I found a cool post on Jigaroo about Yoga Gives Back, a non-profit that combines yoga with microfinance.  Yoga Gives back teams up with the Grameen Bank to help get loans to recipients.  With the slogan “For the cost of two yoga classes, you can save a life” I think that this is a pretty cool concept.  It uses the Grameen group model of microfinance, but applies to the lenders rather than the recipients.  Yoga Gives Back works with a specific group of people whom it teaches microfinance to, with the hopes of spreading awareness. 

It seems just about every week, a journalist somewhere in the world will write a piece on microfinance and the effects the worldwide credit crisis will have on the sector. Most journalists and experts alike are optimistic that microfinance will weather the storm and could even be “the answer” to the international investment predicament we are slipping further and further into (find the article here: Raksin, Huffington Post). An article by Allianz’s James Tulloch, “Can Microfinance Beat the Credit Crunch?” presents one of the more realistic outlooks for microfinance in 2009. Though it strays from the common “nowhere but up!” optimism, it offers a silver lining to the crisis’ impact on microfinance worldwide;

The downturn could [force] MFIs to grow less aggressively and focus on consumer protection, transparency, and governance. “Are we building a ‘bubble’ of over-indebtedness? If so, then a slowdown in growth will provide the opportunity to reconsider the basics of underwriting,” said Cecelia Beirne of MicroVest at the CGAP event.

There is no doubt that microfinance is a pretty resilient investment alternative, and the growth of MFIs (microfinance institutions) through the Asian and Latin American economic crises of the 1990′s and early 2000′s is an encouraging sign that microfinance may reside just below the economic current that can affect the regions of operation.  Today, the sector has not been greatly affected by 2008′s volatility and economic decline. Though past performance is encouraging, it is a different sector today than it was three years ago, not to mention 10-15 years ago. In that period, microfinance investment, exposure, and commercialization has increased exponentially (with projections that at one time had predicted private investment in microfinance to increase from $2B USD to $20B USD by 2015; IAMFI).  Let it be known that I, like the many that are optimistic that microfinance may even benefit from the credit crunch, are cut from the same cloth… we all want to microfinance to succeed in its efforts to alleviate poverty worldwide. I also know there are many out there, like myself, that think microfinance is so close to the tipping point of becoming a mainstream issue and investment avenue. This feeling can lead to a concern that the progress microfinance has made (and deserved) in recent years may take a serious hit because of the current crisis. I personally do not find this concern to be a very valid one. The concerns over the impact of the financial crisis can essentially be split into two camps; the financial concerns and the ideological concerns.

Financially speaking, I do believe funding will become more expensive and harder to find in 2009 (even though investment funds have heralded microfinance and healthcare as the two sectors with the most opportunity… seeing an opportunity and access to the capital to pursue that opportunity are two very different things). Realistically speaking, I think individual microfinance institutions will have considerable woes in 2009.  However, ideologically speaking, I do not believe microfinance will be hurt by the crisis, and in that regard, the progress and attention gained over the past few years will hardly dissipate (just seeing investment funds spotlighting microfinance on par with a sector like healthcare is something quite incredible). Financially speaking, investment in microfinance will likely focus more on the larger, less speculative, and less aggressive MFIs. This will pose serious problems for the majority of MFIs that are still in their nascent stages of operation. Ideologically speaking, the crisis hasn’t hurt people’s interest and advocacy for microfinance. October 2008 was quite possibly the most volatile and economically disruptive month in the US over the past 50 years. However, it is interesting to note that October 2008 was also the month that Kiva raised the most in a single month in the history of its operation to that point (which was then surpassed by November and December of 2008).

The financial concerns, though significant, and the continued ideological progress could turn out to be a microfinance idealist’s dream. 2009 could be a year in which the commercialization and over-aggressive growth of microfinance wane, but attention and interest grow… which would certainly make 2009 an interesting year for microfinance– 2009 could be the year that 2008 catches up to microfinance, but the “gathering clouds” may certainly have a “silver-lining.”

I have been off the radar for a few weeks now due to the holidays and having family visiting, so I do apologize for not posting anything for a while, and especially for holding on to this interview for so long.  Bhalchander Vishwanath, CEO of United Prosperity, who is a supporter of myKRO, was kind enough to donate an interview that he had with Jonathan Lewis, the CEO of MicroCredit Enterprises.

MicroCredit Enterprises to grow to a $100 million guarantee fund – Interview with Jonathan Lewis, CEO of MicroCredit Enterprises

Bhalchander: We have with us today Jonathan Lewis, who is the CEO of MicroCredit Enterprises. MicroCredit Enterprises is committed to reducing poverty by mobilizing private investment capital to finance micro-businesses throughout the world.  Jonathan – Congratulations on winning the Social Venture Innovation award and for being recognized as an honoree by the World Affairs Council of Northern California. And thank you for taking time from your busy schedule to be with us.

Jonathan Lewis:  Thank you for your own commitment to economic justice and for inviting MicroCredit Enterprises to this interview.
MicroCredit Enterprises is deeply honored to be recognized for our pioneering social venture model.  In three years, we have created a stable financing model which is sustaining 100,000 microloans reaching 500,000 poor individuals (89% of whom are women and children) via 28 MFIs partners in 15 nations on 4 continents without needing a single dime of donations, grants OR investment.  In the end, as proud as we are of these awards, our lasting pride comes from knowing that literally thousands of children will go to bed tonight without the pang of an empty tummy and their mothers will awake tomorrow to a more hopeful life.

