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The microfnance revolution began when Bangladeshi economics proessorMuhammad Yunus frst handed over a ew dollars to an impoverished bas-ket weaver in 1974. Since then, the movement toward microfnancethegranting o very small loans to the poorest people in the world to enablethem to run small businesses that will lit them out o povertyhas won

passionate supporters across the globe. Last year, Yunus and the microfnance insti-tution he ounded, Grameen Bank, shared the Nobel Peace Prize.

As organizations ranging rom the World Bank to privately unded enterprisesdevote more resources to microfnance initiatives, business schools are respondingby oering electives and programs designed to teach students how to unctionin this specialized area o business. According to Michael Chu, senior lecturer atHarvard Business School in Cambridge, Massachusetts, Microfnance is a lead-ing example o why business schools have a huge role to play in impacting globalpoverty. The bulk o global poverty is concentrated in the developing world, whichis where the state and the government have many challenges in unctioning well.

That leaves an enormous space or business.Some schools teach microfnance as a component o social enterprise, a way o

doing good through business. Others ocus on its commercial applicationsthehigh rate o return on loans, the proft potential inherent in partnering with thepoor. No matter what the approach, those in the vanguard see the topic as one thatis critical to business, business schools, and the world.

Microfnance and the B-SchoolWhile microfnance can appeal equally to idealists and pragmatists, its becomingpopular in business schools because it works on a very quantifable level. Micro-fnance isnt just about idealsits about wedding vision with concrete fnancialreality, says Andrea Wuerth, program director or the Martindale Center or theStudy o Private Enterprise at Lehigh University in Bethlehem, Pennsylvania.What has kept us rom extending basic fnancial services to the poor is oten aprejudice against them, thinking they dont know how to manage money. Micro-fnance has proven that erroneous.

But understanding microfnance requires a dierent kind o knowledge thana student might get through a standard fnance curriculum. Thats because mi-crofnance is delivered through a bewildering array o models. Major institutionslike Citibank, Deutsche Bank, and HSBC have microfnance initiatives, but so dodonor-driven enterprises, government ofces, and nongovernmental agencies.How they distribute money and how they collect it varies with the organization.

Not only are there dierent models or providing loans, there are dierent crite-ria or deciding who can get the money, says Edwin Brands, an adjunct proessor in

Making a

Major Impact withMicrofnance

As microfnance

initiatives gainmomentum

in developing

economies, they

also fnd their place

in the b-school

curriculum.

by Sharon Shinn

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BizEdMAy/june 2007 27photo by Peter Haden

In the shadow of a temple dedicated to the goddess Lakshmi, University

of Iowa students Ingrid Frisk (center) and Shana Drahn (right) review

financial documents with microfinance leaders in Chennai, India.

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the departments o geography and international studies at theUniversity o Iowa in Iowa City. Some organizations wantpeople who have already started a business. Others ocus onpeople they determine through some method to be poor. Itcan all be very political. You see Muhammad Yunus give $100to someone who needs a micro loan; but then you realize that

other eorts at microfnance are done in a culturally specifccontext by dierent people with dierent motivations.

Dierent approaches obviously lead to the potential ora wide variety o b-school programs, or at least the inclu-sion o microfnance concepts in a number o spots in thecurriculum. It can be part o fnance, or entrepreneurship,or basic economics, or even ethics, says Wuerth. Wereincorporating microfnance now in our socially responsibleinvestment class.

At Harvard, Chu and his colleague, proessor V. KasturiRangan, include microfnance in their courses Business andBase o the Pyramid Markets and Eective Leadership oSocial Enterprise. As microfnance evolves, Chu expects it

to be covered in courses on banking and fnancial services,particularly those servicing emerging markets, as well as incourses that discuss business and low-income sectors.

For business to be successul in low-income sectors itwill require an inrastructure that is very dierent rom inra-structure in businesses at the top o the pyramid, Chu says.You could say that everything that applies to business alsoapplies to low-income businessmarketing, production, dis-tribution, and so on. But the key thing to know is that mar-keting in low-income sectors is very dierent. Production isvery dierent. So is distribution.

Program Parameters

More schools are adding microfnance components to their

curricula as standalone courses or segments o other classes.To make sure such initiatives are successul, administratorsmight keep this advice in mind:

Begin with a single course or modest goals. Most schools donthave the advantage o Tuts University, which just receiveda $100 million endowment rom eBays Pierre Omidyar tostart a microfnance program, or the University o Mary-land, which received $6 million rom the Bill and MelindaGates Foundation to assess the impact o microfnancegrants. Unless you get a big donation to und the pro-gram, it makes sense to start small, says Edwin Brands othe University o Iowa.

