microfinance

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Thousand in Seattle support ‘controversial’ anti-poverty scheme | 

Nearly 1,000 gather for Global Partnerships annual luncheon

It didn’t used to be controversial.

But one way to say this is that nearly one thousand people turned out for a Seattle event Tuesday to celebrate and support an anti-poverty scheme that many experts in the aid and development community contend doesn’t work.

Microcredit loans.

Rick Beckett, CEO Global Partnerships

“We have something like $70 million in loans to 57 partners in 12 countries, serving about 2.2 million clients each of whom support on average a family of five people,” said Rick Beckett, president and CEO of Global Partnerships, a Seattle-based organization and one of the biggest practitioners of microfinance anywhere.

The organization, founded in 1994 by local philanthropists Bill and Paula Clapp and focused primarily on assisting the poor in Central America, held its annual fund-raising ‘Business of Hope’ luncheon yesterday. Nearly a thousand people were estimated to have attended. The organization raised $540,000 for microcredit last year and hoped to do better this year.

I asked Beckett how he has been able to dupe so many folks: Don’t all these people know that many experts in aid and development say microcredit loans don’t work to raise people out of poverty? That it’s a sham, and even an abuse?

“That’s sort of a leading question, isn’t it?” he laughed. 

The rise and fall of the public image of microfinance has been misleading at both ends of the spectrum, Beckett said. Continue reading

Microfinance visualized | 

It’s hard to actually follow the advice of the slogan to “Visualize World Peace.” But below is a pretty cool video that allows you visualize reducing poverty — or at least watch microloans flying all over the world.

Thanks to David Roodman at the Center for Global Development for pointing this out (and for noting that Kiva’s microfinance program is not quite as advertised. But this video at least gives you a good sense of how popular these micro-loans have become … and it’s fun to watch. I think they could’ve picked better music, however. The William Tell Overture?):

Intercontinental Ballistic Microfinance from Kiva on Vimeo.

Muhammad Yunus on the crisis in microfinance | 

World Economic Forum

Muhammad Yunus

The Guardian has published an excellent, in-depth interview with Muhammad Yunus that provides perspective on the current crisis in microfinance.

Yunus, the Nobel Prize-winning economist credited with developing this anti-poverty scheme, has been at the center of his own crisis, which overlaps with the general crisis but is largely due to a political power struggle in his home country Bangladesh.

It one of only a few interviews he’s given since the government forced him out of running his hugely successful Grameen Bank for the poor. A few excerpts:

As the saying goes, a prophet is never recognised in his own country. Neither the global acclaim – nor the protestations of both the French and the US government – is making much difference to a government intent on destroying Yunus’s hold on Grameen Bank and the network of social enterprise companies he has developed over the last four decades.

The most likely explanation for the attacks on him is that Yunus’s brief foray into politics in 2007 unnerved (Bangladeshi PM) Sheikh Hasina. He announced he was going to set up a political party but ended up abandoning his the idea after only two months. His huge global reputation and the economic weight of the Grameen brand has made enemies insecure.

That last bit may be the most likely explanation, but perhaps not the only one. There’s plenty of evidence to suggest the attacks on Yunus are not just due to Bangladeshi politics.

As I’ve noted before, there is a fight right now for the heart and soul of microfinance — between those like Yunus who focus on the social mission of microfinance first and those who focus on it as a profitable way to perhaps also help poor people. The criticism of Yunus’ approach to microfinance really only exploded after he condemned the “loan sharks” who seek profits while only claiming to help the poor.

 

Mysterious microfinance firm re-emerges | 

Flickr, TW Collins

Clay Holtzman, in his new blog Nonprofit Kingdom, notes that a year ago the Seattle microfinance firm Unitus closed its doors, laid off most of its staff and didn’t really tell anybody (including some major donors) why it did so.

Unitus, which had claimed its primary mission was to help poor people, also happened to have made a lot of money — having invested in an Indian company, SKS Microfinance, which had pursued this anti-poverty financing scheme as a for-profit venture.

Here’s a New York Times piece on the controversy about SKS making money while fighting poverty. Here’s what I wrote at the time Unitus closed its doors and a more recent post I did on the broader implications of all the weirdness. Here’s another post from last year that Clay cites as a good overview by Philanthropy Action.

Now, as Clay notes, Unitus has been resurrected as Unitus Labs. Here’s what Clay says:

Many wondered what the new mission would be, and why Unitus had to close so quickly. Unitus recently unveiled its reorganization plan, and while the charity will use a different approach to reduce poverty, its new business strategy appears very similar to the one that sparked an international controversy last year.

Continue reading

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.

World Health Assembly opens to Taiwan outrage, smallpox debate, speeches by Bill Gates and Muhammad Yunus’ arch-enemy | 

WHO

World Health Organization

The World Health Assembly opens today in Geneva for week-long confab on what to do about global health.

I’ve not attended one of these meetings, which sets priorities for the World Health Organization, but from a distance it always looks like kind of a mess. A well-intentioned mess maybe but a mess nonetheless, partly because almost everything under the sun is allowed a place on the agenda. Continue reading

Four answers to the question: Does microfinance work? | 

That, in a nutshell, was the question posed to a panel of microfinance experts at a Seattle forum earlier this week, sponsored by Global Washington and aimed at examining “The global implications of India’s microcredit crisis.”

The answer: Yes and no. Of course.

It’s actually an important, if impudent sounding, question given that microfinance has long been heralded as the most powerful weapon in the fight against poverty. It’s especially interesting in Seattle because this community is one of the leading international hubs of the anti-poverty scheme.


Tom Paulson

From left, Rick Beckett of Global Partnerships, Chris Wolff with Accion Int’l, Peter Bladin of the Grameen Foundation, David Roodman and moderator Steve Davis

I think it’s fair to say microfinance is no longer regarded without question as a panacea for poverty. In fact, as I have written ad nauseum, it is in something of a crisis. Continue reading

Has India jinxed microfinance? | 

Flickr, prolix6x

Indian woman cooking rice

The anti-poverty scheme known as microfinance is in crisis, or maybe several crises.

The political sacking of Muhammad Yunus as head of the pioneering Grameen Bank, allegations of loan-shark profiteering by some microfinanciers and suicides of poor people caught in “debt traps” have led to a drumbeat of negative media stories about microfinance.

The drumbeat is loudest in India where the crisis is most intense. But it has reverberated worldwide, including in Seattle. Continue reading