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Is the crisis in the microfinance industry teaching valuable lessons?

March 22nd, 2011

Social enterprises have been touted as the best thing that happened to the world in a long time. Many of its proponents put forward an ambitious agenda of creating jobs, providing training and developing local services in areas of serious and long-standing deprivation, while holding out the prospect of financial viability rather than grant dependency. Without doubt that the momentum in the social enterprise “industry” has accelerated significantly (I have to add here that yours truly jumped the bandwagon two years ago, and has never been happier!!). But is this growth and attention justified? Are communities and their local economies that are supposed to be the main beneficiaries of these businesses benefitting?

I think one of the issues with the term “social enterprise” is that there are inconsistencies in how people define it. And more importantly, how such organizations in the overarching context of privatization and marketization survive and operate. Are these organizations really a radical alternative model for doing business in a social and ethical way?

The present discourse and debate around the microfinance industry is a case in point. Once the poster child of the social enterprise world, the microfinance industry has come about to signify everything that’s gone wrong with the social enterprise trying to be commercially viable. Why is that? Is it because enterprises that have a social agenda can’t be seen as making profits? Or is it that they are now a force to reckon with and the rest of the market forces are just coming to terms with this new force majeure?

Having known the proponents and key players of both Grameen Bank and SKS Microfinance for a while now, I know for a fact that their intent was never in doubt. Both Prof. Yunus and Vikram Akula are visionaries who dared to dream and give a platform for their dreams to bear fruit. And they proved C K Prahalad’s theory that there is indeed a huge opportunity to do business at the base of the pyramid. So what went wrong?

I inherently believe that any enterprise, social or otherwise cannot be impactful and do justice to its stakeholders if it doesn’t become sustainable. Financially, and operationally. But its also true that this new age financially viable social enterprise is seriously altering existing consensual and sympathetic relationships between the for-profit and not-for-profit service providers. Many people, especially the NGO sector and the polity view this as an encroachment of private sector companies into services previously delivered by the voluntary and community sector.

But I also believe that its important for social enterprises delivering value to a certain community and stakeholder not to don the halo of a messiah out to eradicate all evils that are prevelant in our society in one sweep. The microfinance industry has done a lot of good in the markets they have operated. But their marketing pitch has been that of “eradicating poverty”. I do believe it was this mismatch between what they do on ground (which is significant and highly impactful in providing those with no access to any finance to become self-reliant) and what they project and are perceived. And when it comes to owning an important stakeholder, which is the “poor”, the biggest owner of them all, especially in a shaky democracy like we have in the Indian sub-continent, the politicians feel threatened. And that really has been the reason why the wings of an increasingly mature microfinance industry have been cut unceremoniously.

It’s a lesson for all social enterprises that walk this tight rope between marketization and the intent to create social impact. We need to be credible and we need to articulate what we do and position our products and services without trying to over emphasize its impact on society . It’s a classic marketing lesson that we were taught in B-schools that have acquired a new meaning in the context of social business. Also, it’s a sign that the social enterprise model is maturing. We are moving on from fledging entities led by the heroic entrepreneurial individual who performs miracles on a shoestring budget and against insurmountable odds and reaching out for an organization built with solid citizens, well-educated professionals that could run important, properly funded local enterprises efficiently.

In 20 years time, when most for-profit businesses as well as voluntary groups have a strong social enterprise subsidiary, our kids would be learning about these times in case studies of how they fuelled the paradigm change!

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every drop maketh an ocean…

October 17th, 2010

So mum used to say to me when I was a kid.

Interestingly, as I get involved more with the Palliative Care movement in Kerala, I realise that its success didn’t come from huge donations of money by a few well meaning philanthropists. In addition to a brilliantly concieved and implemented volunteering programme, a big factor in the success of the programme has come from Micro funding or small donations from a large number of people in the community (see www.concernwithoutborders.org).

