For-Profit v Not-For-Profit Microfinance
Below is the video of debate between Mohammed Yunus, founder of Grameen Bank and Vikram Akula, founder of SKS Microfinance at the Clinton Global Initiative conference which took place last Tuesday.
At 14:32 in the video, Vikram Akula tells a story about how he concluded that SKS Microfinance needed to bring in big private equity investors:
Before starting SKS Microfinance I actually worked for one of these small NGO microfinance institutions, basically as a loan officer. I would give out these small loans and see this tremendous impact that Professor Yunus has written about and shown the world. And what would happen is, women from more remote villages would come to us and say, “Can you start in our village?” And we’d always have to say no, it’s grant-run, so we don’t have funds, and we’d have to turn them away, and they’d walk away disappointed.
Now, on one particular day, a very poor woman—emaciated, torn sari, no chappals—she had clearly walked quite a distance to ask me the same question. And again I said, “We don’t have funds. We can’t come into your village.” But unlike the other women who simply walked away disappointed, she looked me in the eye and said something that I’ll never forget. She said, “Am I not poor too? Do I not deserve a chance to get my family out of poverty?”
Now, for me this was a jarring question because here I was thinking I’m doing something to help eradicate poverty. But this woman’s question basically put me in my place, basically said: Look, what are you doing if you’re only doing this in a handful of villages and not doing it in the next set of villages? It’s as if you’re sending one child to school and holding one back….How do you design microfinance in a way so that you never have to turn away a poor person who’s simply asking for an opportunity?