Tag Archives: MicroCredit Enterprises

Poverty, collaboration and patience

11 Feb

Ever since I started working on United Prosperity, I have learned that progress in a startup happens in spurts. One is often faced with what seems like an insurmountable problem. You keep trying various things – nothing seems to work. Nobody seems interested in what you are doing or if they are slightly interested they have other priorities. And then one day suddenly someone decides to help and lo and behold, things start moving. The seemingly insurmountable problem now transforms into a doable task which then gets done with relative ease. This has been the consistent pattern with all the big milestones we have had like Cognizant helping us with the software development; UC Berkeley, Hanson Bridgett and OMM helping us with the legal work or HDFC Bank in India agreeing to partner with us.

 

I met Jonathan Lewis, CEO of Microcredit Enterprises a few days back at Davis and it was a great opportunity to bounce ideas and take advice on solving the seemingly insurmountable problems.  ‘It took us 3.5 years to get a bank to start working with us’, he said.  That gave me a perspective of the level of patience needed to overcome these startup obstacles. In our case, we approached a few banks in India and gave an overview of our guarantee in November 2007. However things picked up a little momentum only in May 2008 when we contacted HDFC Bank, India. Since then we have been closely working with them and are at the final stages of finalizing the legal agreement.

 

Another aspect which has struck me since I started working on United Prosperity has been that many of today’s complex problems like poverty or cures to tropical diseases tend to be outside or on the periphery of market forces and players. However, getting the necessary resources to solve complex problems like poverty requires the immense support and collaboration of mainstream market forces and institutions. They have the resources and expertise to solve different parts of the problem. E.g. we would not have come to where we are today without the support of Cognizant in building the software or the various legal teams who have helped us.

 

I got to discuss this with Jonathan Lewis. He was quick to highlight the importance of collaboration. ‘The current financial crisis is going to require an unprecedented level of collaboration’ he said. He is even putting together a forum called the Opportunity Collaboration where people working on poverty alleviation in various capacities can forge new alliances. Check it out.

 

Overall it has made me realize that combating poverty requires immense collaboration, which further requires patience. And for startups dealing with the seemingly insurmountable problems which come up from time to time, the value of collaboration and patience can never be underestimated.

 

And yes, we are all eagerly looking forward to sign the agreement with HDFC Bank in the next few weeks, so that we can launch soon.

MicroCredit Enterprises to grow to a $100 million guarantee fund – Interview with Jonathan Lewis, CEO of MicroCredit Enterprises

4 Dec

Jonathan C Lewis

Jonathan C Lewis

 

 

 

Bhalchander: We have with us today Jonathan Lewis, who is the CEO of MicroCredit Enterprises. MicroCredit Enterprises is committed to reducing poverty by mobilizing private investment capital to finance micro-businesses throughout the world.  Jonathan – Congratulations on winning the Social Venture Innovation award and for being recognized as an honoree by the World Affairs Council of Northern California. And thank you for taking time from your busy schedule to be with us.

 

Jonathan Lewis:  Thank you for your own commitment to economic justice and for inviting MicroCredit Enterprises to this interview. 

MicroCredit Enterprises is deeply honored to be recognized for our pioneering social venture model.  In three years, we have created a stable financing model which is sustaining 100,000 microloans reaching 500,000 poor individuals (89% of whom are women and children) via 28 MFIs partners in 15 nations on 4 continents without needing a single dime of donations, grants OR investment.  In the end, as proud as we are of these awards, our lasting pride comes from knowing that literally thousands of children will go to bed tonight without the pang of an empty tummy and their mothers will awake tomorrow to a more hopeful life. 

 

Bhalchander : I read that Microcredit Enterprise utilizes ‘idle capital’ to help the poor. It is a very interesting concept to take something which is idle and use it for public good. Can you tell us more about your innovative model and Microcredit Enterprises?

 Jonathan Lewis:  Because poor women do not have collateral or credit histories, MicroCredit Enterprises Guarantors – the key program benefactors — pledge collateral assets and personal guarantees (not a donation or grant) to back loans to MicroCredit Enterprises that are used to fund an overseas microfinance loan portfolio.  Our Guarantors realize returns in the open market, manage their own funds and simultaneously support about 5,000 small entrepreneurs. 

