Industry Trends

Remember to thank the trailblazers

June 25, 2012
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Social entrepreneurs are often trailblazers whether they like it or not. Seeking to fill a void in the business world opens up enough challenges, yet doing so in a market or environment that is not used to it can provide a whole slew of other difficulties.

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Organizations like Kiva and SKS microfinance were not necessarily the first of their kind, but grew to such scale and recognition that they ended up being shoved into the spotlight as representatives for their industries.

Public missteps and controversial business decisions can create such a wave of publicity that might seem to dominate the news streams of an otherwise rather quiet / non-controversial community. Read more »

Microfinance Monday: Uncertainty Ahead

June 4, 2012
By

With the Euro Zone facing ever increasing pressure and manufacturing rates down in China, the importance of the next 6 weeks is heightened not only in the eyes of Europe but of the rest of the connected global economy. While much of the debate involves national debt, austerity measures and credit ratings of many countries, this is not to say that leaders of organizations in other industries should pay no attention.

The NASDAQ is already reporting a softening of Indian stocks, yet the effects will initially be centralized on IT and oil-related industries.

As we’ve seen in the past, such massive global financial challenges leave few untouched. The rise in fuel costs will undoubtedly trickle down to put pressure on the poor who toe the poverty line depending on the price of fuel. How will this affect repayment rates of microfinance institutions? Read more »

Moving the needle ever so slightly

May 21, 2012
By

Much of what we talk about here at Rising Pyramid is the large scale change that is happening at the BoP with respect to sustainable and user-centric innovation.  The challenge to reduce / eliminate / eradicate poverty is one of the largest hurdles that we all face, but every little bit that helps to move the “needle” of impact is something that should be celebrated.

Although poverty reduction and more sustainable living should be viewed as issues that are massively intertwined with geo-political and industrial complications, they cannot be solved all at once, and must be addressed (from a business or entrepreneurial standpoint) in piecemeal.

What is always exciting to me is to see innovation happening where you would least expect it – from large multinational corporations that in the past have rarely served as the beacon of sustainable behavior.  Nestlé recently announced their plans to commit to a global non deforestation target by 2020.  While this might not seem like innovation in some of the other senses we’re used to, the model for working with your suppliers and bringing a non-profit in the loop might prove to be just that: a role model for others. Read more »

What more can we learn?

April 9, 2012
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Stanford Social Innovation Review posted a great article about the importance of data in the non-profit world, and how one specific organization, Data Without Borders (DWB) is making a difference.

DWB’s mission statement begins with the line, “Data Without Borders seeks to match non-profits in need of data analysis with freelance and pro bono data scientists who can work to help them with data collection, analysis, visualization, or decision support.”

A noble task indeed. Of the resources available to non-profits, data visualization and analysis is typically not at the top of their list. Non-profits are mainly concerned with looking for the next batch of funding, and working to drive impact true to their mission. Read more »

Are we disillusioned?

March 19, 2012
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As a new entrant into the social entrepreneurial world, I have encountered so many people using their skills for good, yet the data seems to be singing a different tune.

A recent article written on GOOD Environment asks, “Are Millennials less committed to the environment than Baby Boomers?” Author, Sarah Laskow, posits that traditional routes of service may be not resonating with the millennial generation due to a lack of faith in the results.

“We don’t want to get ‘involved in programs to clean up the environment,’ because we spent all of elementary school involved in programs hoping to save the rainforest, only to find out the rainforest is worse off than ever.”

So are we, as a generation, disillusioned? Have we seen way too many black and white commercials preaching doom about the ever-thinning ozone layer? Have too many major oil spills and nuclear scares shocked us into a state of inaction regarding the effects of our daily actions? Read more »

Introducing Microfinance Monday

January 30, 2012
By

Today marks the last Monday of January and the first monthly Microfinance Monday on Rising Pyramid.  Each last Monday of the month, we’ll take a look at the growth and trends emerging from the microfinance industry.  We plan to offer a holistic and balanced look into an industry poised for a critical year.  Enjoy!

Time for Microfinance to Retool

As venture capitalists maintain their distance from MFIs and large for-profit organizations continue to report poor results, it is clear that now is the lull in the industry lifecycle where MFIs must go back, retool, and change the way  business is done while investors take a sideline role.

Microfinance’s reputation in the past few years alone has pushed the industry to its bounds and essentially made it too sexy too fast.  The rewards and opportunities that microfinance presented were overblown from both the investor and consumer side.  As bold MFIs drank the kool-aid, the IPOs began to trickle out, met with great surprise, trepidation, but spurred on by hopeful confidence. Read more »

Growing Pains in the Microfinance World

December 12, 2011
By

The micofinance identity crisis continues.

