Microfinance and Wall Street

Is microfinance compatible with large scale investing houses like Wall Street banks? A conversation with Susan Davis of BRAC and Rod Dubitsky of Credit Suisse discussed this question in a recent article in Forbes Magazine. The article highlighted two fundamental differences between an MFI and a commerical bank

Two key distinctions between MFIs and other commercial banks are: 1) MFIs generally lend to their clients for income generating purposes (so-called working capital loans), while commercial lenders typically lend to individuals who have collateral, or for consumption purposes; and 2) MFIs focus on those at the bottom of the economic pyramid, whereas traditional commercial lenders typically serve those far above the poverty line.

The article continues to discuss other differences between the two forms of lending, and also highlghted the potential pitfalls of positioning MFIs as profit maximizers, but balanced this concern with the need for MFIs for capital infusions in order to continue serving larger pools of clients.

As MFIs reach deeper into the for-profit capital pool, more and more of their investors will seek to maximize profits, potentially at the expense of the MFIs’ social mission. The challenge then for MFIs will be whether they are willing to make this sacrifice. Will those MFIs that reject the capital markets be able to satisfy the growing needs of their clients?

[Source: Microcapital.org]

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Forbes Magazine: Dearth of innovative SMEs not from lack of $, but lack of trained entrepreneurs

Studies have estimated that over $1 billion in possible venture capital financing has been infused into India in 2007. Instead of spurring a wave of innovative startups, however, this influx in capital has remained just that — surplus of capital. Unlike Africa or parts of Eastern Europe, the lack of wide scale SMEs in India is not due to a lack of startup funds. And given the number of qualified IIT and other engineering graduates that are pumped out of the education system annually, they are not the limiting reagent either. So what gives?

According to Sramana Mitra, India’s current engineers and management professionals are ill-exposed to areas beyond back office tasks and so do not have a refined understanding on how to place and market technology products in the market.

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In the Company of the World’s Top 20 Billionaires

Forbes published its annual report on the world’s billionaires this month, and as many of you may already know, 4 of the top 20 billionaires hail from India. Yes, Mittal (#3) and the Ambanis (#4 and #5) are on the list, but so is a newcomer – K.P. Singh (#8), a real estate baron. Overall, 70% of newcomers on the list are from India, China, or Russia. Does this indicate rapid wealth accumulation for the relatively few, or a much broader, sweeping trend for the country? You decide.

For the complete Forbes Billionaire list go here.

Great Story: The Smartest Unknown Indian Entrepreneur

This story is inspiring on two levels: 1) that contextually specific hiring practices that are counter the norm are not only possible but scalable and efficient and 2) that caring in know way hinders the ability for this company to be a competitive and viable business.

Originally published in Forbes, ThinkChange India picked up the article from The Indian Economy Blog:

In an interesting article on Forbes titled ‘The Smartest Unknown Indian Entrepreneur’ , Sramana Mitra profiles Sridhar Vembu, the founder and CEO of an Indian firm called AdventNet. The firm today, is a ‘100%, bootstrapped, $40-millio[n]-a-year revenue business that sends $ 1 million to the bank every month in profits’.

But beyond the mere profits of the company, it is its hiring practices that deserve the greatest praise.

“We hire young professionals whom others disregard,” Vembu says. “We don’t look at colleges, degrees or grades. Not everyone in India comes from a socio-economic background to get the opportunity to go to a top-ranking engineering school, but many are really smart regardless.

“We even go to poor high schools, and hire those kids who are bright but are not going to college due to pressure to start making money right away,” Vembu continues. “They need to support their families. We train them, and in nine months, they produce at the level of college grads. Their resumes are not as marketable, but I tell you, these kids can code just as well as the rest. Often, better.”