Beyond Business: Rethinking Microfinance
Banking can do more good for the poor than only helping entrepreneurs.
BY TIMOTHY OGDEN, JONATHAN MORDUCH | MARCH 28, 2013
In just 30 years, the microfinance movement has reached 200 million
people who had been deemed "unbankable." That's a stunning success. But
the narrative that drove this success has implicitly shut the vast
majority of the unbanked out of the system. That's why it's time to
change the story, and our minds, on how microfinance works.
The rise of the microfinance industry has been driven by a simple
narrative, most closely associated with Muhammad Yunus and the Grameen
Bank, joint recipients of the Nobel Peace Prize in 2006: Get capital
into the hands of competent but cash-starved entrepreneurs, who would
need loans of just a few hundred dollars to start shops and other
micro-enterprises. While this sort of lending is more complicated than
that, microfinance has certainly worked in the sense that most loans in
most countries are repaid on time, most lenders have steadily grown, and
most investors have been happy with the results.
By keeping the focus on small businesses, this microfinance narrative
keeps us in our comfort zone. We can intuit how small loans can make a
big difference for tiny enterprises that would otherwise depend on local
loan sharks or never start in the first place. More important, we can
imagine how such loans could be repaid with interest, yet still benefit
the poor. The problem is, by clinging to this concept, we have kept
ourselves from seeing what a more inclusive approach could mean for the
world's poor -- and what it is that actually makes the micro-loan model
work reasonably well today.
Consider Selco, an Indian company that sells solar-powered lighting to
people unable to connect to the grid, or for whom power outages are way
too common. The aim of Harish Hande, the engineer who founded Selco,,
was to give households an alternative to expensive, non-renewable power
sources.
Customers liked the Selco lanterns, but many balked at the price --
about $140 for the cheapest system. Hande saw that customers would only
be interested if they could make payments over time. So Selco built
partnerships with banks, and customers can now acquire lanterns and
solar panels by taking out loans payable in installments over 3-5 years.
Since 1995, about 150,000 customers have received such financing to
purchase solar-powered systems. As a result, their children can do their
homework at night, the air in their houses is cleaner, and their
businesses (if they have them) can stay open later.
A similar story can be told about WaterCredit, a non-profit organization
dedicated to financing improvements in household sanitation. To date,
WaterCredit has made 65,000+ loans that have brought access to clean
water and safe sanitation to close to 400,000 people in India,
Bangladesh, Kenya, and Uganda. The loans fund household water and
sewerage connections, toilets and pit latrines, tubewells, and rainwater
harvesting tanks.
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CARLOS ANI - Consultant
Chairman of the Board - SEEDFINANCE Corporation
Mailing address: PO Box 90 UPLB Los Banos Laguna, Philippines 4031
Emails: carlosani@gmail.com , carlosani@seedfinance.net
Landline Phone: +63495010127 (PLDT)
Cellphone Numbers: +63908-1737072 (Smart)
My Websites:
CARLOSANI.COM - http://www.carlosani.com
SEEDFINANCE Corporation - http://www.seedfinance.net
DEVJOBS - http://www.devjobsmail.com
PHILDEVFINANCE - http://phildevfinance.posterous.com
http://phildevfinance.blogspot.com
Family website - http://www.anifamily.net
Skype name: carlosaniph
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