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NextBillion News vol.18 October 31, 2007
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Pop!Tech, MicroPlace, Malaria and More!
[Contents]
1. Kiva vs. MicroPlace - What's the Difference?
Rob Katz
2. Featured Blog Posts:
Bringing Rural Brazil Into the Internet Age?
Al Hammond
Pop!Tech - Jay Keasling's Microbes Are Changing the World
Rob Katz
Bednets and the Demise of Social Marketing - What the NY Times Missed
Abigail Keene-Babcock
3. Rising Ventures: Ouro Verde Amazônia (“Amazon Green Gold”)
4. Featured Activity Capsule: Small Enterprise Assistance Funds (SEAF)
5. Jobs/Careers: Job: Portfolio Associate, Acumen Fund
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1. Kiva vs. MicroPlace – What’s the Difference?
Rob Katz
Through MicroPlace’s secure platform, everyday people can purchase investments – for as little as $100 – from microfinance security issuers. MicroPlace also enables investors to direct the impact of their investment to a specific country and microfinance institution in the developing world. The microfinance institutions use the funds to make small loans to the working poor, who in turn use the loans to start or expand small businesses and lift themselves out of poverty.
This sounds suspiciously like the Kiva [4] peer-to-peer lending model, right? At first glance - and before my first cup of coffee has taken effect - it does. A little digging, however, illustrates some key differences between the two.
As P2P Lending News [5] explains, [t]he big difference between MicroPlace and Kiva...is that loans will be securitized (and therefore potentially trade-able), and lenders will earn interest. Unlike Kiva, lenders on MicroPlace invest in microfinance by purchasing securities. Funds generated by these sales are then invested in microfinance institutions around the world. MFIs, in turn, solicit clients, make loans and collect payments - they do their normal day-to-day business.
Once client payments are in, the institutional investors receive their loan (plus interest) who can then pay back their investors - people who purchased those original securities. It's not as simple a model as Kiva's, but its differences are very important.
First of all, Kiva is a non-profit. As Matt and Jessica Flannery have explained [6], it's very difficult to become a SEC-registered broker/dealer - even more difficult when you're running Kiva from your living room on the nights and weekends. (See pages 37-38 of the Innovations article [7] for Matt's take on this decision.) MicroPlace, on the other hand, had the institutional and financial backing of EBay, allowing it to go through the complex regulatory application process and to put up the necessary money for the SEC to sign off. Upshot: Kiva wanted to be for-profit, but had to stay a NGO because it was a regulatory nightmare to register with the SEC. As a result, lenders on Kiva only receive their loans back - without interest. MicroPlace, as a broker/dealer, can pay interest to lenders - thanks to its ability to navigate the aforementioned regulatory maze.
Secondly, MicroPlace adds a level of intermediation that Kiva doesn't have. With Kiva, lenders provide capital to MFIs, who then lend to clients. MicroPlace is a market for microfinance securities, not just requests for loans. Sure, it takes away some of the intimacy, but for the microfinance industry, it's a big step. Securitizing loans helps diversify risk, and allows microfinance investors to reach into the second and third tier MFIs that are having a hard time raising non-donor money.
Are Kiva and MicroPlace competitors? Yes and no.
Read more [7]
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2. Featured Blog Posts
Bringing Rural Brazil Into the Internet Age?
Al Hammond
Co-ops [8] are big in Brazil. They are how small communities organize to help themselves, given that they are often overlooked by large companies. Recently I had the opportunity to visit just such a coop in Valente [9], a town deep in Bahia in Brazil's Northeast.
The co-op helps its members produce and market sisal [10], a tough fiber used in rope and in many other products, and it provides microfinance services to its members. The co-op is technologically sophisticated--it uses modern computerized accounting systems and even has Voice over Internet Protocol [11] phone links to it branches in 6 other nearby towns. The co-op has used that expertise to help establish an Internet center in Valente, which provides both computer training for students and free access to the community.
The problem is that the co-op pays a huge amount for its Internet access and to lease lines connecting its branches. This is a common problem in rural Brazil--Internet access, when its available, is very expensive; bulk bandwidth typically costs 5-10 times what it does in the United States.
