Mic

rocr

edit

an

d

En

trep

ren

eurs

hip

Prof

. Jay

Aro

nson

2

Bu

zzzz

zzzz

zzzz

zz!

Mic

rocr

edit

has b

ecom

e a

deve

lopm

ent b

uzzw

ord,

ju

st li

ke �

hum

an c

apac

ity�

or �

sust

aina

bilit

y�!

2005

was

dub

bed

the

�Int

erna

tiona

l Yea

r of

Mic

rocr

edit�

by th

e U

N!

A se

arch

of �

mic

rocr

edit�

on G

oogl

e yi

elds

2.7

m

illio

n hi

ts!

Moh

amm

ed Y

unus

and

Gra

mee

nB

ank

won

the

2006

N

obel

Pea

ce P

rize

!Pr

ofit

seek

ers a

re st

artin

g to

ent

er th

e m

icro

finan

ce

sect

or (M

NC

ban

ks, r

egio

nal b

anks

, etc

.)

3

Th

e W

orl

d o

f M

icro

…!

Mic

rofin

ance

: loa

ns, s

avin

gs, i

nsur

ance

, tra

nsfe

r se

rvic

es a

nd o

ther

fina

ncia

l pro

duct

s tar

gete

d at

lo

w-in

com

e cl

ient

s.!

Mic

rocr

edit:

smal

l loa

n to

a c

lient

by

a ba

nk o

r ot

her i

nstit

utio

n.

!M

icro

savi

ngs:

dep

osit

serv

ices

allo

win

g st

orag

e of

sm

all a

mou

nts o

f mon

ey fo

r lat

er u

se (e

.g.,

unex

pect

ed e

xpen

ses o

r fut

ure

inve

stm

ent),

man

y ha

ve n

o m

inim

um b

alan

ce re

quire

men

ts!

Mic

roin

sura

nce:

syst

em b

y w

hich

peo

ple,

bu

sine

sses

and

oth

er o

rgan

izat

ions

mak

e a

smal

l pa

ymen

t to

shar

e ris

k.

4

Tw

o m

ain

ty

pes

of

mic

rocr

edit

!G

roup

lend

ing,

or s

olid

arity

lend

ing,

allo

ws a

nu

mbe

r of i

ndiv

idua

ls to

pro

vide

col

late

ral o

r gu

aran

tee

a lo

an th

roug

h a

grou

p re

paym

ent p

ledg

e.

�Th

e in

cent

ive

to re

pay

is b

ased

on

peer

pre

ssur

e; if

one

pe

rson

in th

e gr

oup

defa

ults

, the

oth

er g

roup

mem

bers

m

ake

up th

e pa

ymen

t am

ount

. !

Indi

vidu

al le

ndin

g, fo

cuse

s on

one

clie

nt a

nd d

oes

not r

equi

re o

ther

peo

ple

to p

rovi

de c

olla

tera

l or

guar

ante

e a

loan

!Lo

ts o

f diff

eren

t len

ding

mod

els�

Gra

mee

nis

onl

y on

e ty

pe»

Sour

ce: I

nter

natio

nal Y

ear o

f Mic

rocr

edit

5

Var

ieit

eso

f m

icro

cred

it

1.Tr

aditi

onal

info

rmal

mic

rocr

edit

(suc

h as

, mon

eyle

nder

's cr

edit,

paw

n sh

ops,

frie

nds a

nd re

lativ

es, e

tc.)

2.M

icro

cred

itba

sed

on tr

aditi

onal

info

rmal

gro

ups

3.A

ctiv

ity-b

ased

mic

rocr

edit

thro

ugh

conv

entio

nal o

r sp

ecia

lised

bank

s (su

ch a

s, ag

ricul

tura

l cre

dit,

lives

tock

cr

edit,

fish

erie

s cre

dit,

hand

loom

cre

dit,

etc.

) 4.

Rur

al c

redi

t thr

ough

spec

ialis

edba

nks.

5.C

oope

rativ

e m

icro

cred

it6.

Con

sum

er m

icro

cred

it7.

Ban

k-N

GO

par

tner

ship

bas

ed m

icro

cred

it8.

Gra

mee

nty

pe m

icro

cred

itor

Gra

mee

ncre

dit

�So

urce

: Gra

mee

nB

ank

Info

�M

icro

cred

it�pa

ge

6

Gra

mee

nC

red

it!

Prom

otes

cre

dit a

s a h

uman

righ

t. !

It is

targ

eted

to th

e po

or, p

artic

ular

ly p

oor w

omen

. !

No

colla

tera

l, or

lega

lly e

nfor

ceab

le c

ontra

cts.

