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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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Tiny links and multiple lives

March 17th, 2009

Compressed communications

The first time I heard about Tiny URL some moons ago, I laughed. I couldn’t understand why someone would take the pain of creating a programme that apparently serves no purpose. But then eventually when I started Twittering more often than I did a few months back, I realized what a boon it is. But the thought of someone making a living making words (OK, links) tinier is way weird, when you come to think of it. As I explore social media tools more, I find myself slaving to communicate in 140 characters or less and find increasingly that the world is rules by the power of the link!!! I suppose this is no different than how people in a bygone era got a high using applications like WinZip of StuffIt that allowed files to compress and fit into a “floppy disk”. I am struggling to even remember how it looked like- the floppy disk, I mean!! In a world that is ruled by communicating in the shortest possible phrase, and one where prepositions and conjunctions are almost defunct…I dnt no whts coming nxt but’ll b intrstng 2 c!!

Getting a (second) life…

 

At a recent talk I gave on using social media for effective communications, one of the participants asked me if I could share how they could use Second Life to position their brand. While waxed eloquent about this 3-D virtual world created online by its users who buy land, build houses, go to parties, and otherwise “live” a virtual life, it set me thinking. When you join Second Life (http://www.secondlife.com), the first thing you do is create an avatar, your personal virtual representation. Not too different than a “Tiny Url” really. I don’t have an avatar and the first time I meandered around the Second Life labyrinth along with a friend who had one, I must admit I couldnt figure the head or tail of what one is supposed to do there. I mean, when I am such a poor shopper in real life, why would I want my avatar to buy stuff online? And I definitely wasn’t interested in seeing a virtual art gallery or go on a virtual picnic, when I could have so much fun doing it in real life feeling the sun on my back and a group of chattering kids around me.

But what I realized was that chatting up with “art critics” on Second Life was much less overbearing than one has to go through with nose-up-in-the air types, who make no sense whatsoever in their critique of art, at least to me. I am warming up to the thought that I could find fellow social entrepreneurs and social media officianados like me with whom I can have a discussion without moving out of my house. Maybe its time to create an avatar. Besides, Philip Rosedale is really cute!! J

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Throwing sheep and some others….

March 3rd, 2009

I am halfway through reading this book written by my friend Soumitra Dutta and his associate Matthew Fraser- “Throwing Sheep in the Boardroom”. I have been generally cynical of books written on some current trends proclaiming to be the next “how to” manual. Its with this attitude that I started reading the book. I must admit I had to swallow my cynicism as the book is thoroughly enjoyable.

 

Picture this- Jimmy Wales who writes the foreword for this book draws comparisons between HR professionals getting paranoid abut employees misusing the employee handbook in the organization wiki, and being completely in control to deal with a situation where an employee demonstrates some ridiculous behaviour like pouring coffee over a colleague. This book brings out areas that business professionals would feel reluctant to use and deploy social media but would be greatly benefitted if they did. It talks about the way some of these social networks are transforming our lives. The narrative is simple but pretty insightful and thought provoking. The very fact that half-way through the book I feel compelled to pen down my thoughts and share with people, many of them unknown on a public medium should be testimony enough!!

 

One of the reasons, opine the authors, that these social networks, be in Facebook or Myspace are so popular (almost compulsive for people who participate in them) is because they give vent to a spontaneous expression of the self, that is restrained at the workplace, no matter how “casual and cool” the organization you work for is.

 

Whether the motivation to join the social networking bandwagon is rational or irrational, the fact remains that markets today are no longer captive to traditional business models. Budding writers no longer need a big publisher’s back up to come out with a book (though it sure helps!!), nor do creative entrepreneurs need traditional funding avenues to fuel their ideas. It’s a marketplace where the power is shifted to the consumer. Even Facebook, that introduces concepts that are unacceptable to its users is forced to retract within days of launching.

 

The one thing that fascinates me about this “power of collaboration” that’s taking over every field of work we are in is its impact on “structured hierarchies” in organizations, and in challenging traditional roles that people have come to accept as the norm. I find a lot of organizations and even senior managers wanting to appear cool, talk a lot about adopting Web 2.0 methodologies and platforms in their organizations, but when it comes to sharing knowledge and collaborating, which is the essence of social networking, most don’t walk the talk. Like Soumitra says, “Knowledge sharing and mass collaborations are nifty management concepts but in the real world where human nature meets organizational behaviour, people behave according to their basic survival instincts.” The issue isn’t really with the technology we have or the platforms existing, but in the people who manage them. Thankfully for every paranoid manager, there is also one that doesn’t shy away from “throwing sheep”…sometimes in the boardroom!

 

I am excited at the prospect of participating in a blog camp this weekend (see http://wiki.ibnms.com/BlogCampDelhi2), where the agenda, the speakers and the participants all are nominated through a process of collaboration. Would be interesting to see how that translates into action in the real world!

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Pink slips and pink slips

February 12th, 2009

I am tired of the colour pink.

 

This has nothing to do with Valentine’s day fatigue, and I definitely don’t have anything to do with Senes’ of any kind. I am tired because that’s the flavour..er…colour of the season. Not so much the unsold pink hearts and V-day merchandise but more pink slips due to this seemingly endless recession, and our “Pub going Loose and Forward women” a-la- Munnabhai style  taking pink slips of another kind to a completely new level!

 

 

 

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Trust quotient- is the marketing wheel turning a full circle?

February 12th, 2009

 

 

I spent last weekend preparing for a workshop on brand management that I am leading shortly. The turn of events in the last few months set me thinking. As did this survey that I read recently: Spending on social media and conversational marketing will outpace that of traditional marketing by 2012, according to a new study conducted by TWI Surveys, Inc. on behalf of the Society for New Communications Research.” (Source: PR Newswire).

 

Make your brand last…that’s the mantra most marketers including myself are taught in B-schools. Make it visible and make it salient. So off one goes, creates an identity for the brand, designs fancy multi-million dollar campaigns, gets a cool brand ambassador and then sit back, relax and enjoy the adulation. Right? Wrong. Without seeming too clichéd, there is obviously something more that will ensure longevity of brands.

 

The contrast between a Citibank and an HSBC is too obvious not to notice. Both are highly visible brands, having a huge global footprint. So why is it that today, the two evoke different sentiments in the minds of the consumer. Its not a coincidence that HSBC has a better association with the values in the geographies it operates than Citibank, something that regular advertising and marketing cannot help much with. What is it that forces Loreal to keep The Body Shop brand alive, despite the fact that spend zilch on advertising?

I am beginning to get convinced that traditional marketing, with run-of-the-mill campaigns will become obsolete if they are not firmly integrated with a strong non-traditional marketing mix using third-party channels, both physical and online media.

Its obvious that all marketing must lead to trial. Today, trust and consumer confidence in a brand is by far the most important attribute. Non-traditional is better at driving trial because it acts as third-party peer validation. And today, such validation is imperative and perhaps the most  powerful driver in marketing. It also comes the closest to approximating an actual experience when “someone like you” – endorses the brand attributes, be it a media editor, a third-party champion, a subject matter expert blogger or other consumers.

Trial creates the opportunity for experience, but that experience had better not disappoint!! There must be alignment with the brand attributes, and the consumer needs to be made aware of those attributes before driven to trial. The consumer must be brand aware, brand attributes must be delivered as a brand promise, and the brand experience must live up to the promise. Any break in the sequence is the difference between success and failure.

 

 

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