Ethan Arpi's blog

A Call to Journalists: Stop Writing about Microfinance

Ethan Arpi — Fri, 01 Sep 2006 12:12:47 -0400

Everyone agrees that microfinance is the coolest thing since sliced bread. That’s why in the last two months we’ve seen it covered by the Financial Times, Reuters, The Globalist, The New York Times, The Economist, The LA Times, Business Week, CNN, and The Times of London. And in all likelihood there are other articles still hovering beneath our radar.

I must confess that at first I was excited to see the mainstream media weighing in on development issues affecting the base of the economic pyramid. I held the opinion that microfinance articles—no matter how repetitive and formulaic—attract publicity to an important cause that draws less attention than Paris Hilton’s latest sexcapade. But I’ve changed my mind.

Leap Frog: Cell Phones are Wallets in Mexico

Ethan Arpi — Wed, 30 Aug 2006 10:44:56 -0400

El Universal, a Mexican newspaper, reported yesterday that by next October Mexicans will be using their mobile phones to buy everything from fast food to newspapers. The program is called Pago-Movil—or Mobile Payment in English—and will be available from six of Mexico’s largest banks and cell phone providers. The aim of the project is to convert the 50 million cell phones currently used in Mexico into electronic wallets that can perform all the same functions as a conventional billfold. If the project is successful, it could integrate many of Mexico’s unbanked citizens into the formal banking sector.

Thanks Rob [Via GlobalVoices from Chilanga Banda]

Selling to the Poor

Ethan Arpi — Tue, 29 Aug 2006 15:48:32 -0400

Today, the Financial Times covers Casas Bahia, a BOP favorite from Brazil which has also been discussed in CK Prahalad’s book, The Fortune at the Bottom of the Pyramid. Although the FT adds little to the debate about extending credit to low-income consumers, it still provides important exposure to businesses that are engaging the poor. Below, I have highlighted some of the more interesting points raised in the article and added some of my own commentary.

Could selling to the poor be more than just turning a profit?

Michael Klein, managing director, says one reason for the company’s success lies in something understood by his father, a Polish immigrant, when he began selling table and bed linen from a handcart more than 50 years ago: “He understood that the poor want to be treated with respect. They want to be treated as if they were rich.”

(Sure, even the poor have their pride. But being rich and acting rich are two different things.)

Consumers or citizens? Can we buy our way into citizenship?

Five decades on, with annual sales of R$12bn ($5.56bn), this is still the case. “We help people achieve citizenship,” Mr Klein says. “When one of our lorries delivers a refrigerator to a house in a favela [shanty town], it tells the neighbours that this customer is an honest person, a person of dignity and responsibility, a person with access to credit.”

(Maybe…the rhetoric is a little strong. I’m not so sure that people immediately equate a refrigerator with honesty.)

Fighting Poverty with Organic Agriculture

Ethan Arpi — Mon, 28 Aug 2006 14:23:38 -0400

Today, the Asia Times published an interesting piece on Nazmi Ilicali, a farmer in Eastern Turkey who has made organic agriculture the centerpiece in the fight against rural poverty. Mr. Ilicali’s efforts have gained him international attention and just last year he was honored by the prestigious Ashoka Entrepreneur Trust. Below I have provided some of the most interesting excerpts from the article:

Why organic agriculture?

He explains why, ironically, the poverty of this area makes it perfect for starting organic farming projects: "The earth in this area is especially suitable, because the local population is so poor that for years they have been unable to afford chemical fertilizers. The climate is good for organic agriculture, too. The frost and cold here even kill the eggs laid in the earth by insects, and because of that there is no need for pesticides - we have a totally chemical-free soil."

Enterprises on the Move

Ethan Arpi — Fri, 25 Aug 2006 15:14:10 -0400

If I’m not scouring obscure newspapers for BOP related stories, staring aimlessly off into space, clipping my toe nails, or thinking about integrating a word like phallogocentrism into a blog about microfinance, then chances are I’m adding new activities to Nextbillion’s activity database. If you have not checked it out already, I would suggest that you click here and learn about some off the most innovative enterprises tapping into BOP markets around the world. But if you’re like me and find it difficult to click on a link, then you can just continue reading this post, which describes some of the latest BOP enterprises doing work in Africa.