So I was there on behalf of the Network for Inclusive Markets--WRI and its partners the AVINA Foundation [12] and FUNDES Internacional [13]-- and the Inter-American Development Ban [14]k to explore whether the co-op could, in effect, become its own Internet Service Provider and specifically to find out whether it could make use of new, low-cost wireless technology to improve connectivity in rural Bahia. Because the coop is part of a well-organized network of some 1500 rural co-ops, the potential opportunity might reach into every corner of Brazil and benefit thousands of small communities and millions of people.
Read more [14]
Pop!Tech - Jay Keasling's Microbes Are Changing the World
Rob Katz
Jay Keasling [15] is the personification of creative destruction. Keasling is an award-winning scientist and the developer of an ultra low-cost source of artemisinin [16], the active ingredient in anti-malarial drugs. His company, Amyris Biotechnologies [17], engineers microbes that produce artemisinin at $0.25 per dose – down from $2.40 today.
So how is Keasling the personification of creative destruction? If you’re an artemisinin producer, Keasling’s success is going to put you out of business. And if you’re Acumen Fund [18] – a lead investor in Advanced Bio-Extracts [19], an artemisinin producer – Keasling changes the return on investment equation.
Of course, creative destruction doesn’t happen tomorrow. ABE has a solid future, and the need for artemisinin far outstrips the supply and will for the foreseeable future. So Jacqueline Novogratz [20] doesn’t have to worry – at least not yet.
Why can ABE and Amyris co-exist? Frankly, the scale of the problem (malaria) makes it possible.
Read more [20]
Bednets and the Demise of Social Marketing - What the NY Times Missed
Abigail Keene-Babcock
The New York Times ran an interesting but rather incomplete article [21], discussing the split over anti-malaria bednet distribution strategies in Africa and the apparent demise of "social marketing" as a legitimate approach to reducing illness on a large scale. The article focuses on an ongoing debate in the aid community over whether or not insecticide-treated bednets, produced by Danish and Japanese makers and purchased by aid agencies, should always be given way in mass quantities for free.
Evidence provided in the article points to the failure of "social marketing" techniques (advertising, branding, and selling of essential goods with social value through local distributors, sometimes at heavily subsidized prices) to reduce local, short-term rates of malaria infection as fast as the massive free hand-outs of nets by aid agencies. Senator Tom Coburn (R) Oklahoma was quoted as going so far as to say that, "We knew social marketing doesn’t work."
But let’s take a step back. First, who, in this case, is conducting the "social marketing"? It's the aid industry. What is the aid industry designed to do? Raise, collect, and then deliver charity to those in need.
On the other hand, what are enterprises designed to do? Produce, market and deliver desired goods and services efficiently, so as to be self-sustaining and maximize financial success. Which one has the greatest invested interest in making sure that people will actively seek out its products, and will continue to have access to them, over and over again?
Read more [21]
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3. Rising Ventures: Ouro Verde Amazônia (“Amazon Green Gold”)
Located in Alta Floresta Mato Grosso, Brazil, Ouro Verde produces high quality cooking oil, jelly, and other ingredients for sweets and salads made from Brazil Nuts. Focusing on healthy products, the company also produces its own environmentally friendly packaging.
Read full company profile [21]
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4. Featured Activity Capsule: Small Enterprise Assistance Funds (SEAF)
SEAF [22] is a global investment firm focused on providing growth capital and operational support to businesses in emerging markets and those underserved by traditional sources of capital.
Based in Washington D.C., SEAF invests in more than 20 countries around the world through an international network of 15 offices in Central and Eastern Europe, Latin America, and Asia. Investors include a cross section of public and private institutions, including several of the international finance institutions, local pension funds, insurance companies, banks and family offices.
Read more [22]
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5. Jobs/Careers: Portfolio Associate, Acumen Fund
Acumen Fund [23] is seeking highly qualified applicants for Portfolio Associate.
Location: New York, NY
Acumen Fund is a global non-profit venture capital fund serving the four billion people living on less than $4 a day. Its objective is to create a blueprint for building financially sustainable and scalable organizations that deliver affordable, critical goods and services that elevate the lives of the poor. Acumen Fund invests debt and equity in enterprises delivering critical goods and services to the poor in South Asia and East Africa.
Read more [23]
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NextBillion News vol. 18 October 31, 2007
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Development Through Enterprise Team
World Resources Institute