Sitting on panels to interview candidates for Acumen Fund’s fellows program is always a highlight for me. Yesterday was no different as we met with five of 56 finalists from 600 candidates who applied from 65 countries for our one-year program. Each person at our New York City panel was engaged, alive and curious about the world. For some reason, the majority were from immigrant families — from Peru, China, India, Germany. Each told stories of struggle and all had grown up in families where hard work, discipline and a focus on giving back were core values. While all could be doing anything they wanted, coming from careers at Goldman Sachs, IBM and consulting, among others, they were hungry to serve. Throughout the day I thought about this next generation so willing to take risks, so eager to change the world; and I thought about the power of the immigrant experience in the U.S. Mostly, I felt blessed.

The day, however, was a long one, and by the time I left the group dinner in Brooklyn, I was feeling under the weather and thinking about my 4 a.m. wake-up for my early flight the next morning. I waited a long time for a taxi, and when a dilapidated yellow cab pulled up, I poured myself exhaustedly into the seat. The tall, wiry, dark-skinned African with enormous hands drove for a few hundred feet and then asked me if I minded if we drove a little out of our way so that he could pick up food he’d just ordered. I sighed and asked how far out of the way it was, and he said it would be just five minutes each way. That prospect didn’t thrill me and I asked if he was sure the food would be ready, and he told me not to worry because he’d drive back over the bridge to get his food after he’d dropped me off.

It was well past 10 and I liked the easy familiarity of the guy and so said, no, let’s go and get your food. He thanked me profusely and we sped across Brooklyn. Five or six minutes later, he pulled the car to the side of the street, and sprinted to a Halal Chinese food joint. Within a flash, he was back in the car and we were heading toward Manhattan.

The driver chatted happily as we drove through Brooklyn, telling me that he loved living in New York City, that in Congo he could never have worked his way up to buying a taxi, and that he was making money and sending it home and was now seen as a hero by his family. Everyone accepts him in New York, he said, even more than in his country where there is too much violence and mistrust. “I love the American dream”, he said, “and I am living it!” He added that he thought New York was different than other cities because everyone was accepted here, and he didn’t want to live anywhere else.

We arrived at my apartment, only 10 or so minutes later than we would have otherwise, and my fare was about $12. I handed him $20 and was about to tell him to keep it all because his spirit was so effusive, but he wouldn’t accept the bill. “Please,” he said, ” the fare is on me because I took you out of your way,” and I said, no, no, no. And he said, “OK, you can give me $5 but only $5 — that’s all I want.” And I laughed because something had made each of us want to be generous. So often, though, it is those with so much less who make the first move to offer something of themselves. This time I insisted and gave him the $20. The driver finally accepted and then insisted on getting out of the car to shake my hand.

At dinner, one of our partners had spoken about looking for light these days, and finding random acts of kindness every day in unexpected places. I thought of the hard life my taxi driver had left and his open, optimistic attitude toward the world and others. I was thankful that this man had managed to remind me that my time is not all that precious. So often when I am in Africa, people go way out of their way to help me, even if they’ve never met me before. We could use bringing some of that spirit to our fair city. It starts with taking just a moment to see one another, and it goes from there.

A heartfelt thank you to our community for sharing the day with us at last Saturday’s Acumen Fund Pakistan Community Gathering. Thank you to Zubyr Soomro, Acumen Pakistan Advisory Council Chair for hosting the gathering and thanks to everyone who sent warm thoughts and words of appreciation for what the day represented for them. And a special thank you to our Dubai friends for joining us and really showing the reach of our community! It was a truly powerful day and we could not have been more blessed than to share it with all of you.

With an audience of over 100 individuals that was a happy mix between our wider community (old friends and new), investees, partners and advisors, we had an opportunity to really demonstrate the power of ‘patient capital.’ It included a truly lively debate on the agriculture panel, “Creating Economic Access for Small Farmers,” (hats off to our incredibly knowledgeable panelists, Dr. Rashid Bajwa, Dr. Sono Khangharani, Shahzad Iqbal, and Abdul Samad Khan) that had the audience engaged in a back and forth in way I have never seen before (who would have thought we would be arguing that aartis are good?!). It was followed by an inspirational message from the Fellows in a well choreographed and riveting session. They challenged the crowd to up their moral leadership compass to focus on dignity not dependence, solutions not sympathy, and choice not charity. It was so inspirational in fact, that we are now speaking with a local multi-national corporation on how they can support the Fellows Program and get more Pakistanis involved in joining the next generation of leaders.

We were honored to have Mr. Syed Salim Raza, Governor, State Bank of Pakistan as the keynote address who had a very strong message on what it takes to spur economic growth from the ground up. Access to finance and capital, whether for micro-entrepreneurs or for small farmers will be key in economically empowering a segment of the population that is critical to the economic health of Pakistan.

And the day was really topped off by a segment on “Honoring the Frontline.” The frontline staff of these social enterprises - the loan officers, installation, accounts, and site managers – the ‘backbone’ of all these organizations are the true inspiration for our team and we are humbled by the tireless work they do day in and day out. Nothing could have been more powerful than to have them recognized and honored. From the Kashf loan officers whose enthusiasm never wavers, to Saiban’s Akhtar sb who was so generous with his time in Acumen’s early days of investing and really taught us about housing – this was the highlight for all of us. We simply could not stop smiling.

On Saturday, through the substance and depth of the panel and the focus on the innovative business models that are really tackling poverty in Pakistan, we went one step further in demonstrating to the broader community that it can be done and patient capital can lead the way. We want to engage all of you, a community of believers and doers who do not accept the status quo and want to show the country what is possible.

We are all so proud to be part of this and hope you are too.

With gratitude and warmth,

Batool

I was lucky enough to attend Harvard University’s 2007 Commencement ceremony and listen to Bill Gates’ stirring speech. While I found the speech inspiring and fascinating in many ways, I was really struck by one part in particular. Gates said:

“I believe we have more caring than we know what to do with.

All of us here in this Yard, at one time or another, have seen human tragedies that broke our hearts, and yet we did nothing – not because we didn’t care, but because we didn’t know what to do. If we had known how to help, we would have acted.

The barrier to change is not too little caring; it is too much complexity.”

This past summer, I had the chance to participate in Acumen Fund’s first Student Leaders workshop for Undegraduates. I left the workshop inspired, with a lot of caring, awareness, and passion – but still uncertain how to turn this caring into action. A lot of ideas were floating around amongst the student leaders; to sell bag tags, sell blue sweaters, and to coordinate amongst ourselves to create a movement out of these ideas. But complexity blocked these initiatives from actually happening.

This brought me back to Bill Gates’ speech. Complexity had made it hard for the student leaders to mark a path of action, and consequently made it hard for our caring to matter. But as Gates said, “To turn caring into action, we need to see a problem, see a solution, and see the impact.”

With this in mind, I set out to turn caring, awareness, and passion into action.

Problem: With schoolwork and other commitments, I didn’t have the time to set up a full-fledged fundraising initiative for Acumen Fund. So how could I use my skills, passions, and networks to create awareness of Acumen Fund’s mission on the Brown University campus?

Solution: Find an easy, logical way to appeal to a broad audience, sensitize them to the problem of poverty, engage them in a cause, and simultaneously raise money. This is when I asked myself: what do college students like to do?

They like to party.

