Global Microcredit Summit 2011 Report
By Sam Mendelson, A Special Report from Microfinance Focus (Official Media Partner – Global Microcredit Summit 2011)
Microfinance Focus, December 8, 2011: Monday, November 14th 2011 saw the culmination of several years of delicate preparation in a packed conference centre in Valladolid, Spain. The fifth Global Microcredit Summit (held every few years – with regional conferences in between) kicked off in the magnificent Centro Cultural Miguel Delibes, with an opening ceremony full of music, pomp, and a great deal of gratitude – in the particular direction of Sam Daley-Harris, the outgoing Director of the Microcredit Summit Campaign.
Queen Sofia of Spain has been an impressive and dedicated supporter of the microfinance sector since its early days. After welcomes to the city of Valladolid and the region of Castilla y Leon by the Mayor and Governor respectively, and an outline of Spain’s development priorities by the Secretary of State for International Cooperation, Queen Sofia took the podium to declare open the fifth Global Microcredit Summit.
Describing the summit “not just [as] a forum for debate, and for the exchange of experiences”, it aims to promote “two basic goals”: to enable about 175m families to reach basic financial services by 2015, and to get 100m of the poorest families on earth above the US$1/day income threshold.
These objectives date from several years ago, and laudable as they are, it was clear from the offset – not to mention the plenary and workshop papers circulated in the weeks before – that the concerns of the industry have expanded to include other matters. The so-called ‘crisis’ in India (Andhra Pradesh in particular) continued to dominate the agenda, not just as a localised, acute issue in one of the largest microfinance markets in the world, but as a clarion call for the industry to wake up.
The industry’s ‘father’, as we are repeatedly informed, is Professor Yunus, who reiterated at the Opening Ceremony his vision of a sector that is anathema to profiteering (and probably to profit too), but painted a rosy picture of microfinance compared to the broken, mainstream financial sector. “Microcredit is a way of helping future generations…dark clouds are gathering [in the broader global economy] and they will not go away; they will create frustration and disappointment, a great deal of unemployment and tension [in the West]”. Microfinance, he argued, by contrast “is a shining hope, creating light at the end of the tunnel”.
There must be plenty of light to follow, as it is an industry that was globally well represented. Roughly 1600 delegates were in attendance. Without seeing an actual breakdown, it was clear that Africa, Latin and Central America and the Indian subcontinent were well represented with practitioners. MIVs, commercial banks, analysts and donors made up most of the balance – with a surprisingly broad contingent of media present throughout the whole summit – evidence, perhaps, of the reputational hit the sector has taken in the last couple of years, and how microfinance has long since left behind the periphery of global finance. Having the Queen in attendance obviously helped, too.
The Summit, as each before it, had a mixture of plenary sessions, workshops and associated sessions. Perhaps more than previously, however, there were dominant themes for each day.
Day One saw the presentation of the most recent incarnation of the Seal of Excellent for Poverty Outreach and Transformation in Microfinance. The Seal has as its aim, in the words of its author, EDA Systems’ Frances Sinha, “to analyse the value of microcredit in the lives of the poorest people. Not only must it be sustainable, but we must also analyse the value we can offer to customers”.
The Seal had its conception at the regional microcredit summit in Nairobi in April 2010. It seeks to provide another valuable player in the growing Social Performance Management movement, supplementing the ‘Do No Harm’ client protection of the SMART Campaign, and the various initiatives of the Social Performance Task Force. It remains a work in progress (testing in beta will begin in 2012) but it was clear to anyone in attendance: the Summit and the Seal are very much familiar bedfellows. The Seal is Daley-Harris’ ‘baby’ (so to speak), and it is his vision of microfinance’s “transformational” (positively received) and “redemptive” nature (very negatively received) that is the DNA of the Seal of Excellence. Whatever one’s thought on its prospects to become an industry standard of Best Practice in SPM, it will be Sam’s legacy, for better or worse, to the Microcredit Summit Campaign he leaves behind.
Day Two had a dual theme: “challenges” and “social business” (if a conference with twenty concurrent sessions can be said to have themes). The day kicked off with the usual plenary – this time the presentation by Anton Simanowitz (of the Institute of Development Studies, Imp-Act Consortium and SPTF) of his commissioned paper: “Challenges to the Field and Solutions: Over-Indebtedness, Client Drop-Outs, Unethical Collection Practices, Exorbitant Interest Rates, Mission Drift, Poor Governance Structures and More” – a title which exemplifies just how significant are the challenges facing the industry.
Joined on a panel by representatives from the USA, Ethiopia, Pakistan and Bolivia, Simanowitz argued that it would be folly to look at recent crises as one-offs; rather, there are lessons to be learned by all parts of the sector and in all places. It is not to endorse the “Bateman” School – that microfinance is a flawed concept in itself and destined to fail, but that there must be (and indeed, already is) an industry-wide recognition that certain assumptions must be challenges. These assumptions are many, but include the belief that loans to the poor, in and of themselves, alleviate poverty; that microfinance is a development panacea; that zero tolerance on defaults is a precedent that needs to be maintained. Rather, we must “find ways to increase effectiveness…to achieve a more conscious and transparent balance between the social and commercial goals in all aspects of strategy and management”.
The “deepening of financial inclusion” to create value for clients, protect clients from harm, and put forward regulation and governance which works with effective management systems to deliver on the objectives of overcoming exclusion of poor, vulnerable and marginalised groups, was key – and something endorsed by the panellists.
