Most Viewed, Most Shared Posts for September: Why Vitanna called it quits, Yunus unvarnished and the SME puzzle
Frank, unvarnished, let the chips fall where they may commentary is often in short supply. But not for the month of September here on NB. The month’s micro-trend was decidedly on posts that were willing speak some plain truths that could easily be papered over with happy talk. As fate would have it, that was what we happened to serve up on NB as well during the month.
The Most Viewed Post for September
Kate Cochran, the former COO and adviser to Vittana, provided an explanation for why the crowdfunding nonprofit for student loans in developing countries decided to call it quits. Vittana, Cochran said, had reached thousands of students across the world by connecting loan programs through microlenders in 17 countries. But, it was treading water:
“We had compelling evidence that, in addition to almost perfect repayment, the loans led to a near doubling of students’ income, an immediate path out of poverty. So why close? While cash was always tight and fundraising was never assured, we did not simply run out of money, as often happens in these cases. In fact, our board would have supported us further if we brought them a plan we really believed in. And that was the problem. We were doing good work – 10,000 students a year sounds great – but it wasn’t good enough. We aspired to spark student loan markets, not just start programs.”
She issued a clarion call to social entrepreneurs to be honest with themselves and their investors/benefactors:
“I’m calling on social entrepreneurs to be the ones to call it quits more often. Only you can really assess if you’re getting traction on your goals. It may take longer than you expected – it almost certainly will, in fact – but eventually you will know whether your original hypothesis had merit. Don’t wait for your donors to tell you. Your donors’ insights will always lag your own. Closing a social enterprise does not mean defeat if you gain insight into what works and what doesn’t and are willing to share those insights.”
Cochran’s post struck a chord because it was so candid and because it is so rare. Maybe she won’t satisfy some of the more vocal critics of microlending who have demanded additional details than her post provides. But I salute her for the courage step forward to acknowledge mistakes. It will undoubtedly help other social enterprise leaders facing similar circumstances.
Second Most Viewed
For the first time, NextBillion had a chance to interview Muhammad Yunus directly. James Militzer, editor of NextBillion Financial Innovation, met the Nobel laureate at the Microcredit Summit in September. Yunus is still as intense and fiery as ever. Here’s a key quote, and the video interview is below:
“We created microfinance to help poor people – we had no intention of personally benefiting in any way,” he said. “When it became popular and respectable, some smart people thought, ‘Ah, we can make a lot of money out of the poor people.’ So they started making businesses to lend money to poor people and make money out of the poor people. I’m very shocked by that. This was not the intention of microcredit. If we can keep one dollar extra in the hands of the poor people, that’s what we should do.”
Third Most Viewed
We know intuitively that SMEs are critical to emerging economies and for blunting poverty. But how best to finance and grow them is a policy question without the strong wind of data behind it, according to the authors, both with the Small & Medium Enterprise Initiative at Innovations for Poverty Action (a NextBillion content partner). They point to two studies presented at a recent working group meeting held in collaboration with Private Enterprise Development for Low-Income Countries (PEDL), a joint Centre for Economic Policy Research and Department for International Development initiative that supports research on private-sector development. Here’s a key takeaway:
“Findings from two studies presented at the meeting offered a new look at an old problem – the inability of small firms to access adequate financing. Lending to SMEs is often perceived as riskier than lending to larger firms and, as a result, banks frequently impose more stringent repayment requirements on small business loans. These rigid contract terms can hamper the firm’s ability to invest in their businesses and innovate.
“To address this issue, researchers are asking whether more lenient loan repayment timeframes might benefit small firms and, if so, whether banks might also profit from these more flexible contracts. A benefit to both parties would make the adoption of such contracts a win-win situation and may encourage banks to revisit their standard contract requirements.”
Most Shared Posts Via Social Media
Authors Adam Bornstein, an innovation health financing specialist, and Mehreen Khalid, an analyst focused on innovative health financing, with The Global Fund to Fight AIDS, TB, and Malaria, provide a great blueprint for a health bond:
“(1) The Republic of Troy issues U.S. $500 million in 10-year debt paying 12 percent per annum to fund a new hospital and 100-megawatt power plant; (2) Bank International is the underwriter and assigns a U.S. $100 million tranche to diaspora and philanthropic investors, or health bond investors; (3) the health bond investors agree to sweep 6 percent per annum into a health trust fund, which is the equivalent of U.S. $60 million over 10 years; and (4) at the end of the 10 years the Republic of Troy repays all the investors, including the health bond investors, their principal in full.”
Bornstein and Khalid also teamed up to author another post this month on Converting Short-Term Remittances Into Long-Term Investments: Global Fund explores ways to build in financial inclusion and sustainable funding for health care. It’s another another read worth sharing.
As always, thanks to our monthly winners and my apologies for the tardy acknowledgements.