United Prosperity Team Blog

We initiated repayments on loan guarantees this weekend and have returned nearly $20,000 in repayments to individual loan guarantors. This is a major milestone for us.

During repayments the amount of guarantee that is returned is proportional to the percentage repaid on the loan tranche from the bank to the microfinance institution. Thus in case of the earliest loans of June 2009 the repayment is around 40% of the guarantee amount, while for the latter loans in May/June 2010 the lowest repayment is around 9%. Loans in the intermediate period will have repayments between 9% and 40%.

To many individual loan guarantors, the repayments are a validation of the guarantee model. There is also a validation of the guarantee model at the human impact level that I am most delighted to share.

A year back at the peak of the financial crisis Ajiwika, our first microfinance partner was finding it very difficult to raise funds from banks. Based on United Prosperity’s guarantee support a large Indian bank agreed to lend a little over $200,000 over a course of a year to Ajiwika. Since then the total guarantees we have raised are a little over $100,000 making around $180,000 in loans helping more than 900 families directly. With the guarantee support, Ajiwika built a relationship with this bank and their credit history with the local banking system. Further since a large bank was lending to Ajiwika, other banks looked at them a lot more favorably. This expanded the circle of trust and since then seven other banks have approved $3.1 million in loans to Ajiwika that can be disbursed to around 17,000 entrepreneurs. Additionally Ajiwika, has also been able to reduce its cost of borrowing from banks and has reduced the interest rate it charges from its borrowers.

This is just a glimpse of the ‘Virtuous Circle’ that all of us have together started helping so many entrepreneurs and their families many of them known to us through their stories on the UnitedProsperity.org website and many more whose stories of courage and fortitude are similar.

Thank you for all starting the ‘Virtuous Circle’ making a difference to the lives of so many people.

I have been travelling the last few weeks and I am currently in India attending to some family matters and work. I have been spending most of my time in the city of Coimbatore and I recently visited an eye hospital run by the Aravind Eye care system.

Their mission is ‘To eradicate needless blindness by providing appropriate, compassionate and high quality eye care to all’.

What amazed me was how they were living their mission. The technology they use is very modern. The treatment is amongst the best in the world and Aravind has one of the highest treatment success rates in the world. No patient, however poor is refused treatment and several thousands of patients get free treatment.

Shubha and I visited Aravind with a patient at around 3:00 PM in the evening. We did not have any appointment. We entered the reception area and then we were quickly asked to register the patient. Since several patients come from far away villages for treatment, Aravind has done away with appointments all together. The registration fee is Rs. 50 ($1 and 10 cents). For poor patients who cannot afford to pay, it is waived. Aravind subsidizes the treatment for poor patients who cannot pay by the income it earns from those who can afford to pay. As soon as the registration was complete, we were ushered to the first testing station by a nurse. The patient went through a series of examinations – Refraction,  Preliminary examination, Eye and System examination, Dilatation and a Final examination with a doctor. The doctor then recommended an additional consultation with a specialist. We were done with the treatment by 5:30 PM. We were constantly being ushered from one station to another by the nurse and all steps went through with clock-work efficiency.

In some cases the patients require surgery or additional tests for glaucoma etc. All these are often done the same day itself and each of these additional procedures costs most patients Rs. 100 ($2 and 20 cents) or Rs. 200($4 and 40 cents). (Note: Health insurance is still not common in India, so these are actual costs of the treatment and not the copay amount or deductible).

Several aspects are truly noteworthy about Aravind:

- The system is designed bottom up for providing eyecare to the poor and very often illiterate patients. All stations are numbered so patients can be simply told ‘Go to station 10’ for example. Additionally a nurse also ushers the patient from one station to another so even those patients who have no escorts are well taken care of.

- The treatment through various stations happens extremely fast with minimal waiting between stations. It is almost like an assembly line. This minimizes loss of income for patients.

- Their scale is also pretty massive. The Coimbatore hospital treats 1100 patients a day, works 6 days a week and has 140 doctors, 700 nurses and ward staff, and 35 administrative staff.

- The doctors and specialists perform only the critical tasks for which their expertise is truly needed. The rest of the tasks are performed by well trained nurses. As a result doctors at Aravind see many more patients in day than doctors in other clinics. Thereby they gain more experience in treating common ailments and also treating rare conditions of the eye that doctors in other clinics rarely come across.

