Monday, July 14, 2008

Microcredit News

Yunus voted second leading intellectual in the world. (Why is Arhundati Roy not on this list?)

Economist Article. Is this microcredit? Or shameless exploitation of impoverished people?

Book Review - Small Loans, Big Dreams

I met Alex Counts when he entered microcredit circles in 1987. We worked together for a while. Alex was very competent. I recommended that he pursue a career
in microcredit. So you can’t expect an unbiased review of Alex’s book Small Loans, Big Dreams.

Twenty years of work informs this book. The one thing that really stands out is just how difficult it is to succeed at micro-credit. How hard the women have to work. The range of obstacles they have to overcome. Inspirational and daunting. How do microfinance institutions manage 112 million people willing to undertake such an arduous path? How dire does the alternative have to be before this is a viable option?

112 million families receiving microfinance services in 2007. This is a growth of 12% from the previous year. At 12% annual growth the current target of 175 million poor families by 2015 will be exceeded by more than 100 million.

The average annual growth rate over the past 11 years is just a hair below 32%. If it were possible to continue that rate of growth, the number of families receiving microfinance services would be 1.03 Billion by 2015 – about half of all the families in the world.

Yunus also published a book recently. Here is Yunus talking about Social Business from 2007.

What about the conceptual failure. And one conceptual failure that I would like to share with you because you are coming up with lots of conceptual framework in your mind.

It’s very clear how it fails in addressing the issue of human abilities. It is the concept of business. We all know what is business, but the existing concept of business, I feel very strongly doesn’t do justice to human beings. It limits human beings ability.

The present concept of business is to make money. Business means business to make money. There is no other business definition. Profit maximization is the mission of business.

That’s fine.

But is that what human being is all about?

What about the other urges people have inside their heart? Same human being who wants to make money at the same time wants to do other things, do good to other people, to make an impact on this planet. How come I can not accommodate it in my business.

So I am saying there is a failure to limiting human being in only one role. Single dimensional human beings. But human beings are multi-dimensional. Human being want to make money, but human beings are also caring human beings. So in order to accommodate the other urges why cant we create another type of business. Maybe we call them social business. Social business is a business to do good to other people. Social business is to solve a social problem. Not for making money, or personal gain out of it. It’s a non-loss, non-dividend company. With a social objective.

And some people say,” Ah people are not crazy to do such things”. And I say you will be amazed how crazy people are, they give away their money in philanthropy. If they can give away money for philanthropy, they can put their money to do good to other people too, as a business. Philanthropy is a wonderful idea, you help people But philanthropy money has a capacity of one type, but social business money, social business dollar has a multiple of that capacity, because it recycles, it goes on. It can solve the problem.

As Alex points out in Small Loans, Big Dreams microfinance institutions modeled on Grameen are one example of a social business. There are many others. Yunus is working to establish a social stock exchange whereby people can invest in social business. This has enormous growth potential -- the available market is huge. About six and a half billion people could benefit directly from not for profit businesses capitalized to take care of environmental and social problems. Because these organizations are bubbled up from the bottom, rather than managed from the top, they remain closer to local realities and priorities. This is a vastly more efficient process than relying on government programs, and of far greater utility than business capitalized for the purpose of making money.

What kind of world do you want?

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