So I thought I could take advantage of this and extract a philanthropic “pleasure tax” for partying. While it may seem strange to bring the two emotionally polar opposites together, I thought that by “Partying to End Poverty” we could use the things we love – music and dance – against the things we hate – poverty – to create a sense of global unity.

So I met with a couple of venues in Providence and ultimately decided on the State Lounge, as they did not charge a fee for using the venue. And I got Nico Jaar, a famous DJ, to agree to provide music with no charge.

But there were always a lot of parties going on around campus, so I had to figure out how I could encourage people to pay $20 to attend a party when there are a handful of fraternity parties that were free of charge?

To solve this problem, I decided to add a free drink to the ticket (what magical things a drink can do for a college student), to make the dress code semi-formal, and to undertake extensive marketing about the Acumen Model.

I set up a Firstgiving page one month before the event with the goal of raising $1,000 in 24 hours. I went all over campus, announced the event in big lectures, dormitory halls, on Facebook, and Twitter, even just running into people.

I also sent out an email that said:

“…It all started back home in Alexandria, Virginia, with the blue sweater, a special gift that quickly became her prized possession—until the day she outgrew it and gave it away to Goodwill. Eleven years later in Africa, during a morning run, she spotted a young boy wearing what looked like the same sweater. She approached the boy, asked to see his sweater, and found her name still written there on the tag inside. That her garment had made it all the way to Kigali, Rwanda, was ample evidence of the way we are all connected…

In 2001, Jacqueline Novogratz started Acumen Fund, a non-profit organization that is revolutionizing the way the world tackles poverty by investing in transformative businesses that serve the poor.

From Alexandria, Virginia to Kigali, Rwanda, we now bring her story to Providence, RI and invite you to celebrate her story and Party to end Poverty.

Date: Saturday, November 7th

Place: State Lounge (located Behind Olives)

Admission: $20 cover (includes free drink) + any charitable donation

Music by Nico Jaar

*100% of proceeds donated to Acumen Fund

Because you rarely get the chance to drink with dignity, don’t miss this opportunity - DRINK WITH DIGNITY, and buy your ticket today. ”

The key was to create a sense of immediacy. People wanted to contribute to this. And the early donors were constantly checking the webpage to see how close I was to my goal – because they felt as though they were for promoting the party a couple of weeks later.

Once this foundation was set, I recruited about 20 friends and asked for their help in marketing the event. Initially many people were reluctant to spend $20 on a ticket, even though it was for a good cause. This is why I spent a lot of time individually encouraging people to attend, explaining why Acumen Fund is not just another non-profit organization, but is actually revolutionizing the way the world tackles poverty. I decided to call the event “The Blue Sweater Party” because I knew this would cause everyone to ask: why The Blue Sweater? These were exactly the kinds of conversations we wanted to trigger.

Impact: Delicious food, great drinks, upbeat entertainment, and an energetic and positive atmosphere could be felt throughout the crowd. $3,000 was raised for Acumen Fund but more importantly; over 120 students became engaged in the fight against poverty. Every minute of time or penny donated to this cause means that somewhere, someone’s life has improved. It is our responsibility as students and as future leaders to take action and allow organizations such as Acumen Fund to disseminate their powerful message in order to continue to do the work that they do. This event proved to me that the fight against poverty can be brought to the dance floor and that if we set ourselves to achieve something, we can block complexity and turn caring into action.

With a curriculum based heavily on the English canon – from Shakespeare to Milton to Conrad– Achebe, though an exceptionally able student, began to find himself troubled by many of his readings and the assignments he was obliged to produce on them. With scant mention of African histories or cultural forms, and with what few representations of Africans he encountered of a largely regressive nature – savages such as Caliban at best – the pre-independence image of Africa and its peoples that the young Achebe encountered in his courses insulted both his pride as an African and his emerging artistic vision. Where, he wondered, were the African protagonists? Why was he being educated exclusively through the stories of precisely those who had subordinated the communities of which he was part? Was there any reason that the novel as a form could not articulate the story of a Nigerian, or articulate a vision of Africa’s future? On the eve of Africa’s independence, Achebe realized that emerging nations such as Nigeria would need written versions of its own stories and new stories to educate its coming citizens.

Even from that young age, Achebe’s understanding of art was predicated on a progressive relationship to society, and he believed even then that the role of an author was akin to that of the teacher: to instruct and develop the moral character and worldly knowledge of emerging publics. At that startlingly young age, though, Achebe understood a key difference between teachers and writers: while teachers were responsible for educating their students through a variety of means – from lectures, to tests, to recitation periods – the exclusive tool available to the literary author was storytelling. What Achebe believed while beginning the novel – a belief that would become a hallmark of his critical writings and his literary practice – was that sharp storytelling combined with innovative ideas carries the potential to change the world.

Several years later and after several administrative hiccups (the sole manuscript at one point losing a year in the unhurried hands of a London- based typing service) the streamlined story of Okonkwo become Things Fall Apart. Then and now the novel represents an innovation based on an adaptation of existing tradition, in this case the novel. Published in 1958, the novel would eventually sell over eight million copies worldwide, and make Achebe a lion of global literary culture. Not only did the success of Achebe’s work facilitate the establishing of the institutions most responsible for the development of African writing in English – publishing houses and distribution networks – but it also serves as a perennial and indigenous cornerstone of a whole new kind of literature. It remains the first text in most if not all African studies curricula.

I was strongly reminded of the history of this novel’s birth as I listened to Fred Swaniker describe his experiences developing the African Leadership Academy during his recent visit to Acumen’s New York offices. A graduate of both Macalester College and Stanford Business School, Fred first had the idea for the ALA while working as a consultant at McKinsey’s Nigerian office, just prior to beginning his graduate work at Stanford.

Astonished to find so many wealthy Nigerians sending their children to expensive foreign boarding schools, many of them costing upwards of $40,000, Swaniker wondered why it was that no viable alternative existed anywhere on the African continent. As he recently recalled for Junior Kanu of Solving Africa , Swaniker began asking himself,

Why are we spending so much money to educate kids outside of Africa? Why don’t we have a school on par with the best in the world right here? It would be a cheaper alternative… [and because]… these kids were leaving at such an early age, they would never come back to Africa. And if they came back, how useful would they be to the continent?

In addition to this “lack,” there were two other conditions facing the continent that convinced Fred that an elite school based in Africa was not only a good but also a necessary idea. The first reason is the so-called “brain-drain,” alluded to in the quote above. Throughout the continent, the smartest, best- educated African youth have been fleeing to Europe and the United States in startling numbers, often pursuing lucrative careers thought to be unavailable in Africa. This kind of corporate diaspora, a path that Fred himself initially followed to McKinsey, often winds up a self-perpetuating cycle, with new African businesses and firms being built outside the continent, with foreign capital and foreign profits.

Fred also identified early on the centrality of leadership in both those African nations that were flourishing and those that were locked in alternating cycles of kleptocracy and dependence on foreign aid. In one case, exceptional leadership had worked to build central institutions, self-perpetuating infrastructure, and sustainable industry, in the other corrupt, factionalizing rule had lined the pockets of small elites while impinging the development of nations. A continent rich in resources and industriousness, leadership and its follies have been at the heart of persistent problems facing Africa. As Fred puts it, again in the interview from earlier this year:

The countries I’d lived in that I saw things were working, like Botswana, you could see that it was the leadership at the root cause of it. And no place shows you the impact of leadership in Africa [more] than Nigeria. People think what we need in Africa is resources, it’s not resources, the world keeps giving us more aid, that’s not what’s going to change Africa, we have all the resources we need… They have all these natural resources… time and time again, we find that our leaders have held us back.

