Archive for the ‘Social Business’ Category

Two Steps Backward for Innovation to End Poverty

May 5, 2011

A guest post from Sam Daley-Harris, Founder of the Microcredit Summit Campaign, which seeks to reach 175 million poorest families with micro-loans, and of RESULTS, which seeks to create the political will to end poverty.

The deed is done.  On May 5th, the appellate division of the Bangladesh Supreme Court agreed that the Bangladesh Bank, the nation’s central bank, was justified in firing Nobel Peace Prize Laureate Muhammad Yunus from his post as Managing Director of Grameen Bank, the institution he founded more than three decades ago.  Prof. Yunus’s lead lawyer, Dr. Kamal Hossain, one of Bangladesh’s most distinguished attorneys and a drafter of the nation’s constitution, was scarcely able to hide his disgust at the Appellate Division order, when he said, “I [apparently] have to take admission to university again to newly learn the constitutional laws of the 21st century.”

The dismissal is not the lone action of one government institution, but is part of a premeditated campaign that starts at the highest level, with Prime Minister Sheikh Hasina.  Their reason for sacking Prof. Yunus?  He’s “too old.”  Never mind that the 70-year-old Yunus maintains a rigorous schedule or that the Finance Minister, another key player in the sacking, is at 77 somehow not “too old” for that post.

The dismissal of Prof. Yunus from his post as Managing Director of Grameen Bank could portend ominous changes by the Bangladesh government.

The dismissal of Prof. Yunus from his post as Managing Director of Grameen Bank could portend ominous changes by the Bangladesh government.

Their excuse would be laughable if it were not for the calamitous impact it portends.  What makes the decision to remove Prof. Yunus so disgraceful is not that he would be out of a job – any university in the world would welcome him with open arms as a visiting professor.  No, the atrocity here is the fact that the independence and integrity of one of the world’s premier poverty-fighting institutions is now at grave risk.  Grameen Bank, an extraordinary institution with more than 8 million microcredit borrowers that took 35 years to build, could be destroyed in a matter of months by incompetent government action.

The government’s action cannot honestly be in response to accusations by a Danish documentary maker about an improper transfer of Norwegian aid funds more than a dozen years ago, because both the Norwegian government and Bangladesh’s own review committee have found that Grameen Bank did nothing wrong.  It cannot be due to the documentary maker’s charge of excessive interest rates, because Microfinance Transparency and the government’s own review committee found that Grameen Bank has the lowest interest rates in the country.  Instead, most observers see this as an inexcusable political vendetta by the Prime Minister against Prof. Yunus, stemming from his short-lived attempt to start a political party in 2007.

Consider these groundbreaking innovations that Prof. Yunus’ poverty-fighting laboratory has brought to the world, and what could be lost in the future from his unwarranted ouster:

  • In 1976 he made loans of less than US$1 each to 42 desperately poor Bangladeshis to start or build tiny businesses – and the microcredit revolution was born.  It has made its way all around the world.  While others have seen microfinance as a way to make big money for investors, Prof. Yunus has never once diverted from his original intent to empower the poor.
  • In 1997 Grameen Phone Ladies started bringing cell phone technology to remote villagers throughout Bangladesh – providing the dual benefit of creating jobs and increasing communications, which enhanced others’ work.
  • Grameen Shakti, an energy firm, has installed more than a half-million solar home systems and sold more than a quarter-million improved cooking stoves.
  • In a joint venture with Danone, the yogurt maker headquartered in France, Grameen Danone is bringing low-cost fortified yogurt to malnourished children throughout the country – and creating a business opportunity for the poor women who sell it.
  • College scholarships and loans have gone to 180,000 students. Most remarkably, in almost all of the cases, these are the children of illiterate parents who have had the help of Grameen Bank in breaking the bonds of inter-generational illiteracy.

A government that so rashly and ruthlessly ousts this innovative and transformational leader cannot likely be trusted to continue his revolutionary work.