Bhalchander : I read that Microcredit Enterprise utilizes ‘idle capital’ to help the poor. It is a very interesting concept to take something which is idle and use it for public good. Can you tell us more about your innovative model and Microcredit Enterprises?

Jonathan Lewis:  Because poor women do not have collateral or credit histories, MicroCredit Enterprises Guarantors – the key program benefactors — pledge collateral assets and personal guarantees (not a donation or grant) to back loans to MicroCredit Enterprises that are used to fund an overseas microfinance loan portfolio.  Our Guarantors realize returns in the open market, manage their own funds and simultaneously support about 5,000 small entrepreneurs.   In the event of an overseas financial loss, each Guarantor bears the tax-deductible loss on an equitable, pro rata basis with all other Guarantors.  Guarantors do not realize a return on the guarantee risk, but do maintain complete control of their assets, thus receiving all investment returns from their portfolios.

Bhalchander:  In how many countries does Microcredit Enterprises operate currently and how have you chosen the countries to operate in?

Jonathan Lewis:  MicroCredit Enterprises is in 15 nations diversified across 4 continents.  The special focus is sustainable economic development for families living in extreme poverty ($1.00 per day or worse), so our lending criteria are, first and foremost, targeted to reach overseas microfinance partners in rural areas with high numbers of deeply impoverished women.  Secondarily, we apply strict geographic diversification to minimize risk.  Since MicroCredit Enterprises is entirely open source, your readers can visit our website  to study our specific criteria, loan process and evaluate what we have accomplished and – if they wish – build on it.

Bhalchander: What were the biggest challenges you faced in setting up and growing Microcredit Enterprises? How did you tackle them?

Jonathan Lewis:  The steepest hill to climb, which still exists today, is explaining our new model, a new funding paradigm.  Since MicroCredit Enterprises depends on neither donations nor social investments, we have an important educational job to explain how a foundation, high net worth individual or company can directly impact lives around the world without writing a check.
The solution?  Patience, and old-fashioned, low-tech guerilla marketing by word of mouth.

Bhalchander :  You were a very successful business executive before you started MicroCredit Enterprises. Can you tell us a little bit more about what you did before starting MicroCredit Enterprises?

Jonathan Lewis:  My last commercial venture was an international knowledge company in the healthcare field.  Among other services, we organized trade missions to other countries to investigate healthcare systems and business opportunities and hosted the International Summit on Public-Private Healthcare Partnerships.  The Summit was attended by delegations from about 80 nations.  One day I realized that I cared more about the people who get no healthcare at all.

Bhalchander: In your experience what is tougher and why – running your previous organization or setting up and growing Microcredit Enterprises?

Jonathan Lewis:  Both are tough, but in different ways.  All businesses, social or otherwise, and all nonprofits serve multiple stakeholders:  shareholders, customers, the larger community interest, etc.  A social venture adds mission clarity, but – as the adage goes – “no margin, no mission”.

Bhalchander: In the last few months, everyone’s attention has been on the economic crisis. Microfinance is also seeing a lot of changes – there is private equity and venture capital coming in. Are there any new kind of risks Microfinance faces and something we should all watch out for?

Jonathan Lewis:  Microfinance is not immune from the turmoil in the financial markets.  MFIs are indicating that the biggest challenge resulting from the global financial crisis will be securing new financing and rising interest rates which ultimately have to be passed on to impoverished borrowers.  Stories already abound about MFIs losing commitments for funding from so-called mainstream lenders and banks.   For some MFIs in select countries, foreign currency exposure is becoming a more serious risk.  In recent years, the weak dollar has largely muted this concern.  No longer will that risk factor be so easy to overlook or ignore. In general, microfinance will soon discover that private capital flight risk is real.  Indeed, I predict that the microfinance intelligentsia will mute the complaint about public capital “crowding out” private capital, an argument that actually has never made much sense either economically or in terms of social mission.  Hopefully, in the future microfinance thought leaders will be more respectful of the need for stable, socially committed capital, whatever its source. For a quick overview about microfinance, visit the MicroCredit Enterprises Study Center.

Bhalchander: What advice would you give to up and coming entrepreneurs and social entrepreneurs?

Jonathan Lewis:  To dream.  Listen to everyone, but trust your instincts.  Hang on to your core beliefs and live them intensely and everyday through your venture.  Keep moving.
Bhalchander: And my last question, what are your future plans for Microcredit Enterprises?

Jonathan Lewis:   One, MicroCredit Enterprises will grow to a $100 million guarantee fund (or one percent risk exposure per Guarantor unit of $1 million).  That will mean roughly 2.5 million people with food security.  Two, in 2009, MicroCredit Enterprises will become an offering on the new, very innovative MicroPlace.com website which allows individuals to earn interest from microloans.
Bhalchander: Thank you very much for being with us. We are all very happy that MicroCredit Enterprises is making the world a better place. We wish you greater and bigger successes.

You will also find this interview posted on http://unitedprosperity.org/blogs/team/

If anybody would like further information about MicroCredit Enterprises or United Prosperity, feel free to comment on this post or email me.

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