Grameen Foundation and the Future of Micro-finance

Alex_CountsA few weeks late on this but definitely some insights worth sharing.  On September 30th, I had the privilege of hearing Alex Counts, President & CEO of the Grameen Foundation, speak at a Schwab Charitable Philanthropy Speaker Series presented by The Center for Non-Profit and Public Leadership.

 

Grameen Foundation’s mission is to take the thrilling progress of the Grameen Bank in Bangladesh and spread and support these models worldwide to support persons of a “much more modest level of affluence.”  (interesting way to put it…).

 

Clearly the wall between the terms charity and business have all but been smashed, particularly as a result of the rapid dominance of microfinance as a poverty alleviation tool (and financially profitable asset class).  But there are still a number of common arguments about the MFI model that Alex attempted to address.

 

  1. “Not everyone is an entrepreneur.” – No, they aren’t — but everyone is a survivor.  According to Counts, micro-finance is not just a tool for aspiring entrepreneurs but more broadly for anyone striving for upward trajectory, whether it be to build a scalable enterprise, or to simply improve their own means of subsistence and quality of life for their families. 
  2. “Bangladesh is still an impoverished nation.” – True, in a macro sense, but poverty rates HAVE been declining and the country’s GDP has been growing at 6%. There aren’t many other countries that have accomplished this level of growth.  Counts attributes this to two factors: 1) Low-cost manufacturing labor; 2) Microfinance
  3.  “MFIs have been experiencing mission drift“- moving from working for the poor to working for investors and IPOs” – Compartamos Banco’s $400M IPO of 2007 was indeed a controversial event for the industry, but other banks have been learning from its shortcomings.  Future IPOs (most likely in India) may explore a profit sharing model with their beneficiaries and members as well as their investors.  Also there are many benefits to thinking like a for-profit organization.  For example,  investment in IT infrastructure and back office applications have not only been making operations more cost-efficient, but also far more accessible for the hard-to-reach last-mile clients.

hatAlex also spoke confidently that microfinance as an industry has not yet reached its logical conclusion, that even after 20-30 years, there is a still a tremendous amount of work to be done to continue to improve the breadth and effectiveness of this space.  “Half of what we know about Microfinance is wrong… but we don’t know which half.”

  1. Costs still need to come down — interests rates are still high, and exchange rates result in loss of capital in international transfers.  Efficiencies and IT (and expert banking knowledge) are necessary to continue to improve the cost to clients.
  2. Technology solutions have not been fully leveraged – there exists a huge opportunity to integrate all kinds of innovative ICT technologies to strengthen microfinance channels.
  3. Performance measurement –– it’s time to move past process metrics to capture MFI’s true impact on the livelihoods of people and communities.
  4. Expanding to failed states — contrary to popular belief, microfinance actually thrives in countries of civil unrest, where political leaders are too pre-occupied to ay attention to MFI activities. It can also be hugely empowering in these nations.
  5. Leveraging MFI channels to add additional value beyond micro-loans — find ways to provide products and services to MFI clients including education, healthcare, political empowerment, etc.  There is no other distribution channel like it in the world (except maybe Coca-cola and Wal-mart).

 

And don’t forget, we’re offering a Microfinance speaker series in Fall B!  So, what are you waiting for?  

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