But the deed is done.  Here is a sample of the visionary voice that Bangladesh has likely lost in this despicable government act.  Reflecting on the 1997 Microcredit Summit, Prof. Yunus wrote: “In teaching economics I learned about money, and now as head of a bank I lend money.  The success of our venture lies in how many crumpled bank bills our once starving members now have in their hands. But the microcredit movement, which is built around, and for, and with money, ironically, is at its heart, at its deepest root not about money at all.  It is about helping each person to achieve his or her fullest potential.  It is not about cash capital, it is about human capital.  Money is merely a tool that unlocks human dreams and helps even the poorest and most unfortunate people on this planet achieve dignity, respect, and meaning in their lives.”

Bankers without Borders Now Serving U.S. Microenterprises

May 2, 2011

Shannon Maynard is the Director of Bankers without Borders, Grameen Foundation’s skills-based volunteer program.

Today, Bankers without Borders (BwB) has joined with the Association for Enterprise Opportunity (AEO) to announce a new collaboration to support microfinance and microenterprise development organizations in the United States.  This alliance will enable more than 400 organizations to benefit from the skills and experience of our more than 6,300 highly skilled active and retired business professionals in BwB’s global volunteer reserve corps.

We are currently recruiting for our first project to support AEO and its members.  BwB is seeking a team of volunteers to refine and develop a toolkit that will enable microfinance and microenterprise organizations to better meet the needs of their existing clients and reach individuals presently not served.  For more details or to apply, please visit the Bankers without Borders website.

Once the toolkit is developed and piloted, we anticipate opportunities for other volunteers to work with microenterprise organizations to conduct a market assessment using the framework designed through this first volunteer project.

AEO's new report talks about the job-creating power of microenterprises.

AEO's new report talks about the job-creating power of microenterprises.

In conjunction with today’s announcement, AEO released a report on the state of the microenterprise sector in the United States.  The report, “The Power of One in Three,” frames the powerful role that the microenterprise sector can play in helping the American economy recover and create jobs. As suggested by the study’s title, the findings demonstrate that if one in three microenterprises hired just one employee, the U.S. economy could reach full employment. For more information on AEO, please visit www.aeoworks.org.

We believe BwB’s volunteers are some of the best and brightest minds in the corporate sector. For those of you who are U.S. residents, this partnership presents a unique opportunity to help make a difference, both locally and globally.  Stay tuned as we keep you informed of opportunities to engage through this new alliance.

No Single Solution When It Comes to Research

April 4, 2011

Alex Counts is President, CEO and founder of Grameen Foundation.

In addition to our commitment to excellence in social-performance management by microfinance institutions, exemplified by our championing of the Progress out of Poverty Index™, Grameen Foundation has long been committed to promoting a fuller understanding of research into the effectiveness of microfinance as a poverty-reduction strategy. We have published two reports, one by Professor Kathleen Odell of Dominican University in 2010 and an earlier one by Nathanael Goldberg (who is now with Innovations for Poverty Action), that attempted to summarize in simple terms what the evidence could tell us. (Though Grameen Foundation commissioned both reports, we exerted no editorial control over what either Odell or Goldberg wrote.) Both reports were well-received by practitioners, researchers, investors and policymakers alike.  David Roodman, a leading blogger in the microfinance industry, wrote that Prof. Odell did “a fantastic job” with her report, adding, “I applaud the Grameen Foundation for giving her such autonomy. The report reviews a good set of relevant studies. With concision and clarity, yet without jargon, it explains the pros and cons of various research methods, and the limitations of them all. And it draws balanced judgments. It is a model of public communication about social science research.”

"Measuring the Impact of Microfinance: Taking Another Look" is the latest report published by Grameen Foundation that examines the studies of the effectiveness of microfinance as a tool to alleviate poverty.

"Measuring the Impact of Microfinance: Taking Another Look" is the latest report published by Grameen Foundation that examines the studies of the effectiveness of microfinance as a tool to alleviate poverty.