This also has been a big contributor to bring in a strong element of sustainability and local ownership to community owned programs.

When programs are aided by philanthropic donations by individuals or trusts, or managed by a non-governmental organisations (NGO), generally the implementing agency takes responsibilities for procuring and managing funds and the community is neither expected to contribute nor have any direct involvement in how this money is spent. Community involvement if any is marginal and not intrinsic to the definition of success of the programme. Such programs owned by external agencies suffer from the disadvantage of being unsustainable once the agency / funder decides to pull the plug on the programme.

A programme that has ground-up support and has demonstrated effectiveness can also be more easily integrated with the mainstream programmes run by the government, and impact a larger policy and implementation decision.
For example, in Kerala, the 300 odd palliative care units are organized and supported by Community Based Organizations (CBO). Most are independent units, but some are based in government and private hospitals. The CBOs are mostly supported by local communities and are self-sustaining in terms of manpower, funding and other amenities. In many places, the Local Self Governments Institutions (LSGI) have come forward to work with these groups in providing home visits, outpatient service and free drugs for the poor. Recognizing the need of palliative care as a primary health care and the importance of home care services for patients with long term/ incurable diseases, the Government of Kerala recently brought out a Kerala State Policy for Pain and Palliative Care Services. The National Rural Health Mission (Kerala) has initiated a major project in Kerala this year to facilitate the development and expansion of community owned palliative care services in collaboration with Local self Government Institutions in the state.

In many ways, microfunding is the opposite of microfinancing where individuals take small loans to initiate a small set up to be self reliant.There could be so many initiatives in education and healthcare that could take a cue from the micro-funding model and make a big difference, just like micro-financing has demonstrated.

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Dreams to reality….

September 6th, 2010

It’s a beautiful feeling when dreams begin to look real. This week, I spent many “two-hours” smiling to myself just thinking about and experiencing everything that was unfolding around me.
The first round of recruitment of visually impaired guides at the first Dialogue in the Dark centre in India got off to a flying start. The quality of candidates and the enthusiasm that I could feel from the team even though I was many hundred miles away from the scene of action has made me all excited and looking forward to the grand opening in November, 2010. I have often been asked about what’s so special about this exhibition that has made it survive the test of time and impact the millions that it has. I guess it has got to do with the fact that it’s not just about giving the disabled just another job or telling the sighted what it is to be blind. It has got to do with empowerment and respect for the other through a role reversal in a setting that is not preachy and contrived. I have seen the impact this programme has had in many countries where the blind are relatively well taken care of by the state, and I am filled with nervous optimism on what it can do in a country like India. Watch out this space for more updates!
I wrote sometime back about the status of palliative care in the world and how community-driven initiatives like the one run by the Pain and Palliative Care Society in Kerala can be a role model. The EIU report on this subject seems to have generated quite a bit of buzz and spurred an enthusiastic cartoonist to let pictures do the talking. Sometimes, pictures really do the talking, don’t they? http://www.facebook.com/album.php?aid=13338&id=109063229135563.
Inspired by some of the work that organisations like The Blue Yonder, Ecosphere, Help Tourism, etc. have done for the revival of economy through supporting local community initiatives, I really have come to believe that tourism in many ways can be a change maker in bringing about a paradigm shift in the average citizen of the world by making them more aware on how one can really contribute real time to making the world a better place to live. And it was a blissful day long crash course I had this weekend when the members of Green Circuit, an alliance of a few committed responsible tourism leaders across the Indian sub-continent shared their stories and experiences of how one can bring about sustainable change in remote areas while preserving the local culture and heritage through tourism. A real case study in measuring social impact that has been possible through commercial ventures, and involvement of local communities.

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my love affair with words!

