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Microfinance institutions have been asked to lower their interest rates and work together towards economic recovery and poverty alleviation in the country.
United Nations Development Programme (UNDP) business adviser Fortunatius Okwiri asked the organisations to play a leading role in economic development and employment creation by offering loans and other financial services to more clients at affordable rates.
Sub-Saharan Africa
In mid-September, cell phone users on Malawi's Telecom Networks (TNM) received a text message saying "With TNM you can now recharge your friends mobile using TNM direct top up service. Just use the following command: *112*phone number*recharge pin*. Its that easy"
2005 is the UN Year of Microcredit
Microfinance is widely viewed as a panacea for poverty alleviation and development; claims of income-generation activities and near-perfect returns on low-interest loans to the poor abound. However, this is only half of the story.
A recently-completed research project concludes that the overwhelming majority of microfinance institutions (MFIs) are at pains to break even. This is less than what had been initially promised by most promoters of microfinance. Nevertheless, the achievements by microfinance in terms of generating net social benefits for millions of working poor remain significant. The research team takes a critical look at how public policy can best support microfinance.
The project, undertaken by the International Labour Organization (ILO), the University of Geneva, the Graduate Institute of Development Studies in Geneva (GIDS) and Cambridge University, seeks to rationalize support strategies for microfinance. The Geneva International Academic Network (GIAN) provided financial support for the project, together with the Ford Foundation and the European Commission.
Approved for funding by the GIAN in 2002, the research project, "Microfinance and Public Policy" will be presented on 31 October and 1 November at an international conference in Geneva. Based on more than 50 surveys of microfinance institutions in Africa, Asia, Latin America and Eastern Europe, the research team concludes that most microfinance institutions have not reached the scale necessary for full cost-recovery and remain dependant on donor grants.
The research team found that many MFIs are technically efficient, but fail to be fully financially self-sufficient due to adverse local market conditions, like low population densities, insufficient diversification of economic activities and limited acceptance of certain cost-reducing techniques such as group lending. Yet, these MFIs generate substantial social benefits by stabilising livelihoods and incomes, helping the working poor to protect themselves against risks and empowering women. This has implications, according to the research team, for the promotion of microfinance by governments and donors. Rather than support individual MFIs on an ad hoc basis depending on financial performance or social impact, which varies greatly given the local context, aid agencies should base their decisions on efficiency.
According to project director, Dr Bernd Balkenhol of the ILO, "there are close to 10,000 microfinance institutions that effectively work with and serve the poor, yet almost all are partly financially unsustainable and subsidy-dependent. Yet many of them appear to operate efficiently. This should be reason to revisit one of the basic tenets of the microfinance industry, that the provision of financial services to the poor is financially sustainable under almost all market conditions."
According to Prof. Daniel Fino of the GIDS, "microfinance institutions help the poor to cope better with risk, take advantage of modest income-generating opportunities and reduce their vulnerability. In the absence of such institutions, the poor would be worse off, as neither banks nor the State would want to take the place of microfinance institutions." Prof. Edouard Dommen of the GIAN noted that "although efficiency in microfinance institutions does not automatically translate into full financial sustainability, the overall net social benefits far exceed those of inaction."
Africa's grey market VoIP operators are coming out into the light as attitudes and legislation change. The emergence of a VoIP service providers sector could prove almost as significant for Africa as the earlier emergence of independent ISPs. Because beyond the mobile companies, it has been the entrepreneurial energy and lobbying of ISPs that has driven regulatory change in many countries. The emergence of the newly legalised VoIP service providers (or those who hover in a legal 'no-man's land) will add further pressure for change. In this week's issue we talk to one of this new breed of operators Joseph Tekeng of Icon in Cote d'Ivoire.
So who are these former grey market VoIP operators? Most are young (aged between 30-40), have a background in IT and are involved in some way in distribution or sales. Often they operate IT businesses (offering computers, networking and installation) as part of a broader portfolio of businesses. At the smaller end of the business, many are cyber-cafe owners who have sought to increase their income. Indeed, the main motivation for taking the legal risks associated with VoIP has been the desire to make money but also to meet an overwhelming demand for cheap voice calls.
When it comes to sexy mobile phones, the stars of the moment are multimedia wonders such as the new RAZR V3x handset from Motorola Inc. and Nokia Corp.'s top-of-the-line N-90 camera phone with Carl Zeiss optics. Yet for all the attention they grab, these pricey gizmos are a sliver of the 800 million unit-per-year mobile-phone business. Increasingly, the real action is at the unglamorous end of the scale, among bare-bones Nokia and Motorola models priced under $50. Sales of such phones, which often handle just voice and text messaging, could grow 100% annually for the next five years.