It is

bas

ed o

n "t

rust

", no

t on

lega

l pro

cedu

res a

nd s

yste

m.

!Pr

omot

es in

com

e ge

nera

tion,

not

con

sum

ptio

n !

Cre

ated

in o

ppos

tion

to tr

aditi

onal

ban

king

pra

ctic

e!

Peop

le sh

ould

not

go

to th

e ba

nk, b

ank

shou

ld g

o to

the

peop

le.

!G

roup

-lend

ing

base

d ap

proa

ch

!It

com

es w

ith b

oth

oblig

ator

y an

d vo

lunt

ary

savi

ngs p

rogr

ams

for t

he b

orro

wer

s. !

Sust

aina

bilit

y of

bus

ines

s mod

el is

key

!G

ram

eenc

redi

tgiv

es h

igh

prio

rity

on b

uild

ing

soci

al c

apita

l. �

Sour

ce: G

ram

een

Ban

k In

fo �

Mic

rocr

edit

Page

�

7

Mic

rofi

nan

ce V

ideo

!So

urce

s for

vid

eo:

!ht

tp://

ww

w.y

outu

be.c

om/w

atch

?v=s

3I9T

hVw

w3k

!ht

tp://

ww

w.g

ram

eenf

ound

atio

n.or

g/vi

deo/

ful

lscr

een.

htm

l

8

When

is

mic

rocr

edit

NO

T

appro

priat

e?!

Whe

n co

nditi

ons p

ose

seve

re c

halle

nges

to lo

an

repa

ymen

t (e.

g., h

igh

dise

ase

burd

en, g

eogr

aphi

c is

olat

ion,

bus

ines

s com

mun

ities

, fam

ine,

nat

ural

di

sast

er, w

ar, e

tc.)

!A

ccor

ding

to m

ost m

icro

cred

itso

urce

s, un

der t

hese

co

nditi

ons,

mor

e tra

ditio

nal d

evel

opm

ent

tech

niqu

es w

ork

bette

r!

In g

ener

al, c

lient

s mus

t hav

e th

e ca

paci

ty to

repa

y th

e lo

an u

nder

the

term

s by

whi

ch it

is p

rovi

ded

in

orde

r for

loan

s to

be e

ffec

tive

»So

urce

: Int

erna

tiona

l Yea

r of M

icro

cred

it

9

Man

y e

xam

ple

s!

Gra

mee

n, F

INC

A, A

ccio

nIn

tern

atio

nal,

Opp

ortu

nity

Inte

rnat

iona

l, N

amas

teD

irect

, Fo

nkoz

e(H

aiti)

, etc

. etc

. etc

.!

As o

f Dec

embe

r 31,

200

4 �

3,16

4 m

icro

cred

itin

stitu

tions

�

92,2

70,2

89 c

lient

s, 66

,614

,871

of w

hich

wer

e w

ere

amon

g th

e po

ores

t of t

he p

oor

�83

.5 p

erce

nt, o

r 55,

622,

406

mill

ion,

of t

hese

poo

rest

pe

ople

wer

e w

omen

(sou

rce:

STA

TE O

F TH

E M

ICR

OC

RE

DIT

SU

MM

IT C

AM

PA

IGN

RE

PO

RT

2005

)

10

Ro

le o

f T

ech

no

logy

!Pr

odem

Smar

t ATM

in

Bol

ivia

�C

lient

s can

get

cas

h an

d do

oth

er tr

ansa

ctio

ns a

t A

TMs w

ithou

t co

nnec

tivity

�A

ll ac

coun

t inf

o st

ored

on

smar

t car

d�

Secu

rity

base

d on

fin

gerp

rint

�G

UI d

esig

ned

for i

llite

rate

us

ers (

audi

o an

d vi

deo)

�M

ultil

ingu

al�

Hig

h ra

te o

f acc

epta

nce

Gra

phic

take

n fro

m a

nd In

sead

pres

enta

tion:

�The

Myt

hs &

The

Mag

ic o

f Mic

rofin

ance

: Ass

essi

ng th

e ro

le th

at m

icro

finan

ce c

an p

lay

in p

rivat

e se

ctor

dev

elop

men

t in

Afric

a,�a

vaila

ble

onlin

e at

: http

://w

ww

.inse

ad.e

du/in

devo

r/doc

umen

ts/0

606_

MF_

mag

icM

ythl

.pdf

11

G-C

ash

: M

icro

fin

ance

by

ph

on

12

Cau

tio

ns

!V

ery

diff

icul

t to

dete

rmin

e w

heth

er m

icro

finan

ce h

as a

si

gnifi

cant

impa

ct o

n de

velo

ping

eco

nom

ies

�Lo

ts o

f ane

cdot

al e

vide

nce

and

trend

s, lit

tle st

atis

tical

ly si

gnifi

cant

pr

oof

�Ev

iden

ce a

vaila

ble

sugg

ests

impa

ct is

gre

ates

t in

poor

est

com

mun

ities

and

fam

ilies

�D

efin

itely

hel

ps p

eopl

e, b

ut it

isn�

t cle

ar w

heth

er it

lifts

them

out

of

pove

rty!