Pressure from all ends of the value chain continues to mount, further tightening the vice on the future of microfinance. Vishal Mehta, Co-founder and Partner of Lok Capital recently summarized investor sentiment by saying that, “the sector is not at all attractive unlike a year ago.”

As Lok Capital, a venture capital firm with investments in MFIs, is raising their red flag, SKS Microfinance is raising the upper limit of Foreign Institutional Investment in orer to shore up a balance sheet that has taken a beating over the past year.

While an infusion of capital might provide shareholders with some temporary comfort, larger issues in desperate need of resolution loom in the near future.

Yaseen Anwar, Governor of the State Bank of Pakistan recently spoke at the 5th Pakistan Microfinance Country Forum about the future of microfinance in Pakistan. His speech, while in depth, seemed to highlight the needs of everything from regulation reform to alternative delivery channels to financil literacy courses.

Further, with the harsh government-imposed restrictions placed on micro loans in Andhra Pradesh, a recent report has shown that in the absense of proper micro loan availability, borrowers are turning to non-traditional methods for credit.

In 59% of the sessions, respondents unanimously said that they had taken loans from money lenders in the absence of MFI credit. Daily finance companies—informal money lending entities—were the preferred choice of borrowers in 29% of the sessions.

This sense of confusion and uncertainty from investors through to borrowers are major growing pains that will need resolution sooner rather than later. A majority of borrowers in Andhra Pradesh have even stated that they would be willing to “repay loans if MFIs can disburse fresh credit”.

Things are not all in a disarray, however. International standardized regulations appear to be heading the way of MFIs.

The International Finance Corporation (IFC), a member of the World Bank group, is working with other institutions to promote global standards for corporate governance. 30 development finance institutions (DFIs) have agreed to adopt a set of standards based in part of IFC’s Corporate Governance Methodology.

The longer that regulation and consumer protection continue to be issues that are unmet in the microfinance industry, investors will stay at bay. These growing pains, while not indicative of a troubled industry, must be addressed through a collaboration of international organizations, governmental regulators, and MFI information-sharing. While I believe the industry is on the right path, the time to act is now.

- Chris

A Microfinance Changing of the Guard

November 28, 2011
By

When news broke of Vikram Akula’s resignation as Chairman of SKS Microfinance, it smacked eerily of the same style of resignation from Grameen Bank founder Muhammad Yunus.

Mr. Akula’s resignation comes at an interesting juncture for the publicly-young SKS.  After making a splash with their decision to go ahead with an IPO, they had an equal and opposite reaction for their practices in Andhra Pradesh.  The resulting effects have left SKS with a toxic portfolio and a battered image.  Losses in their latest financial reports have done nothing to alleviate these growing concerns.

Rumors of clashes with the SKS board started swirling, and Mr. P H Ravikumar, Interim non-Executive Chairman, confirmed as much in an interview with The Economic Times.  Mr. Ravikumar explains, “the board very clearly feels that we need to be a financial services inclusion company, of which microfinance will be a subset. That is an issue.” Read more »

True Change Takes Time

November 22, 2011
By

A line that not only Americans heard over and over a little more than 3 years ago was, “Change We Can Believe In”.  That slogan, emboldened into voters’ and non-voters’ minds helped to propel Barack Obama to victory as the President of the United States.

Now, with re-elections around the corner, the retort that is slyly thrown around is “What Change?”  In the minds of some, things have gotten worse, not better, over the past 3 and a half years.  Was Obama’s slogan misleading?  False advertising?  Possibly.

Change at a massive scale requires innovation, concessions, and most importantly – patience.  Social Entrepreneurship is no different.  Take microfinance for example.  You’re creating a whole new financial market by opening the previously-shut gates to millions more consumers.  This sort of a massive entry of consumers to a new market will inevitably lead to pushing its boundaries. Read more »

A Microfinance Identity Crisis

November 14, 2011
By

In a recent interview with The Economic Times, Vinod Khosla, one of the early and large backers of SKS Microfinance, remarked that SKS “should present themselves as a business, and not as do-gooders.”

I fundamentally disagree at the notion that those are necessarily (or appear, in his statement) to be mutually exclusive.

For the sake of this article, let’s go ahead and assume that Mr. Khosla’s point is correct, and MFIs should operate solely as a business.  What does this actually mean? Read more »

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