That's feeding an explosion of new mobile users worldwide, especially in developing countries. In the past year, for instance, South Africa's No. 1 operator, Vodacom, has expanded its customer base 35%, thanks in part to ultracheap phones. "We've pushed for years to get cheaper handsets," says managing director Shameel Joosub. Vodacom has placed an order for 700,000 units of a new $30 Motorola model slated for 2006.
South Asia
The tech market in Bangalore may be racing ahead, but it is a very different story for India's 700 million farmers. Spencer Kelly has been to Northern India to see how plans to bring technology to rural areas are working.
A tranquil, green landscape, a people who live off the land, and village life built around ancient customs and traditions - this is most of India.
In a village meeting, known as a choupal, the adults of Sabalpur are given the weekly news and discuss the pressing issues of the day.
Ted London, who leads WDI’s Base of the Pyramid (BoP) research initiative, will begin teaching an MBA class on this exciting business phenomenon beginning on Nov. 1.
London’s twice-weekly, 90-minute class, BA612 – Business Strategies for the Base of the Pyramid, will integrate concepts of strategy, international business and sustainable enterprise to stimulate the leadership skills and competitive imagination needed to design strategies for the base of the pyramid.
Through a combination of cases, readings, lectures, videos and outside guests, class sessions will engage students in discussions aimed at identifying the business opportunities associated with base of the pyramid markets and developing the strategies and business models required to productively explore those opportunities.
Rounding out the course design are three guest speakers. Jesse Moore from CARE Canada, Jordan Kassalow from Scojo Vision and Patrick Donohue from BRINQ (and also a member of the BoP Protocol team in Kenya) will discuss their real-world experiences in designing and implementing BoP-oriented enterprises. Each brings a unique perspective on the opportunities at the BoP and will share both their successes and the challenges that they faced.
“I am delighted to have such a thoughtful and experienced set of guest speakers this year,” London said. “They will bring a wealth of BoP knowledge to the classroom. We are, of course, located in Ann Arbor, so our students cannot visit the base of the pyramid during the class. Having these speakers is a great way to bring the BoP context to the Ross School of Business.”
In addition, London brings his current research into the classroom and has developed, often in collaboration with MBA students, several teaching cases and associated teaching notes. This year he will use two new cases.
One chronicles the challenges CARE faces in developing revenue generating enterprises that serve low-income markets and is being co-authored by current Ross MBA student Gabriela Reyes. The other focuses on the different strategies that Unilever (via its subsidiary Hindustan Lever) has used to serve the BoP in India over the past decade. This case is being co-written by Maulin Vaklin, who was one of London’s students at the University of North Carolina.
At the University of North Carolina’s Kenan-Flagler Business School, London’s course on business strategies for the Base of the Pyramid was consistently ranked near the top of MBA classes by students. In 2004, he received awards from both the Kenan-Flagler Business School and UNC’s Hubert Humphrey scholars program for his teaching in the MBA program.
A dream of bridging the digital divide is coming true in the countryside outside Mexico City. A municipality called Tecamac in the state of Mexico witnessed birth of Real del Sol, a development of 1,800 small but attractive homes surrounded by palm trees, quiet streets and a connection to the world.
Surprisingly it is a pilot project in Mexican low-income housing. Even more surprising, perhaps, is that each home comes equipped with a computer and a high-speed connection to the Internet. A Mexican Texa PC connected to the Internet is included in the house price, and the connectivity is merely $18 per month, including a neighborhood portal, a security system, e-mail account and more. All that for about half the cost of DSL connection service in the region. The homes are available to families earning less than U.S. $700 per month, and according to Adriana Labardini, a telecommunications expert, demand has exceeded all expectations, as about 600 homes are now finished and sold.
Ensemble 2005, the annual festival of XLRI, would be held at Jamshedpur on November 12 and 13 in a format that would be different from the general B-school Festival format in the sense that it would have events for students, corporates, and B-school aspirants.
The games and case studies would be taken as usual from real life incidents and problems faced by sponsors of the event, a release issued by XLRI said. Industry stalwarts would discuss the enormous potential of the 'Bottom of the Pyramid' concept in the Indian business scenario under the 'Idea Summit 2005' section of Ensemble.
Nowadays, it is not enough for a business merely to make money. Companies also have to demonstrate that they care about the society and environment in which they operate. This notion has caught on to such an extent that the concept it helped to create " Corporate Social Responsibility " has itself become a big business.
But, while this is largely an additional activity indulged in by large companies, a new type of small business is springing up.
Social enterprises resemble their more traditional counterparts in that they have to make some money in order to survive. But profit is not the primary motive. Instead, they are focused on whatever issue or problem inspired them to be established in the first place, in the belief that if this work is done properly the businesses should be sustainable.