Mos

t app

ropr

iate

whe

n ho

useh

old

has o

n-go

ing

econ

omic

ac

tivity

and

exi

stin

g ca

sh fl

ow o

r pot

entia

l for

cas

h flo

w"

dang

er o

f cre

atin

g la

rge

debt

bur

den

�G

ram

een,

FIN

CA

and

a fe

w o

ther

s are

exc

eptio

ns!

Not

a su

re b

et fo

r inv

esto

rs�

mak

ing

a pr

ofit

on

mic

role

ndin

gis

har

d!

13

Cau

tio

ns

!N

ot a

ll m

icro

cred

itle

nder

s cha

rge

low

inte

rest

rate

s �

Gen

eral

ly 3

0-70

% p

er y

ear

�B

ut th

at�s

muc

h lo

wer

than

oth

er p

oten

tial s

ourc

es

!M

any

peop

le a

rgue

that

the

stat

e sh

ould

be

prov

idin

g m

icro

finan

ce se

rvic

es a

nd a

gen

eral

soci

al sa

fety

net

�I d

on�t

find

this

con

vinc

ing,

do

you?

!N

ot a

solu

tion

for t

he d

estit

ute;

mus

t wor

k in

con

cert

with

oth

er e

ffor

ts�

But

wha

t is i

n th

e re

al w

orld

?

14

Cau

tio

ns,

co

nt.

!C

reat

ing

incr

ease

d de

bt b

urde

n fo

r po

ores

t of t

he p

oor

!M

icro

ente

rpris

esre

quire

mac

rosu

ppor

tto

surv

ive

15

Lin

ks

to

En

trep

ren

eurs

hip

!Th

e m

icro

cred

it tre

nd h

as e

mer

ged

sim

ulta

neou

sly

with

two

othe

r dev

elop

men

t tre

nds:

�So

cial

ent

repr

eneu

rshi

p�

The

notio

n th

at p

eopl

e in

dev

elop

men

t com

mun

ities

sh

ould

pay

[wha

t the

y ca

n] fo

r the

goo

ds a

nd se

rvic

es

that

will

impr

ove

thei

r liv

es�

incr

ease

s lik

elih

ood

that

they

will

mak

e go

od u

se o

f the

se

good

s and

serv

ices

�cr

eate

s inc

ome-

gene

ratin

g ac

tiviti

es fo

r com

mun

ity m

embe

rs

(opp

ortu

nitie

s for

old

-fash

ione

d en

trepr

eneu

rs)

�M

ore

sust

aina

ble

than

don

or-le

d or

gov

ernm

ent-l

ed p

rogr

ams

�Sh

ift fr

om c

harit

y an

d ha

nd-o

uts t

o se

lf-im

prov

emen

t and

pr

ivat

e in

itiat

ive

(aga

in, a

par

t of t

he n

eolib

eral

app

roac

h to

de

velo

pmen

t)

!M

any

of th

e m

ost i

nnov

ativ

e ap

proa

ches

to

deve

lopm

ent i

nvol

ve a

ll th

ree

16

Wh

at i

s an

en

trep

ren

eur?

!�T

he e

ntre

pren

eur s

hifts

eco

nom

ic re

sour

ces o

ut o

f an

area

of

low

er a

nd in

to a

n ar

ea o

f hig

her p

rodu

ctiv

ity a

nd g

reat

er

yiel

d.� �

Jean

Bap

iste

Say,

ear

ly 1

9th

cent

ury

Fren

ch e

cono

mis

t!

�Ent

repr

eneu

rs �

refo

rm o

r rev

olut

ioni

ze p

atte

rns o

f pr

oduc

tion.

��

Jose

ph S

chum

pete

r, ea

rly 2

0th

cent

ury

econ

omis

t!