Aravind reminds me of the concept of Social Business that Muhammad Yunus talks about. I recently read Muhammad Yunus’s latest book ’Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs’. The book is literally a ‘How to’ manual distilling the decades of insight Muhammad Yunus has gathered. Having been through the journey of starting an organization that I see as a social business the book was most enjoyable and I would highly recommend the book to anyone who plans to start an organization whose primary goal is making a difference to the world in a sustainable manner.

Aravind can also be considered as a social business. It does not have for-profit investors in a traditional sense. It is not a typical charity either. It is sustainable and absolutely committed to its mission. It once again proves how imagination and commitment can make a big difference to the world.

United Prosperity is competing in the Chase Community Giving Challenge. Individuals signed up on facebook vote for their favorite charities.  Chase will give the winning charity $250,000, the next 4 will get $100,000 and the next 195 will get $20,000.

You can do 10 easy things in just 29 minutes to help us win.

1. Read this blog – 3 minutes.

2. Vote for United Prosperity: http://bit.ly/b3OxAp - 1 minute.

3. Share with your friends on Facebook, Linkedin and twitter –3 minutes

4. Join the event ‘Chase For Giving - VOTE for United Prosperity’: http://bit.ly/aNfRph

Mark your status as ‘Attending’ – 1 minute.

5. Invite people to come for the event. Invite at least 10 friends – 2 minutes.

6. See if any of your friends are online on facebook chat or yahoo messenger or MSN messenger or google chat. A few are normally online.

Post a quick message for all your friends who are either online or away or have idle status.

“Hi .. Please join this event http://bit.ly/aNfRph and vote for United Prosperity. I just voted.”–5 minutes.

7. Compose an email for your friends and family asking them to vote for United Prosperity. The draft can be taken from the event page: http://bit.ly/aNfRph – 2 minutes.

8. Select people from your address book. Make sure that your family is copied. They will be proud. Finally send the email – 5 minutes.

9. Many of your friends whom you contacted through chat in step 6 would have replied by now. Most would say ‘Sure’ or ‘I did’ or ‘I voted’. Thank them and give them the link to this blog.

“Thanks a ton. Check this out: http://bit.ly/ax9K1N “– 2 minutes.

10. Relax, breathe deeply and enjoy the rush of feel good emotions– 5 minutes.

If at any time till July 12^th, you want another rush of the feel good emotions then repeat steps 5 to 10. This time you will need just 21 minutes.

On May 28^th, 2010 we celebrated our first anniversary since launch of operations. It has been an eventful year.

When we started last year we did not know from where our support would come from. And a year down the line, we know the answer. It came from all over the world. We have guarantors from the US and Canada, Europe – UK, Norway, Germany, France, Luxembourg and many more countries, Asia – India, Singapore, Philippines; Australia and New Zealand. Thank you all for helping us get here.

We have also been extremely fortunate to have several in-kind supporters, team members, mentors, advisers, interns and volunteers. Everyone has believed in the cause and stood by us through this journey.

And the results are there for everyone to see. We made more than $165,000 in loans available and thereby empowered more than 850 entrepreneurs to earn their livelihood and better their lives with dignity.

The difference we are making to the lives of so many poor families has been very satisfying. The local relationships and communities we are building will make our work self-sustaining. A year back, Ajiwika was finding it difficult to get loans from banks especially since the financial crisis had made banks extremely conservative. With the support of the guarantee, a bank in India stepped up and made a loan to Ajiwika. Thereby Ajiwika gained the trust and credibility with the banking community. Since then, five other banks have made loans to Ajiwika. This clearly reflects the power of our guarantee-loan-impact model.

We have two big goals for the second year. First we want more people to know about us and get involved with UnitedProsperity.org. We need the help of the guarantor community here. As an existing guarantor your word carries additional credibility, so please continue to encourage your friends, colleagues and family to join you in supporting poor entrepreneurs and building self sustaining communities. Second, we have to build our internal capacity to execute by raising funds for operations and hiring staff.

Once we accomplish these two goals, then I think we will be on our way to realize the full potential of UnitedProsperity.org, to help the poorest families earn their livelihoods with dignity and build self- sufficient communities. Thank you all for your continued support.

I recently got invited to a panel discussion on ‘Empowering Women Through Microfinance’. This panel is being held at 7:00 PM on the 28^th of April at UCLA Anderson School of Management at Los Angeles. It is being hosted by the Yale Club of Southern California.