August 5th, 2010

Words are beautiful. They can evoke such an array of emotions, have life-altering effects, kill people or elicit crazy laughter. The first word that I fell in love with, was the word “enhance“!! I must have been in middle school and had always been a voracious reader. But my love affair with words started then. I had never used the word „enhance“ all that much in the past….and when I heard a classmate use it in a debate, it struck me how apt that word was in that context. And since then there have been numerous such flings I have had…some short-lived, and others that have stayed with me.
I look out for words that convey the meaning they do in ways more than one. In the way they sound, and the reaction they evoke…. Diffuse for eg….you can almost sense a blue ink seeping through a glass bowl of water! Or Nebulous ..a word that brings to mind visions of a bulbous amoeba like structure…or Tingling!!!
By the same yarstick, there are words I hate…..everyday words like Which…and not-so-everyday words like Hackeney. No apparent reason, maybe they were used in a context that brings up unpleasant memories! The best part is that a word can have this ability and the power to affect one in any way they want. Just that we dont realise it most of the time!! This is one of the reasons I love words.
Like my fellow lover of words, author Bill Bryson puts it…“Any language where the unassuming word fly signifies an annoying insect, a means of travel, and a critical part of a gentleman’s apparel is clearly asking to be mangled.“

And then there are words that have kept changing meanings over a period of time, which is why perhaps they dont evoke such a passionate response in one as do the others. Brave, for example, once implied cowardice — as indeed Bravado still does.

A word that perhaps describes this best is Nice, which is first recorded in 1290 with the meaning of stupid and foolish. A century later, it was being used to mean lascivious and wanton. Then at various times over the next centuries, it came to mean anything from extravagant, elegant, strange, slothful, unmanly, luxurious, modest, slight, precise, thin, shy, discriminating, dainty, and eventually in the last few centuries — pleasant and agreeable. Perhaps, that is why when someone says „you are nice“, one doesnt really know what exactly they mean!!!
That was a nice long blog post…………

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when a social cause results in building a commercial global brand

May 16th, 2010

What do you do when you meet someone who sets up an innovative business to fund a movement to bring alive a dying river, and makes it a global brand in 5 years flat? You sit with a smile on your face and mind full of intrigue and having a firm belief that all is really well in this world! Its exactly what I felt when I finally met my cyber friend of many weeks, Gopinath Parayil, the man behind the Nila Foundation that was set up to raise awareness among local communities and the general public alike about the devastation that a dried up river system can cause. Because in India, as is true in many other parts of the world, the river and other water bodies are not merely a source of water. They are the thread around which history has been written, people lives have been intertwined and where the ecosystem draws its energy from. To build a sustainable movement around NIla Foundation, Gopinath set up a responsible tourism company called the Blue Yonder that is a credible global brand name today in the responsible tourism world.

It’s an incredible story. His. One of dogged passion and a survival instinct that only the bitten can possess. And an amazing case study in the power of word of mouth marketing and the business impact right market segmentation and positioning can have. But its different from any other case studies that I have read or come across, because it’s the first time a social project was the cause of the establishment of a commercial global brand, and not vice versa. It’s a story that inspires one to believe that you can be the cause of change, however daunting the cause might be.

And I came away truly inspired and hungry for more…..

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The power of technology and the human spirit

May 5th, 2010

This has been a stressful week with many unpredictable issues cropping and unexpected surprises (obviously not all pleasant!!) springing up. And I have been up since 5 AM to do my bit as a judge on a panel with exceptional individuals across 5 geographical locations and 2 continents. We had the onerous task of identifying one business plan submitted by the contestants of the Acara Challenge, who are engineering students aiming to create a viable commercial business solution to a particular social issue that they think is crucial to address over a looong 4 hour web meeting. The topic was Water and I have to admit the grogginess I experienced when I woke up to log in to the call was gone in a matter of minutes!!