There is no doubt that things are improving, argued Tilman Ehrbeck of CGAP, who pointed to the emergence of the mobile phone in the developing world as perhaps the greatest modern day driver of development, and a massive opportunity for the industry. “Out of crisis comes innovation”, said Roshaneh Zafar of Kashf Foundation, who emphasised, like Simanowitz, the importance of microfinance beyond credit alone; with savings paramount.
Despite the overwhelming and dire title for the session’s paper (a title no doubt deliberately provocative), the session was strangely positive and upbeat. For one thing, the mere fact that the SPTF, Imp-Act Consortium, SMART Campaign and SEAL exist reflects the very healthy debate on standard setting for social performance that is underway. Second, the first step towards any solution is recognition of a problem. If there was any doubt before, there can be none now: the industry recognises some of its flawed past assumptions and is concertedly working on re-designing itself. Which is more than you can say for the mainstream banking sector.
Professor Yunus reserves his most scathing contempt for this sector, and used the second plenary session of Day Two to argue for “social business”: Social Business and Microfinance: Building Partnerships with Corporations and Other Entities to Speed the End of Poverty. Insisting that his work with social business is not a move away from microcredit, but that microcredit is in fact a social business, he argued for business-oriented solutions to social problems, drawing on many experiences as MD of Grameen Bank.
Yunus’ notion of a social business (a company that should be profitable, but re-invests much or all of the profits for social ends) is well exemplified by Groupe Danone, the Chairman and CEO of which, Franck Riboud, was present on the session Panel. “Yes, we need profits”, Riboud said. “We need to cover costs, provide a return to shareholders, but returns should be more than money”, adding that crucial to convincing shareholders about social businesses is explaining the concept well and ensuring observable results.
Various workshop sessions that ran between the two main plenaries of the day demonstrated clearly just how vigorous and wide-ranging the microfinance industry has become. They ranged from gender issues and measuring impact; to strengthening institutions and transparency in interest rate pricing; from microinsurance that goes beyond Credit Life, to agricultural technologies and housing products for slum dwellers; from, encouraging children’s education to Best Practices for microfinance networks. There were even two sessions relating to Industrialised Countries. It needs hardly be said, but the days of microfinance being just $30 loans to Bangladeshi women for sewing machines are long, long gone.
Day Three started with a plenary session that many might have thought out of place: a motivational speech by Dave Ellis from the Brande Foundation, which was descreibed as a “Guided Inquiry and Discussion”; in which the delegates were encouraged to participate in the Socratic process of how they as practitioners could achieve their personal and organisational objectives.
The main draw card of the day was the plenary session on how microfinance can support rural farmers and agriculture. Sir Fazle Hasan Abed, Dr. Mahabub Hossain, Susan Davis and Rod Dubitsky had co-written a paper entitled Using Microfinance Plus Agricultural Services to Improve Rural Livelihoods and Food Security, which was presented by Shameran Abed, BRAC’s Director of Microfinance Programs. The paper argued that MFIs “can play a critical role in agricultural development on two fronts: bridging the funding gap by providing MFI loans to rural areas in general and farmers in particular; and the network effect – where MFIs use their network as a “trusted conduit” to help deploy agricultural innovations to rural areas that many players would struggle to reach.
Shameran Abed noted that financial services alone aren’t enough, but argued for ‘microfinance plus’; and the positive feedback loop that exists between agriculture, food security, sustainability and women’s livelihoods, something endorsed by the panel.
The theme of agriculture continued into the second half of this plenary on Day Three: a focus on the so-called ‘last mile’ problem. Alex Counts, CEO of Grameen Foundation, is the author of a summit paper entitled Towards Reinventing Microfinance Through Solving the Last Mile Problem: Bringing Clean Energy Solutions and Actionable Information to the Poor. This considered energy poverty, climate change (which disproportionately affects the poorest), and among others, how technological developments (smartphones and apps in particular) can provide agricultural best practice, weather, market prices etc to small farmers.
Counts, presenting his paper, said “A vast and growing body of technological innovation and knowledge can directly benefit the poor in their struggles to lead healthy and productive lives, and ensure educational opportunities”, with the caveat that this is a challenge rarely overcome – and a return to back to basics philosophy of ethics will be required.
Joining Alex on the panel was Prakash Bakshi, Chairman of National Bank for Agriculture and Rural Development (NABARD) in India, who noted the complementary nature of the approaches: “If incomes improves, the quality of life and health improve, which in turn help improve income.” Claudio González Vega from Ohio State University reminded delegates that clients are not a homogeneous group, but each has unique needs and challenges: “Standardization”, he said, “is our greatest threat.”
Nicola Armacost, Managing Director and Co-Founder of ARC Finance, observed the disproportionate effect on the poor that climate change has, and that a focus on products beyond credit alone is critical.
Describing ARC’s core work, she said that energy lending, “is fundamentally about improving the livelihoods and quality of life of poor people” – especially for women and children, who are overwhelmingly responsible for fuel collection, and cooking in confined spaces – with adverse educational and health consequences for both.
Several dozen more workshops and associated sessions rounded off the final day of the Summit ‘proper’ (another day was put aside for optional, day-long sessions), but the one which attracted several hundred people was the session based on a deliberate false dichotomy: “IPOs – Salvation or Downfall?”