One of the most confusing and contentious issues covered in both reports is the controversy regarding the well-known Pitt/Khandker studies on the impact of three major microfinance institutions in Bangladesh, including Grameen Bank. In general, their research found many positive, statistically significant impacts on clients when measured against  comparison groups. Despite being one of the few microfinance impact-assessment research studies that has undergone a rigorous peer-review process prior to its publication in an academic journal (the Journal of Political Economy), it has been criticized as being flawed and unreplicable by other researchers using the same data. These criticisms have been leveled by NYU Professor Jonathan Morduch (a respected researcher) and Roodman (microfinance’s most widely read and respected blogger). Though I lack a deep understanding of econometrics (on which the Pitt/Khandker study relies), I have probed into this debate, as Odell and Goldberg did in their papers. Interestingly, I was alerted last year that an article that was supposed to conclusively prove that the Pitt/Khandker study was wrong was itself rejected from a peer-reviewed journal. It may still be published, though.

Most recently, Professor Pitt has published a detailed response to the criticisms of his original research with Khandker. He claims that Morduch and Roodman made errors of their own in their analysis of his data, and when those errors are corrected, the original findings stand up. The paper’s abstract states, “This response to Roodman and Mordoch seeks to correct the substantial damage that their claims have caused to the reputation of microfinance as a means of alleviating poverty by providing a detailed explanation of why their replication of Pitt and Khandker (1998) is incorrect. Using the dataset constructed by Pitt and Khandker, as well as the data set Roodman and Morduch constructed themselves, the Pitt and Khandker results standup extremely well, indeed are strengthened … after correcting for Morduch and Roodman errors.” Roodman has just published a preliminary response on his blog.

What are the main takeaways at this point?  First, in the world of social-science research, things are not always as they appear. Individual studies should be taken with a grain of salt, as all have their strengths and limitations. More than ever, I think the safest course is to reflect on more than two decades of research using experimental, quasi-experimental and non-experimental designs, as well as personal observations (for those of us who have spent time with microfinance clients) and qualitative research, such as that found in Portfolios of the Poor, a terrific book co-authored by Professor Morduch, and my book, Small Loans, Big Dreams.  Objective efforts to demystify research findings, such as the Odell and Goldberg reports and another solid treatment by Freedom From Hunger President Chris Dunford, should be reviewed by microfinance practitioners, investors and volunteers.

Finally, there is no “gold standard” in research, but rather a growing body of evidence that microfinance is an incomplete but improving strategy to address global poverty – one that can be made more effective by refining it based on available research, as well as by having regular feedback loops involving social-performance data that Grameen Foundation will continue to ensure becomes a part of our industry’s DNA.

How You Can Help Support Prof. Yunus

March 23, 2011

Todd Bernhardt is Director of Marketing and Communications for Grameen Foundation.

As readers of this blog may know, several weeks ago the Bank of Bangladesh (BoB) informed microfinance pioneer Professor Muhammad Yunus, winner of the 2006 Nobel Peace Prize, that he was dismissed from his post as Managing Director of Grameen Bank, which he founded in 1983. It claimed that he was serving illegally in his position because it had never formally approved his appointment when the 12-person Grameen Bank Board of Directors – which has three government-appointed directors on it, including the chairman – voted unanimously in 1999 to exempt Prof. Yunus from the mandatory retirement age of 60.

In fact, the BoB had asked the Grameen Bank Board in 1999 for an explanation of Prof. Yunus’s appointment. The GB Board promptly replied, and the subject was never brought up by the Bangladesh Bank again – including during its annual audits of Grameen Bank in the ensuing years. Why then, has it only now brought up the age of Prof. Yunus as an issue, after more than 11 years of silence about it?

The answer is becoming increasingly clear. The government’s latest moves are not just about Prof. Yunus and his age. Yes, he’s been a victim of partisan politics, in which the players involved seem to be trying to destroy his reputation because they see him as a political rival, but there are also signs that the ruling party is trying to gain control of Grameen Bank to use it as a tool to attain their political goals. Grameen Foundation and others strongly believe that an attack against the independence of Grameen Bank has far-reaching, negative implications for microfinance around the world.

Prof. Muhammad Yunus has devoted his life to fighting poverty and empowering women in his native Bangladesh. The current government has repaid him by unfairly dismissing him from his post, an effort he and Grameen Bank are fighting in the courts. Will you help us defend his reputation?

