Round 2 with CGAP’s Gautam Ivatury

The ThinkChange India staff is committed to providing our readers with interviews with people we believe are at the brink of something special but have for the most part been overlooked by the mainstream media. Readers will be able to see other conversations under our TC-I Changemakers tag.

This week, Vinay sat down (over the phone) with Gautam Ivatury of the global microfinance center CGAP, which works to expand poor people’s access to financial services. Such services include but are not limited to microcredit and branchless banking. This interview is a follow up to one conducted on May 4, 2008, which you can read here.

Vinay Ganti: Could you please review yourself on the following topics, which we discussed in our last conversation?

  • Reaching beyond MFIs:

Gautam Ivatury: This still continues to be a major focus of CGAP’s mission. Across all of CGAP’s work we continue to look for ways to partner with a range of institutions and providers, including but not limited to MFIs, to be able to massively expand financial services for poor people.

GI: With regard to branchless banking, we set out to accomplish a number of goals. Overall we have been happy with the results of CGAP’s work in this area over the last six months, despite the fact that it has taken longer than expected for our project partners (in countries like Pakistan, Kenya, Mongolia, South Africa and elsewhere) to roll-out the branchless banking channels we helped design and finance.

Since our last talk, CGAP has expanded its policy and regulatory diagnostic work in branchless banking. New markets analyzed have included Colombia, Argentina and Indonesia, and we’ve continued to maintain close dialogue with the Reserve Bank of India and regulators elsewhere.

Also, the actual awareness of mobile banking in the field, i.e. what is and how it can work, has increased dramatically in the past. Last May we co-organized the first major annual event on “Mobile Money” for the unbanked in Cairo with the GSM Association (the industry body for the world’s 700+ mobile operators), IFC and DFID. That event got more than 500 paid attendees, most from private industry. And this week at the GSM World Congress in Barcelona, GSMA and other private sector players will announce additional activities in the space. DFID announced its new FAST program to encourage branchless banking this week. Initiatives like these are critical to get widespread adoption of the concept and to achieve scale. Moreover, major consulting and research outfits like Aite, Monitor and McKinsey have started research and published reports on the topic.

At the same time, our seven branchless banking projects have been slower to launch than we all expected two years ago. There have been some notable achievements — our Philippines partner has entered three new rural provinces and signed up about 80,000 new mobile banking clients, and Telenor bought 51 percent of Tameer Bank (our partner in Pakistan) to jumpstart its mobile banking initiatives. But in general the implementation of mobile / branchless banking has been slower than anticipated.

VG: Why do you think this is? Continue reading

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[TC-I Call to Action]: New Ventures India Business Proposals

Anil G of  New Ventures India informs us that New Ventures is inviting clean tech companies to submit their business proposals for a chance to receive mentorship, assistance, and connections with capital and market opportunities to scale up.  Click here for further details about the call for proposals, including eligibility requirements and contact information.  Proposals are due by April 30, 2009.  This is a great opportunity for clean tech and clean energy SMEs in India.

About New Ventures India:

New Ventures India works for sustainable entrepreneurship and is specially designed to meet the needs of Indian entrepreneurs and help them overcome common business challenges to deliver environmental and social benefits in addition to economic development and growth opportunity.

India’s First Social Enterprise and Investment Forum: Sankalp 2009

Shital had written in last November about Sankalp 2009, a business plan competiton for Medium, Small and Micro Enterprises (MSMEs) organized by India Development Gateway, in partnership with Rural Innovations Network (RIN) and National Bank of Agriculture and Rural Development (NABARD).

Turns out the business plan competition has now developed into India’s first ever Social Enterprise and Investment Forum, with additional support from the Rockefeller Foundation. Continue reading

UFV-CRRID partnership promises grassroot-level business development

Indian Express and Abbynews.com report that University of the Fraser Valley (UFV), Canada and The Centre for Research in Rural and Industrial Development (CRRID) have signed a memorandum of understanding (MoU) to “empower the rural entrepreneurs of North India.”

“India needs entrepreneurs at the grass roots level, and our partnership with CRRID allows us to fuel business start-ups and the development of SMEs outside the city centres, in the areas that need it most,” said Professor DJ Sandhu, UFV President’s Advisor.

A quick look at the university’s website to find out what the nature reveals some of the ways means of intervention this partnership will possibly employ.

…for example, students enrolled in UFV’s BBA degree at SDCC will be able to work with research faculty at  CRRID to implement projects aimed at uplifting businesses involved in such industries as agriculture and agrifoods.