This session was based on two papers, arguing either side of the case – making this session unusually adversarial in format (perhaps appropriate considering the opprobrium directed at SKS and Compartamos in recent years). Sanjay Sinha of M-CRIL and EDA Rural Systems spoke first, and argued how the overheated market in Indian microfinance, and the run-up to the SKS IPO in 2010 precipitated the Indian crisis. Noting that the market had become geared “to profit maximisation in the short term”, Sanjay argued that microfinance is still a “development activity that needs greater sensitivity”.
In retrospect, the warnings were all there: ambitious business plans, high valuations, high growth, high valuation for SKS shares to private equity and high net worth individuals, meant that collection practices and growth stragegies were put in place that were far from a client-centred industry. Plus, of course, the commercial success of the Compartamos IPO in 2007 meant that investors were pushing hard. New NBFIs sprang up, there was a “get rich quick” rush for “low hanging fruit”, leading to multiple lending, decline in customer service, pressure on managements, staff and perhaps client coercion too.
Carlos Danel of Compartamos responded with integrity, clarity and bravery. “I don’t think IPOs are necessarily the downfall…but they are not the salvation either”. Arguing that the Mexican microfinance industry has become much more positively competitive because of the IPO (“In 2007, our competition had 400,000 borrowers. Now it has 3 million… we are creating not just an institution but creating an industry”), Carlos emphasised the need for client protection and appropriate regulation to avoid a repeat of SKS.
Before the session, the moderator asked the huge audience for a show of hands, for those who thought IPOs were the downfall (many), salvation (virtually none) or ‘don’t know’ (some). After the session, he repeated it. Downfall was ‘some’, salvation remained virtually none, ‘don’t know remained ‘some’, and a new category emerged: a plurality of the audience thought that IPOs could be positive or negative, depending on the context, procedures and circumstances. As this is surely the only rational response, most of the speakers were very satisfied with the engaging and adversarial session.
A report of the Fifth Microcredit Summit that sought to summarise several plenaries, tens of papers, and many dozens of associated sessions and workshops would be hundreds or thousands of pages long. For many delegates, the really important work was done in the corridors; the coffee breaks, in which new partnerships are born and new ideas discussed. For an industry that a year ago was on its knees at the hands of a sometimes ill-informed, reactionary and alarmist lay media, these connections between microinsurers, mobile providers, donors, technologists and investors are going to dictate the messages of the Sixth Microcredit Summit and beyond.
Naturally, everyone takes something different from a big meeting like this. For some people it’s about networking; for others it is about learning best practice to implement in their own organisation. If the 1600 delegates were asked to write a report, it’s likely that 1600 quite different responses would be given. But one striking feature worth noting was that the industry-wide ‘backslapping’ – the self-congratulation for having cracked the development ‘code’, as it were – was totally absent. This was a summit that asked itself three main questions: how do we re-focus on providing value for the Client? How do we measure what we’re actually doing? And how do we create an industry that lives up to what it claims – something sustainable, ethical, and ultimately a global force for good?
Nursing a social conscience need not rule out making a profit. Ethical investing does both
By GEOFF NAIRN
Like motherhood and apple pie, socially responsible investment warms most people’s hearts. But during a two-year cycle trip across Africa, Swiss investment banker Klaus Tischhauser realized the SRI industry was failing in a key challenge—fighting poverty. Ten years on, the grassroots style of social investing he helped pioneer is wooing many wealthy investors.
The rich are different, and not just because they have more money. Wealthy individuals often have a wider sense of responsibility toward society. Traditionally, this desire to do good is harnessed through philanthropy.
“These investors realize that there is no contradiction between ethical and financial performance,” says Mr. Tischhauser, co-founder and chief executive of responsAbility Social Investments, an asset manager for social investment.
A Moral Maze
For example, Germany’s RWE utility is investing heavily in solar and wind power. That’s a big plus on any ESG score-sheet. But it also wants to extend the life of its coal-fired plants.
The FTSE4Good, one of the best-known SRI indexes, originally excluded five industries: nuclear power, tobacco, weapons, infant formula and uranium mining. But at its last revision in 2010, all but the tobacco and arms industries got clean bills of health. On the other hand, BP was ejected from the FTSE4 Good UK index for the Gulf of Mexico oil spill.
For many ethical funds, resource companies will always be beyond the pale. Yet minerals such as coltan, mined in the
war-ravaged Democratic Republic of Congo, find their way into every cellphone, including Apple’s and Google’s.
In 2010, Europe’s high-net-worth individuals—usually defined as people with at least $1 million in financial assets (excluding residences and consumer durables)—dedicated €729 billion, or around 11% of their wealth, to “sustainable” investing, according to Eurosif, a Paris-based research firm. That’s an increase of 35% over the figure for 2008, even while such individuals’ total assets under management shrank during that two-year period because of the global economic crisis.
Despite the market turmoil, the wealthy have kept putting money into socially responsible investment. That is mainly because they can afford to take a long-term perspective, particularly if they have inherited wealth.
“There has definitely been a pick-up of interest in the SRI area,” says Karina Litvack, head of governance and sustainable investment at F&C Investments, a U.K. fund manager whose SRI roots go back to the 19th century.
Clearly, one of the attractions of SRI for wealthy investors is the comfort in knowing their money is helping make the world a better place. “Part of our job is to tell our investors heart-warming stories so that they feel good,” says Mr. Tischhauser. His firm has grown to manage $1 billion in assets and offers eight SRI products, covering themes such as microfinance, fair trade and small and medium-sized enterprise financing.