Like Chinua Achebe and Fred Swaniker, leaders can also drive nations forward, helping them reach their potential. It is this brand of leadership that Acumen Fund seeks in its Fellows, and why Swaniker was an ideal speaker to include in their training. With funding from family, friends, Stanford classmates, and others, by the time he was a year out of school, much of the initial work had been realized. Last year, with the arrival of their first class of students, the two-year ALA began educating the future leaders of Africa. Its curriculum based on the best practices of global entrepreneurship yet grounded in the history of Africa, and its wildly variegated cultures, ALA is teaching its exceptional pupils how to be both global and continental leaders and how to be historically-conscious Africans. Needless to say, holding a central place in the African Studies section of its three-pronged curriculum (the other two being leadership and entrepreneurship) is Chinua Achebe’s Things Fall Apart.

By Aden Van Noppen

“I will develop a social enterprise major on my campus.” “Thousands of incoming freshmen will read the Blue Sweater as their first taste of college.” “We will create a viral video that reaches millions.” “Students will learn about and engage with social enterprise through the online hub we will build.” “We will change the way our generation tackles poverty.”

The seventeen student leaders who took Acumen Fund’s New York office by storm last week committed to accomplishing all these goals and more. Acumen’s inaugural Student Leaders Workshop was meant to ignite the fire under a cohort of young leaders who will return to their campuses in the fall as champions of social enterprise. The workshop and the students exceeded all expectations, and time will tell what they will accomplish together.

History tells us that college students are frequently on the cutting edge of social change. We (as a recent graduate, I still count myself among them) are often unsatisfied with the status quo and have the energy and passion to demand new ways of solving old problems. However, young people today are not protesting or rioting—instead, we are proclaiming ourselves social entrepreneurs and actively searching for the best models to address poverty. The movement for social enterprise is brewing on campuses across the country and the world, and seventeen young global leaders left Acumen Fund’s workshop last weekend inspired and driven to bring it to a new level.

We spent much of the workshop asking ourselves hard questions. What is development? How do we measure poverty alleviation? When can market-based solutions sidestep the barriers of traditional approaches? What is leadership? How do we know when to step forward and when to step back? How do we change the way our generation tackles poverty? There are still more questions than answers, but the participants now look to Acumen as an inspiring model and to each other as a dynamic group of leaders who can continue searching for the answers together.

If the last few days are any indication, their excitement, curiosity, and commitment will continue to grow. Social media tools are buzzing as they stay in touch, collaborate, and strategize. What they accomplish together is still to be seen, but I have no doubt that they will inspire many on their campuses and beyond to question the status quo and embrace a new model of fighting poverty.

In the coming months, the students will demonstrate the power of young people and of building a tribe of individuals who, as Seth Godin told us when he kicked off the workshop, “Decide to say yes.” Two days after leaving, one participant wrote, “The workshop left me with hope and inspiration. I now have a better idea of the field and how it works but most importantly, the workshop gave me the confidence to aspire and dare to dream.” These seventeen leaders will return to their campuses in the fall as extensions of the Acumen Fund team, ready and equipped to support Acumen’s mission to change how the world tackles poverty.

TechnoServe VP for Development Simon Winter speaks at ANDE training. (Photo by Brian Murray)

Last week, along with 40-plus other participants, the Acumen Fund summer associates participated in an energetic and informational training session run by the Aspen Network of Development Entrepreneurs (ANDE).  ANDE is a member-driven organization whose goal is to dramatically increase the effectiveness of capital and technical assistance for entrepreneurs in developing countries.  This training was a definitive step towards that goal.

For the second year in a row, ANDE has organized this training along with Acumen Fund, Root Capital, Grassroots Business Fund, Endeavor and many other members of ANDE.  With the exploding interest in supporting Small and Growing Businesses (SGBs) as a means of alleviating poverty, the importance of coordinating and connecting those entering the field has never been more critical.  Not only was the training immensely important to developing relationships across organizations; it also provided a forum to share best practices and to promote innovative thinking.

The two-day seminar was packed with a discussion of different business models, presentations on social metrics and hands-on case studies.  As if any of the graduate-level interns needed more motivation heading into the sector, the opportunity to hear from amazing speakers such as Christine Eibs Singer from E+Co, Brian Midler and Namrita Kapur from Root Capital, Susie Lee from IGNIA, Raj Kundra, Sasha Dichter and Ann MacDougall from Acumen Fund, Simon Winter and Jennifer Golden from TechnoServe, Ben Powell and Ricardo Teran from Agora Partnerships was inspirational.

I was uplifted to meet our peers who are now heading into the field to countries such as Pakistan, Kenya, Rwanda, Ghana, Nicaragua and Guatemala. In particular, I was humbled and inspired by their backgrounds, skill sets and demonstrated passion for the work we will be undertaking.   I hope that this foundation of collaboration is something we all push to continue beyond the training amongst ourselves and by including more people interested in the sector.

My personal highlights were:

• Sasha Dichter’s non-profit Venn Diagram
• Learning more about the Global Impact Investing Network and its mission to educate and drive more investors into the sector
• Quote to inspire by Ben Powell of Agora Partnerships:
  Men wanted for hazardous journey. Small wages. Bitter cold. Long months of complete darkness. Constant danger. Safe return doubtful. Honour and recognition in case of success

  ~ Sir Ernest Shackleton’s trans-Antarctic expedition recruitment advertisement

Although not exactly applicable to those of us heading out into the field (safe return = certain), it is a reminder that we all need support, encouragement and community to help us through the hard times when things don’t seem possible and barriers appear impassable.  I’m confident coming out of this training that this community is stronger than ever and I look forward to contributing.

For those of you who were at the training, please feel free to share your highlights in the comments section!

This is a thrilling initiative. First, it underscores to me that many of the world’s new standards are likely going to come from corporations who increasingly see themselves as global citizens. Of course, regulation is critical – and I am not naïve about the damage multi-national corporations can cause to the environment. But this is an important step forward, and I do believe that young people especially will hold companies to a higher standard of behavior and the smartest companies will stay ahead of this curve.

This initiative also excites me because it may provide an algorithm not only for corporations but for all of us. What would it take to influence our individual behavior so that we took the attitude that we give back to the world what we take out of it? We now have sophisticated tools to measure our carbon footprint – therefore, we know what steps could be taken to offset it. The same calculations can be done for water.

We could take this further as well, for example, around luxury consumption. What if we each created some sort of match for ourselves, whereby we would contribute to organizations fighting poverty in proportion for what we spend on luxury consumption? In other words, we would not “charge ourselves” for what we think we need in terms of the essentials (and this figure may vary widely according to overall income, of course). But we might contribute to charity at a rate connected to the very non-essential – not only to make us think about what we’re consuming but also create a different kind of redistribution that would be encouraged not by government taxation but by an individual’s own – but perhaps shared – moral code.

In the early years of Acumen Fund, one of our Partners told me that he was considering buying a Lexus when it hit him that he could, instead, buy a good (but less expensive) car, and give the difference to Acumen Fund. Years later, that gift is one of the most meaningful to me. I saw the partner recently and he told me that after seven years, he’s still driving the car and that every now and then, he smiles to himself thinking about the meaning the particular car enabled him to create. There’s something to this idea…

Our most recent intra-office debates revolve around the question of how to support and encourage social entrepreneurship - let alone find the solid business ideas that are providing services at the BoP - so we at Acumen Fund are excited to see positive news of on-the-ground initiatives and social businesses that often operate in the most challenging environments and landscapes. The story really is around social entrepreneurs like Roshaneh Zafar, Tasneem Siddiqui, and Dr. Sono Khangharani who “have seen possibilities where other people see hopelessness.”

