To Profit or Not to Profit

According to Mr Chu, “to roll back poverty rather than to merely alleviate it”, any solution needs to be able to reach massive numbers, deliver permanent results that can help many generations, provide continuous effort so it gets better and better at what it does, and provide continuous efficiency so it also becomes cheaper and cheaper. Mr Chu believes the only state that can offer all these four requirements is business.

From a review of a debate between the father of microfinance Mohammad Yunus and Michael Chu, former President and CEO of ACCION. Given that today’s Blog Action Day is focused on poverty, it seemed fitting to highlight this issue. 

Can we truly reach microfinance’s potential without the efficiency and scalability gains that business and for-profit models provide? Is profiting off of the poor unethical, and as Yunus argues, should we only be looking to sustain the model at the lowest possible point of surplus?

You can read the rest of the recount by Amy Rennison here at Microcapital.org.

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Access to Safe Drinking Water, the Sustainable Way

PepsiCo Foundation has awarded two grants, totaling $76 million, to sustainable water and sanitation efforts by WaterPartners and Safe Water Network. The PR release describes each program. WaterPartners will use the award to implement their WaterCredit program:

The WaterCredit program in India has two main components: first, to provide traditional grant funding directly to local non-government organizations to install pipes, faucets and storage cellars in impoverished communities, reaching some 60, 000 people. The second component is to establish a loan fund that will empower communities to expand access to safe water for an additional 60, 000 people over the course of the three-year project. This model produces a “multiplier effect” for impact based on a single source of funding and is the first time PepsiCo Foundation has applied micro finance as a strategic vehicle to advance water and sanitation improvements.

The idea of building community-based water supply projects through a combination of grants and loans is new to the water sector. Until now, nearly all water projects facilitated by other organizations have been funded entirely by grants, even when the individuals served by the project have the means to share costs.

Bridging microfinance and water is a topic that NextBillion.net covered earlier this year, so this is a connection that is working well in some regions and with the support of different organizations, such as ACCESS Development Services and Hindustan Unilever Limited. The vision behind this is that communities may not be able to afford methods that purify water and make it safe for drinking, but using microfinance models allows them to collectively take a loan and repay until they eventually purchase the system. Continue reading

Just in case you didn’t believe me

The global credit crunch has led to a significant drop in fund flow to the microfinance sector. Banks, which are required to provide 32-40 percent of their loans to the priority sector (which includes rural credit), are the largest providers of funds to MFIs.

They lend to microfinanciers, who then on lend to the poor at a higher rate. But with banks’ lending rates rising more than 200 basis points over the last quarter, microfinanciers are finding it tough to get enough funds to sustain business.

This is an excerpt from an article on Microcapital.org.

Job Opportunities with the Centre for Microfinance

The Centre for Microfinance, an organization that focuses on research, training, and strategy for MFIs, posted about exciting new job opportunities:

The Centre for Micro Finance (CMF) has recently posted several new job openings, and we thought that some of this blog’s readers may be interested. New positions include:
• Programme Head – Analytics Unit
• Regional Field Director – West Zone
• Visual Basic Programmer

To learn more, check out the job openings section of CMF’s website, linked here. If you have any questions, please reach out to us at cmfhr@ifmr.ac.in.

Job Opportunity with BRAC Development Institute

Please contact ajaita.shah[at]gmail.com if you are interested in applying for the following:

BRAC Development Institute, BRAC University, Bangladesh

Seeking Young Professionals

for a Challenging Career in International Development

BRAC Development Institute (BDI) is looking for bright, young professionals, interested in an exciting career in development and research.  Selected applicants will be part of a core team that will coordinate different research activities and help build up the Institute. The team will be based in Dhaka and have access to the different activities of BRAC and a wide range of other development organizations.  

The recently created BRAC Development Institute seeks to promote research and build knowledge on practical solutions to problems of the poor in the global South.  It is anchored in the basic ethos of BRAC – developing solutions to the challenges of poverty, inequity, exclusion and social injustice. BDI is a space for academics and practitioners in the South (or working in the South) to come together to raise critical questions on development. It will build knowledge around exciting initiatives in the South, focus on developing new ideas and new strategies, pilot test such ideas and provide important lessons on good practices for practitioners, policy makers and funders. Continue reading

Loans that can save Lives

Indians have a much higher pre-disposition for heart disease, and are genetically three times more vulnerable to a heart attack as compared to people living in many Western nations. While cardiovascular medicine has made great strides in the last few decades, heart surgery continues to be a costly affair for most of the poor in India.

On the other hand, the Bangalore based Narayana Hrudayalaya has been in the forefront of providing quality cardiovascular care for the poor – adopting a Aravind like model of charging the rich and subsidizing the poor. Now the hospital is experimenting with a new idea – collaborating with State Bank of India to offer loan product on a pilot basis for poor heart patients undergiong cardiac treatment [via Economic Times].

“The SBI Hrudaya Suraksha scheme is being launched as a pilot project to evaluate the concept of offering loan on easy interest terms for those below poverty line – earning less than $2 a day – who need urgent cardiac intervention,” SBI chairman and managing director OP Bhat said on the occasion.

Narayana Hrudayalaya founder Devi Shetty said the loan amount (Rs.50,000) would meet about 80 per cent of the total cost (Rs.65,000) for a heart surgery of poor cardiac patients to be identified and subsidised by the hospital. The average cost of a heart surgery at Shetty’s health cities is about Rs.100,000

Interestingly, the loan product was launched by Nobel Laureate Mohammad Yunus during his recent visit to Bangalore.

Microfinance and Food Rations

In the latest edition of Pragati, the Indian National Interest Review, Ankit Rawal proposes a new approach to the public distribution of food and the use of microfinance institutions. Since the Public Distribution System (PDS) in India has its share of flaws and is not always able to meet the needs of the poorer families, bringing in MFIs or NGOs may be a useful supplement to the solution.

One of the issues arising in the PDS pipeline is that poor households often have irregular cash flows. This irregularity is one of the reasons that microfinance works so well – loans help smooth consumption. With irregular cash flows, a household may or may not be able to purchase goods when a shop has them in stock.

This is where NGOs already engaged in microfinance can plug the gap. They can provide funds to the poor families to buy their allocated rations from the fair price shops.

Such a project would involve identifying poor households from their existing client list. They would then be required to identify the fair price shops in the area from which they procure their rations. Loans would be distributed to the selected list of families. One way of disbursing these funds is by introducing a “credit card”. Households could buy their rations from the fair price shop on credit while the NGO pays the amount directly to the shop using this card. This loan will then be returned by these poor households—in daily, weekly or monthly instalments—over the period of the month from their income. If the NGO charges interest to cover transaction costs, the households are likely to enjoy substantial savings.

The proposal is an interesting one, but the question arises as to whether this solution is just another stop gap and whether solutions should focus more on improving the leaks in the PDS pipeline rather than coming up with a whole other system. India has already tried to implement a better targeted PDS system, with few successes. Is the solution introducing MFIs and NGOs into the mix, or do we need to take a closer look at the implementation of the delivery networks?