But SRI also makes sense from a hard-nosed asset management perspective. Wealthy investors’ appetites for real estate and hedge funds have decreased, so they are looking to SRI to diversity their portfolios.
Small is Still Beautiful
He could have started another company or opted for a life of leisure, but this British expat took the less trodden road and used some of his new-found wealth to finance self-help projects for the poorest of the world’s poor.
Microcredit has improved millions of lives in recent decades and has grown in importance as an investment theme for wealthy individuals who want to do good, but are concerned about the shortcomings of charitable giving.
His Swiss-domiciled 1to4 Foundation uses the assets of wealthy Swiss investors to borrow funds at commercial rates. Microfinance institutions in developing countries then use these funds to make microloans. Each 1 million Swiss francs ($1.09 million) guaranteed by a 1to4 investor helps around 15,000 people.
The microfinance industry has evolved considerably since the 1970s, when Grameen Bank pioneered microloans in Bangladesh. Today, there are more than 3,000 microfinance institutions serving more than 150 million customers in over 100 countries.
“The growth of some microfinance institutions has been forced, which led them to lower their credit requirements,” says Marilou van Golstein Brouwers, managing director of Triodos Investment Management, a Dutch pioneer in microfinance investment.
One of the oldest SRI indexes, the MSCI KLD 400 Social Index—an index of 400 U.S. companies that have “positive environmental, social and governance characteristics,” has slightly beaten the MSCI USA index over the past decade. However, with gains of just 1.15% and 1.01% respectively, investors would have made more leaving their money in the bank.
Socially responsible investors seek to balance financial return with social good. Pension funds set the foundations for today’s SRI industry, boycotting firms employing sweat-shop labor or doing business with oppressive regimes.
In the past decade, the SRI industry has grown considerably and widened its appeal to attract retail investors. In the U.K., £11.3 billion is now invested in green and ethical retail funds, compared with just £4 billion in 2001, according to Eiris, a U.K.-based research house.
The “do no evil” origins of SRI have given way to a variety of investment approaches that embrace issues such as sustainable business practices, stakeholder relations, climate change and corporate governance.
According to a recent Eiris survey, 60% of French retail investors attach some importance to environmental, social or ethical criteria. But only 8% know precisely what SRI means. Unlike retail investors, however, high-net-worth individuals usually have quite specific ideas of how they want their money to be used to do good.
They are thus less attracted by the broad-brush approach of mainstream “ethical” funds that target a spread of SRI issues. Instead, they are more likely to use smaller specialist vehicles that invest away from the main markets and focus on one particular theme.
There are clear parallels with philanthropy, where wealthy individuals create foundations or favor charities with a particular focus. But the two ways of helping shouldn’t be confused. “SRI is not seen by HNWIs as an alternative to giving but as complement to their philanthropic activities,” says Mr. Nordheim of Eurosif. For Mr Tischhauser, the touchstone issue was global poverty. After coming back from his African trip, he set up responsAbility Social Investments in 2003 and pioneered a style of grassroots investing that has come to be called “impact investing.”
Impact investors are often—but not always—prepared to sacrifice some financial returns to help boost the social impact of their investments. According to Eurosif, impact investing is attracting significant interest from HNWIs, though it remains a relatively niche area.
Microfinance is the best-known form of impact investing and this is where responsAbility got started. But the microfinance industry is now well established and, for Mr Tischhauser, the “hottest” area of impact investing is small-business finance.
Last year, responsAbility closed a $15 million venture-capital fund that invests in small companies developing innovative solutions that could make a big difference to poor people’s lives. A typical holding is Silicon Valley-based Driptech, which has developed a novel drip irrigation system for poor farmers in India and China.
The typical investment is $500,000 to $2 million. Because of the small deal size, Mr Tischhauser says these deals are uneconomic for mainstream venture-capital funds. ResponsAbility steps in to fill the gap and promises its investors a relatively modest return of around 5% a year.
“Our impact investors are mostly wealthy individuals who are fascinated with development issues and do not need to maximize financial returns,” he says. But the social returns can be immeasurable if any of the portfolio companies can make an impact on poverty.
By Bill Murphy
Atlanta real estate developer Bob Pattillo has been named to Forbes’ Impact 30, an inaugural listing of the world’s leading social entrepreneurs.
Pattillo is also the founder of a novel venture firm that raises funds for microfinance and invests in early-stage companies.
“Gray Ghost Ventures – apparently named for the small but strong gray ghost fish and “gray matter”- is “primarily a fund of funds that provides capital to microfinance groups,” said Forbes, But it also invests in early-stage businesses like CellBazaar, which creates mobile electronic marketplaces.
Pattillo, 51, a successful real estate developer in a prior life, seeks a positive return across the entire portfolio, the magazine said. Gray Ghost has invested $200 million so far.
The 30 social entrepreneurs were selected by a panel named by Forbes. The panel consisted of the following: Ashoka founder and CEO Bill Drayton; Yale economics professor and MIT Poverty Action Lab research fellow Dean Karlan; Deb Nelson, executive director of the Social Venture Network; Antony Bugg-Levine, the chief executive of the Nonprofit Finance Fund; and Jed Emerson, the executive vice president of ImpactAssets.
