sustainable development

SOCIAL ENTERPRISE AND MICROFINANCE – A POWERFUL PARTNERSHIP

by Miranda Barham, WAM UK Steering Committee

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WAM UK hosted a very interesting evening with special guest, President & CEO of FINCA, Rupert Scofield.  Rupert shared with us the journey he has been on since starting FINCA in 1984 to today’s challenges of finding social enterprises, running profitable microfinance institutions and running fundraising campaigns.

FINCA started on a quest to identify investible social enterprises to fund and partner and in doing so, discovered that they were already funding a number of these.   Examples of this include over 200 “charter schools” in Uganda, and a community health clinic in Lumbumbashi, Democratic Republic of the Congo.

Rupert explained, “I stumbled upon a charter school on the outskirts of Masaka, Uganda when I went to see some clients who had purchased solar lanterns from Brite Life.   “Do you want to see our school?”  one of the clients asked me.   “You have a school?”   It seemed unlikely; this was a remote community many miles from the nearest paved road.   They took me to meet a former teacher who had left the public school system and, with a series of Finca loans, built seven classrooms and hired other teachers to teach grades K through 6.”

By having the school right in the community, the students avoided the perilous 5 kilometer walk to the nearest public school where they could be preyed upon by pedophiles.   Finca was also financing the other side of the transaction, making loans for school fees to the parents of the children.

In Lumbumbashi, two physicians had left the public healthcare system and, with a series of Finca loans, build a small clinic and a 10-bed hospital.  They were treating the people of the community for the four most common illnesses in rural Africa and charging $2.50 per consultation.  If the patients were destitute, they provided treatment for free.

FINCA is passionate about social enterprise.  Rupert believes that the current trend of social enterprises moving into the vacuums left by a faltering, underfunded public sector services will continue, and eventually social enterprises, small, medium and large, will be the main vector for meeting the basic needs of people living at the bottom of the pyramid.   He explained that an added bonus will be that these social enterprises will collectively employ millions of currently un/underemployed young people, which is a huge and growing time bomb which, if not addressed, will destabilise all developing societies.

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For those of you inspired to take up the social enterprise challenge, Rupert has some words of wisdom, “Find a disadvantaged/oppressed constituency, live amongst them, walk in their shoes until you feel their pain and figure out a way to be useful.”  He recommends working or volunteering for an organisation that works in this space and then with experience gained, striking out on your own.   He says that’s when the real adventure begins.

“If your idea is powerful enough, it will withstand the many mistakes you will make.   Remember that nothing works the first time, so be stubborn and persistent.   Stand up to the skeptics and keep plugging away.   You will find, also, that your passion for your mission will attract fellow travelers.   You also have to pick your head up every now and then and see who is imitating you and possibly doing it better than you are.   The life cycle of new technologies is getting shorter and shorter.   Picking the winners is going to make the difference between success and failure.” And After five decades in the space, Rupert should know.

If you would like to support FINCA’s latest campaign to raise £1 million in support of women taking their first teps in business, please donate here so that FINCA can help them generate the extra income they need to buy food, pay for healthcare, and put their children back into school.

In the last few months, faced with rising levels of conflict and migration, women have been forced to find new sources of income to support themselves and their children. With your help, FINCA can make a difference.

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Investing in Social Enterprise to Fight Poverty

FINCA

By Rupert Scofield, President and CEO of FINCA International 

Rupert Scofield will be speaking at a dinner hosted by Women Advancing Microfinance UK on Tuesday 10th May in London. He will talk to us about the work FINCA does and the impact it’s having, in particular in the social enterprise and innovation space. Tickets to the event are available here

Ahead of the event, we asked Rupert to give us some thoughts about what it is that makes FINCA different, how they have evolved their approach and support for those they work with and their unique approach to fostering social enterprises.

 Tell us about the clients FINCA reaches and what it is about your offering that allows you to reach clients other microfinance organisations don’t.