Prof. Muhammad Yunus has devoted his life to fighting poverty and empowering women in his native Bangladesh. The current government has repaid him by unfairly dismissing him from his post, an effort he and Grameen Bank are fighting in the courts. Will you help us defend his reputation?

The government actions have prompted considerable outrage inside and outside of Bangladesh. Diplomats, politicians, leaders of international-aid agencies, and business and thought leaders from around the world have made their opinions known – for example, there have been open letters by Sens. Kerry and Durbin, and from the Bangladesh Caucus in the House of Representatives, as well as very public efforts by Secretary of State Hillary Clinton on Prof. Yunus’s behalf – while many hundreds of thousands of supporters in his country have rallied in protest. Online efforts are also picking up steam – if you haven’t already, please visit and “like” the SupportYunus page on Facebook, and sign one (or more) of the petitions below:

Where Do We Stand Now?
Prof. Yunus and the nine directors on the Grameen Bank Board who represent the Bank’s 8.3 million borrower-owners have petitioned the Bangladesh court system to stop the government’s attempts to dismiss Prof. Yunus from his position. During this appeals process, Prof. Yunus continues to serve in his role as Managing Director, because the Bank’s lawyers and many other legal experts believe that the Bangladesh Bank letter and ruling have no legal basis, because (among other things) the bylaws of Grameen Bank give its Board full discretion over the appointment of its managing director, and because of the precedent set by the many years of the BoB’s audits from 1999 to now that did not mention Prof. Yunus’s age.

The case is now in front of the Bangladesh Supreme Court, which was originally due to hear the petitions March 15 but instead adjourned for two weeks. During this time period, the Grameen Bank staff has continued to cooperate with the government, working toward a solution that ensures the independence of the Bank and that enables Prof. Yunus to retire and set up a succession plan in a considered, orderly fashion. This is what will be best for the poor people of Bangladesh, which has always been the prime concern of Prof. Yunus.

How You Can Help
Grameen Foundation remains concerned that the time before Supreme Court rules will be used by the government to step up its attacks against Prof. Yunus and Grameen Bank – in fact, we’ve already seen indications of this, with members of the ruling party making very personal attacks on the Parliament floor against Prof. Yunus. Because of this, it’s more important than ever that supporters of Prof. Yunus make their views as public as possible.

How can you do this? Here are a few ideas:

  • As mentioned above, please “like” the SupportYunus page on Facebook and tell your friends and families to do the same.  When positive stories and links are posted on this or other Facebook pages, please share them with your friends and family.
  • Please sign the petitions mentioned above.
  • On Twitter, please express your support by posting thoughts, articles, encouragement to join the Facebook page above, etc.   Use the hashtags #SupportYunus, #Yunus, #Grameen, #Socent, #YY and, on Fridays, use the “follow Fridays” hashtag (#ff) to build support.
  • If you have a blog, please post about the situation, or use your keyboard in other ways – write to your local newspaper or media outlet, to the Bangladeshi embassy near you, to the U.S. administration or State Department, etc.  Several supporters in the U.S. have had good luck convincing their member of Congress to issue a statement of support, so please try that.  Of course, if you read articles or blogs about Prof. Yunus and Grameen Bank, please show your support by leaving positive comments.
  • Grameen Foundation is a founding member of an organization called Friends of Grameen, which now has a website containing good background information on what’s happened so far.
  • Finally, we encourage you and your friends to stay informed by signing up for the Grameen Foundation e-newsletter (the link is available on the right side of most pages on our website), on this blog, the Facebook page above, or other sites, including the Grameen Bank and Yunus Centre websites.

One More Way You Can Help
Before wrapping up, perhaps I should clarify the relationship between Grameen Foundation and Grameen Bank, which are completely separate entities. Grameen Foundation has no operations in Bangladesh, and supports no microfinance institutions there.  That said, one reason Grameen Foundation exists is to promote the values of responsible microfinance pioneered by Prof. Yunus and Grameen Bank – transparent, accountable, measurable efforts to empower the working poor, especially women, through small loans and other financial services – throughout the world.  We will continue in that mission, which is possible only because of the generous support of people like you, who care about human dignity and damage that poverty causes to individuals and families every day.  We hope we can count on you for your support.