See the entire Forbes list here:
Through impact investing, Kellogg alumni are tackling some of the world’s biggest problems — and satisfying the bottom line
Stories as told to Sara Langen
Contrary to conventional thought, financial returns and social returns aren’t mutually exclusive.
In fact, when pursued simultaneously, pairing markets with philanthropy can have a very powerful outcome. Powerful enough, perhaps, to contribute to solving some of the world’s biggest problems, including hunger, poverty, pollution and disease.
This new strategy, known as impact investing, is creating all sorts of buzz in the private equity and venture capital arena — and Kellogg alumni are leading the charge. These investors and industry leaders have adopted innovative methods for placing capital in businesses that generate financial returns and have an intentional social or environmental goal.
Interestingly, Kellogg alumni each approach this strategy from a slightly different perspective. David Chen ’84, principal and founder of Equilibrium Capital Group, pursues investments with a market rate of return in the areas of green real estate, water asset management, energy efficiency finance and other environmentally driven initiatives. Debra Schwartz ’88, director of program-related investments at the John D. and Catherine T. MacArthur Foundation, manages a portfolio of below-market-rate loans and investments that support economic development and affordable housing organizations in the U.S. In Madrid, Agustín Vitórica ’99 and Luca Torre ’06, founder and co-CEOs of Ambers&Co Capital Microfinanzas, direct their investments toward microcredit institutions that support low-income workers in Latin America, sub-Saharan Africa and Asia. And Amit Bouri ’07, director of strategy and development at the Global Impact Investing Network, is establishing metrics and industry standards for impact investing to encourage greater activity among mainstream investors.
In their own words, these Kellogg leaders outline their strategies for connecting the dots between pressing global problems and smart investment solutions.
05 December 2011
Richard Leftley, president and CEO of MicroEnsure.
Most people would agree that grant funds should be focused on tackling development projects which would simply not take place unless free money was available. However, what is the right point for grant funds to be replaced by more commercial forms of funding such as debt or equity?
Four years ago, we set up MicroEnsure with a grant from the Bill & Melinda Gates Foundation. Our aim was to serve a large number of people with a range of affordable and relevant insurance products. Today we are serving in excess of 3.1 million people whilst growing by more than 200,000 new clients per month. By the end of 2012, we should be approaching 10 million active clients being provided with a safety net that stops the poor from falling back into poverty when disaster strikes.
MicroEnsure is entering that difficult stage in its development where the grant funds are coming to an end and donors are rightly asking whether more grants are really needed for an organization serving millions of clients. And yet, it is still early to demonstrate to potential investors that it’s a sound investment that will offer a compelling return.
Our approach to this conundrum has been to contemplate separating our operations into those that have been proven and are rapidly scaling up and those, such as the development of health insurance in Africa, which are still at an early stage. The “proven” parts of our business can be placed into a company that insurers, mobile phone companies and social investors can fund using equity; the “R&D” parts of the business can be placed into a foundation that can continue to use grant funding. As the best ideas from the R&D company are proven, they will be transferred across to the core business to be scaled up using a robust platform that is serving millions of poor people.
Using this approach, we believe, will enable us to tap into commercial funds and strategic partnerships that are necessary to continue our growth, while continuing to experiment and test out new development ideas using grant funding.
Of course the real test of this approach is whether the inevitable tensions between the needs of the equity funders for continued growth and the desire of the management team to innovate and develop new ideas can be addressed to everyone’s satisfaction.
The role of donors
The finance that donors provide not only plays a significant role in the development of organizations that address difficult development goals; it also has the power to shape markets. One of the frustrations of working in development is to see well-intentioned funding not helping those that were targeted to be assisted. In most developing countries, the provision of health care is funded by donors via the ministry of health, which in turn pays for medical facilities, medical personnel and the drugs required to provide the population with the services they need. If you visit these government-run health facilities or speak to the general public who use them, it is all too frequent you will learn that medical personnel and the drugs that are supposed to be available are in short supply. All too often, the medical personnel and supplies can be found around the corner at a private clinic.
Interestingly, some innovative approaches are emerging for funding health care; the most notable has been in India through the provision of the Rashtriya Swasthya Bima Yojana, a state-managed national health insurance program. Central to this approach has been the theory that it would be better to provide donor funds as a premium subsidy to the poor, enabling them to have a health insurance policy which they can use at both private as well as public health facilities. This approach is innovative because it ensures that the poor benefit from the donors’ health expenditure; it provides power to the people who are free to choose where they want to spend their health funding, leading to the development of a robust market in the provision of health services. Whilst there are a number of issues that continue to be worked out in relation to these public-private partnerships in the provision of universal health for the poor, the early results indicate that they have a greater impact on the poor than funding the ministry of health.
Donors should be proud of the role that they play in providing grant funds to organizations engaged in tackling issues that the commercial market sees as too risky. MicroEnsure would never have taken off without grant funds provided by Opportunity and the Bill & Melinda Gates Foundation. Some of these organizations will inevitably fail due to the magnitude of the task they undertook. But those that succeed need to be ready to transition from grants to debt or equity, which can be used to finance working capital needs whilst not losing sight of their roots and continuing to seek grants to continue to push the development boundaries on specific projects.
Donors should continue to look inward at their activities and ask themselves whether their grants are distorting markets or having the greatest impact on those they hope to help.
Want to read more about innovative financing for development? Check out Busannovate, a blog brought to you by Devex in partnership with the United Nations Foundation, and launched with a thought-provoking guest opinion by Nobel Peace Prize winner Muhammad Yunus.
