Defeating Global Poverty

I have supported global poverty reductions since I was a kid. This included sponsoring children through World Vision, sending money for relief efforts on many disasters, funding people volunteering their time to go on mission trip projects to help people with building projects and in many other ways.

While much of this felt good, I have always wondered in the back of my mind whether my contribution were making any long-term impact. Hey, survival-oriented initiatives are important, but they are just that, survival centric, not long-term in their mission. It seemed like for all of our money (multiple trillions of dollars) and good intentions we were making very little impact on poverty … and I was right.

In 2002, my father introduced me to microfinance. My father has been a long-time volunteer board member for World Vision – both on the Canada board and the international board. He often traveled to areas where World Vision was doing their development work to see firsthand how things were going meeting the local World Vision staff, board and clients being served. Being a business person, he immediately was attracted to the new microfinance services organically developing in the local World Vision projects. Today, he is the chairperson of Vision Fund, World Vision’s microfinance arm.

So, I was almost instantly intrigued by the concept of microfinance because of my experience in the venture capital-intensive high-tech business world and my degree in business. I had lots more questions about how microfinance worked and whether it might be having a long-term impact. I began an intensive learning process reading many books on microfinance and scouring around on the Internet for information about how microfinance was developing. I was invited to join an inside strategic planning summit with World Vision where I learned a lot more about the inner workings of microfinance from a business and operations standpoint.

Later I discovered Unitus, a very innovative microfinance organization staffed by socially-minded business people who are attempting to dramatically reduce the number of people in poverty by dramatically accelerating access to microfinance by leveraging global capital markets and applying proven management consulting practices for high-growth businesses. I really liked the Unitus people and I really liked their innovative commercial approach and entrepreneurial culture. I almost immediately volunteered to join with the Unitus team on potential partnership due diligence trips to Argentina, India and Mexico. I joined the Unitus board and then helped facilitate a leadership conference for senior management of some of the world’s most entrepreneurial microfinance institutions (MFIs) in Malaysia. I was continuing to learn about microfinance and using my skills in leading and managing high-growth businesses in return.

As I got interested and involved in microfinance, I started to bump into a variety of thinking and ideas around how to sustainably defeat poverty. One of the common themes was that unless poor people were enabled to increase their income (an economics issue), the poor would stay poor. The interesting fact is that the #1 activity which is leading people sustainably out of poverty is the much maligned and misunderstood globalization movement. Globalization is literally resulting in 100’s of millions of people stuck in generational extreme poverty to start on a new positive cycle of hope. Yes, there is need to fight disease, reduce corruption, create physical infrastructure, more & better education opportunities … all of which are tied to economics and generating more income for poor people.

And so, now I write this blog … read about why I write this blog.

Labels: my story, poverty

I write this blog because I don’t think that people are destined to live in poverty. I believe that everyone has a God-given right to have the opportunity to live in dignity. I am most interested in ideas, activities and approaches which result in sustainably lifting people out of poverty. I’m interested in practical solutions which are highly scalable … that is, once refined and proven can be economically rolled out to help millions if not 10’s or 100’s of million people.

I continue to learn. But learning about ideas, experiments, successes/failures of this nature is very difficult and time-consuming. There is a lot of spin and PR which hides the facts … the “whole truth” as I’ve come to call it. I continue to be frustrated by the lack of transparency and accountability in the so-called “international development” government and NGO sector. So much energy is focused on inputs (e.g. we fed 100 people) and very little on results (e.g. 50 people cross the poverty line and are still there after 5 years.) I’m finding that so much of the interesting high-potential break-throughs are coming from smaller socially-driven organizations (both for-profit and non-profit) which are cash-strapped, but entrepreneurial-minded.

So, I write this blog to share what I’m learning so that you can benefit. And, my hope is that you will challenge my assumptions and conclusions and help me get smarter and become more effective. (BTW, that’s what “add comments” feature is for ;-)

How did I get here? Read about my journey.

Labels: my story, poverty

Last week, I met up with Kiva founders Matt Flannery (his blog) and Jessica Jackley Flannery at a presentation they were making to the staff at microfinance innovator, Unitus. I have blogged before about my positive experience in using the Kiva service. In a nutshell, Kiva is building a marketplace for microfinance ... matching up lenders (mostly from developed countries) with microentrepreneur borrowers (mostly from developing countries.) They have made a lot of progress since I last reported and I also found out about some of the enhancements that they have in-the-works. Here are some of my notes:

• Marketplace. Kiva wants to evolve into a microfinance lending marketplace ... similar in some ways to what Prosper is doing in the USA for larger loans. They want to match up borrowers with lenders much like Ebay matches up buyers with sellers. They will be introducing community features like the reputation of borrowers with ratings (like Ebay stars) and last loan repayment info. They are already starting to see some borrowers who are using their repayment record on Kiva.org as a credit worthiness indicator for other kinds of transactions.
• Stats. Kiva now has 4,000 lenders. Average lender is lending $68 (may be over multiple loans.) Kiva lenders have disbursed > $250,000 since they began in October 2005. For comparative purposes, to reach 4,000 lenders, Calvert took 10 years and GlobalGiving took 5 years.
  
• Income. Today, Kiva receives all of their income/funding from donations. Yes, they are a registered 501(c)3 charity. They have no income (e.g. interest income or loan fees) for loans which they facilitate. It is not that they are philosophically against income related to loans they facilitate/manage, they are working through regulatory issues. Here are some of the ways they may generate income:
• loan fee to MFI (maybe 1-2% ... still incredibly low cost of capital!)
  