As always, we will continue to keep you informed as events develop. And, as always, if you have any questions or concerns in the meantime, please let us know.  If you have ideas about how to support Prof. Yunus, please leave them in the comments section!

Prof. Yunus

AppLab’s Initial Social-Impact Measurement Efforts Pay Off

February 8, 2011

Eric Cantor has led Grameen Foundation’s AppLab efforts in Uganda for the past three years, and continues to serve as an advisor on the project.

Grameen Foundation takes outcome measurement seriously.  We want to make sure that our programs and services are effective, and that we can demonstrate their benefits before implementing programs or practices on a wider scale or urging others to replicate them.

With this in mind, we recently completed one of the first randomized control trials designed to assess the impact of a mobile phone-driven health service aimed at improving the lives of the poor.  The service we sought to measure was Health Tips, part of the Google SMS suite launched throughout Uganda in 2009 with our partners Google and MTN Uganda.  Our social impact partner Innovations for Poverty Action (IPA) performed the study.

Preliminary findings from the study are substantial, supporting some of our initial hypotheses and refuting others, and informing our approach to building pro-poor, mobile phone-driven solutions going forward. In short, findings indicated that when people learn of such services, they use them. People also seem to learn from this particular text-message query-based product.  But we also found that, because of the limitations of human motivation and barriers like language and literacy, we have a lot more work to do.

The Health Tips study was conducted in Uganda over an 18-month period. Before the launch of Google SMS in June 2009, IPA conducted a baseline survey of 1,800 people in 60 rural communities, assessing demographic profiles, attitudes, and knowledge and behavior regarding sexual and reproductive health, and collecting data from local clinics.  When we launched the service, we initiated a marketing campaign that randomly targeted half of those communities (the “treatment” areas) and did not reach the other half (the “control” areas).

A Mobile Midwife counselor talks with a client

Our studies have shown the value of "trusted intermediaries" -- such as the Mobile Midwife counselor in the photo above -- as a way to make mobile phone-based communications to the poor more effective.

Through randomization, IPA chose two sets of communities that were uniform in every relevant respect – except that one was exposed to the product through targeted marketing campaigns, while the other was not.  Nine months later, they began a follow-up survey of 2,400 people to detect changes.  They looked at data from surrounding clinics, conducted qualitative interviews and assessed the information provided to the communities. Because the targeted marketing in treatment villages was effective – we saw more than four times as much usage in the treatment areas as in the control – we were able to assess the effect of the service on attitudes, knowledge and behavior relating to sexual and reproductive health.
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Lessons Learned from AppLab’s First Three Years in Uganda

January 21, 2011

Eric Cantor has led Grameen Foundation’s AppLab efforts in Uganda for the past three years, and continues to serve as an advisor on the project.

More than three years ago, I landed in Uganda to establish Grameen Foundation’s “Application Laboratory” – a program conceived to explore the potential of mobile phones to improve the lives of the poor.  In our quest to test, develop and expand mobile services that are useful for the most often-ignored people on the planet, our team spent (and spends) extensive time talking to our users, in the places they work and live, to hear about the good and the bad of the methods we are testing to empower them.

We sit under the mango tree at the rural health clinic, hearing about how people learn to avoid and treat common and devastating diseases like malaria and HIV.  We walk the banana plantations of farmers in the West, trying to gauge how they can best control banana wilt, using locally available resources and techniques.  We observe the effects of the rapidly growing “mobile money” phenomenon – essentially digital currency delivered through a mobile phone network – and assess how it can improve the lives of villagers.  We see how people interact with the Internet and other unfamiliar services available through the few laptops and smartphones in a community.  And we listen to farming groups, led by Community Knowledge Workers (CKWs), as they plan and prepare to bulk their crops for sale to the highest-paying buyers.  As white winter washes over the US, and the rains wind down and planting season approaches in Uganda, we share some lessons learned through this work in the hopes that our growing body of work, as well as that of other practitioners in this field, will benefit.

