or deductible).

Several aspects are truly noteworthy about Aravind:

The system is designed bottom up for providing eyecare to the poor and very often illiterate patients. All stations are numbered so patients can be simply told ‘Go to station 10’ for example. Additionally a nurse also ushers the patient from one station to another so even those patients who have no escorts are well taken care of.

The treatment through various stations happens extremely fast with minimal waiting between stations. It is almost like an assembly line. This minimizes loss of income for patients.

Their scale is also pretty massive. The Coimbatore hospital treats 1100 patients a day, works 6 days a week and has 140 doctors, 700 nurses and ward staff, and 35 administrative staff.

The doctors and specialists perform only the critical tasks for which their expertise is truly needed. The rest of the tasks are performed by well trained nurses. As a result doctors at Aravind see many more patients in day than doctors in other clinics. Thereby they gain more experience in treating common ailments and also treating rare conditions of the eye that doctors in other clinics rarely come across.

Aravind reminds me of the concept of Social Business that Muhammad Yunus talks about. I recently read Muhammad Yunus’s latest book ’Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs’. The book is literally a ‘How to’ manual distilling the decades of insight Muhammad Yunus has gathered. Having been through the journey of starting an organization that I see as a social business the book was most enjoyable and I would highly recommend the book to anyone who plans to start an organization whose primary goal is making a difference to the world in a sustainable manner.

Aravind can also be considered as a social business. It does not have for-profit investors in a traditional sense. It is not a typical charity either. It is sustainable and absolutely committed to its mission. It once again proves how imagination and commitment can make a big difference to the world.