FINCA’s segment is not “the poorest of the poor”, which are now reached by specialised “Ultra Poor” or “Graduation” programmes which provide subsidies not loans, although some of our most successful clients have come from that segment.    Most of our clients live on $2 to $4 per day when they take their first FINCA loan and then progressively move up the ladder.

The vast majority have an existing business when they join FINCA, but not all.  In Africa, for example, we encourage our village banks to take on one or two younger women who want to start a business but need mentoring and support from the group in order to succeed.

While many other MFIs work in this segment, FINCA is unique in that we have done this now for three decades and on four continents, learning to adapt our methodology to many different cultures.   We still deliver the majority of our loans through “village banks”, and although that methodology has been adapted over time, it remains largely the same, depending on local knowledge and a group rather than physical guarantee.   When you visit a village bank, you can see that it is a strong, community-based support group where the members help each other weather the adversities that come with living at the base of the economic pyramid.

You developed an initiative called FINCA Plus back in 2012. Can you explain a little about what you hoped to achieve?

We saw an opportunity to become a “holistic” MFI, one that would also provide non-financial services of value to our clients, things that would make them more resistant to the contra temps that threatened to knock them off the ladder out of poverty.   We sought instead to develop interventions in new sectors like healthcare, water & sanitation, education, energy, and agriculture.   While organisations like BRAC had been doing this for decades, we decided to take a different approach.   Rather than becoming experts in these sectors, we would find partners whose products and services would be of high value to our clients, and figure out how to finance and deliver them.

We discovered that there were literally hundreds of social enterprises doing amazing work, and who were eager to partner with FINCA and take advantage of our well-known brand.

Furthermore, there are “incubators” working with social entrepreneurs and helping them to develop their concepts to the point where they are “investible” and scalable.   This led to our decision to create the Social Enterprise Collider, a facility that will invest in early stage social enterprises deemed promising but too risky for institutional investors or even most Venture Capitalists.   At the same time, we created Brite Life, a distribution company that markets solar energy products, fuel efficient cook stoves, water filters and other products which bring a powerful value proposition to our clients, providing benefits in the health, education, and energy areas.

To hear more from Rupert about FINCA’s unique approach to social enterprise initiatives, please join us for the dinner discussion on Tuesday 10th May 2016. Tickets for the event are available here.

Rupert

Rupert Scofield, FINCA International President and Co-Chief Executive Officer, also serves as President and CEO of FINCA Microfinance Holdings, LLC, a first-of-its-kind, socially-responsible investment partnership for microfinance, formulated to strike the right balance between attracting capital needed for expansion and protecting the integrity of FINCA’s charitable mission.

Mr. Scofield co-founded FINCA in 1984 with John Hatch, and has served as its President and CEO since 1994. A practitioner at heart, he is actively involved in the management of FINCA’s operations, and is also a frequent keynote speaker. As author of The Social Entrepreneur’s Handbook: How to Start, Build and Run a Business that Improves the World, Mr. Scofield seeks to inspire the next generation of microfinance leaders and social entrepreneurs.

Prior to FINCA, Mr. Scofield served as the CEO of Rural Development Services, a consulting firm, and country program director of the AFL-CIO’s Labor Program in El Salvador. He earned two Masters of Arts degrees in agricultural economics and public administration from the University of Wisconsin, as well as a Bachelor of Arts from Brown University, and served in the Peace Corps in Guatemala.

Read more about FINCA here.

Celebrating IWD: Q&A with Diana Noble, CEO of CDC

In celebration of International Women’s Day (IWD), March 8th 2016, WAM UK interviewed Diana Noble, CEO of CDC Group Plc. 

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Diana Noble, CEO of CDC, the UK’s development finance institution.

What is CDC?

CDC is the UK’s development finance institution. Wholly owned by the UK Government, we invest in the private sector in Africa and South Asia – where over 80 per cent of the world’s poorest people live – to support the building of businesses and to create jobs.

