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The first signs of spring?

1 Apr

Over the past few months we have been approaching MFI in several countries – Kenya, Nigeria, Sierra Leone, Sri Lanka, Pakistan, Indonesia, Philippines and Cambodia. While most of the MFIs in India get their loan funds from local banks, in these countries there seems to be very little funding from local banks.

Even in cases where banks fund MFIs, the loan is backed by an international guarantee and in many cases it is a 100% guarantee. In a few countries we found local development wholesale funds that lend to MFIs without a guarantee.

We have started the process of evaluating some of these organizations and we are glad to announce that we are making steady progress with one organization in Sri Lanka. This will be the first loan for the organization from a Bank. We hope to have more news to share soon.

In India, the regulator (Reserve Bank of India – RBI) is likely to implement some of the recommendations of the Malegam committee. These regulations will be applicable for the large Non Banking Finance Company (NBFC) MFIs that were already being regulated by the RBI.A microfinance bill to cover all categories of MFIs will also be drafted over the next few weeks and it will be eventually presented to the Indian Parliament around July 2011. The uncertainty and dramatic slow-down in bank funding is likely to continue till the regulations are fully crystallized.

All these tell us that governments and regulators in countries have a very important role to play in making sure that microcredit is suitably supported and properly regulated. In India, there needs to be appropriate and comprehensive regulations backed by timely action against any errant organizations so that microcredit is safely and consistently delivered to clients.

In many other countries regulators need to find ways for MFIs to mobilize a reasonable amount of funds from local banks and/or the savings of microfinance clients so that adequate funds are available for the larger future needs. Further mobilizing local funds will also reduce foreign aid dependence, make local economies self sufficient and also make MFIs and their clients insulated from currency devaluations and international financial shocks. Our guarantees will make a positive contribution here in the years to come.

Meanwhile, we continue to look forward to an early spring.

Celebrating our first anniversary

10 Jun

On May 28th, 2010 we celebrated our first anniversary since launch of operations. It has been an eventful year.

When we started last year we did not know from where our support would come from. And a year down the line, we know the answer. It came from all over the world. We have guarantors from the US and Canada, Europe – UK, Norway, Germany, France, Luxembourg and many more countries, Asia – India, Singapore, Philippines; Australia and New Zealand. Thank you all for helping us get here.

We have also been extremely fortunate to have several in-kind supporters, team members, mentors, advisers, interns and volunteers. Everyone has believed in the cause and stood by us through this journey.

And the results are there for everyone to see. We made more than $165,000 in loans available and thereby empowered more than 850 entrepreneurs to earn their livelihood and better their lives with dignity.

The difference we are making to the lives of so many poor families has been very satisfying. The local relationships and communities we are building will make our work self-sustaining. A year back, Ajiwika was finding it difficult to get loans from banks especially since the financial crisis had made banks extremely conservative. With the support of the guarantee, a bank in India stepped up and made a loan to Ajiwika. Thereby Ajiwika gained the trust and credibility with the banking community. Since then, five other banks have made loans to Ajiwika. This clearly reflects the power of our guarantee-loan-impact model.

We have two big goals for the second year. First we want more people to know about us and get involved with We need the help of the guarantor community here. As an existing guarantor your word carries additional credibility, so please continue to encourage your friends, colleagues and family to join you in supporting poor entrepreneurs and building self sustaining communities. Second, we have to build our internal capacity to execute by raising funds for operations and hiring staff.

Once we accomplish these two goals, then I think we will be on our way to realize the full potential of, to help the poorest families earn their livelihoods with dignity and build self- sufficient communities. Thank you all for your continued support.

Is a for-profit model a silver bullet for the Bottom of the Pyramid?

23 Nov

The last few months have been very hectic for me getting things operational, getting the marketing going and also trying to raise funds for operations.

Fund raising for operations is one of the biggest challenges we face and one of the questions I hear very often is why is a not-for-profit and why it isn’t a for-profit social enterprise. I explain that our model is unique, we are pioneering something new to the world, it involves crowd sourcing and support from thousands of microlenders and that a sustainable not-for-profit model or a social business model works the best for us. However, the feeling I get on several occasions is that a large number of social investors, philanthropists and even many foundations nowadays have already made up their mind on the type of organization they would like to support and believe that all social enterprises need to operate in a for-profit manner giving reasonable returns and in many cases lucrative returns to their investors.

For those who can pitch their organizations in 30 seconds indicating how their social enterprise can help mitigate a social problem and also give returns to their investors I think there are a large number of investors willing to lend an ear.

On the other hand, for those who have started non-profits however innovative, I think it is quite hard to raise operational funding. My most recent experience was in a discussion with a billionaire who thought United Prosperity was a great idea. But he simply walked away in the middle of a discussion when I told him that United Prosperity was a non-profit and I had no intention of turning it into a for-profit enterprise in the near future. And in our discussion I had also not solicited any funds.

To me these incidents serve as a cautionary tale of how far mainstream thinking and perception on social enterprises has gone from the actual ground realities. I think there are social enterprises which should be for-profit enterprises, several need to be non-profits and we need many more social businesses. In my opinion, for-profit social enterprises are not a silver bullet for all problems at the Bottom of the Pyramid and an ideological worldview that only for-profit social enterprises can scale and be sustainable can be pretty short-sighted.

My view that there is a huge role for non-profit social enterprises was further re-affirmed when I heard the presentation from Operation Asha at the IDCA Seventh International Conference-Chicago where I was also one of the speakers. Operation Asha is treating Tuberculosis (TB) in the slums of India. Despite the fact that TB is a treatable disease, it has assumed epidemic proportions in India, claiming the lives of 400,000 and newly infecting 2.2 million every year. India has the highest proportion of its population, 3.3 per capita, infected with TB and accounts for one-fifth of the world’s TB burden.

There were several things about their organization which impressed me a lot:

-They serve the poorest of the poor.

-They are very customer centric in their approach. They have outbound health workers who visit patients at the patient’s home and they also have several TB treatment centers close to the slums so that their patients don’t have to spend time and energy or miss a day’s work to visit these centers. While most government centers remain open from 10:00 AM to 1:00 PM, their centers are open from 7:00 AM to 9:00 PM so that their patients can visit the center at their convenience without missing a day’s wage.

-They practice stringent cost control and the cost of the treatment over 7 months was only $15.Interestingly, the patient needs to go to the treatment center about 70 times during the therapy over 7 months. The low cost speaks highly of the operational efficiency despite the extremely high level of transactions.

-The have leveraged the support of the community, corporate and the government very well.Operation Asha has access to free supply of medicines from the government. This takes care of 3/4th of the total cost. Further, with the space and services given by providers for a modest payment, every dollar is leveraged 35 times. Thus, with an investment of $15 only, Operation Asha is able to provide medicines and services worth $350 and treat a patient for the entire period of therapy, which lasts seven months, on average.

-Each of their centers becomes sustainable from operations in two years.

-They have achieved remarkable automation of their operations and were piloting bio-metrics with Microsoft.

I don’t know how hard it has been for them to raise funding, but anyone would agree that the work they are doing is remarkable and in many areas worthy of emulation in so many areas. We are fortunate to have organizations such as Grameen Bank, Brac, Amul and Aravind which have done remarkable work at the Bottom of the Pyramid and transformed lives. Had the ‘for-profit’ filter been applied very early in their lives, we may have never heard of these remarkable organizations.

United Prosperity on Twitter, Facebook, Linkedin and Ning

10 Jul

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Have a great weekend.