Also featured in the same issue of Blue Chip is Roshaneh Zafar , President of Kashf Foundation, who recently launched Kashf Microfinance Bank Limited (KMBL) in October 2008. KMBL is an investment of Kashf Holdings Private Limited, the parent holding company in which Acumen Fund has also invested.

In the five months since operations were launched, Kashf Microfinance Bank has set up 18 branches and is serving 20,000 microfinance clients. But with the microfinance industry facing a challenging period in Pakistan due to the macroeconomic environment and political instability, the innovation of the original group lending methodology is now facing a setback. There is a need to innovate in microfinance services beyond the group lending methodology commonly used by microfinance institutions in Pakistan.

With the launch of the new Kashf Microfinance Bank, Kashf has begun individual lending and savings mobilization and now provides savings products to women from low-income communities. Roshaneh discusses the pioneering work Kashf has been doing at the BoP and Acumen is proud to support Kashf and the microfinance sector in Pakistan.

I recently visited Khuda Ki Basti 3, a low-income housing development 2 hours away from the city centre of Karachi. I first learned of Khuda Ki Basti (”God’s Settlement”) and the incremental development model when I met Tasneem Siddiqui of Saiban during a research project in 2005. I was ushered in an office by Mr. Siddiqui’s assistant (his only staff at the time) where he sat at his desk, shrouded by mountains of papers and books. Though he was extremely busy and seemingly understaffed, he made himself available to speak to me. Mr. Siddiqui is the sort of person who inspires people. Not because he is a great story teller with heart warming anecdotes that leave you with a good feeling. No, he is inspiring because he takes a no-nonsense approach to a problem that is colossal and overwhelming both in its scale and by its nature.

Without a piece of land on which you can raise your family, sleep at night and call your home, it is difficult to find the stability you need in your life to propel yourself forward. No one should be denied the opportunity to attain this stability and prosperity. Almost all people understand this. However there are very few people who will roll up their sleeves and try to get something done about it. This is especially true in an environment like Pakistan where public officials are a part of the problem, not solution. (Pakistan was ranked 134th out of 180 countries by Transparency International’s 2008 Corruption Perceptions Index - which is not a good ranking.)

My report recognized that, without government cooperation, there is no method of scaling any successful models in housing. However, it also acknowledged the reality – that public sector solutions are usually public relations rhetoric within a larger political game. As a result, government-initiated projects do not often reflect the reality of the issues. For example, as has been documented by Saiban extensively, the age-old government approach of creating elaborate “sites and services” schemes in Pakistan ends up inflating the cost and price of housing far beyond the reach of base of the pyramid, and yet we continue to hear of initiatives based on this model.

In his inauguration speech at the National Assembly on 29th March 2008, Prime Minister Yusuf Raza Gilani announced his coalition government’s agenda, including a plan to build one million homes annually targeted towards the lower income sector. Such grandiose plans that are removed from the reality of the current and historical housing reality are not uncommon - especially when they come during times of crises (in this case both economic and political).

Tasneem Siddiqui is known internationally for his work in low-income housing - he has been the recipient of the Aga Khan Award for Architecture, The Ramon Magsaysay Award for Government Service and nominated for several others. What is somewhat disheartening is that even today, despite his reputation and the successes (KKB has been replicated in three areas of Karachi and currently in the process of development in Lahore) of the incremental development model, government cooperation (in the form of subsidized land) remains the biggest bottleneck to solving the housing and squatter settlement crisis in Pakistan.

Though consultation with Mr. Siddiqui and Saiban is often part of protocol during various government-led initiatives, they have still not been able to get their model officially adopted. A Saiban employee told me that while officials praise Saiban’s efforts and achievements in the field during meetings and conferences, off-the-record discourses usually involve an official asking very plainly “Meray liye faida kahan hai?” (“Where is the benefit for me?”). It is easy to see how anyone with good intentions might be discouraged. But as the perseverance of Mr. Siddiqui, his colleagues at Saiban and of the residents of Khuda Ki Basti 3 demonstrated, determined ideals will get you long way.

In my next blog post, I’ll talk about how two of the earliest residents of KKB 3 and its very model taught me the meaning of patient capital. For now I’ll end on a note that nags at the back of my mind whenever I think of the achievements of Mr. Siddiqui in such an onerous environment. How much is the success of a movement dependent on its figure head? We at Acumen Fund like to talk about the sustainability of our advocacy for social change, but when it comes down to the nitty gritty, how do you go about succession planning for revolutionaries – especially when it is their reputation and clout that opens doors in such a dramatically politicized environment like Pakistan?

By Priya Pingali

Last Tuesday night, Rob Katz and I had the privilege of attending a talk by Nobel Peace Prize winner, Muhammad Yunus, hosted by NYU’s Stern School of Business and its Berkeley Center for Entrepreneurial Studies. Not surprisingly, the hall was packed with students, faculty and professionals, but very luckily, we were offered a couple of reserved seats right up front! One of the original pioneers of social entrepreneurship, Yunus and the Grameen Bank are shining examples of how businesses designed to serve the poor can have a profound impact on the lives of millions.

The stories of Grameen Bank (and the other businesses founded by Yunus) are clearly well known, but I would be surprised if anyone had walked away that night without a revitalizing sense of optimism, if not pure awe and admiration. Yunus’ journey began in one village in Bangladesh, with no plan except for the idea of lending $27 to a group of 42 people. Today, the Bank has about 7.5 million borrowers, 97% of whom are women. It manages over $1 billion in small loans, lending $100 million per month, and is currently making it possible for 34,000 students to enter higher education with loans and scholarships. Among his other ventures is Grameen Phone, the nation’s largest phone company and employer of 300,000 telephone ladies, and a solar energy company that currently sells about 8,000 solar systems a month. Yunus has also dedicated his efforts to the eradication of night blindness in Bangladesh by selling fortified vegetable seeds.

In a soft spoken yet powerful manner, Yunus challenged the audience to remove our “profit-maximizing glasses” and to regard making money not as the means and the end, but as the means to a social end. Admittedly, he seemed almost to be preaching at times, but judging by the standing ovation and roaring applause received, he had inspired the room of future leaders and entrepreneurs to reject the traditional (and outdated) trade-off between creating successful businesses and serving the poor.

I was personally moved by his emphasis on how insignificant the differences between all humans are. Hearing this at a time when the entire world, it seems, is yearning to believe once again in the possibility of collaboration, I was reminded of the importance of working to eradicate poverty, not just for the sake of reducing inequality, but in service to the idea that everyone in our world deserves the same chances in life.

Of course, that’s not how the world works - the truth is that I’ve never been to Pakistan, and I’ve never met the “Ted Turner of a small village near the Bay of Bengal” as Roshaneh describes Khairoon. I did have the pleasure of meeting Roshaneh, however, and she left a lasting impression. Her passion for microfinance is contagious; she believes deeply in the power of credit to bring dignity and choice to a formerly disempowered underclass - to people like Khairoon Apa.