We focus on investing in sectors where growth leads to jobs.  These include microfinance institutions, as well as companies in agribusiness, construction, manufacturing and broader financial services. In 2014, our investments created around 1.3 million direct and indirect new jobs and livelihoods.

Why is microfinance important for women and their families?

Many of the businesses we support help empower women and this is particularly true of microfinance institutions and other financial services companies. CDC has invested over US$300m in microfinance institutions and funds to date, reaching out to over 15 million women clients.

There are a number of reasons why microfinance is important for women and their families. According to the World Bank, only 50 per cent of women in the world have access to formal financial services and microfinance institutions aim to improve this statistic. However microfinance is not only economically but also socially empowering for women by enhancing their status in male-dominated societies, improving financial literacy, and allowing them to scale up their businesses. Also, when women participate in the workforce and are earning, it tends to have a positive impact on the family as a whole with evidence suggesting that women reinvest 90 per cent of their income back into the families, while that figure is just 35 per cent for men.

Can you give us any examples of how CDC’s investee companies have supported women?

CDC recently invested in Equitas, an Indian microfinance institution based in Chennai, Southern India. Its clients are women who run small businesses.

We decided to invest in Equitas because the company prides itself on being a responsible lender – before loans are given, borrowers attend three days of financial training and further support and advice is provided afterwards too. Equitas has helped many women entrepreneurs. Kala was given a loan equivalent to around US$160 to buy a sewing machine and start her tailoring business. When colleagues met Kala recently in Chennai, she said she was close to repaying the loan and she uses the extra income she now generates to pay for her children’s education.

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Kala, Entrepreneur. Source: CDC

In Africa, CDC has invested in DCFU Bank in Uganda, which helps support women entrepreneurs to start and build their businesses. For example, Yvonne Katamba used a loan to help grow her cleaning business. In just 10 years, it grew from an annual turnover of US$2,000 to US$275,000, and she now employs 175 people.

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Yvonne Katamba, Entrepreneur. Souce: CDC

What plans does CDC have for future investments?

At CDC, we will continue to invest in sectors and business which can create jobs and make a lasting impact to people’s lives. This includes supporting companies in Africa and South Asia that help to empower women.

In the last financial year, our figures suggest the businesses we invest in employ 165,000 direct jobs for women. Our aim is to continue to build on this, so we can provide opportunities to even more people in some of the poorest parts of the world.

Q&A With Thea Anderson, Director of Financial Inclusion at Mercy Corps

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Two women transacting payments over their phones in Kathmandu, Nepal Source: Mercy Corps

WAM UK hosted a dinner with Thea Anderson, Mercy Corps’ Director for Financial Inclusion, with our members to learn more about the global organisation’s engagement in advancing access to financial services for women. Mercy Corps operates in 42 countries and is a leader in integrating mobile technology in financial inclusion. On the night, Thea shared her experiences working directly in designing and implementing solutions on the ground for Mercy Crops, and for the benefit for those who couldn’t join us, we asked her some questions here:

Thank you Thea for sharing your experiences with WAM, but first things first, could you introduce us to Mercy Corps?

Mercy Corps is an international non-governmental, non-profit agency impacting over 30 million people each year in the world’s most difficult places and emerging markets. We focus on solutions to systemic global poverty through humanitarian relief and long-term development. We recognize that new technology, business models and creative partnerships provide transformational opportunities to overcome poverty. Managing and providing technical assistance to over 40 country offices, with US and European Headquarters (based in Scotland) and a representative office in London U.K. Mercy Corps complies with the U.K. International Aid and Transparency Initiative and is rated each year by the U.S. Better Business Bureau and Charity Navigator – the premier American charity evaluator. Consistently, Mercy Corps receives the highest ratings. Mercy Corps ranked in the Top 10 in the 2013 Global Journal list of top 100 NGOs.

As Director of Financial Inclusion you’ve worked on expanding the reach of financial services in some of the world’s most fragile environments. Could you tell us more about Mercy’s Corp’s approach to financial inclusion?

