Two Cents on Impact: Untangling Microfinance’s Gordian Knot, Part 2

(Photo courtesy of Mad House Photography)

In a recent blog post, I described why measuring impact in impact investing is so darn complicated. In summary: it’s hard to define and quantify; the measuring process can be burdensome for many microfinance institutions (MFIs); and it’s simply just not standard practice yet.

So what does this mean for me and other MicroPlace investors? Well, it’s going to get easier for us to determine whether our investments are making an impact as the industry continues to mobilize to make this type of reporting standard practice.  

Two Cents on Impact: Untangling Microfinance’s Gordian Knot

It’s been nearly a year since I made my first microfinance investments through MicroPlace. I’ve learned and written a lot about various facets of impact investing, from navigating a prospectus, to microfinance interest rates, to Social Impact Bonds and beyond. Now, I’m wondering: Have my investments actually made an impact on people’s lives?

Unfortunately, answering this question has been more difficult than trying to untangle the Gordian knot. It has led me to the biggest challenge in impact investing: measuring impact.

Two Cents on Impact: Will the new Social Impact Bond Right Society’s Wrongs?

 

Image courtesy of ThirdSector

 

There’s a new kid on the impact-investing block: young and full of promise, yet easily susceptible to excessive bureaucracy. I’m referring to a “Social Impact Bond” (SIB), a new financial instrument that straddles the public, private, and non-profit worlds, using a market-based approach to help right society’s wrongs. This type of bond aims to serve vulnerable populations—like the chronically homeless, juvenile and adult offenders, and low-income seniors—by scaling effective nonprofits that are unable to raise enough expansion capital through traditional fundraising channels.

How to Support Sandy Relief Efforts Through eBay and PayPal

This week, we’re all reeling and dealing—directly or indirectly—with the aftermath of hurricane Sandy.  The latest cost estimate of the damage is up to $50 billion.  Many Americans (MicroPlace investors and borrowers included) who were affected are in trouble, and many of those who weren’t are eager to help them.  PayPal, our parent company, has a long history of mobilizing their users when disasters strike around the globe. The generous PayPal community has raised millions of dollars for nonprofits doing critical work at the site of major disasters. Sandy is no different.

You can use PayPal to donate right now to a featured nonprofit, like the American Red Cross and the Humane Society, leading Sandy relief efforts. PayPal is waiving its transaction fee until November 19, so the nonprofit will receive 100% of your donation through this campaign, which has already raised more than $250,000, mostly through donations of $25 on average.  Many people taking small actions pays off!

Your donations through PayPal are tax deductible, so you will receive a tax receipt.

If you’re an eBay user, you can buy items that specifically support nonprofits doing relief work, buy any items and check out using your PayPal account so you can donate to your favorite nonprofits as you pay, or donate a percentage of your eBay sales (and get the same percentage of listing fees credited back to you). This can be done through eBay’s charity fundraising platform, eBay Giving Works, which has enabled buyers and sellers to raise more than $300 million for nonprofits since the program was created in 2003.

We hope that MicroPlace investors and their families are safe and sound. And for those now dealing with the aftermath, we wish you a speedy recovery and return to normal.

-- The MicroPlace team

Two Cents on Impact: A Mobile Money Revolution in the Developing World

Every day, business headlines tell us that mobile is the future of commerce, education, advocacy, and … fill in the blank. To put this into perspective, today, 85% of the world’s population has access to a mobile phone with voice and text capabilities, according to a recent report from Ericsson. India and China are growing most rapidly, followed by Brazil, Indonesia, and Bangladesh. By 2018, voice traffic will be very small compared to data, which will grow about 20 times from today’s consumption levels. Although growth varies by region, global data usage doubled in 2011.

