Alex Counts

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Muhammad Yunus, Craig McCaw, mobile phones and poor people | 

Tom Paulson

Founders of Seattle's Grameen Technololgy Center share a laugh. From left, Alex Counts, Peter Bladin, Susan McCaw, Craig McCaw

A decade ago, few thought poor people had much use for cell phones and, likewise, few in the cell phone industry had much use for poor people.

The folks who launched Seattle’s Grameen Foundation Technology Center, which yesterday celebrated its 10th year anniversary (and new digs in Belltown), disagreed with both of those assumptions.

More importantly, they proved both assumptions stunningly wrong. Africa, for example, is today home to the fastest growth in mobile phone use. In Seattle alone, there seems to be a new company springing up every month looking to grow the cell phone business in the developing world.

“When we started on this, others in the industry thought Africa was irrelevant,” said Craig McCaw, the wireless magnate who built an empire in the early days of the cell phone industry and who contributed the seed money (a mere $2 million) to launch the Grameen technology center.

“We’re in a unique position right now,” said Peter Bladin, outgoing director of the Grameen tech center, which is a branch of the Grameen Foundation — one of the world’s leading microfinance institutions founded on the poverty-fighting principles of the Nobel Peace Prize-winning pioneer of microfinance Muhammad Yunus.

Progress amid controversy

The field of microfinance, and Yunus himself, has been embroiled in a number of controversies lately — partly as a result of having exploded in popularity as a financial scheme and suffering all the attendant problems of rapid growth (opportunism, mission creep, debates over impact or outright scams).

While many seem to be arguing the merits of microfinance these days, few seem to be arguing anymore that cell phones don’t have a place in poor countries. What the Seattle-based Grameen tech center aims to do is make sure the rapid expansion of mobile telephony also serves the needs of poor people.

Yunus, it turns out, was also an early advocate of using cell phones to fight poverty in Bangladesh, which eventually led to Bangladesh’s largest telecommunications service Grameenphone. With McCaw’s financial assistance, the Grameen tech center was created to expand on Yunus’ vision by funding research projects devoted to making the best of the emerging technologies.

“We wanted to create a center of excellence here,” said Alex Counts, president of the Grameen Foundation, headquartered in Washington D.C.

McCaws made it possible

Counts credited the McCaws with making that possible, briefly noting the turmoil in microfinance but quickly moving on to celebrate all of the many advances being made today in exploiting the ubiquitous cell phone to help poor people improve their lives and livelihood.

“What we are doing is closing the information poverty gap,” said Bladin.

Some of the Grameen Foundation Technology Center’s projects: Giving a smallholder farmer the information he or she needs to improve agricultural productivity or get the best prices for a crop; providing traveling health workers with on-the-go access to critical information they need to care for people; developing software that allows people without access to banks to make payments or transfers on a cell phone.

I’ll explore one of these projects in more detail tomorrow, a project in Uganda known as the community knowledge worker program.

The goal of all of these initiatives, said Bladin, is not merely to make use of the cell phone as just another tool that poor people can also use. The goal of the Grameen Foundation, he said, is to bend technology to serve a much bigger aim: Defeating poverty.

“Too many of these (technology) projects are one-offs,” said Bladin, with the untested assumption that somehow technology alone will help bring people out of poverty — or maybe just another commercial scheme, gilded as a “social” venture, which is only aimed at selling a product or a service.

“Our goal is to figure out how to leave most of the money in the village,” Bladin said.

Five reasons why microfinance is in crisis – and why it matters | 

Flickr, TW Collins

The popular anti-poverty scheme of providing small loans and other financial services to poor people, generally known as microfinance, is in crisis.

“In one sense, you could say it’s a coming of age,” says Alex Counts, CEO at the Grameen Foundation, a leading non-profit microfinance organization with offices in Seattle and Washington D.C.. “Controversy often comes along with growing in size and impact.”

You could also say microfinance is actually suffering from several different crises: An external appearance of a crisis based on a damaged public image; a related, but slightly different, internal “identity crisis” and, at least according to one leading observer, a cash crisis in reverse — too much money.

Here are five reasons for the crisis:

  1. Microfinance has grown rapidly, from a simple anti-poverty program into a major player in the financial industry.
  2. Some now view microfinance primarily as an investment opportunity, with reducing poverty as either a secondary goal or not really the goal at all.
  3. Microfinance is a multi-headed creature with no agreed-upon strategy or approach.
  4. There is no consensus on how to measure “social performance” — for donors to tell the difference between a program focused on poverty reduction from one focused on maximizing profit.
  5. The evidence that microfinance does bring people out of poverty is mixed. Some say it has helped millions of poor people, mostly women. Others say it hasn’t and is, in fact, a debt trap for the poor.

All of these points, and most of the arguments, tend to circle back to the pioneer of microfinance, or microcredit, the Nobel Peace Prize-winning Bangladeshi economist Muhammad Yunus.

Tom Paulson

Muhammad Yunus visits with fans Seattle Town Hall May 2010

Yunus used to be golden, uniformly regarded as almost the patron saint of the anti-poverty movement. He still is seen as such by many of his supporters.

But Yunus is also in a bit of trouble these days, fighting off a push by politicians in Bangladesh to force him out of the Grameen Bank (his pioneering microfinance organization). The push comes after a film-maker’s allegations of corruption and the increasingly popular refrain among critics that these microloans hurt rather than help the poor — even driving some debtors to suicide.

Many in the microfinance industry see the power struggle in Bangladesh as more of a political sideshow, unjustified but more importantly unrelated to the real challenges facing the field. Continue reading

Microfinance flap keeps getting weirder | 

World Economic Forum

Muhammad Yunus

There is a crisis in the anti-poverty scheme microfinance, centered in India but reverberating globally.

I posted on the local implications of this mess in October, before it exploded in India but back when there were signs of trouble. I’ve tried to keep up as it has gotten more intense and weirder by the moment.

In the latest (even weirder) turn of events, the Nobel Peace Prize-winning pioneer of microfinance, Muhammad Yunus, has been accused of embezzling funds based upon allegations made by a Norwegian documentary filmmaker who has taken a critical look at the whole microcredit movement. Continue reading

Microfinance, subprime loans and baseball | 

Flickr, TW Collins

Is Microfinance the New Subprime?

That’s the provocative title of a new article in the Harvard Business Review by financial journalist Barbara Kiviat and New York University economist (and author of Portfolios of the Poor) Jonathan Morduch.

The subtext of the question is the implication that, like those sub-prime mortgage loans in the U.S. that turned out to be a catastrophic house of cards, some approaches to microfinance are starting to also look like another way for financial whizzes to make money off poor people.

I’ve been posting for the past few weeks on this increasingly heated debate surrounding “profit-maximizing” microfinance and the resulting turmoil in the field. It’s a debate that many organizations in Seattle, where microfinance is big, are watching keenly. Continue reading

Microfinance backlash: Identity crisis, evolution or greedy mission creep? | 

Seattle is big on microfinance, but what is it?

The short answer is that microfinance is a set of financial services such as small loans for the poor aimed at helping people get themselves out of poverty.

Sounds fairly straightforward, right? In reality, there’s a fight for the soul of microfinance going on and some of that battle has been playing out here at home.

There has been an explosion of “profit-maximizing” microfinance organizations lately which some say threatens to undermine the credibility of this anti-poverty scheme — if not its fundamental social purpose. But the proponents of profit-driven, commercial microfinance say it is the only way to really grow these services, to reach the many millions more in need of help.

Flickr, TW Collins

Continue reading