In a way this partnership is similar to Tata International Social Entrepreneurship Scheme (TISES), a partnership between TATA sons, UC Berkely and Cambridge University. Continue reading

Back to the drawing board? — A harsh look at microfinance

To start, I want to say that my mind has been racing despite sleep deprivation and jet lag since I touched down in Mumbai at 0135 IST this morning. This is the first I have set foot in India since 2005 and thus my first visit since the inception of TC-I, which makes the experience all the more exhilarating. But on to the post …

In the past, I have criticized microfinance’s shortcomings, particularly with regard to its inability to actually stimulate significant job creation. However, I also have recognized that despite its downfalls, microfinance still serves as a useful tool in the arsenal of a poverty alleviation strategy.

Now, microfinance has come under more scrutiny, as opponents argue that this financial product actually hurts the interests of the poor and that it can lead to the romanticization of the bottom of the pyramid, creating dangerous consequences. These new arguments further support my point that microfinance is relative to other approaches not an effective tool in combating poverty.

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Partnership to nurture SME entrepreneurs

In what could be a significant boost to the Rural BPO industry in the Indian state of Tamil Nadu, Cisco Systems is partnering with the Small Industries Development Bank of India (SIDBI) and Tiruchirappalli Regional Engineering College – Science and Technology Entrepreneurs Park (TREC-STEP) to nurture and support ICT entrepreneurs in the country [via Economic Times]:

In the three-way partnership, SIDBI will provide financial support, Cisco would aid in technology and the incubator TREC-STEP would help in mentoring. The partnership is targeted at the micro, small and medium enterprises segment. It has been rolled out on a pilot basis in India.

TREC-STEP is an award winning small-business incubator local in the south Indian city of Trichy. Since its establishment in 1986, it has excelled in promoting technology entrepreneurship in the region. Given the broadening focus on small and medium enterprises (SMEs), it would be worthwhile to consider setting up well-functioning business incubators in every district in India.

(IFMR) Trust Me

Editor’s note: In addition to being informative, this post also outlines what IFMR Trust is looking for in potential hires. If you would like to see that immediately, go after the jump.

Before Thanksgiving break I had the pleasure of sitting down at an informal roundtable with Dave Wallack, Senior Vice President of People to learn more about IFMR Trust‘s ambitious plans to provide financial inclusion to every person in India. Chaired by Dr Nachiket Mor, who is also the President of the ICICI Foundation for Inclusive Growth, the Trust’s mission is to “ensure that every individual and every enterprise has complete access to financial services.” In order to accomplish this goal, the Trust is looking at a rather unconventional business model that where the non-profit parent oversees multiple self-sufficient for-profit silos in various financial sectors.

The three ventures that the Trust has currently launched are the IFMR Trust Holding Company (ITHC), the IFMR Trust Advisory Services (ITAS) and the IFMR Trust Guarantee Company (ITGC). Each venture has a specific and distinct goal. The ITHC aims to build a network of Kshetriya Gramin Financial Services (KGFS) that will serve as low-cost, paperless branches providing access to financial products. According to Wallack, the goal is to have one of these branches for every 10,000 people or 2,000 households. Wallack emphasized the feasibility of such scale is due to the incredibly low-cost structure of each branch. By being completely paperless, transaction costs is on the scale of 20-30 rupees as opposed to $20 dollars. Wallack self-titled the initiative as the Starbucks of microfinance, as they are able to provide loans at only 11.5%, far less than the typical 20-30% charged by traditional MFIs.

The ITAS’ charge recognizes that microfinance is merely a stopgap or defensive measure and that more aggressive financial services will be needed to enable true inclusion. In order to do this, the ITAS has structured as essential a private equity firm and with the aim of raising $150 US. Utilizing this capital, ITAS will look at 14 different supply chains that reach the rural population and figure out ways of improving and fixing them through investments in operating companies along the product cycle. These investment strategies, organized as Network Enterprises, will operate in a for-profit fashion with the belief that the quest for profits will seek out the most efficient and effective ways to address the supply chain breakdowns.

One example is the current gap that exists between urban labor demand and rural supply. After some preliminary research, ITAS discovered that the major hurdle was that rurual workers could not afford to live anywhere in the city for their first 2 weeks, because they had yet to been paid. In order to resolve this ITAS partnered with a local temporary housing and staffing company in order to provide that stopgap housing for these workers.

Finally, the ITGC will focus on providing much needed debt capital to small and medium size enterprises throughout India to truly enable them to grow. Here, the organization is partnering with many existing financial providers to roll out their offerings more aggressively.

Continue reading