So, how do I know Khairoon? After all, I’ve still not been to Pakistan…but I feel like I have after reading a recent article authored by Roshaneh, the founder and CEO of Kashf Foundation. In the article, entitled Female Empowerment and the Promise of Microfinance, we learn Khairoon’s story, about “a woman who started her life owning only one sari that she would wash from one side wrapping the wet end around herself since she did not have the resources to buy another.”

I urge all members of the Acumen Fund community to take a few minutes on this Saturday to read Roshaneh’s words. You may even meet someone new in the process.

While he was skeptical at the time of the role that a commercial approach could play in improving access to safe drinking water, over the past years, he helped launch 30 factories to produce affordable clay filters in Colombia, Honduras, El Salvador, Kenya, Cambodia, Cuba, the Dominican Republic and Darfur. Working with Potters for Peace, he was the drive and energy behind an effort that got 300,000 filters to the world’s poorest. According to the New York Times, “He often traveled in the wake of water-related disasters — following floods in Ghana or a tsunami in Sri Lanka — capitalizing on the rush of aid money to establish a locally owned enterprise that would sustain itself long after he left.”

His life was claimed in September by a bout of malaria he contracted in Nigeria while opening his 30th factory. He was 60 years old. His goal was to build 100 factories to produce these simple but effective clay pots and to reach 4 million people with safe water.

While I only met him a few times, Ron Rivera was someone who stood out in my mind as the “real deal,” someone who was driven to make a difference in people’s lives, and who himself was continually learning about how to have a greater impact. He may have been skeptical at first when I suggested he look at these factories like a McDonald’s chain, with standardized designs, manufacturing processes and marketing materials, but he ultimately found his own way to encourage local enterprises to take up this innovative business model. It was an approach that required him to personally connect with, train and inspire local entrepreneurs – work that was undoubtedly rewarding and effective, but that proved incredibly dangerous. His work will fortunately continue to impact people’s lives, as many of his protégés have committed themselves to carrying it forward. My hope is that we honor his life and what he worked for through our efforts to make affordable drinking water solutions available to the billions who need them, and our investments in health enterprises that can make diseases like malaria history.

Two weeks ago, I joined a group that included Aun Rahman, Acumen Fund Pakistan Country Director, Dr. Sono Khangarani and Saqib Khan, respectively the CEO and COO of Acumen Fund investee Micro Drip to visit Hyderabad in the Sindh region of Pakistan. Micro Drip sells drip irrigation systems to smallholder farmers in Pakistan (check out the company’s web site as well). My colleague Sasha Dichter took a similar trip earlier this year to a different part of Pakistan (Thar), and reflected on What It Means to be Patient: Drip Irrigation in Pakistan’s Thar Desert.

It was the Sunday before a 3-day Eid celebration, and the traffic leaving Karachi was noticeable, even to me (a Karachi novice). Then again, I couldn’t complain. Even the traffic in Pakistan is colorful, what with intricate designs adorning all manner of transport from the smallest rickshaws to buses and large-haul trucks.

But today, the color came not just from trucks, but from our non-human counterparts sitting in traffic. As part of the Eid celebration, families sacrifice an animal to share; as such, many vehicles were transporting goats and cows bound for slaughter; even camels played their part, pulling families along the highway. Later that evening, on our way home, I saw one guy in a rickshaw, his knees up to his chin as his feet rested on two goats, stacked atop one another on the floor of the rickshaw, much like one might stack up suitcases for a long family road trip.

I was eager for the road trip. It was a chance to get out of Karachi, where the inability to simply walk around freely must surely become stifling; it was also a chance to see more of Pakistan’s countryside. The day was facilitated very effectively by National Rural Support Program (NRSP). NRSP is (in Aun’s words) the ‘big brother’ of TharDeep Rural Development Program – the parent organization of Micro Drip – and has been providing agri-specific support to farmers for over 20 years.

In the past few years, NRSP has been offering micro-lending options in addition to agri-services, and the villages we met - like these farmers, pictured at left - with have organized around these micro-loans. The farmers that we met were not users of drip irrigation; in fact, the difficult task of selling drip systems to farmers was a key outcome of the meetings for me.

Many of these farmers have taken on loans between Rs10,000 and Rs30,000, and what we heard from them is that while these loans help them to operate without total dependence on a middle man – ‘Arti’ in Urdu – they barely cover the cost of inputs, let alone any of the other household costs the farmers incur on a daily basis.

Our objective for the day was simple: to listen to farmers. We wanted to hear directly their key concerns, constraints and cost burdens in order to gain a deeper understanding of where drip irrigation might play a role in increasing farm productivity. From a broader perspective, we were also interested in what we should be thinking about as Acumen Fund moves forward with our new agriculture portfolio. I can’t help thinking that my modest report is going to be complimented by a deeper and more colorful analysis in Jacqueline’s journal, so I’ll stick to facts and basics and attempt to relay the key insights we heard from these farmers.

The farmers are incredibly wise. Any solution that Micro Drip – or any other enterprise looking to solve the problems of smallholder ‘productivity’ – puts forward must be designed via an ongoing process of endless discussion with farmers. They know that drip irrigation needs a constant water supply; today, they are lucky to have access to flood irrigation from the canals once a week. Naturally, farmers are skeptical of drip’s impact.

They know that they are lucky to get 3 hours of electricity a day with which to pump the water from their wells, and even that they pay the landlord for – and it’s still cheaper than diesel. ‘Loadshedding’ has become such a common phenomenon throughout the rural areas that, despite the fact that they were speaking to us in their local Sindhi, the English word was common to all.

These farmers are keenly aware that, in 2008 alone, the price of inputs such as fertilizer has risen from Rs500 to Rs1300 on the black market despite the standard rate being Rs600. Their market access is limited to the back market through their historical relationships with Artis (middle men) leading them to hoard fertilizer, which in turn drives the price up more.

They know that even if their yields do increase, it’s often difficult to find a market for their product. This was confirmed in one village where we saw vast piles of cotton (pictured at left), brown and wasting because there was no one to buy, no where to sell. And finally, they know that the loans allow them to cover the costs of these inputs, but do not allow them to break the cycle of debt that the landlords and the Artis further entrench. If only the loans were larger, and the definition on ‘productivity’ broadened even a little, then they might be able to diversify their income sources, break their dependence on a crop that might easily be devastated by a flood or other natural disaster. A larger loan would allow them to buy new clothes, educate their children, pay for healthcare and truly improve their standard of living.

Dr. Sono knows the right questions to ask. He is in his element and it’s an honor to see him in action; he’s the only one of us who can speak directly to the farmers in Sindhi. The questions he asks all three villages get the same unanimous replies: 1) Do you think the cost of inputs is going to come down any time soon, if at all? No is the clear answer. 2) Do you think water will get any easier to get a hold of? Again, no is the immediate consensus. 3) What do you think is the best way to deal with these issues and allow you to become more productive? That, the farmers say, is the billion rupee question!

Dr. Sono discusses drip as an option, although he admits that without solving the bigger infrastructure question that would provide a more reliable water supply, it may not be the best solution for these farmers just yet.

One can’t help but be struck by the deepening and systemic tragedies Pakistan has fought throughout 2008: the continued lack of true leadership and the IMF intervention whose impact raises many more questions on the horizon. There are undoubtedly equally tough times are ahead here. But taking the time to listen to these farmers, to see Dr. Sono’s quiet manner of marketing with truth, and the deep seated commitment of the Acumen Fund Pakistan team (who are all complete rock stars) as well as the commitment I’ve witnessed this week from Jacqueline, Aun, Hunter Boll and Stuart Davidson, I feel a warming sense of hope that by partnering with and learning from local entrepreneurs like Dr. Sono, we might just gain the insights and the humility to give more farmers what they really need: the ability to determine their own definition of productivity and the dignity of providing for themselves.