This is great news for the developing world, where access to mobile phones is widespread and people are increasingly using them to create new livelihoods, manage their finances, stay informed, and engage with government. For instance, grain traders in Niger compare market prices across the country using their mobile phones, cutting the cost of traveling to different markets, which can result in a 30% profit increase. And in Kenya, rural AIDS patients receive SMS reminders to take their antiretroviral drugs. Not only is this less expensive than in-person reminders, but it is leading to higher rates of medication taking, according to a recent report, “Maximizing Mobile,” from the World Bank.

There are many exciting mobile innovations geared towards improving lives in the developing world, some based in their local markets and others developed internationally. Here are four noteworthy innovations focused on improving access to financial services and fair wages:

Labor Link

Developed by California-based nonprofit Good World Solutions, Labor Link allows companies to easily communicate information—via SMS and voice recordings—to workers across their entire supply chain, and to collect real-time data from them on satisfaction, working conditions and social impact. This is accomplished via mobile phones and is free to the participating workers. The tool launched in Peru in 2010, having expanded today to India, Brazil, China, Dominican Republic and Sri Lanka. Working so far with brands like Eileen Fisher, Marks & Spencer and Patagonia, Labor Link has served 10,000 workers to date, and is hoping to expand that to more than 100,000 by 2015.

InVenture

Three quarters of the world’s poor are unbanked, with no hope of accessing basic financial services because of lack of credit scores. This is why InVenture, with offices in Bangalore, has set out to help low-income individuals and small businesses track their daily accounting via mobile phones. This allows them to better manage their finances, and InVenture to collect the data to calculate their credit scores, which will ultimately help them secure better loan terms and be considered bankable. InVenture also offers the data to lending institutions (e.g. microfinance institutions, or “MFIs”) so that they can actively monitor the health of their portfolios to improve visibility into their lending performance. The organization has five lending partners in India, thousands of users, and is growing about 30% a month. It’s planning to expand to Kenya in 2013.

Zoona

Formerly called “Mobile Transactions,” this Zambia-based company allows people to send and receive money quickly and easily through their mobile phones. The vast majority of financial transactions in Africa are done with cash and paper, because in countries like Zambia, more than 80% of adult income earners are unbanked and have very limited access to computers. This is a problem, because dealing in cash is expensive, inefficient and insecure. Besides transferring money, Zoona allows people to securely store savings on their phones, receive insurance payouts, and receive and repay loans. It uses a distributed network of agents who serve as live ATMs, collecting and distributing cash for transfers and other transactions. The company is currently processing $5 million a month, with 75,000 active users in Zambia, Zimbabwe, Mozambique, and Malawi.

For another example of a wildly successful application of this type of technology, check out mobile money service M-Pesa, used by at least 70% of the Kenyan population and operated by Safaricom, Kenya’s leading mobile network provider.

Kopo Kopo

In the U.S., there’s PayPal; in Kenya, there’s a PayPal-like up-and-comer—Kopo Kopo—also working to solve the inefficient cash economy of Africa. With backing from venture capitalist superstar Vinod Khosla, the 2-year-old startup (which started as a nonprofit serving MFIs) allows Kenyan consumers to pay merchants via their mobile phones, while providing a web-based application that enables small- and medium-sized businesses to accept and track these mobile transactions.  It also allows businesses to analyze buying trends and communicate with their customers—about upcoming sales, for instance—via SMS. The company has recently partnered with Safaricom to enable Kopo Kopo merchants to process M-Pesa transactions. Currently operating only in Kenya, Kopo Kopo hopes to expand into all of East Africa within five years.

The mobile money future of the developing world is promising, but there’s work to be done to ensure that the people who need mobile financial services most—the poorest of the poor—aren’t neglected because telecom companies have little interest in building out infrastructure in rural markets and because mobile services providers’ transaction fees are prohibitive.

Does anyone know of other organizations that are working to resolve these problems? If so, please leave a note in the “Comments” section below.

 

-- Lonnie Shekhtman
Lonnie is not an employee of MicroPlace and is paid by MicroPlace to produce her blog series.