The panel has some outstanding speakers - Jessica Jackley, Co-Founder of Kiva.org; Dean Karlan, President of Innovations for Poverty Action & Professor of Economics at Yale University; Jon Yasuda, West Region Vice President of Opportunity International and Eric Weaver, CEO of Opportunity Fund. The panel will be moderated by Professor Robert Spich from the UCLA School of Management.

Lisa Kant, who is organizing the event sent me a brief note sharing the fascinating and thought provoking questions Professor Spich may ask.

- Why do microfinance organizations usually focus their assistance on women?

- Is focusing on women the most effective way to fight global poverty?

- Are there other tools, instead of or in addition to microfinance that add to women’s empowerment?

- What are some of the biggest problems or challenges with the microfinance industry today?

- Which parts of the microfinance chain are most inefficient? What are the best ways to address them?

- What changes need to happen in order to improve the microfinance industry as you see it?

- How do you respond to criticism regarding negative impact on individuals and high interest rates?

- What types of environments can benefit the most from microfinance? The least?

- What are some of the other areas that microfinance channels can be used in: (such as healthcare, education, social)?

- How can technology help? Hand held devices? Cameras? Mobile banking?

- How do you test that microfinance is working? What Statistical methods do you use? What do you think the role of analysis should be in philanthropy and microfinance?

- What does the future of microfinance look like? 5 years from now? 20 years from now?

I am really looking forward to hearing the views from my co-panelists. It is going be an excellent education opportunity. If you are around Los Angeles and have not yet registered for the event, please do so. It is not too late.

Professor Bhagwan Chowdhry from the UCLA School of Management will be delivering the keynote address. He has recently embarked on a project called ‘FAB - Financial Access at Birth’. The goal of FAB is to ensure that every child born in the world starts life with a deposit of US$100 in a bank account at the time of official birth registration.

The stated benefit of FAB account is “Relatives, private donors, other social organizations could design plans in which regular payments are made to FAB accounts to provide for education, training, immunizations and health-care.”

I think the potential outcomes from the successful execution of this campaign are mind boggling in areas ranging from poverty reduction, health, education to better governance and accountability. If every child born has a bank account various governments and related agencies can directly send payments to the bank account of the child bypassing several intermediaries. This has huge potential to reduce corruption and leakages in delivery of public services. Readers of this blog may recollect a similar point made by Nandan Nilekani where he recommended money reaching the beneficiaries directly and the beneficiaries exercising choice on how they would use the money. To quote Nandan Nilekani “1)Money in your hands - direct subsidies. In the form of cash to an account held by each citizen, which would replace the creaky indirect system of ration shops and subsidized rice/fertilizer/kerosene. 2) School vouchers, which give poor students the option of attending either private or government schools. These two alone would bring more cash into the hands of citizens, and give them access to markets.  And it would as a result, create more pressure towards better infra that connects markets, and less red tape in education.”

The FAB campaign is a Big Hairy and Audacious Goal (BHAG). Interestingly if we look at some of the BHAGs, when we have tried to achieve those goals in all earnestness, we have made remarkable progress on many of them. Congratulations to Professor Chowdhry.

I will also be presenting in two microfinance classes taught by Prof. Chowdhry – one for undergraduates and the other for MBA students. Recently I also took a couple of classes at Santa Clara University and at Berkeley. It is most invigorating talking to students who are so invested in the future and have a strong desire to make the world a better place. I am eagerly looking forward to these classes over the next two days.

Last month we visited Ajiwika, our first partner microfinance institution based out of Jharkhand, India. We were very keen to meet some of the entrepreneurs from Ajiwika. We were joined by Tanay Chakravarty, the CEO of Ajiwika and some of his staff.

Our first visit was to Chakri Pahar which is around 10 miles from Deoghar where Ajiwika’s main office is located. We were greeted by several entrepreneurs and their families including Barki Devi and group, and Bandana Devi and group. Many of the entrepreneurs belonged to the Santhal tribe and we received a traditional Santhal welcome where they offer a pot of water with flowers to their guests, which was a wonderful experience. Shortly thereafter we started talking to the entrepreneurs on how the microloans had helped them – Barki Devi bought a bullock with the loan, Bandana Devi increased the inventory in her shop, Juba Hembram and a few others bought a cow.

Most of the stories showed signs of incremental progress, but we were impressed how Shaila Devi and her husband Naresh Murmu had quickly grown their business of making ventilators for houses. Naresh Murmu had been working as a mason for sixteen years. He had the skills but he did not have the money to start his own business. On getting the microloan, he started his business and now he has also employed two other people.