I’ve been studying, working with and thinking about leadership development for the last seven years, but I never stop being surprised. This past summer, I led an idea session for the Center for Creative Leadership to brainstorm how leadership development could be applied in the context of poverty.

But in this group of East Africans, West Africans, and North Americans, we could barely agree on semantics-leadership for the base of the pyramid, bottom of the pyramid, leadership for the majority, leadership for all…etc. However, no matter what we called it, we all could agree that not only did the poor have little access to leadership development tools, but the research and resources at hand had limited relevance to someone living in poverty.

That is not to say that there aren’t leaders. I have had the honor of meeting leaders born into poverty and raised through adversity who demonstrate true leadership irrespective of socio-economic status.

Living in Ethiopia, I met Solomon (above, left), a young man who lost three of his limbs when the Addis-Djibouti railway overturned on route to Dire Dawa, Ethiopia’s second city. Solomon ended up in one of Mother Theresa’s clinics and tried a variety of prosthetic options, none of them feasible for the life he would lead in Ethiopia.

So he decided to pack it up and return home. Solomon wanted to start his own business, and I worked with him over a period of months to figure out how he could make it happen. Solomon left his old community, where people saw him as half the man he once was, and established one of the most successful video rental shops in his new neighborhood. His business has grown quickly because Solomon has impressed and befriended those around him, and he’s not done yet. He’s sending home money to his mother, employing boys from the street and he dreams of opening a proper internet café.

After such a devastating accident, many in Ethiopia take to the streets as beggars-either by choice or by force-but Solomon chose a different path. His optimism, courage, and work ethic helped him found his shop and attract a growing number of customers each day.

For me, leadership is about unlocking human potential. In my work with the Cherokee Gives Back Foundation and the Acumen Fund, I have struggled to find entrepreneur-leaders and provide them with the financial support needed to succeed and alleviate poverty through market-oriented solutions. But finance is only part of the picture. I have participated in two Leadership Essential programs, designed by the Center for Creative Leadership’s Leadership Beyond Boundaries initiative, and experienced first-hand the impact of “leadership development for the majority.”

I see immediate potential to introduce these tools to a broader audience in East Africa, but I see an even greater opportunity/challenge: How do we take this concept of leadership development and apply it to the people living in the villages and slums? In East Africa, the “pyramid” looks more like the Eiffel Tower - a needle at the top and large in its foundation. I believe that unlocking doors for this “foundation” will require creativity and a cross-disciplinary effort. But I also believe in the power of leadership development to transform the paradigm. Solomon is one of those extraordinary leaders who succeed, no matter the odds. There are many more out there like Solomon, and with appropriate and accessible leadership development, the impact could be revolutionary.

Seth Godin just announced an alternative MBA that he’s personally giving to a small group — application deadline is December 14, program starts January 19th, six months with Seth and a select group of people. It sounds amazing. You should tell amazing people you know about it.

Hats off to Seth for caring only about things that are valuable (as opposed to what’s conventional and expected), and for his being totally willing to put his money where his mouth is in terms of creativity, innovation, and break-all-the rules ideas. I’ve no doubt this will be incredible.

Here’s the full scoop: http://www.squidoo.com/Alternative-MBA.

Want to know a little about your professor-to-be? Check out Seth’s talk, “Influencing the Masses”, which he delivered at last month’s Acumen Fund Investor Gathering.

By Linda Segre

In many ways, Wednesday, November 5 was like any other day at the office. I came into work, powered on my computer, grabbed a coffee, and sat down to start the day. As usual, a host of unread e-mails awaited me. But that’s where my day ceased to be usual and instead, became truly memorable.

Innocuously nestled in with all the other messages was a note from Samuel Onyango. I first met Samuel in 2006, while traveling in Kenya with Acumen Fund’s CEO, Jacqueline Novogratz. That day, Jacqueline and I left Nairobi for western Kenya, where one of Acumen’s investments, Advanced Bio-Extracts, operates. Advanced Bio-Extracts is a for-profit company that processes raw Artemisia annua into artemisinin, the active ingredient in Coartem - one of the world’s most effective anti-malarial drugs.

ABE doesn’t source the raw Artemisia annua from just anywhere, however - they’ve invested in farmers who grow the plant and sell their yields to ABE. One such farmer is Samuel Onyango; I had the honor of meeting him and hearing about how his lifestyle had improved once ABE began to buy his Artemisia.

In January this year, I received an e-mail from Samuel - the post-election violence in Kenya had made its way to his small farm; looters and rioters had burned his house and fields.

It’s amazing how much has changed in just a few short months. Two Wednesdays back, I heard from Samuel again. His e-mail radiated hope, and brought a tear of joy to my eyes. I won’t do Samuel the injustice of trying to summarize his e-mail; instead, I’ll copy it in its entirety below:

Dear Linda, I take this special opportunity to congratulate you and the entire population of America as you celebrate the victory of your new president. Whether you supported John McCain or Barack Obama, the victory that has been achieved is the victory for the whole of America, the victory of Kenya and a victory of the whole world. Barack Obama, being a son of a Kenyan father, has made as Kenyans proud for having produced the president of the most powerful nation in the world. To that effect, the president of Kenya, H.E. Honorable Mwai Kibaki has announced that tomorrow - Thursday - will be a public holiday so that we can celebrate the Obama victory, unlike in January when he himself was controversially declared the winner, and instead of celebrating we went to war. Your elections and Obama’s victory are big lessons for us. Linda, I am so excited by Obama’s victory. Not only because he comes from Kenya, and not only because he is black, but because Onyango Husain Obama - the grandfather to Obama - and Rebecca Abongo Obama - my own grandmother - ware a brother and a sister. I have never met Barack nor will I. But I am humbled and feel greatly honored that a man who shares some blood with me is indeed today the most powerful man in the world. May God bless you. May God bless America. May God bless Kenya and may God bless ABE. I hope and pray that he will make America and Americans greater. I am praying and hoping that he will make your life more comfortable and make you proud to be an American. Thank you so much as we celebrate, SAMUEL FROM KENYA.

Or not. To my surprise, there’s an antidote to this sedative trio – and his name is Nachiket Mor. Last night, along with 150 or so others, I sat in rapt attention while Nachiket described his latest thinking on banking at the base of the pyramid in a talk entitled The Next Big Step: Revolutionizing Financial Services Distribution in Rural India. Yes, the event started at 6:30, and they served delicious (but heavy) hors d’oeuvres. And since the auditorium was bright in the late-day sun, the organizers drew the blinds and dimmed the lights. But for the duration of Nachiket’s presentation and through the Q&A, the entire audience sat and stood at attention. It was that good.

I shouldn’t be surprised; Nachiket really knows what he’s talking about. After early-career success at ICICI Bank, he moved to Philadelphia and worked for a hedge fund while pursuing his Ph.D. from the Wharton School. Upon graduation, he returned to India and moved up the ladder at ICICI, joining the Board of Directors until he stepped down last year to become the president of the ICICI Foundation for Inclusive Growth. His passion and life’s work center on financial service delivery in base of the pyramid markets – the subject of last night’s talk.