Richard Leftley is the president and CEO of MicroEnsure. He pioneered the introduction of insurance products at Opportunity International, which led to the establishment of MicroEnsure. Before MicroEnsure, Leftley served as a reinsurance broker for Benfield Greig where he was responsible for the African account and worked in a team covering the Middle East and Southeast Asia.
SUNDAY, NOVEMBER 06, 2011
The Tech Awards is a signature program held by The Tech Museum, San Jose, in association with the Santa Clara University. What stuck me was the grand global vision that the relatively small museum had (for a start, it calls itself ‘THE’ Tech Museum)! For the last 11 years, it has been seeking out, encouraging and supporting enterprises around the world that were trying to play meaningful and transformative roles in Environment, Economic Development, Equality, Education and Health. The program is sponsored by technology majors like Applied Materials, Intel, Flextronics (the sponsor for our award), Microsoft, Nokia and the Swanson Foundation.
There is another great signature program for the Tech Museum – its called the Grand Challenge. I hope someday soon, we will be able to have something similar for students in India!
We also got a chance to visit and Abhishek got a chance to speak to a class at the Stanford University. The campus itself is so picturesque and grand; with such a great legacy that just being on that campus inspires you to think big. Imagine what would happen if you’re tutored there ;)? Ans: You get to be Larry Page, Sargey Brin, Peter Thiel, Jerry Yang, Azim Premji, Ray Dolby or Vinton Cerf 🙂
Close to Stanford University is the Sand Hill Road– one street lined with all the major VCs. Guess why they have parked themselves right outside the university gates 🙂 ?
From what I could observe, the valley is what it is because of three main reasons:
1. Climate. Seems to be just right! I’d call it nice cold and nice sunny. No sweat.
2. All migrants. I think I read somewhere that it was a place which did not have incumbents. Its ‘history’ hardly stretches back a few centuries. It perhaps represents a very open and forward looking culture.
3. Infrastructure. Things were just in place. To someone coming from India, even simple things like the highway networks, buildings, traffic lights that work, reliable electricity and water seemed awesome. While it is true that the sheer volume of the needs in India are daunting, we seem to have stretched this excuse way too far.
Consider the presence of just the Stanford University and its contribution! Even access to capital could be considered an essential infrastructure and silicon valley seems to have a surfeit of it!
|At the Golden Gate Bridge|
Jetlag (this thing is for real!) prevented any further ambitions of venturing out – something hit us so hard by the time the sun went down that we could hardly force an eye open.
Thursday, 20th October was the gala. That was a really grand gathering marked by meticulous planning and impeccable execution. It was encouraging to have Patrick from Creation Investments (the folks who have invested in us) with us at the gala. Silicon valley was well represented by top executives, VCs and well-wishers. It took some time for the realization to sink in that the net worth of that hall, that evening, should have been a pretty impressive $billions figure :)!
Also, each year, an individual is honored through the Global Humanitarian Award- this year’s recipient was Jeff Skoll (An active philanthropist and a maverick movie producer- An Inconvenient Truth, American Gun, The Kite Runner and the erstwhile employee number one for eBay). Previous recipients include Bill Gates, Gordon Moore, Dr. Mohammad Yunus and Al Gore.
There were over 600 nominees, 15 laureates (5 in each category) and 5 grand prize winners. The names of the grand prize winners of $50K were revealed only during the gala, when Abhishek and Abhinav were on-stage. The sense of joy and exhilaration when Eko was named as a winner was amazing. Equally awesome were all the other laureates and winners. My personal favorite was WeCareSolar represented by its founders Dr. Laura and her engineer husband Hal. Their innovation was a solar power unit that fits in a suitcase and provides the necessary power and lighting required for medical procedures, especially related to child-birth; in developing countries. There is nothing technologically earth-shattering about most of these innovations, its their simplicity and appropriate use in solving real world problems efficiently that makes them noteworthy. Their solar suitcases for instance have already saved a lot of lives!
Check out Abhishek’s acceptance speech video:
That was an amazing week! One last thing…
The trophy that we received aptly summarized the spirit of the silicon valley. On the bottom is a solid ingot of silicon (The same thing that is sliced into neat wafers and each slice could give birth to a set of microchips). On top of it rests a crystalline globe. The modern world literally runs on silicon. The Silicon Valley therefore is closely intertwined with all of our lives.
Here’s a technologists salute to all the people who make the valley what it is.
To The Tech Museum, CSTS Santa Clara University, Leslie, Andy, Lee, Mike – and all the others who led us through the entire process- thank you!
[It took me quite a few sessions to finish this blog post- its been almost a fortnight now!]
That weekend, we returned home -recharged.
To newer heights!
You may have noticed the emerging class of “social entrepreneurs” who are creating companies that seek profit but also are devoted to a social purpose, to create long term, sustainable value.
About the Author
Kyle Westaway is founding partner of Westaway Law in New York, and cofounder of Biographe, a sustainable style brand that employs survivors of the commercial-sex trade. He lectures on social-enterprise law at Harvard Law and Stanford Law, and launched socentlaw, a legal blog for social entrepreneurs.
Social entrepreneurs believe a business can be a part of the solution to some of the world’s greatest challenges. It’s this kind of thinking that has given rise to such mission-driven companies as Better World Books, TOMS Shoes, D-Light Design and Warby Parker, to name a few.