We were also delighted to learn that all the children in the neighborhood were going to school. In some cases, some families who were now enjoying a higher income after taking the microloan were enrolling their children in private schools instead of the government run schools which offer free education. While most of the women could only sign their name but could not read and write, their determination to make sure that their children have a good education was truly noteworthy.

As we were about to leave, Barki Devi sang a Santhal song to mark the occasion. The song was about coming together to create a shared prosperity for everyone. The experience was truly overwhelming and I still cannot fathom how she could choose a song so apt and profound on that occasion.

We visited more entrepreneurs at Nilkothi. Nilkothi is in the neighboring state of Bihar, which has recently experienced very good economic growth. The entrepreneurs here including Shanti Devi, Savitri Devi and other members were mainly involved in agriculture. All the entrepreneurs were highly appreciative of the fact that the microloans are disbursed quickly at their door step. They were excited to see pictures of guarantors coming from all over the world to support them.

We also visited Ajiwika’s branch offices and their head office. The branch offices are very functional and consist of two rooms with a kitchen and an attached bath. One of the rooms serves as an office and has a computer, two desks, a few chairs, a cupboard and a white board for keeping a scorecard of the loans. The staff involved in running the branch sleeps in the office at night.

The impact of the guarantee on Ajiwika has been remarkable. Six months back most of the smaller microfinance institutions like Ajiwika were struggling to raise funds because of the financial crisis. While development lenders such as FWWB and SIDBI were making some loans to smaller microfinance institutions, most of the banks had become extremely conservative in their lending. Banks often tend to work in an informal syndicate. If one bank lends then other banks are more inclined to follow. The converse also holds true, if the more development oriented banks become conservative, then the rest of the banks follow suit.

UnitedProsperity.org’s guarantee enabled one bank to lend to Ajiwika. Now that a mainstream bank was lending to Ajiwika, over the next six months several other banks have approved loans to Ajiwika.

The guarantee has had a catalytic effect. Not only did we directly support the entrepreneurs on our website, but we also provided the spark for freeing up funds locked with other banks to support many more entrepreneurs who are not listed on our website.

Barki Devi’s song of coming together to create a shared prosperity is apt indeed!!

The last few months have been very hectic for me getting things operational, getting the marketing going and also trying to raise funds for operations.

Fund raising for operations is one of the biggest challenges we face and one of the questions I hear very often is why UnitedProsperity.org is a not-for-profit and why it isn’t a for-profit social enterprise. I explain that our model is unique, we are pioneering something new to the world, it involves crowd sourcing and support from thousands of microlenders and that a sustainable not-for-profit model or a social business model works the best for us. However, the feeling I get on several occasions is that a large number of social investors, philanthropists and even many foundations nowadays have already made up their mind on the type of organization they would like to support and believe that all social enterprises need to operate in a for-profit manner giving reasonable returns and in many cases lucrative returns to their investors.

For those who can pitch their organizations in 30 seconds indicating how their social enterprise can help mitigate a social problem and also give returns to their investors I think there are a large number of investors willing to lend an ear.

On the other hand, for those who have started non-profits however innovative, I think it is quite hard to raise operational funding. My most recent experience was in a discussion with a billionaire who thought United Prosperity was a great idea. But he simply walked away in the middle of a discussion when I told him that United Prosperity was a non-profit and I had no intention of turning it into a for-profit enterprise in the near future. And in our discussion I had also not solicited any funds.

To me these incidents serve as a cautionary tale of how far mainstream thinking and perception on social enterprises has gone from the actual ground realities. I think there are social enterprises which should be for-profit enterprises, several need to be non-profits and we need many more social businesses. In my opinion, for-profit social enterprises are not a silver bullet for all problems at the Bottom of the Pyramid and an ideological worldview that only for-profit social enterprises can scale and be sustainable can be pretty short-sighted.

My view that there is a huge role for non-profit social enterprises was further re-affirmed when I heard the presentation from Operation Asha at the IDCA Seventh International Conference-Chicago where I was also one of the speakers. Operation Asha is treating Tuberculosis (TB) in the slums of India. Despite the fact that TB is a treatable disease, it has assumed epidemic proportions in India, claiming the lives of 400,000 and newly infecting 2.2 million every year. India has the highest proportion of its population, 3.3 per capita, infected with TB and accounts for one-fifth of the world’s TB burden.

There were several things about their organization which impressed me a lot:

- They serve the poorest of the poor.