Nachiket talks about banking low-income consumers in straightforward terms. After all, whether his customer is rich or poor, a banker must do a few things and do them well: take and give money, determine the borrower/saver profile and properly value uncertainty. These basics are the foundation on which the Kshetriya Gramin Financial Services (KGFS) initiative has been started. KGFS is Nachiket’s latest initiative to bring banking services to the BoP, which he’s doing in partnership with the IFMR Trust.

Kshetriya (regional) Gramin (rural) Financial Services is an effort to blanket rural districts with full service bank branches, reversing the typical microfinance model where banks are located in urban areas and MFI officers visit villages periodically. KGFS branches, on the other hand, are open from 6:00 AM to 11:00 PM and offer villagers a range of financial services from savings to loans. Nachiket describes the branches as providing continuous, reliable, convenient and structured financial services, which sounds simple but hasn’t been available to date in many areas of India.

Some key elements of the KGFS business model really struck me last night:

• They recruit bank managers from the Indian Army, which has a well-earned reputation for neutrality. This helps prevent caste- and income-based bias by bank staff against customers.
• Starting an account takes less than 7 minutes; each transaction takes less than 3 minutes. These strict time limits are a response to customers’ complaints about microfinance institutions. MFIs hold lots of meetings – but many see these as a waste of time, especially when the attendees could be at work instead. KGFS wants to respect its customers’ time.
• "Wherever we enter, we will stay" – KGFS is committed to the communities it serves, and is rolling out slowly – first in Tamil Nadu, later in Bihar and Orissa.

If they can pull it off at scale, KGFS will be revolutionary. They are offering savings accounts at 9 percent (vs. government savings rates of about 3 percent). Loans, at full yield to maturity, can be had for 11.25 percent (vs. typical microfinance rates of 30 percent or more). They can offer such attractive rates because they’ve built an IT platform that keeps costs absurdly low ($0.50 per year per account!) The attractiveness of these services is undeniable.

But what stands out from the presentation is Nachiket’s palpable passion for the business of banking the unbanked. He says that every customer is seen as a high-quality, rational human being – an obvious statement, but in a society dominated by caste and income inequality, it’s no small step. Audience questions are answered enthusiastically and honestly, without pretension. If only every presentation could be this compelling.

We will have to keep an eye on KGFS to see how it goes. After all, even Nachiket is straightforward about the possibility that the model won’t work. But, like a true entrepreneur, he understands the power of learning from one’s failures as much as one’s successes. As I left the NYU auditorium last night, I couldn’t help but think that, in the case of KGFS, Nachiket and IFMR Trust will be learning from success in this case.

Thanks to the NYU Microfinance Initiative and the NYU Financial Access Initiative for organizing and hosting the event last night.

Editor’s Note: Sam Goldman writes a great blog - Let There be D.Light! - at Social Edge. Check it out.

The award is well-deserved. We have known Aravind since Acumen Fund was first established, and although Aravind was one of the first organizations supported by us, it is Acumen Fund who stands proudly on the shoulders of Aravind and not the other way around. Dr. Venkataswamy, who sadly passed away in 2006, founded Aravind in 1976 at the age of 58. His goal: eradicate needless blindness in India.

Dr. V. and his team – mostly family members, including his seven younger siblings – focused on using a rigorous, market-oriented approach to delivering basic services to all people, including the poorest. A sliding scale pricing system enables those who pay to subsidize the cost for those without the means to afford Aravind’s services. Aravind also re-engineered the intra-ocular lens to make it more universally affordable. And critically, the operations are driven by a culture of compassion, respect and dignity for all – and you can feel these values in the hospital’s very halls.

Acumen Fund supported Aravind in 2002 to experiment with building a telemedicine network that would allow doctors at Aravind’s five main hospitals to serve low-income people living in rural areas. Today, Aravind serves more than 2.3 million outpatients and performs 270,000 surgeries annually through its network of hospitals and clinics – making it the world’s largest provider of eye care. Even more staggering is the fact that two-thirds of the outpatient visits and three-quarters of the surgeries were provided to poor clients, at no cost. These milestones are a testament to a system that is both efficient and just.

Dr. Venkataswamy and the Aravind team had a profound effect on me personally. Through knowing this remarkable team, I’ve tried to live more fully the idea that we can hold the discipline of the market and deep compassion at the same time. I’ve worked harder to emphasize the dignity of work. At a very personal level, I think often of what Dr. V. often said: that we can integrate divinity into our lives through not only what we do, but how we do it. It has been such a gift to know this institution.

All of us at Acumen Fund are cheering for the wonderful team at Aravind and look forward to its continued success.

LifeSpring’s maternity hospital

I first visited LifeSpring on Mother’s Day, where, as part of a free vaccination offering, the hospital sat new mothers and their families for photographs. Later that week, I visited with LifeSpring manager Anant Kumar and Acumen Fund Fellow Tricia Morente.

LifeSpring addresses a powerful and daunting problem. Fewer than half of Indian women are cared for by a skilled attendant during childbirth, and the chances, over a lifetime, of an Indian woman dying due to complications in pregnancy and childbirth are 1 in 70.

Mr. Ayyapan, the Chairman and Managing Director of Hindustan Latex Limited - a large Indian public sector company - and his team created LifeSpring to address this problem. Acumen Fund then joined in as a 50/50 joint venture partner to help take the concept to scale.

Lifespring’s maternity care hospitals offer a low-cost alternative to public clinics, which are free but often low quality. At LifeSpring, expectant mothers pay 1500 rupees (about US$35) to deliver a baby. This price point seems to make sense, and Mr. Kumar told us that the mothers typically decide based on quality of service, and the fathers based on price. The opinion that prevails will often depend on the education level of the mother.

Already, LifeSpring’s occupancy ratio has surpassed its targets, with more than 1500 customers coming in per month, and there are plans to build 5 more small, 30-bed hospitals before the end of this year.

At Acumen Fund, we talk a lot about looking for “breakthrough innovations.” What does this mean? The iPhone is a breakthrough innovation - fancy, high-tech, and paradigm-breaking. But what about a small, simple maternity hospital on the outskirts of Hyderabad?

Innovations - regardless of sector or target market - begin with an insight. In LifeSpring’s case, the insight was that the free care offered by India’s public hospitals was not good enough. Ayyapan and Anant’s innovation was to create a hospital with world-class care (LifeSpring is ISO 9001 certified) at a price that poor people can afford. Since the economics are working well, the innovation is poised to scale: one hospital today, 5 planned by the end of this year, and hopefully 50 or more in the years to come.

But the surprises run deeper than this first insight. For instance, Tricia Morente (an Acumen Fund Fellow spending this year working with LifeSpring) had explained to me that LifeSpring calls expectant mothers “customers” and not “patients.” In Tricia’s words, this is because “pregnancy is not an illness.” I smiled the first time I heard this, thinking back to the medicalized pregnancies that have become the norm in the United States (I’m the parent of two children, ages 1 and 4).

I realize now that I didn’t fully understand the power of treating “customers” until I spoke to Anant Kumar. “The first time doctors come into our hospital,” Anant said, “we train them on talking about ‘customers’ and they maybe get it right 1 out of 10 times. After some time with us, the number jumps up to 6 out of 10 times, and we want it to keep improving. It really means a lot for a doctor, who is educated and from at least a middle-class background, to treat poor people with this kind of respect.”