• optional lender fee (in the 1-2% range)
  
• interest earned on float (could be substantial)
• loan insurance (e.g. 1% fee pays off loan in case of death)
• Interest rates on loans. Their MFI partners (identified with each loan application) set the loan interest rates and fees. Today, these rates and fees are not disclosed on their web site. They are planning to expose these going forward in order to provide more transparency and encourage interest rate competition.
• Earning interest. Today lenders are paid no interest. Going forward this is going to change once Kiva sorts through the various regulatory issues.
• Loan size & admin. They now have a minimum loan size of $600. They do this for a number of reasons including (a) overall higher transaction processing effort for Kiva loans (e.g. have to post update to Kiva system as well as the MFI's system); and (b) generally means that this is not the borrower's first loan, so higher qualification for borrowers = higher liklihood of repayment. MFIs are typically paying loan officers a fee of ~$10 for each Kiva loan they administrate.
• For or not-for profit. Today they are a non-profit. Their business plan says that they need an additional $1.5M of capital in order to get to break-even in 2009. One (key) benefit of being a non-profit today is that Paypal charges them no fees on transactions ... which is a substantial cost savings based on their high # of transactions.

Kiva is continually upgrading their web service. I really like how they are now more concisely listing businesses with graphical stats in many places. Also, they have made an easy way for anyone with a blog/webpage/space to promote loans ... you simply paste a snippet of HTML (shown at the bottom of every business loan profile) into your web page and a very nice promotion is presented. I've done this on the right column of this blog just after archives section. Very cool!

Also, see recent Business Week article on Kiva.

Labels: kiva, marketplace, microfinance, poverty

The project to create an affordable laptop for every child in developing countries which I wrote about earlier, has recently spun out into its own non-profit called One Laptop per Child.

They have made a lot of progress in moving forward this project for concept to reality and will soon be rolling out the first test units in Thailand. They have a map of where they are planning further pilots and where governments have shown interest in purchasing the product.

They have also have hired/appointed a pretty serious management team to take this idea to market with Nicholas Negroponte continuing as chairman.

Check out the One Laptop Per Child wiki site to follow and discuss the progress.

One section I found particularly helpful is their Design Decisions FAQ where they answer some of the critics biggest questions about "why laptops for every child."

Do you think this is a good initiative?

Labels: children, computers, laptop, Negroponte, OLPC, poverty

NextBillion.net is an interesting an organization dedicated to helping the "next billion" -- the next billion poor people rise from the base of the economic pyramid (BOP) as participants in healthy economies, and the next billion in profits for businesses, from multinational to microenterprises, to earn by selling to underserved markets.

They describe themselves as "NextBillion.net brings together the community of business leaders, social entrepreneurs, NGOs, policy makers, and academics who want to explore the connection between development and enterprise."

This site has many interesting stories of how poverty is being defeated through enterprise.

NextBillion.net is a project of World Resources Inc, an environmental think tank ... what an interesting association!

Labels: nextbillion, poverty

I recently finished reading Guns, Germs and Steel by Jared Diamond. This is an interesting book tracing human development and exploring why societies developed differently. I wrote a brief review in my recommended poverty reading list.

Review of Guns, Germs and Steel
Dave's Defeating Poverty Reading List

Labels: book reviews, history, poverty

I am always interested in practical ways that most people can contribute to defeating global poverty. It seems like so often the ideas coming our way are so indirect ... through one or more intermediary whom you give money to and then it passes down the chain and trust that it actually benefits the needy recipient.

Africa@home (modelled after SETI@home) is a collaboration between the Swiss Tropical Institute, CERN and a group of universities to develop a long-term model of malaria epidemiology which can be used to test different ways of combatting the disease. You can donate extra cycles on your PC to help solve malaria at MalariaControl.net. In fact, they have had so much interest that they've temporarily stopped accepting computer cycle donations!

I think that this kind of response demonstrates a desire for people to help out with what they have. I hope that this will encourage other grid computing projects to help defeat poverty!

Please post comment if you have other sources for this type of program.

Labels: distributed computing, malaria, poverty, seti

In July 15th issue of The Economist, there was an interesting article on whether the money being spent on education in developing countries was resulting in children actually learning. Globally, the World Bank alone has spent over $12 billion on primary education since 1990. Pratham, an India educational charity, reported that less than half of children ages 7-14 could read a simple passage in their native language.

One of the most successful programs to date in increasing school enrollment is to not only make primary education free, but to actually pay parents (cash or free meals) if they keep their children in schools. In Nicaragua, a pilot program like this has raised enrollment rates by 22%.

It seems that donors are more interested in school-building than they are in schooling. That is, focused on the inputs -- # of buildings, # of teachers, # of text books, etc. -- rather than the outputs -- are children learning.

Pratham has found one educational experiment that has worked well ... hiring balsakhis (which means "children's friends") who are unqualified high-school graduates to provide remedial education to students falling behind. These mentors were cheap, quick to train and could work in hallways or under trees reducing the need for more buildings. The result in Mumbai is that it raised the chances of fourth-year pupils grasping first-year math by almost 12% and second-year math by almost 10%.

Read article

Labels: children, economist, india, learning, poverty

This article was pointed out to me by my friend Harry Veihmeyer... The number of people with mobile phone subscriptions in Africa is projected to explode to 378M by 2011 increasing penetration levels to nearly 50% by then. From there its one small step to internet connectivity for the mass of Africans.

Mindbranch's African Mobile Handset Market Analysis (2006-2009)

Labels: africa, mobile banking, poverty