- They are very customer centric in their approach. They have outbound health workers who visit patients at the patient’s home and they also have several TB treatment centers close to the slums so that their patients don’t have to spend time and energy or miss a day’s work to visit these centers. While most government centers remain open from 10:00 AM to 1:00 PM, their centers are open from 7:00 AM to 9:00 PM so that their patients can visit the center at their convenience without missing a day’s wage.

- They practice stringent cost control and the cost of the treatment over 7 months was only $15. Interestingly, the patient needs to go to the treatment center about 70 times during the therapy over 7 months. The low cost speaks highly of the operational efficiency despite the extremely high level of transactions.

- The have leveraged the support of the community, corporate and the government very well. Operation Asha has access to free supply of medicines from the government. This takes care of 3/4th of the total cost. Further, with the space and services given by providers for a modest payment, every dollar is leveraged 35 times. Thus, with an investment of $15 only, Operation Asha is able to provide medicines and services worth $350 and treat a patient for the entire period of therapy, which lasts seven months, on average.

- Each of their centers becomes sustainable from operations in two years.

- They have achieved remarkable automation of their operations and were piloting bio-metrics with Microsoft.

I don’t know how hard it has been for them to raise funding, but anyone would agree that the work they are doing is remarkable and in many areas worthy of emulation in so many areas. We are fortunate to have organizations such as Grameen Bank, Brac, Amul and Aravind which have done remarkable work at the Bottom of the Pyramid and transformed lives. Had the ‘for-profit’ filter been applied very early in their lives, we may have never heard of these remarkable organizations.

On Wednesday, October 21, Columbia University’s NetImpact Group hosted a discussion at Lerner Hall on “Models of Microfinance”. Accion was represented by Erica Dorn, Coordinator of their Kiva partnership; Kiva was represented by Sierra Visher who is Kiva’s translation team leader; Grameen was represented by Daniel Brodhead, Communications Director; and I represented United Prosperity. Sara Smolley, NetImpact’s head, opened the event with some remarks about the importance of microfinance, and Nevin Shetty, Co-Coordinator of United Prosperity’s New York Chapter, moderated the panel. There were about 50 to 75 people in attendance, most of whom were students though there were some working folks in the audience, too. 

The panel discussion highlighted some differences between the various organizations: Kiva, Grameen, and Accion were all supporting lending in the United States while United Prosperity’s focus is on those living in absolute poverty in developing countries. In addition, United Prosperity exclusively provides guarantees while the other organizations tend to have a focus on micro-lending. Kiva and United Prosperity tend to rely more on volunteers while Grameen and Accion had larger full-time staffs. The discussion also touched on topics including the rapid growth of the industry, challenges to expanding microfinance, and the potential of cellular technology in expanding opportunities for the poor. 

I’d like to thank the United Prosperity’s New York Chapter and Columbia’s NetImpact group for organizing a terrific discussion!

Hemant Wadhwani and Cindy Yang

Nevin Shetty and Ashok Parameswaran

Praveen Srikanth and Siddharth Dandekar

Katie Wold, Suzie Sagues, Nevin Shetty, and Anthony Winslow with dollar bills to show how a $10 guarantee turns into a loan of $20 or more!

Rita Bagai, Diti Sangoi, Kanika Marwaha, and Amar Patel

Kristi Polsdam, Aditi Shah, and Siddharth Dandekar making a guarantee!

Krista Mar, Matt Neimken, and Sara Smolley

I am happy to report that the first happy hour organized by United Prosperity’s (first) New York Chapter was a successs! Despite torrential downpours, over 30 people came out to learn about United Prosperity and spread our message.

Everyone had a terrific time.  Nevin Shetty and I said a few words to the group about why anyone who is passionate about sustainably eradicating absolute poverty should get involved with United Prosperity.

A special thanks to Columbia University’s Microfinance Working Group for co-sponsoring the event, to the Leela Lounge for hosting it, and to Lisa-Marie Gil and the other New York Chapter organizers for their outstanding job in organizing it.

We look forward to organizing many more events. Please join us one facebook as well : http://www.facebook.com/group.php?gid=100842699351

The New York Chapter of United Prosperity is organizing its first event - a happy hour! We’re looking forward to telling people about United Prosperity and how to get involved with the Chapter. Please spread the word to your friends in the NYC area.

Where:

Leela Lounge
1 West 3rd Street (between Broadway and Mercer)

When:

Wednesday July 29th, 6-9pm

$5 beer and wine all night
$10 suggested donation
Presented in conjunction with the Microfinance Working Group