The marvel of technology connecting this motley group of individuals each of who in their own right is trying to initiate change, and the human enterprise made me realise that at the end, this is what really makes things happen; makes the world go around- This will to bring about change and the technology that will power it. And I am glad I got an opportunity to witness the optimism of youth combined with the maturity that can only come from experience this morning. The results will be out soon and I would love to see the project we chose, to see the light beyond the secure environs of the University it was created and make a difference to the lives of many with clean water and fresher air. In a manner that’s sustainable and scalable.

Life is good.

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Its makes sense to be “good” in business

November 27th, 2009

When an oil company transforms its marketing to focus on health and improves its market share, and when a leading bank becomes carbon neutral and insists that the people it lends to also be taking measurable steps to reduce their carbon footprint, you know the world of business is changing. Marico and HSBC are not exceptions. They are becoming a part of an increasing brigade of businesses who are changing their business model to become more sustainable. Their focus on creating a social impact while meeting and improving bottom-line is not restricted to a few CSR projects that they might initiate. It’s about changing business process and weaving in the social impact within the fabric of the business itself. At the NHRD annual conference that’s happening in Mumbai even as I write this piece, there are only two key thoughts being discussed at the conference. To be more Inclusive and to be more Sustainable. It’s what the keynote speakers spoke on and it has been the underpinning of every concurrent session.
The big question to ask is…are today’s organizations prepared for this big shift that’s sweeping across, or are they still struggling to understand the gravity of these words and not entirely sure how they can adapt their business models to this New Normal. In my view the biggest challenge is bringing about a change of mindset among today’s leaders, for it’s their will and clarity of thought that will bring the rest of their organization up to speed. And this change of mindset needs to come from experiential learning and mentorship from those who are ahead in the maturity curve. Perhaps its time our B-schools and organizational design programmes in corporations take a relook at their programmes and address this with the urgency it deserves.
The fact that BMW Foundation managed to get a buy-in from 200 of their top global leaders to assemble in India for 3 days to talk about this subject should be a good indicator of the behaviour organizations are demonstrating to not just survive but have a competitive edge in the future.

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Two sides of Entrepreneurial success

November 5th, 2009

I gave a talk recently to a group of senior managers of a large multi-national bank on how social impact needs to become a part of the fabric of any for-profit organization. I used my own personal journey on the road to being a social entrepreneur to articulate my thoughts. Social responsibility cannot be construed as opposing the principles of competition and profitability, in fact far from it. Not only can in resurrect the brand image of any organization and reinforce its standing as a trustworthy entity in the eyes of its stakeholders, it can actually add directly or indirectly to the profitability of the business. It was heartening to see that seasoned business leader crowd nod in agreement. Signs of changing times?
American Apparel differentiates itself from low-cost competition with socially acceptable and sustainable production (e.g., domestic production, higher average wages, and compliance with environmental interests). So does Fab India with its backward integration of artisans and keeping age-old dyeing traditions alive while they show their marketing savvy in getting those weavers their due. Allianz Global Investors have invested in a Dialogue Training Centre at their headquarters in Munich, not as a philanthropic CSR measure, but as an inherent operation to bring in mindset change in their leadership that is bound to impact their ways of conducting business.
I believe that the days of “aligning brand” to CSR are over. The brand and therefore the business have to demonstrate profitability through social impact. A study done by Deloitte L.L.P. in 2008 suggests that many companies may be missing the opportunity to leverage volunteerism to develop business and leadership skills. Deloitte surveyed 250 human resource managers from Fortune 500 companies across the U.S. as part of its 2008 Impact Survey. About 91 percent of those surveyed agreed that skill-based volunteerism — applying one’s expertise in areas like technology, business strategy, human resources or finance to a nonprofit’s operations on a pro bono basis — can actually sharpen that employee’s professional and leadership skills.
But a miniscule of them actually think about this as an area to demonstrate profitability. Its high time Triple Bottomline, a phrase was coined by John Elkington in 1994, to describe the concept that a company’s responsibility be to stakeholders rather than shareholders, is adopted as a norm than as an aberration. In this case, “stakeholders” refers to anyone who is influenced, either directly or indirectly, by the actions of the firm.
Corporate social responsibility as it is seen today by organization is no different than an ISO standard, a seal of ensuring quality in the world of global “citizendom”. It is worn as a badge to demonstrate credibility and communicating the “intent of ethical behavior”. Its important no doubt, but I firmly believe that if corporate social responsibility is understood to be a core competency, which strengthen intangible and temporarily inimitable assets such as integrity, credibility, reputation, and human or social capital, it enables companies to create innovation, develop new markets, clearly differentiate themselves from competitors, or influence the competitive environment to their benefit. Merely showing off charitable gestures, sponsoring, or taking on pro-bono projects, without having such activities anchored in the business philosophy, cannot generate sustainability. Profits and Ethics are not contradictions, they are two sides of the same coin of entrepreneurial success.