But, until recently, social entrepreneurs would find themselves in the position of choosing whether to organize either as a for-profit company or a nonprofit organization. The problem was that sometimes a company would be too much of a business to be a nonprofit. Yet, it also might be too mission-driven to be a for-profit.
Fortunately, there are a few innovative legal structures designed for entrepreneurs who are driven as much by mission as money. The cost of using one of these new legal structures will vary depending on lawyer fees, but generally those fees shouldn’t exceed more than $10,000 for a start-up with fewer than 10 employees.
Here’s an overview:
Ideal for: companies that want to blend traditional capital with “philanthropic” capital, such as from foundations
Available to start-ups in: Vermont, Michigan, Wyoming, Utah, Illinois, North Carolina, Louisiana, Maine and soon in Rhode Island.
An L3C offers the same liability protection and pass-through taxation as an LLC. But it must be organized primarily for a charitable purpose – and secondarily for profit. Unlike a traditional nonprofit, it may distribute its profits to owners.
The L3C is designed to attract both traditional investment and a very specific type of philanthropic money called Program Related Investments (PRI). PRI is capital – in the form of equity or debt – from a foundation to a for-profit company that is doing work in line with the charitable purpose of the foundation.
Ideal for: companies that want to create a measurable positive impact while and providing greater transparency to the public
Available to start-ups in: Maryland, Vermont, Virginia, New Jersey, Hawaii, California and soon New York
The Benefit Corporation is a new class of corporation with a corporate purpose to create public benefit, a broader fiduciary duty and is transparent about its overall social and environmental performance.
By definition, it must operate for the general public benefit – defined as a material positive impact on society and the environment. Every benefit corporation is required to publish an assessment using an independent, third-party assessment tool. To create a material positive benefit, a benefit corporation operates in a manner that not only creates value for the company’s shareholders, but also its community, environment, employees and suppliers.
The structure also calls for a high level of transparency and accountability. Within 120 days after the end of each fiscal year, a benefit corporation is required to publish a “Benefit Report,” which states how it performed that year on a social and environmental axis.
Ideal for: companies seeking to do good on their own terms
Available to start-ups in: California
The Flexible Purpose Corporation a new class of corporation that creates the maximum amount of flexibility for socially/environmentally conscious companies. It is designed for businesses that want to pursue profit along with a special purpose of its own designation.
The structure allows the designation of a special purpose that the company will pursue in addition to profit. For example, a flexible purpose corporation might be a for-profit developer that has a special purpose of building a public park in each of its developments.
This type of corporation must issue an annual report that is available to the public and provides details on the following: the special purpose; the annual objectives that it has set to achieve its special purpose; the metrics used to gauge the success of the special purpose; how it has achieved or fallen short of the stated objectives; and how much money was spent in furtherance of the special purpose. But it does not require any measurement against an independent third-party standard.
November 29, 2011, 9:00 PM
Fixes looks at solutions to social problems and why they work.
At Fixes, we often argue that good ideas are plentiful — but ways to keep them going are hard to find. That’s why we pay a lot of attention to sustainability, especially financial sustainability. Life is always precarious for programs that depend on government financing or charitable donations, particularly so today. So we choose many of the programs we highlight because they have found a creative new way to sustain good work, often through combining social and for-profit missions.
Most social change projects, however, can’t be turned into businesses. After all, they aim to improve the lives of the people least able to pay. Yes, social enterprises are interesting and glamorous — it’s attractive to find ways to marry altruism and profit. But let’s not kid ourselves: most of the time, it isn’t possible. Even most successful social enterprises start by relying on donations — the Grameen Bank, for example, spent 18 years accepting donor funds before it became self-supporting. The need for charitable giving isn’t going away — it’s getting bigger.
When people give, they want to know they are making a difference. So here are some tough-minded programs we’ve written about since Fixes began in October 2010, that make particularly good use of charitable dollars. Like all the ideas we’ve highlighted in Fixes, they are proven to work. All of them spend a relatively small amount now to create huge savings down the road. But these are also programs where a little bit of money can make a huge difference — some are bare-bones operations, and some of them have taken particularly big hits and are scrambling to stay alive.
This court keeps teenagers’ bad choices from ruining their lives. Too often, typical youthful delinquency — shoplifting, talking back to a police officer — can land a teenager in the juvenile justice system, where he will learn to be a real criminal. Youth Court gives first-time, nonviolent teenage offenders an alternative. They are judged by their true peers — other young people. The offender this week is usually on the jury next week. Young people can hear, often for the first time, disapproval of their behavior from their peers, not just from adults. And serving on the jury, writing letters of apology and participating in girls’ or boys’ groups has proved to help them stay out of trouble. “The idea is to take that first encounter with the law, especially for minor things, and use it to put them back on the right track, turn it into something positive,” said Carolyn Dallas, Youth Court’s executive director.
Youth Court is a bargain, saving the district thousands of dollars a year in incarceration costs and helping create citizens who will pay taxes instead of commit crimes. Yet Youth Court’s budget was cut by 40 percent this year, and its staff of five is now working part time. Including all staff and overhead, sending a teenager to Youth Court instead of juvenile justice — including support groups and other services — costs less than $500 per teenager.
A teacher in a poor neighborhood once told Kyle Zimmer that when she asked her students to bring in a book from home, three of them brought in a phone book — the only book in their house. We commonly assume that families who don’t have books are that way because they aren’t interested in reading. But very often, the reason is that they can’t afford books. Ms. Zimmer started the organization First Book to put books in the hands of low-income children in the United States. To date, it has distributed free or at low cost more than 85 million books, mostly through charitable groups that work with poor children.
