Friday
December 4
2009

Nathan Wyeth

Weekly Roundup: Ripples Across the Arabian Sea

Water innovation spreads from India to East Africa… but first these opportunities:

Are you an MBA student looking for a relaxing break over the holidays? Sorry. The Global Social Venture Competition call for entrants is out – inviting both for-profit and non-profit social ventures to enter as long as they intend to create a self-sustaining revenue stream. Teams must have a graduate business student on them. The prize pool is worth $45,000 but the turnaround for an executive summary is fast – January 20, 2010. It’s a truly global competition – last year sustainable building material company EcoFaeBrick from Indonesia walked away with the top prize.

Second, Agora Partnerships is accepting applications for its Fellowships, which bring management and finance talent to Central America – Managua or soon San Salvador – to work with small business entrepreneurs there and build Agora’s ongoing capacity to support them. The deadline for this one is January 8.

The Ripple Effect – the Acumen/IDEO collaboration backed by the Gates Foundation – has made it across the Indian Ocean from South Asia to East Africa, initiating partnerships with four water and sanitation companies and NGOs in Kenya. This will include Kentainers (manufacturing water containers), Maji Na Ufanisi (community toilets and water kiosks), PureFlow (household water purification and now business-in-a-box water kiosks), and Umande Trust (super-local piped water distribution) – with more extensive write-ups on each organization, as well as stories about the Ripple Effect team’s interaction over recent weeks with these groups, on the Ripple Effect blog.

Another Acumen partnership – this one with the Aga Khan Development Network – announced the roll-out of health-related microinsurance products through health clinics in several neighborhoods in Karachi (which is, after Shenzhen, the the world city of over ten million people you heard least about in Western media). In addition to coverage in the event of serious illness, obstetric care, and accidents, services include innovative products that complete planned savings and provide lines of credit in the event of the death of a family’s breadwinner.

A LiveMint article that I missed last week but just saw ran down a collection of MFIs in India that are dipping their toes in housing finance but doing so with a lot of skepticism (Basix, Madura Micro Finance, Bhartiya Samruddhi Finance, SKS, and Ujjivan Financial Services). But this comes in tandem with a new push of investment from both established conglomerates and new investors into the Indian affordable housing market (“affordable” being a segment defined differently by different people, but I live in San Francisco so I know all about this phenomenon). There’s room enough for everyone – or more accurately, there should be, because there’s an estimated 25M unit housing deficit in urban areas that’s growing at up to 2M units a year.

The MFI’s quoted in the article express concerns about loan size, potential default rates, and a much greater need for paperwork than with livelihood loans. Home loans can obviously come with collateral, but MFIs would need to develop expertise in this new form of collateralized lending.

Despite the need, my guess is that MFIs’ cautiousness is linked in part to the fact that this seems like a potentially touchy moment for MFIs to get into housing. With reporters eager for scoops that counter the conventional wisdom, stories accurate or not are popping up asking whether microfinance is a base of the pyramid subprime bubble. Going into housing invites unflattering comparisons.

The question I ask myself is whether MFI’s are well-positioned to do housing. In the past year I’ve spoken a few different groups – from large investors like the Sorenson Housing Opportunity Fund to start-ups like Micro Home Solutions – that hope to tap social ties and relationships built by MFIs and formal sector employers to reduce the risk of making housing loans, then connect this with existing housing finance expertise. If Countrywide in the U.S. had been using social ties and working through community organizations to evaluate their customers, default rates might be a lot lower (of course, they’d have to have wanted to evaluate their customers in the first place, but that’s a different question).

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