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Dull or Dim?

August 1st, 2009

I read this article by David Brooks in the New York Times with much amusement.

He claims success for today’s CEOs comes more from from a focus on hard skills. I wonder if Mr. Brooks has blinkers on to what’s happening around in the world. Just one look at CEOs who have demonstrated traits that he holds so high in esteem in companies would tell him that his theory as far from the truth as possible.

I have been following the Harvard Business debate closely and the writing on the wall is clear. Its time that not just leadership but also schools that are breeding grounds for future CEOs need to look inward and rethink their strategy so tomorrow’s leaderrs are more collaborative, transparent, empathetic and inclusive.

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Social media- the good, the bad and the Ugly

June 2nd, 2009

First- the good. Its heartening to see ground-up momentum for a call to action. A few weeks back I got a FB update from one of my friends on the social networking site, Onir (a filmmaker, who’s made sensitive films like My Brother Nikhil in the past), about this film he was making on the story of a child abuse survivor inspired by a true story. What excited me was that Onir was using FB and other social media effectively to not just promote the film, Abhimanyu, but also raise funds for the making of the same. He has got several volunteers to support the initiative in direction, promotions (me included!) and other aspects of film making, purely by word-of-mouth. Couldnt be a better case study to demonstrate the power of social media, if it needed one anymore anyway!
I am totally in agreement that topics like child abuse must come out in the open. In India, one out of every five girls and one out of ten boys face some form of physical or psychological abuse. Sadly, most of these incidents are never reported and innocent victims are forced to suffer in silence. The brave few that do come forward are woefully underserved by a society that prefers to look away and a legal system that doesn’t care.
I am enthused by the fact that this initiative will also be a slap on the face to the power-hungry producer/multiplex coterie. Bravo new cinema!! Anyone who wishes to be a part of this initiative, either in the form of monetary donation (which will get the donor suitable credits in the film) may contact me on this blog. Incidentlly, the script of Abhimanyu has been nominated in the new category of Best Educational Movie, Triangle Media Group (UK)Global Award Nominations for 2009 for its script. www.bollywoodhungama.com/news/2009/05/18/12881/index.html

The Bad (not so bad really!!)
An interesting trend I notice when I scan Twitter and Friendfeed for news and trends. Unlike TV that thrived on “sensationalizing” bad news, it was heartening to see all news- bad and ugly included getting evened out on social media sites. So my fellow communicators while breaking their heads over “exciting” headlines need to rethink their new media strategy if they have to garner attention of bloggers and master tweeters, for its not a sensational headline, but a news that is new and provocative in its content that will garner attention. Now, if only broadcast and print take the cue…

The Ugly
I learnt through a recent post on Oliver Marks’ blog on ZD Net that hundreds of teens who coordinated through MySpace and Twitter got together in South Philadelphia, hijacked a taxi and created mayhem and rioting on the streets http://blogs.zdnet.com/collaboration.
The reasons were not very clear in the posts, but what’s interesting to note is that the powerful collaboration that’s possible today through social media can also turn ugly. Is it time for a new set of rules?

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