 In the event of an overseas financial loss, each Guarantor bears the tax-deductible loss on an equitable, pro rata basis with all other Guarantors.  Guarantors do not realize a return on the guarantee risk, but do maintain complete control of their assets, thus receiving all investment returns from their portfolios.

 

Bhalchander:  In how many countries does Microcredit Enterprises operate currently and how have you chosen the countries to operate in?

 Jonathan Lewis:  MicroCredit Enterprises is in 15 nations diversified across 4 continents.  The special focus is sustainable economic development for families living in extreme poverty ($1.00 per day or worse), so our lending criteria are, first and foremost, targeted to reach overseas microfinance partners in rural areas with high numbers of deeply impoverished women.  Secondarily, we apply strict geographic diversification to minimize risk.  Since MicroCredit Enterprises is entirely open source, your readers can visit our website  to study our specific criteria, loan process and evaluate what we have accomplished and – if they wish – build on it.

 

Bhalchander: What were the biggest challenges you faced in setting up and growing Microcredit Enterprises? How did you tackle them?

Jonathan Lewis:  The steepest hill to climb, which still exists today, is explaining our new model, a new funding paradigm.  Since MicroCredit Enterprises depends on neither donations nor social investments, we have an important educational job to explain how a foundation, high net worth individual or company can directly impact lives around the world without writing a check. 

 The solution?  Patience, and old-fashioned, low-tech guerilla marketing by word of mouth.  

 

Bhalchander :  You were a very successful business executive before you started MicroCredit Enterprises. Can you tell us a little bit more about what you did before starting MicroCredit Enterprises?

Jonathan Lewis:  My last commercial venture was an international knowledge company in the healthcare field.  Among other services, we organized trade missions to other countries to investigate healthcare systems and business opportunities and hosted the International Summit on Public-Private Healthcare Partnerships.  The Summit was attended by delegations from about 80 nations.  One day I realized that I cared more about the people who get no healthcare at all.

 

Bhalchander: In your experience what is tougher and why – running your previous organization or setting up and growing Microcredit Enterprises?

Jonathan Lewis:  Both are tough, but in different ways.  All businesses, social or otherwise, and all nonprofits serve multiple stakeholders:  shareholders, customers, the larger community interest, etc.  A social venture adds mission clarity, but – as the adage goes – “no margin, no mission”. 

 

Bhalchander: In the last few months, everyone’s attention has been on the economic crisis. Microfinance is also seeing a lot of changes – there is private equity and venture capital coming in. Are there any new kind of risks Microfinance faces and something we should all watch out for?

Jonathan Lewis:  Microfinance is not immune from the turmoil in the financial markets.  MFIs are indicating that the biggest challenge resulting from the global financial crisis will be securing new financing and rising interest rates which ultimately have to be passed on to impoverished borrowers.  Stories already abound about MFIs losing commitments for funding from so-called mainstream lenders and banks. 

 For some MFIs in select countries, foreign currency exposure is becoming a more serious risk.  In recent years, the weak dollar has largely muted this concern.  No longer will that risk factor be so easy to overlook or ignore.

 In general, microfinance will soon discover that private capital flight risk is real.  Indeed, I predict that the microfinance intelligentsia will mute the complaint about public capital “crowding out” private capital, an argument that actually has never made much sense either economically or in terms of social mission.  Hopefully, in the future microfinance thought leaders will be more respectful of the need for stable, socially committed capital, whatever its source.

 For a quick overview about microfinance, visit the MicroCredit Enterprises Study Center.

 

Bhalchander: What advice would you give to up and coming entrepreneurs and social entrepreneurs?

Jonathan Lewis:  To dream.  Listen to everyone, but trust your instincts.  Hang on to your core beliefs and live them intensely and everyday through your venture.  Keep moving. 

 

Bhalchander: And my last question, what are your future plans for Microcredit Enterprises?

Jonathan Lewis:   One, MicroCredit Enterprises will grow to a $100 million guarantee fund (or one percent risk exposure per Guarantor unit of $1 million).  That will mean roughly 2.5 million people with food security.  Two, in 2009, MicroCredit Enterprises will become an offering on the new, very innovative MicroPlace.com website which allows individuals to earn interest from microloans. 

 

Bhalchander: Thank you very much for being with us. We are all very happy that MicroCredit Enterprises is making the world a better place. We wish you greater and bigger successes.

 

You will also find this interview posted on http://www.mykro.org