The Tumblelogging Experiments of Harish Venkatesan- random musings, sometimes on technology and business
bored with a pencil and paper- “Brandon Jennings” or “The Truth is Never Pretty”
“AYURVEDA’S TIPS FOR BETTER HEALTH (SINCE 1898)”
“ Characters are not born like people, of woman; they are born of a situation, a sentence, a metaphor containing in a nutshell a basic human possibility that the author thinks no one else has discovered or said something essential about.
— Kundera, Unbearable Lightness of Being
I recently had the chance to see Alex Counts, President & CEO of the Grameen Foundation, give a talk at Wharton. This was a great opportunity to gain some insights on microfinance from someone on the frontlines of the movement, and his talk did not disappoint.
Alex recounted how he got his start at Grameen- as a starry-eyed 20 year old college student at Cornell, he enthusiastically composed a letter to Muhammad Yunus asking for the chance to work with Grameen Bank & help scale microfinance into a global solution. Armed with a few semesters’ worth of Bengali and a Fulbright scholarship, he went to Bangladesh and began learning about the power of microfinance firsthand through interviews of borrowers. This anecdote helps illustrate the power of immersive learning; by being on the ground and conversing with the actual affected individuals, Alex learned more than he ever could have in a classroom in Ithaca.
Alex spoke a little about how remarkably microfinance has scaled since its inception in the 1970s as a solution to abject poverty. Grameen Bank currently finances 7 million borrowers worldwide and has started numerous other initiatives- among others, Grameen Phone, Bangladesh’s largest mobile network operator; Grameen Shakti, the most successful rural energy program in the world building more than 10,000 solar units a month; and Grameen Kalyan, a successful micro health insurance program.
Despite the huge scale of microfinance and its success to date, however, it would be a mistake to assume that innovation in this field is over. According to Alex, microfinance as an industry still has a long way to go. Herein lay the most revealing parts of his talk- takes on the future of microfinance and where the opportunities exist. Here are some noteworthy points:
- The cost of microfinance is much too high in almost all markets except the most competitive ones. The poor are bearing this inefficiency because we don’t have better alternatives, and face APR rates as high as 40-50%.
- The microfinance industry, still nascent, has no real code of ethics or consumer protection code. MFI’s need to establish a set of industry-wide ethical norms.
- On the technology side of microfinance- all MFI’s have different incompatible information systems, built by scratch based on each institution’s profile and needs. Alex compared this to all business organizations writing their own word processing software incompatible with others, leading to data being highly fragmented and difficult to share between organizations.
- We’re used to measuring the success of a typical for-profit business on one figure alone- profitability. The MFI industry needs to adopt of a set of standards to measure performance in two dimensions- profitability and social impact. Alex called this “double-bottom line driven microfinance”.
- The energy needs of MFI’s are too high- we can take steps towards establishing carbon-free MFI’s.
- The biggest opportunity though, by far, lies in the notion of “microfinance as a platform”. To date, thousands of MFI’s have provided financial services to over 150 million people (directly or indirectly). They interface with their clients on a biweekly basis and keep in frequent contact, giving them a strong community presence which allows them to gain the trust of people in the communities and deeply understand their predicaments. This ongoing relationship between the institution and 50-60 annual contact points in each community (the entrepreneurs) represents the largest intentional mobilization of the world’s poor in history. This infrastructure can be leveraged as an organization for the poor, paid for by the poor. No government or NGO can pull the plug on this infrastructure by cutting funding, for example. A couple examples from Bangladesh-
- The Grameen network was used to build the most successful energy program in the developing world (Grameen Shakti), which builds 10,000 news units a month in a self-sustaining manner, not requiring subsidies to operate.
- Grameen created a health insurance program for the poor by placing health clinics next to Grameen branches, deducting payments from their accounts instead of making them physically part with their money. Grameen Health now annually provides services to hundreds of thousands of people.
- This expansive network infrastructure can be leveraged to provide the cost-effective delivery of information and services to the poor (in tech parlance, “last mile” connectivity). Many problems currently faced by the poor stem from an inability to inform and educate individuals in a way that they will trust and use the information (for example, avoidable healthcare problems stemming from unhygienic living conditions, water intake, etc.). Microfinance can be that infrastructure that provides us the reach and legitimacy to tackle community-wide problems across the globe.
Overall, this talk, rife with new perspectives on microfinance, was one of the more illuminating speaker events I’ve been to the past couple of years. I left feeling even more excited about the future of microfinance and social entrepreneurship than I had been before. And while all the above items provide food for thought, the last point seems to be the most salient for social entrepreneurs— how can you use the on-ground MFI network to improve the efficacy and reach of your product or service offering?
I hate to talk so much about Facebook, but given its sheer size (200 million worldwide users and growing) and control of the social graph, it is simply the most relevant entity in the social web. The company is quickly approaching a critical period in its evolution— establishment of a sound business model— and the rest of the web waits with bated breath to examine the results and implications. As such, it’s no surprise that it recently overhauled its design again, adding a new kind of functionality that alters the dynamic of what Facebook can accomplish.
I read a recent piece by Joshua Porter that hits the nail on the head as far as Facebook’s most recent strategy moves are concerned— Facebook is going asymmetric, allowing users to maintain a unidirectional “follow” relationship with any other user.
Facebook will grow their service by allowing people to accrue attention in a way they can’t currently in the system. People will realize the same benefits they currently do on Twitter…you can actually start to have an audience that is larger than your current friends list. In other words, this will allow members of Facebook to have a much larger reach than they could before…thus giving Facebook a larger reach as well. This will be the next big growth spurt for Facebook, who has executed so well on almost everything they’ve done so far…but at the present moment the structure of the system prevents this from happening.
Is this a good move? I believe so. The most salient point in that article to me was how an asymmetric model allows you to track & measure attention. I think we are moving towards attention as an underlying web currency (in a social network you could also call it “social capital”), and while we currently do not know how to monetize it, it’s pretty clear that any structure of a web business model will revolve around the attention metric (even assuming that traditional web advertising is not a sustainable model, a topic recently discussed by TechCrunch and The Economist, attention will still be the key component to leverage).
I do think they are taking a risk in trying to mold user behaviors— away from a more real-world-like symmetric friendship model into a more online-only asymmetric follower model. If anything though, I think Twitter is showing that this type of model is a great way for friends to interact. As a social tool, I get a TON of more value out of following real-word friends on Twitter than I do being their friends on Facebook. While this may not be the case for many of Facebook’s users, Facebook benefits from making this move open-ended. The site maintains its core offering- a communication utility for friends that emphasizes public wall communication and photo sharing, while at the same time diversifying the type of experience its users can get by adopting the real-time status updates model. While I personally won’t use Facebook for the latter, as a matter of choice, I’m already so invested in Facebook’s original product that I will not stop using it (all my real world friends use it, upload their pictures on it, etc.).
Facebook almost seems to benefit from this new type of ambiguity it’s established among its users. Is it a pseudo-news reader where you can go to get interesting links from friends, or is it a social utility where you can get frequent life updates from friends and communicate with them sporadically? Does it even matter what it is as long as you keep using it?
I see the site as entering a strange experimental phase that I think will bear out some fascinating results and drive a more focused product strategy in the next 6-8 months. Again, this stage will prove vital in establishing Facebook as a sound business entity rather than just a dominant social network.