In AppLab’s early work, we tested a number of information services, leading up to our launch, with MTN (one of the primary mobile phone services providers in east Africa) and Google, of Google SMS Tips, the product that won the award for “Best use of Mobile for Social and Economic Development” at the 2010 GSM Mobile World Congress.  It was rewarding to sit on a farm and hear how making organic pesticides using local chemicals or even waste products found on the farm helped save a farmer money, and increase her yields and incomes.

Community Knowledge Workers act as valuable local intermediaries, bridging the "last kilometer" to bring essential information to other rural farmers in Uganda. Here, a CKW uses her high-end mobile phone to check for information on banana wilt.

Community Knowledge Workers act as valuable local intermediaries, bridging the "last kilometer" to bring essential information to other rural farmers in Uganda. Here, a CKW uses her high-end mobile phone to check for information on banana wilt.

But what became quickly apparent was that information alone is not a complete solution.  A reference pointer or a tip about maternal health techniques may be useful to an expectant mother, but creating deep, impactful behavior change – what information-driven development initiatives seek – requires a context in which that information has a value. People certainly have a hunger for knowledge and a willingness to embrace the mobile phone to search for answers, as shown by all the questions they asked from the beginning about family planning, and HIV and other sexually transmitted infections, which affect them directly and for which few reliable, anonymous sources are available.  But we require several things to make this information actionable and impactful: specific information, a context in which to make it useful, and relevant services and resources.

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Engendering Our Work in Uganda

December 14, 2010

Jason Hahn is the Information and Communication Technology Innovation (ICTI) Development Manager at Grameen Foundation. The ICTI team develops, tests and advances mobile phone products and services in Uganda, Indonesia, and Ghana to improve healthcare, farming, banking, and more.

After we launched our Community Knowledge Worker (CKW) network in Uganda, I was reviewing a budget report and came across a “babysitting” entry. Thinking this must be an obvious mistake, I contacted our local finance person for an explanation. I discovered that we did pay for babysitting as some of the CKWs we were training were mothers who would not have been able to participate unless we paid for child care. It makes perfect sense now and is a good example of a practical step you can take to ensure that women and men access your programs.

Hosea Sempa from our training team holds a baby so the father (in picture) and mother (out of picture) can participate in the training.

At Grameen Foundation, we’ve learned first-hand the importance of doing what it takes to strive for gender equity in our work. Ensuring that women have equal access to the actionable agricultural information we provide through our CKW network is not just a “feel good” action for us. It is also one of the most practical steps we can take to achieve our goal of improving farmers’ livelihoods through access to information.

In Uganda, women do 85% of the planting, 85% of the weeding, 55% of the land preparation, and 98% of all food processing. This may explain why 90% of rural women in Uganda work in agriculture, compared to 53% of men. According to the Food and Agriculture Organization (FAO), women in rural areas produce at least 50% of the world’s food. While women are hard at work on farms, we also know that many women do not have access to mobile phones. According to the Women and Mobile Report by the GSMA and Cherie Blair Foundation, women are 24% less likely than men to own a mobile phone in sub-Saharan Africa, and women in rural areas and lower income brackets stand to benefit the most from closing the gender gap in mobile phone ownership.

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A Thanksgiving Discussion of the Best Microfinance Model

December 3, 2010

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

On Nov. 25, Thanksgiving Day in the U.S., I joined Vikram Akula, the founder of SKS Microfinance (India’s largest microfinance institution), for an interview on “Talk of the Nation,” which airs nationally on National Public Radio. This 40-minute interview followed our 90-minute debate at the Asia Society a few weeks earlier. I must say, my heart goes out to Vikram, since for him both sessions took place after midnight his time (he participated remotely from India).