India's Amul Dairy Cooperative

Ethan Arpi — Thu, 24 Aug 2006 16:26:17 -0400

Earlier this week the Los Angeles Times reported that over 100,000 cooperatives have been formed in Venezuela in the last year, forming “the centerpiece of President Hugo Chavez's new socialist model to create jobs and redistribute this oil-rich country's wealth.” By providing tax exemptions and interest free loans, as well as hundreds of millions of dollars in subsidies from oil and tax revenue, the Venezuelan government has given “groups and existing companies” all the reason in the world to form cooperatives.

And while cooperatives have done much to alleviate poverty and redistribute wealth, a remarkable feet in this economically stratified petrocracy, I remain highly suspicious of the project. What it comes down to is that I don’t entirely trust Chavez. Olly Millan, Chavez’s minister of popular economy, has fought off allegations that the cooperative program is a top-down, soviet-style operation, explaining that, “The state is a non-invasive facilitator.” It provides money to the cooperatives, Millan says, but once the cooperatives are fully functional, private mangers, not government bureaucrats, make business decisions. While this is a relief, I am still a bit incredulous, especially because the movement is so heavily dependent on oil, a finite resource disappearing before our very eyes.

So I am inclined to think that Venezuela is not the best place, after all, for examining successful cooperative models. Perhaps a better, or at least a less controversial, place is India, where cooperative success stories abound.

The Birth of the Microfinance Fund

Ethan Arpi — Wed, 23 Aug 2006 15:48:13 -0400

Next year microfinance celebrates its 30th birthday (Of course, that depends on who you ask). Beginning when Dr. Muhammad Yunus, an American trained economist from Bangladesh, experimented by lending money to 42 women so that they could buy bamboo for making and selling stools, microfinance has transformed throughout the decades, becoming a global industry and a pillar of international development. According to the Microcredit Summit Campaign, a whopping 92 million people have received microloans, a number that has attracted significant attention from more than just the do-gooders involved in international development. So it should have come as no surprise when The Wall Street Journal reported earlier this year that a new player has entered the arena of microfinance: the microfinance fund. Funding for microfinance has traditionally come from charities and government-aid organizations, the Journal notes. “Now, an increasing number of private funds are steering capital to microfinance -- and demanding a return, albeit a modest one in single digits, on their investments. By doing so, the funds hope to boost microfinance's reach and efficiency, while also drawing more capital from investors.”

Using Business to Fight Malaria

Ethan Arpi — Tue, 22 Aug 2006 11:49:05 -0400

Over a month ago, we covered a New York Times article on Billiton and its six year effort fighting malaria in Mozambique. Now it has come to my attention that The World Economic Forum, in collaboration with Harvard’s School of Public Health, has released a paper, Business and Malaria: A Neglected Threat? which documents the danger that malaria poses to business. The paper reaffirms the urgency of the situation and suggests that businesses need to step up where inept and corrupt governments have failed and help support the fight against malaria. Check out the World Bank’s PSD Blog for more information.

Got An Old Cell Phone? Don't Throw It Out

Ethan Arpi — Mon, 21 Aug 2006 16:26:21 -0400

"The fact that you can combine a business — a profitable business — with a useful service and a charitable good is a win, win, win," Mike Newman told the USA Today. You see, Mr. Newman is Vice President of Recellular, a triple bottom line company that collects used cell phones, refurbishes them, and then exports them to developing nations, “where land lines can be costly or unavailable.” According to USA Today, “The odds are good that a refurbished cellphone in the pocket of a user in Bolivia, Jamaica, Kenya, Ukraine or Yemen originated with ReCellular.” That’s because on an average week Recellular gets about 75,000 used phones, mostly from charities, which it then spruces up and sends overseas. “Refurbished cellphones,” USA Today reports, “are opening doors to wireless communication in much of the developing world, where a new cellphone might be prohibitively expensive…”

Microcredit in India: Will It Last?

Ethan Arpi — Mon, 21 Aug 2006 10:14:39 -0400

Two weeks ago on these pages, Rob Katz blogged about an opinion piece in the New York Times, which discussed India’s brewing controversy over microcredit. Last week, The Economist followed suit, writing its own opinion of the controversy, which, I must confess, is a lot rosier. Here are some excerpts:

The dispute centres on one poor rural district, Krishna. Some women were reported to have killed themselves because they could not repay the MFIs. In March a top government official in Krishna temporarily shut 50 branch offices of four MFIs, seized and destroyed their records and told their borrowers not to repay their loans. He accused the microfinance groups of charging exorbitant rates.

Microcredit in India, although generally a good thing, has its faults: