Archive for November, 2006

Is charity the wrong approach?

November 18th, 2006

Muhammad Yunus, the recently announced 2006 Nobel Peace Prize winner and founder of the Grameen Bank in Bangladesh, did an interview that was recently published in Ode Magazine. Here are a few of his quotes:

“What all these pop stars and politicians want, is the usual recipe: charity. But charity is not the way to help people in need; it is not a healthy basis for a relationship between people. If you want to solve poverty, you have to put people in a position to build their own life. Unfortunately, this is not how the aid industry works. Western governments and development organizations think they need to offer permanent charity. As a result, they keep entire economies in poverty and families in an inhuman situation.”

“The approach [many take] to poverty is thwarted by our fixed convictions. Poor people are helpless, unhealthy, illiterate and thus stupid, they have nothing, they know nothing, we must take care of them, we must give them food… It is completely wrong to think like this. I am convinced that poor people are just as human as anyone else. They have just as much potential as anyone. They are simply shoved into a box marked POOR! And it’s written in giant letters so that everyone simply treats them the way poor people are treated, because we think this is the way we should treat them. This means it isn’t easy to get out of the box.”

This is definitely a very different way of thinking than the current establishment players/experts who claim to serve the poor — e.g. Jeffrey Sachs, the U.N., Bono, Clinton, Blair and many others. Yet Yunus’ success in building one of the world’s most successful banks for the poor gives him the authority to challenge the status quo thinking. Yunus is by no means some neo-conservative touting some theory that sounds great but has no on-the-ground substance. Rather he is a practitioner who is much more interested in ways to actually bring opportunity to those who have been denied it by the current powers and systems.

I find this thinking very personally challenging as some much of the lens that I look through towards solving poverty (however incrementally enlightened I may have become in the past few years ;-) still includes a large dose of charity thinking. I keeping thing, “yes, but…” Hmmm… good food for thought and implications for the road forward.

Read the interview and share your comments.

The Microfinance Revolution

November 6th, 2006

I made a microfinance presentation on Saturday at Off The Map’s Revolution Conference. As requested by participants, here are the Powerpoint slides I used to for my session called “The Microfinance Revolution”.

A few other references I made in our discussion and links on microfinance:

Please posts comments here on feedback on this session.

Mobile bank accounts

November 2nd, 2006

The Economist published a report on how mobile phones are starting to become banking tools for the poor. In South Africa, 16 million people, over half of the adult population, have no bank account. Yet 30% of those people have mobile phones almost all of which are used on a pay-as-you-go basis.

You might think — why do poor people need/want bank accounts? The report highlights Andile Mbatha, who owns a hair salon in Soweto. He used to have to travel more than 2 hours by minibus to send money to relatives … a personal delivery. He also used to have to keep what ever cash he had on hand at the salon or with him as he travelled. He now uses a new mobile banking service called Wizzit which enables him to instantly transfer money to his relatives for a very low fee which enables him to spend more time earning money. He also now receives payment for services at his salon via mobile phone from more than half of his customers which means that he doesn’t have to manage a lot of cash.

The reality is that the poor, with by definition fewer resources, have needs (often more so than wealthier people) to transfer their monies to support other dependents and family members who out of necessity live significant distances from each other. Without bank accounts, the transaction cost of making these payments (recurring ones are often referred to as remittances) are very high … even higher than what it costs wealthy people to transfer even much larger sums. This is often referred to as the the “poverty tax” where the less well off pay a premium because they are not able to use more economical service options due to their economic and/or social status.

I am a big fan of scalable models like this which provide valuable services to the poor at a price point that works for the poor. This enables increased productivity and therefore enables more earnings capability which is a core element in increasing wealth (another way of saying decreasing poverty levels).

And, I’d like this kind of service too!!

See NPR story on Wizzit.

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