Reach out to everyone. Involve as many people as pos-siblenot only in your school, but also in the local com-munity, says Brands. Then you can generate more buzzabout your program. The Iowa proessors described theirIndia trip to community leaders and local businesspeople,

who donated small grants to help deray the costs o travel.I think people in the community can appreciate microf-nance because many o them started small or have beenin situations where they needed loans to get them past thenext month, says Brands.

Plan visits to microfinance organizations.A good microf-nance program really needs to have a hands-on compo-nent, says Andrea Wuerth o Lehigh University. I dont

think you understand microfnance or believe its possibleuntil you see it. A microfnance program should allow stu-dents to do internships, act as consultants, or just go onact-fnding trips.

Take advantage of your assets. A school with a strongfnance program should incorporate microfnance intothat curriculum; a school whose strength is global citizen-ship could tackle microfnance rom that perspective. Says

Wuerth, Lehighs traditional strengths are technology andengineering, so technology was a key part o the project

we undertook in Honduras.Make friends.It helps to have a connection to a micro-

fnance institution, says Brands. Cultivate a relationshipwith a nonproft, or a oundation, or even another univer-sity that already does work in this area. Wuerth agrees;Lehigh planned its trip to Honduras using the connectionsalready in place through programs run by the anthropol-ogy department.

Look for an advocate. Initiatives in academic institutionsrise or all depending on the presence or absence o a ac-ulty champion, says Ronald Chua o the Asian Institute oManagement. A motivated aculty champion can promotethe microfnance agenda and win the support o othersin the business school, the university, and the community.


Chris Baxley, an Owen Graduate School of Management student (seated

at right), distributes a microloan to a local villager in Sadhashivpet, India,

as part of Project Pyramid, a new cross-campus initiative at Vanderbilt

University aimed at ending global poverty.

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Perhaps whats important is not so much howthe topic iscovered as why. The answer is very clear or proessor RonaldT. Chua o the Asian Institute o Management (AIM), Ma-nila, the Philippines. AIM has a mission o developing man-agers o Asia who are entrepreneurial and socially responsi-ble. Poverty in Asia remains a stark reality; and, at minimum,equipping our graduates with an awareness o the challengeso addressing poverty is an important part o ulflling ourmission. Schools whose graduates will have to work in a con-text where poverty is a critical concern need to prepare theirstudents. That is part o being relevant.

Interconnected InitiativesMicrofnance is such a broad concept that it can reach acrossthe whole b-school curriculumand, indeed, the whole uni-versity. While microfnance initiatives most oten fnd a home

in the business school, Brands points out that many aspectso microfnance ft more comortably into other disciplines,such as environmental protection, social change, sociology,and international studies.

At Vanderbilt University in Nashville, Tennessee, a mi-crofnance initiative called Project Pyramid brings togetherstudents rom the Owen Graduate School o Managementwith divinity students. Participants in the program, which isentirely student-driven, headed to India in March to bringtheir business plan ideas to entrepreneurs at the base o thepyramid. According to Owen student and Project Pyramidco-creator Rehan Choudhry, the goal was to arm graduatestudents with the tools to create sustainable businesses andprograms that eectively combat poverty.

Members o the program say their very dierent per-spectives on the world created a valuable synergy or reach-ing their goals. One o the questions brought up in classwas, Are we going in to make money or are we going in tobetter lives? says divinity student Elizabeth Nicole King.In todays global environment, I have to embrace the busi-ness world. I I dont, Im the one who loses out in my initia-tives or empowering the poor.

Administrators at both the University o Iowa and LehighUniversity also capitalized on the multidisciplinary aspect o

microfnance when they recruited mixed groups o majors totravel to developing countries to study microfnance. As de-tailed in Destination: Microfnance (on page 30), the Lehighgroup, which traveled to Honduras, included graduate andundergraduate students in business, anthropology, engineer-ing, and computer science. The business students enjoyedproblem-solving with the multidisciplinary group, says Wuerth.They got involved in mutually benefcial teamwork.

The Iowa group that headed to India was similarly blend-ed, and Brands thinks the project benefted rom the diversity.It worked well because the discussions that went on amongthe students were much broader, he says. In a situationlike this, i we are all engineers, we might just be interested

in a small business that deals with solid waste or bio uel.Whereas i we have students and aculty rom anthropologyand fnance and geography and international studies, we getto see a much bigger picture.