�The

ent

repr

eneu

r alw

ays s

earc

hes f

or c

hang

e, re

spon

ds to

it,

and

exp

loits

it a

s an

oppo

rtuni

ty.�

�Pe

ter D

ruck

er, 2

0th

cent

ury

busi

ness

man

agem

ent g

uru

!�E

ntre

pren

euria

l man

agem

ent [

is] t

he p

ursu

it of

opp

ortu

nity

w

ithou

t reg

ard

to re

sour

ces c

urre

ntly

con

trolle

d.�

�H

owar

d St

even

son,

Har

vard

B-S

choo

l

Sou

rce:

Tim

Zak

(CM

U-A

ustra

lia)

17

Wh

at i

s so

cial

en

trep

ren

eurs

hip

?!

App

lyin

g th

e pr

inci

ples

and

pra

ctic

es o

f en

trepr

eneu

rshi

p to

soci

al p

robl

ems

�G

ener

ally

with

the

goal

of d

ecre

asin

g re

lianc

e on

trad

ition

al so

urce

s of s

olut

ions

(I.e

.,

gove

rnm

ent,

phila

nthr

opy,

and

cor

pora

tions

)

18

Pri

nci

ple

s o

f SE

!A

dopt

ing

a m

issi

on to

cre

ate

and

sust

ain

soci

al (n

ot

just

priv

ate)

val

ue!

Rec

ogni

zing

and

rele

ntle

ssly

pur

suin

g ne

w

oppo

rtuni

ties t

o se

rve

that

mis

sion

!En

gagi

ng in

a p

roce

ss o

f con

tinuo

us in

nova

tion,

ad

apta

tion,

and

lear

ning

!A

ctin

g bo

ldly

with

out b

eing

lim

ited

to re

sour

ces

curr

ently

in h

and

!Ex

hibi

ting

a he

ight

ened

sens

e of

acc

ount

abili

ty to

th

e co

nstit

uenc

ies s

erve

d an

d fo

r the

out

com

es

crea

ted

19

Soci

al E

nte

rpri

se

!Ta

king

soci

al e

ntre

pren

eurs

hip

to th

e in

stitu

tiona

l/ins

titut

iona

l lev

el!

�An

orga

niza

tion

or v

entu

re th

at a

dvan

ces i

ts

soci

al m

issi

on th

roug

h en

trepr

eneu

rial,

earn

ed in

com

e st

rate

gies

.��

Soci

al E

nter

pris

e A

llian

ce (d

raft

defin

ition

)

20

Soci

al E

ntr

epre

neu

r V

ideo

!B

ill D

rayt

on, �

Entre

pren

eur f

or S

ocie

ty�

�ht

tp://

ww

w.y

outu

be.c

om/w

atch

?v=B

oh9z

KQ

l5oc

!B

ill D

rayt

on, �

Not

hing

Mor

e Po

wer

ful�

�ht

tp://

ww

w.y

outu

be.c

om/w

atch

?v=j

-tK

0ajU

z0A

21

Res

ou

rces

!G

ram

een

Ban

k (w

ww

.gra

mee

n-in

fo.o

rg)

!G

ram

een

Foun

datio

n (w

ww

.gra

mee

n-fo

unda

tion.

org)

!Y

ear o

f Mic

rocr

edit

(http

://w

ww

.yea

rofm

icro

cred

it.or

g/)

!A

shok

a (w

ww

.ash

oka.

org)

!Sc

hwab

Fou

ndat

ion

!Sk

oll F

ound

atio

n (w

ww

.skol

lfoun

datio

n.or

g)!

CM

U�s

Inst

itute

for S

ocia

l Inn

ovat

ion

(ww

w.h

einz

.cm

u.ed

u/so

cial

inno

vatio

n)

22

Kic

kst

art

!K

icks

tart

vide

o:

�ht

tp://

link.

brig

htco

ve.c

om/s

ervi

ces/

link/

bcpi

d42

2541

436/

bclid

2251

5191

3/bc

tid47

4435

226

23

Dis

cuss

ion

!W

hat a

re th

e pr

oble

ms t

hat K

icks

tart

is tr

ying

to

solv

e?!

Wha

t is t

he b

usin

ess m

odel

use

d by

Kic

ksta

rt?!

Wha

t is t

he d

evel

opm

ent m

odel

use

d by

Kic

ksta

rt?�

I.e. W

hat i

s the

mos

t �ap

prop

riate

�us

e of

tech

nolo

gy

acco

rdin

g to

Kic

ksta

rt?!

How

doe

s Kic

ksta

rt�s s

olut

ion

to th

e pr

oble

m o

f w

ater

diff

er fr

om th

e on

e de

scrib

ed in

the

Wat

ers o

f A

yole

?!

How

do

mic

rocr

edit,

ent

erpr

eneu

rshi

p, a

nd so

cial

en

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