The host and especially the callers asked some direct questions about interest rates and private benefit for SKS’s management, including Vikram himself. In response, Vikram seemed evasive at times, prompting follow-up questions. At one point, I answered on his behalf, saying that his stock options were worth about $60 million based on publicly available documents and the share price at the time of the offering – facts that he did not challenge. I was not trying to embarrass him, but I thought the question deserved a direct answer. Several times I raised the issue of the ways that the IPO had likely provoked the regulatory backlash that is endangering the entire microfinance sector in India today. Vikram basically ignored the point. This echoed some of our earlier exchanges.

During the Asia Society debate, I said that I was disappointed that SKS (a) had not embraced an internationally accepted social performance tool such as the Progress out of Poverty Index™ (a point I returned to during the NPR interview), (b) had not undergone a social rating, and (c) had not commissioned a randomized control trial (RCT)-type study of its impact. My thesis was that taking these steps would represent a true embrace of being a double-bottom-line MFI, rather than one focused exclusively on maximizing profit. Vikram responded that there in fact had been an RCT study of SKS that indicated income growth of 45%. I indicated surprise about this study since I had not heard of it previously, and after the debate I emailed him asking that he send it. Weeks passed and I did not hear back.

In the aftermath of the NPR interview, Vikram and I exchanged emails congratulating each other despite the fact that we have some fundamental disagreements – disagreements that came out on the air. Having his attention, I followed up on the issue of the study and the following day a colleague of his sent a link to the report, which can be found here. In several respects, I was underwhelmed by it. Rather than being a study of SKS’s impact, it covered 25 MFIs and it is impossible to know whether or not SKS’s clients were among those who experienced income gains. Secondly, after consulting two experts on research methodology, it is clear that this was not an RCT study. Third, the 45% client income gains that Vikram cited twice during the debate were higher than those actually found in the study itself (though not by much, as the researchers stated that microfinance clients had average income gains of 37% beyond what the control group experienced).

I will be travelling to India in mid-December and I expect that I will be revisiting some of these issues in the discussions and presentations I engage in while there. Stay tuned!

Your Impact in Haiti

December 2, 2010

By Alberto Solano, Regional CEO, Latin America and the Caribbean, Grameen Foundation

Eleven months have passed since an earthquake devastated the country of Haiti.

Many of you made a generous gift to help Haitian families rebuild their businesses and their lives and entrusted Grameen Foundation to carry out this important work. I want to report to you on how we used the funds you provided.

Nearly 100% of the $157,000 we raised is now invested in the people of Haiti. Of that, 59% was disbursed within just a few weeks of the earthquake.

“Many partners and friends came to our side during this tragedy. Grameen Foundation was engaged in the response on day one,” said Leigh Carter, Executive Director of Fonkoze USA


More than 19,000 microfinance clients of our long-time partner Fonkoze (the largest microfinance provider in the country) lost their homes and/or businesses, driving many of these poor families even deeper into poverty. You made it possible for us to quickly disburse $92,000 to Fonkoze to relocate and completely equip seven microfinance branches that had been destroyed by the quake, and repair three branches that had been damaged. With this infrastructure back in place, money was rapidly put into the hands of people who needed it most in the critical weeks following the earthquake. In fact, Fonkoze’s branches were open for business before the country’s commercial banks.

You also made possible two high-impact projects to support economic recovery efforts in Haiti – projects that we believe have the potential to reach many poor Haitians in the future:

  • A Way to Save: The poor typically save cash at home, where it is vulnerable to theft, or buy livestock or other tangible goods they can quickly sell, sometimes at a loss, when needed. Thanks to your assistance, Grameen Foundation and Esperanza International, another local partner, funded self-help savings groups in severely affected areas in Miragoaine and Belladere. This program will give 2,250 poor families the opportunity to safely set money aside (in deposits too small for commercial banks) and recover more quickly if they face financial hardship due to healthcare problems, family emergencies or natural disasters.
  • Clean Water to Drink: As the recent cholera epidemic highlighted, inadequate access to safe water sickens – and kills – poor people every day. Unhealthy people cannot work. With your support, Grameen Foundation is partially funding a water-purification system, working with our partner Esperanza International. It is located in the southwest of the island and will provide 5,000 gallons of clean water every day and serve approximately 1,100 people who would otherwise be at risk of drinking, cooking and using contaminated water. This is a pilot project – if it works, we hope to launch many more throughout the country, helping even more Haitians.