He thinks any microfnance initiative should include stu-dents rom womens studies, because 90 percent o the mi-crofnance participants are women. On his recent trip, hewas also impressed by what the photojournalism studentsbrought to the project. They were able to combine vid-eo and music in a thought-provoking way, he says. Such agraphic visual tool can be very powerul i a school is trying

Educating the Microinance Leaders

This spring, Harvard Business School will hold its secondexecutive education session ocused on microfnancebutat a very high level. The HBS-ACCIN Program on Stra-tegic Leadership or Microfnance is aimed at top execu-

tives rom leading microfnance institutions who need to beprepared or doing business in an industry that is seeingimpressive growth. ACCIN International is a privatenonproft microfnance organization that works primarily inLatin America, the Caribbean, the U.S., and Arica.

Over its 30 years o development, microfnance hasbeen very successul, notes Michael Chu, who co-chairsthe program. However, he notes, the feld is changing

very astand that presents new challenges to microf-nance executives. Are these leaders prepared to ace

wholesale challenges that are external to the organiza-tion? Corporate strategy, competition, the entry o newplayers, managing growing organizationsthey requirea totally new set o skills. Harvards executive educationprogram targets those specifc skills.

Harvards frst microfnance executive educationprogram drew 61 participants rom 33 countries andHBS aculty rom all over the curriculum. Not only wereparticipants immersed in topics related to organizationalleadership, but they had a chance to orm peer consul-tancy groups to discuss their individual issues with otherattendeesand learn rom each other today about thechallenges they will ace tomorrow.

In todays global environment, I have to embrace the business world. I I dont, Im the one

who loses out in my initiatives or empowering the poor.Elizabeth Nicole King, divinity student, Vanderbilt University

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Destination: MicroinanceI seeing is believing, then students at two U.S. universitieshad a chance to become believers when they traveled to verydierent parts o the world to see microfnance in action.

A multidisciplinary group o students rom LehighUniversity traveled to Honduras in 2006 to work withREDMICROH, a network o microfnance institutionsheadquartered in Tegucigalpa. Their goal was to use theirtechnology skills to make REDMICROH more efcientspecifcally by developing a program or handheld PDAsthat would help loan ofcers in the feld quickly enter inor-

mation about their clients and consolidate the loan processrom about three days to 20 minutes.The team o studentsincluding economics, computer

sciences, and business majorswere accompanied byAndrea Wuerth o Lehighs Martindale Center or the Studyo Private Enterprise and Todd Watkins, associate proessoro economics at Lehighs College o Business and Econom-ics. Watkins and Wuerth had been teaching a microfnanceclass since the spring o 2005, and Watkins secured agrant that would und the trip. During the ten-day visit, stu-dents visited with fve microfnance organizations with di-erent approaches, philosophies, and geographic ocuses.

Wuerth believes that the participating students cameback with a changed perspective o the world. These arekids who, almost exclusively, grew up in suburban environ-ments, she says. They had never seen anything like thepoverty they saw there. At the same time, they expectedpeople to be more downtrodden. What we saw werepeople making a heck o a lot out o very little. They weretaking out small loans and using the money to turn theirlives around. It was a lie-altering experience or students.She plans to accompany another group to Honduras againthis spring.

In a similar ashion, a multidisciplinary group o 17students rom the University o Iowa traveled to Indiabetween December 2006 and January 2007 as part otheir course on Microfnance or Women-Run Enterprises.

The class was led by geography proessor RangaswamyRajagopal, adjunct proessor Edwin Brands, and ChristineBrus, director o Women in Science and Engineering.

During a semester-long course at the university, weread about microfnance in dierent parts o the world andlooked at dierent models, says Brands. But much o thereal learning occurred in India. There, students actually gotto meet the people involved, he says, including loan recipi-ents and individuals running microfnance organizations.

While some o the lessons students learned might not havean immediate relation to coursework, Brands believes thoselessons will stick with students a long time.

My hopes are that the students will have a broaderperspective, not just on microfnance, but on what its like tobe running a small business by the shoestrings when youramily depends on it to eat, says Brands. Perhaps theresa couple with their two children living in a ten-by-ten hut.They bend metal to make asteners or stainless steel buck-ets. They have a fre going, and the babys there, and thetwo-year-old is there, and they do this work every day, allday long. Seeing that gives students a very real perspectiveon the world. Speaking personally, Ive never elt richer thanI did when I came back here.

to promote its microfnance program, he says, since it can beshown to administrators, sponsors, and other students whomight be interested in a uture trip or a course.

