Those Too Poor for Microfinance Look to Trickle Up
What’s a hundred dollars from the perspective of a low-income, base of the pyramid community? That question should be viewed in a new light in the weeks after Muhammad Yunus was announced as the Nobel Peace Prize winner. A hundred bucks? That’s a micro-loan, of course, to be made through Yunus? Grameen Bank or any of its surrogates around the world. Perhaps the cutting edge answer is to loan the hundred peer-to-peer through Kiva, or invest it in a for-profit microfinance fund, as reported in a lengthy, well-researched New Yorker article. All are worthy responses, but microfinance is not the be-all, end-all answer to the perspective question.
In the new APP (After Peace Prize) world, the barrage of media coverage about microfinance has overshadowed an important fact: some people are too poor for loans, or simply scared of credit. What does this mean for the development, philanthropic, and policymaking communities? Perhaps they should take a closer look at organizations like Trickle Up, a non-profit that provides seed grants (not loans) of $100 and business training to aspiring microentrepreneurs worldwide.For the past 27 years, Trickle Up has been fighting poverty with small business. Working through local partners–often NGOs and social service agencies–they identify promising businessmen and women who are too poor to qualify for microfinance, or simply scared of the default risk. Prospective grantees work with the partners to develop a basic, 2-page business plan: description of the product/service, how much demand to expect, what will happen in the slow season, etc. Pictures and drawings are often used–many Trickle Up grantees are illiterate. When the plan is complete, the entrepreneur signs on and establishes milestones. Think of it as venture capital for the ultra-poor.
Microfinance is often criticized by people saying that it focuses on “rich” poor people–those who are connected in their communities or who already have seed capital to hedge the risk and help pay interest. Because they work with grants and target the poorest of the poor, Trickle Up gets bottom of the pyramid entrepreneurs ready for microfinance, filling an important gap in the business-in-development space. So the next time someone asks you what a hundred dollars means from the perspective of a low-income, base of the pyramid community, remember to include both microfinance and Trickle Up in your answer.
Learn more about Trickle Up on their web site or listen to a podcast interview with President Bill Abrams over at BusinessWeek.