Mercy Corps leads financial inclusion initiatives in over 30 countries partnering with commercial and public banks, MFIs, non-bank financial institutions, community-level financial institutions, and technology providers.  Even as a non-profit, we have launched commercial bank models in the Philippines, Mongolia and Indonesia, and most recently agent banking in Ethiopia which all use digital payments to serve millions of low-income clients without the need of a physical bank branches.

We recognize that traditional foreign aid hand-out programs will not lift and keep the billions of people at the bottom of the pyramid out of poverty. Mercy Corps therefore uses market-based approaches in partnership with commercial actors where feasible. We see technology as the key driver to lower transactions costs and payments as the entry point for other financial services allowing people to access money with the longer-term goal of establishing a place where they can safely save money, access capital and insurance products.

How does Mercy Corp use Technology to achieve financial inclusion, in particular with women?

Globally, Mercy Corps supports technology providers, financial institutions, and mobile network operators (MNOs) to identify and expand access to financial services at scale through the use of mobile and cashless technologies. This includes digital financial services and e-commerce platforms, agent networks, and bundled technology solutions such as the examples below:

  • In Nepal, Mercy Corps works with over 260 community-level financial institutions to access wholesale capital as well as introduce new savings, affordable credit, and remittances. This includes scaling several mobile payment platforms to rural Nepal in partnership with banks and Nepal’s largest branchless banking provider to reach thousands of new clients.

  • In Indonesia, Zimbabwe, and Uganda, Mercy Corps bundles financial services and farm- and crop-management tools for 170,000 small-holder farmers on affordable, unified mobile phone platforms. Farmers move along a four-step process using access to digital information and payments solutions as an entry point. Through these digital transactions, farmers build a transaction history to develop credit scores that enables them to engage with more formal financial services, including remittances, savings, credit, and insurance.

  • Mercy Corps hosted Tunisia’s first ‘Innovation Challenge for Financial Inclusion’ with financial institutions, crowd- sourcing platforms and angel investors for new mobile financial products for the growing Tunisian market. As a result, Mercy Corps is co-financing new crowdfunding platforms targeting youth entrepreneurs. In 2015, the Tunisian Post Office, which has over 1,000 branches and millions of clients, will launch a micro-savings product via mobile phones and electronic cards across the country with support from Mercy Corps.

Is Technology an effective enabler for financial services? If so, how can we ensure that women are not left out of the digital revolution?

Digital technology can change lives. It provides access to critical information for women. Female farmers can learn to weather costs of agricultural inputs, be linked to financial services such as payments, remittances, and savings, and connect to social media and e-commerce platforms. However, to benefit from technology you must have access to technology. Globally, over a billion women do not have full access to a mobile phone or access to digital financial services even in its most basic form.[1] This is especially acute in South Asia. Recent data shows than more that up to 50% of women in Niger, the Democratic Republic of Congo, and Indonesia have never used a mobile phone, even for voice calls.[2]

As the world moves forward towards digital, huge numbers of the population are being left behind. Not only is this a missed opportunity for women on the customer-side this is a huge lost for the commercial sector – up to an estimated £111 billion for MNOs alone over the next five years.

Mercy Corps has a major role to play – to connect different segments of women to technology providers, financial institutions, and MNOs to expand their access to and usage of digital financial services. International agencies like Mercy Corps offer valuable insights about potential client demand to governments, multinational corporations and technology firms that don’t have first-hand knowledge of field realities and needs. Development actors like Mercy Corps play a critical partnership role by mitigating risks for other actors, especially in complex and fragile states.

Looking ahead, what are the key priorities for Mercy Corps’ in financial inclusion?

Mercy Corps will continue to prioritize countries in transition from war or natural disaster or in the midst of economic or social transformation. For us, ‘business as usual’ means partnerships with governments and the private sector to solve complex global challenges of both emerging and pre-emerging economies, including financial inclusion.

Please find more on Mercy Corps current work in financial inclusion here.

[1] http://www.gsma.com

[2] Ibid.