If you are interested in volunteering, we are recruiting Bankers without Borders™ volunteers for two projects. The first project will develop materials to educate the local community on how to encourage good health and hygiene practices to prevent the spread of cholera, use and maintain the water treatment plant, and protect water as a natural resource. The second project involves evaluating the financial model for the treatment plant and the business processes needed to create either a sustainable business or recoup the initial investment. Please e-mail us using “Haiti” as the subject line if you would like to be notified of these or similar volunteer opportunities.

Thank you for your generosity and concern for the world’s poorest.

The Importance of Keeping Score in Microfinance

November 8, 2010

by Alex Counts, president and CEO, Grameen Foundation

Part of my job is to speak at various public fora on behalf of Grameen Foundation.  I usually find it quite enjoyable and also a challenge, as every speaking engagement is different in terms of the audience, format, and environment.  Sometimes, I speak alongside other experts in our field, which gives me an opportunity to learn from them as I wait my turn to present the Grameen Foundation story.  I often find the questions I get from audiences to be stimulating and challenging; occasionally, they yield great new insights.

During my recent debate with Vikram Akula, the founder of Indian microfinance institution (MFI) SKS, a questioner framed the issue of the tension between profit-making and poverty reduction in microfinance in a fascinating way, using an analogy from the world of professional sports.  He compared MFIs to baseball franchises, saying that though they measure their profit and loss in financial terms, the true measure of their success by most people — especially fans, players, and even owners most of the time — is how often they win games, and especially championships.  I thought about this analogy — which could be extended to other sports — and I found it more and more apt.

For a baseball team, profit and loss in financial terms is important and often — but not always —  related and correlated to winning percentage.  But it is not the ultimate measure of success to most of the franchise’s stakeholders (and sometimes not to any of them).  In some cases, teams with low profitability win lots of games and even championships, and everyone around that team is usually very happy.  A case in point would be the Minnesota Twins during many years over the last few decades.  (This can even be the case in loss-making franchises.)  On the other hand, highly profitable teams sometimes lose many more games than they win — think of the New York Yankees from the mid-1980s to the mid-1990s.  (I am in no position to opine in an objective way on the Philadelphia Phillies since I am a lifelong, rabid fan!)

How does this relate to microfinance?  For MFIs with a poverty-reduction mandate, financial profitability is important.  If an MFI cannot turn at least a small profit most years, it will be unlikely to continue to serve its clients, much less expand to reach more, unless it has an endowment or long-term philanthropic donors with deep pockets.  But the ultimate measure of an MFI’s success is whether it is helping people to move out of poverty through providing quality products.  To know whether it is being successful, it has to “keep score” by measuring its outcomes vis-à-vis poverty reduction.  This is why social performance management tools like the Progress out of Poverty Index™ are so important.  (Social ratings and impact studies using control groups are also quite useful, and complement approaches like the PPI.)  If an MFI doesn’t use a social-performance tool, it would be like a sports team that didn’t keep score in the games it played, or one that didn’t track wins and losses in comparison to its peer group (i.e., teams in the same league).

Puzzlingly, this is what some people like Vikram Akula seem to be arguing: that if an MFI is profitable and growing, we can assume that it is high-achieving in realizing its social mission (assuming it has one).  Well, maybe yesmaybe no.  Long-term, those two outcomes can be correlated — but not always.  My strong sense, based on more than two decades in this field, is this — some MFIs that are marginally profitable are having a significant impact on poverty, while others that are highly profitable are not making much of a dent in this terrible societal problem.  So let us define crisply what we are trying to do in microfinance and then let’s “keep score” on all the important measures of success, especially on the ultimate measure (at least for groups like Grameen Foundation) — how clients are able to improve their lives.

Thanks again to the attendee at the debate at the Asia Society who framed this age-old debate in a novel way — you really taught me something!

Photo credit: Pierre-Olivier, via Creative Commons.