If you give books to children who don’t have them, good things happen — they become interested in reading, and they read more. Having lots of books in the home is as good a predictor of children’s future educational achievement as their parents’ educational levels. But good things also happen to the publishing industry: First Book has harnessed its large network of education programs to create a guaranteed market and persuade publishers to make low-cost versions of some 2,000 titles — allowing publishers to reach the 42 percent of American children who t were not in their market before. Fifty dollars buys 20 books for a child who has none.
This is one of the most successful, influential and long-lived community health worker programs in the world. It trains impoverished women with very little schooling — many of them are illiterate — to become their village doctors. It’s been going since 1970 and has utterly transformed the villages where it works — people are not only much healthier, they are more prosperous. At its campus in Jamkhed, India, it teaches its methods to people all over India and from dozens of other countries.
The C.R.H.P. accomplishes all this — plus running a modern 50-bed hospital — on a budget that has never gone above a half-million dollars a year. The program has won all sorts of awards (most recently the Times of India Social Impact Award) but recognition has not been matched by money, and it has had to reduce the number of villages where it works. One hundred dollars will buy a village health worker’s field kit. It costs $2,500 to sponsor a whole village for a year — bringing health care to thousands of people.
Riders was the subject of our first Fixes column because of its ingenious strategy for greatly expanding health care in Africa — through motorcycle maintenance.
The group was started by motorcycle racer Randy Mamola, his colleague Andrea Coleman, and her husband, the journalist Barry Coleman, after they visited villages in Somalia where no health care worker had ever gone. They also saw graveyards of dead trucks and motorcycles — bought by the health system to solve this problem but lost to poor maintenance or want of a simple part.
Riders works in seven African countries. In some of them it provides vehicles, mostly motorcycles. But its truly innovative contribution in all those countries is that it keeps those vehicles running. Health care workers get a bike, helmet and protective clothing. They are trained to ride and do a quick check of the bike every morning. A mechanic comes to visit once a month for a tune-up. Now health care workers who used to walk for miles and see only three villages a week can visit 20. It’s comparable to a nearly 600 percent increase in the health care budget. For $30, you can buy a basic maintenance tool kit a health worker can use to keep the bike running; $100 will pay for maintaining a motorcycle for a year.
A prosthetic leg in the United States costs upwards of $7,000. But the vast majority of people in the world who need new limbs are desperately poor. Jaipur Limb, named for the Indian city of its birth, provides limbs at no cost that are specially designed for use by the rural poor — people can use them to walk barefoot, traverse uneven ground, squat or sit cross-legged. People who have spent their lives being carried by relatives come into a Jaipur Limb camp — and they leave walking. These limbs have made an overnight difference between begging and self-sufficiency for hundreds of thousands of people.
An Indian group named B.M.V.S.S. makes these limbs, runs limb camps, and trains and equips clinics around the world. Its financial support comes largely from the Jaipur Limb Project of the Rotary Clubs of Britain and Ireland, which is the way to make a tax-deductible donation from the United States. Forty-five dollars buys the materials for a new limb; total cost of a limb including overhead and labor is $100 to $200.
This center is formally opening its third site in Manhattan this week, on West 17th Street. It has been working for years in St. Luke’s and Roosevelt hospitals, treating some of the toughest patients in the city – people with H.I.V. and multiple other serious illnesses, including mental illness and substance abuse. The clinics are a medical home — a single place where people with H.I.V. can get complete health care. They can even get their teeth fixed and prescriptions filled.
Read previous contributions to this series.
The center’s staff members are not just doctors and nurses. Also important are a group of people who have no medical training at all. Instead, their qualification is that they, too, are living with H.I.V. and have struggled with drug addiction, domestic violence — all the problems their patients are going through. They build trust and comfort by listening to a patient’s problems and talking about their own experience with the same issues. Doctors and nurses can tell patients what to do to become healthy. But it’s the peer counselors who get them to do it.
The program is effective and cheap — healthier patients stay out of emergency rooms. Twenty dollars will allow two peer counselors to run a one-hour support group for patients. One thousand dollars will pay for a year’s worth of continuing education and training for a peer counselor.
This is a nationwide three-year effort to move 100,000 chronically homeless people into permanent supportive housing by July 2013.
Led by a group called Community Solutions, it works with organizations in dozens of cities to identify the chronically homeless, understand their vulnerabilities, persuade them to move into real housing and streamline the process for getting them there.
Every city has a strategy for getting the homeless off the street, but those strategies have often failed because they are uncoordinated, poorly informed and badly designed. The 100,000 Homes Campaign makes a difference by standardizing the process and helping cities teach one another how to do it. It’s now working in 103 cities.
Like the other projects on this list, this effort requires a small investment for large savings — moving people into housing linked with services they need is far cheaper than leaving them on the streets. Two hundred and fifty dollars will buy a basic mattress for a homeless person’s apartment. One thousand dollars can furnish the whole thing.
Tina Rosenberg won a Pulitzer Prize for her book “The Haunted Land: Facing Europe’s Ghosts After Communism.” She is a former editorial writer for The Times and now a contributing writer for the paper’s Sunday magazine. Her new book is “Join the Club: How Peer Pressure Can Transform the World.”