The Right Student AttitudeJust as there is more than one approach to teaching microf-nance, there is more than one type o student who might signup to learn about it. Brands and Wuerth fnd that many otheir students are also interested in sustainable developmentand corporate social responsibility. For instance, two o the

Lehigh University students Scott Menzer and Kelsey Smith work

with Cesar Alfaro of FUNED, looking for ways to make microfinance

organizations in Honduras like FUNED more efficient.

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engineers who were with us also belong to a group calledEngineers or a Sustainable World, says Brands.

In act, Wuerth thinks that interest in microfnance hasbeen driven at some schools by the students themselves.The students are the ones who have a sense o wanting todo good and do well at the same time, she says. She believesmany students o this generation are committed to a strongcommunity and a better world, unlike students o previousgenerations who all wanted to be Wall Street analysts. Itseems the pendulum is swinging the other way, she says.

Mainstreaming MicroinanceAt the Asian Institute o Management, a variety o micro-fnance initiatives have been designed with the goal oappealing to both practitioners who need expertise andMBA students who need an introduction to the feld.Ourfrst objective is to strengthen the management capacity oexisting microfnance institutions in our country, says AIMsRonald Chua. Our second is to plant the seeds o interestin microfnance into AIMs programs and courses, particu-larly its degree programs.

To meet the needs o practitioners, the school has

launched an 18-month microfnance track in its master inentrepreneurship degree program. Participants are otenheads o microfnance institutions or responsible or aproft center at such an organization. AIM has also devel-oped a suite o short management courses designed orsenior managers o microfnance institutions and coveringtopics such as strategic planning and implementation,human resource management, marketing to the bottom othe pyramid, and microfnance in hard-to-reach areas.

Some o the microfnance cases studied in these man-agement courses also can be used in AIMs other degreeprograms. For instance, Chua teaches a mainstreamBanking with the Poor elective that is designed to inter-est AIMs MBA students in microfnanceand its work-ing. Most recently, out o a class o 99 MBA students, 27enrolled in a microfnance elective.

Some o AIMs microfnance programs have beenmade possible by seed money given by the MicrofnanceManagement Institute (MFMI), which has unded a three-

year research grant. AIM is one o a handul o schoolsthat has become an MBA Project Partner with MFMI andoers courses dedicated to creating and diversiying thebody o knowledge on microfnance.

Other students who exhibit an interest in microfnanceare rom countries where such programs are successul, shenotes. Many o our Indian, Pakistani, and Bangladeshistudents know all about microfnance, says Wuerth. Themore global a business school is, the more microfnance willbe known to its students.

To Harvards Chu, its not so obvious that the sustainabledevelopment crowd is leading the microfnance charge, buthe suspects thats because o the way Harvard teaches thetopic. He says, For example, in our microfnance executiveeducation course, we look at corporate strategy, emergingmarkets, competition against multinationals, proft, growth,and control. From that perspective, its about understandinghow to manage eectively in an industry that serves the low-income segment. But you could take a dierent approachand look at microfnance rom the perspective o sustainabledevelopment and social impact, and you would look at com-pletely dierent cases.

A World o GoodNo matter how they are structured, microfnance programsmeet several key criteria or business schools. They oerschools opportunities to become involved in their communi-ties and to participate in the global economy.They also give

management students a chance to see the power o businessto change the world. Even so, experts know that microf-nance will not solve all the problems o the worldor evenall the problems o the poor.

Access to fnancial services is necessary and important,but it is not enough to lit people out o poverty, says AIMsChua. A problem arises when people expect microfnanceto be a silver bullet.

Todays microfnance programs arent even scratchingthe surace o the potential, Brands says. In India alonethere are 300 million people below or at the poverty line,and only our or fve million are being served by microf-nance, he says.

The numbers are growing, however. In the 2006 GlobalMicrocredit Summit in Haliax last November, it was an-nounced that the goal o reaching 100,000 million poorwomen worldwide with microfnance was achieved in 2006,says Chua. The new goal is to reach 175 million poor wom-en by 2015 and move 100 million o them out o poverty.

That leaves a lot o room or businessand businessschoolsto maneuver. Business schools that want to par-ticipate in the microfnance revolution should identiy theirgoals, pick their models, refne their approaches, and roll uptheir sleeves. Theres plenty o work to be done. z

My hopes are that the students will have a broader perspective, not just on microfnance,

but on what its like to be running a small business by the shoestrings when

your amily depends on it to eat.Edwin Brands, adjunct proessor, University o Iowa

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