Respect. We talk every day at Acumen Fund about how treating poor people as customers forces an organization to treat them with respect and dignity, and to listen to their needs. To be reminded of this lesson by the head of one of the enterprises we invest in was humbling. Kumar said that he sometimes thinks it would make more sense to recruit nurses from the hospitality industry (hotels and the like), because it may be easier to teach nursing skills than it is to teach good service! And while he was saying this, I couldn’t help thinking of the hospitals I’ve been to in the United States, and how scarce a commodity dignity is once you put on a hospital gown.

Putting dignity at the center of high-quality, low-cost maternal care in a 30-bed hospital outside of Hyderabad? Now that’s a breakthrough innovation.

Dr. Farmer coined his talk an ‘insider’s critique’ of social entrepreneurship, and started by wondering whether he was in fact a social entrepreneur. Does he, by his own definition, bring real innovation to solving big problems? What’s so innovative about what he does? Partners in Health basically says that poor people deserve basic health services and then makes it happen. Farmer thinks that access to those services should be a right enjoyed by all people. However, the fact is that most of the world’s poor don’t have access to basic health needs – even defined by mid-19th century standards: clean water, food, sanitation. (Amartya Sen might describe these deprivations as “unfreedoms.”)

According to Farmer, the efforts of most social entrepreneurs are falling short – despite the best of intentions. Their innovations are not reaching the people they are designed to help. Much hard work is being done, but it is scattershot. He asks the questions: are we innovating merely for the sake of innovating? Are we targeting the right problems? Answering himself, he argues that we must keep our innovations grounded in solving the problems of the poor.

Farmer also warns social entrepreneurs to be mindful of damaging public sector initiatives. Even more, he cautions that a social entrepreneur may contribute to the lack of public sector service delivery, because a problem may appear to be getting solved. He thinks that the problems of global poverty (as well as environmental problems) are so large and so intractable that they can only be solved by a broad-based social movement, a “bus,” as he puts it. The bus should carry both “greens” and social entrepreneurs out to beat poverty. The bus needs experts, entrepreneurs and governments. And the movement needs to resonate and build among large and growing groups of people, and in the media as well.

Dr. Farmer spoke eloquently and made a good case. Still, it was interesting to hear him argue that this battle would not be won except by a grand coalition, rather than by brilliant examples of success, i.e. little beacons of light. Many have associated his work to date as constituting one of those beacons.

Media coverage of Fisher’s award is widespread; the Boston Globe has a good article on the announcement, and PopSci makes a mention as well.

To celebrate, be sure to watch “Don’t Wait for the Rain,” a social marketing rap video produced about KickStart’s signature MoneyMaker pump.

I arrived early, set up my laptop and grabbed a bite to eat (if you’re curious, the CFR building is beautiful and they do a good lunch spread). Before I was through my sandwich, the room had filled to capacity and CFR staffers were scrambling to set up overflow seating – there’s clearly a lot of interest in the recent controversy surrounding microfinance. It was quickly apparent that women outnumbered men in the audience by a ratio of about 2:1 – interesting, though not completely unexpected given the importance of women in microfinance and the fact that the speakers and moderator are all women.

Coleman kicked off the session with brief introductions and quickly segued into the topic at hand – the good, bad and ugly of microfinance. She stated – without dissent – that microfinance now finds itself at an inflection point. On the one hand, there have been calls for microfinance not to profit off the backs of the poor, notably in the New York Times’ coverage of Compartamos’ IPO. On the other hand, those who know microfinance realize that it can’t scale – from 100 million clients today to its potential market of 4 billion – without the capital markets, and the formality capital markets require.

I thought Coleman did a good job setting the stage here. From my perspective as a quasi-insider, there wasn’t much new – but it is important to say nonetheless. Microfinance can and will go one of two directions, and it’s pretty clear that there are strong arguments being made by advocates on either side.

Mary Ellen Iskenderian was next to speak. She is President and CEO of Women’s World Banking (WWB), the world’s largest network of microfinance institutions and banks. Iskenderian leads the WWB global team, based in New York, providing hands-on technical services and strategic support to more than 50 top-performing microfinance institutions and banks around the world. Iskenderian told us that WWB’s network MFIs have a total portfolio value of $1.4 billion and an average loan size of just $500. Those MFIs serve roughly 9 million clients and there are another 14 million clients served through WWB affiliate banks. Of WWB’s 23 million clients, approximately 70 percent are women.

Iskendarian took the helm of WWB after 17 years at the International Finance Corporation and a stint at Lehman Brothers. She holds a BS in International Economics from Georgetown University (my alma mater) and a MBA from the Yale School of Organization and Management. In a ’small world’ moment, she and I have collaborated in our previous professional endeavors (she at the IFC and I at WRI) and got a laugh out of the fact that we found ourselves at the event today.

After Mary Ellen’s initial comments, Roshaneh Zafar took the microphone. Zafar is the Founder and President of the Kashf Foundation, the third-largest (and fastest growing) microfinance institution in Pakistan. (Full disclosure: Kashf is an Acumen Fund investee.) Before founding Kashf, Zafar worked at the UN Development Program and at the World Bank. In 1993, while at a conference, she found herself discussing the idea of starting a microfinance organization in Pakistan with Grameen Bank founder Muhammad Yunus – who later sent her a plane ticket to Bangladesh to study the Grameen model.

In 1996, she decided to take the step from thinker to practitioner by founding Kashf. By early 2008, Kashf had served over 250,000 clients and held a $110 million loan portfolio. Zafar earned a BS in Finance from Wharton, a BA in Economics from the University of Pennsylvania and a Masters in International Development Economics at Yale.

Zafar began her remarks by reflecting that upon seeing the title of the event – The Good, The Bad and The Ugly – she first thought of Clint Eastwood, which elicited a laugh from the crowd. She went on to describe the state of microfinance in terms of those three descriptors.

First, the good – microfinance does bring about change in the household, according to Zafar. Her Kashf Foundation has seen that a household that has taken 3 loans generates at least 70 percent more income. In general, the Pakistani sector is growing by 30 percent per year. Government policy is open and liberal towards microfinance, which will help bring about commercialization and formalization (code for scale).

The primary ‘bad’ when it comes to microfinance is that it hasn’t scaled. Most MFIs are not profitable; since 2003, Kashf is the only MFI in Pakistan that is financially sustainable. What makes this truly bad is Zafar’s belief that a non-sustainable MFI is fraudulent. I was intrigued by this line of argument. Why fraudulent? Zafar argues that, by going out and asking people to take a loan and then pay it back, you have to use that trust and be there for the long term; unsustainability (and the risk of closing) breaks that trust.

Finally, the ugly: economic conditions in Pakistan are affecting Kashf client households (and others throughout the developing world) in terms of food and energy prices. They are developing what they call vulnerability products – like savings. Secondly, there’s a need to document borrowers (here, Zafar references Hernando de Soto; I wonder how many in the room are familiar with The Mystery of Capital…). She argues that formality is so important, because a BoP client can never really come out of poverty if they are in the informal economy.

Coleman asked the panel a first question – how do you see commercialization unlocking opportunity, and what are some parameters MFIs could put in place to ensure borrowers are not taken advantage of. I thought it was a good question, getting right to the core of the recent debate.

Iskenderian began her answer by observing that microfinance NGOs – many of which have been part of microfinance since its beginning – have distinct social missions. To fulfill those missions, these organizations must have more capital; without access to the capital markets, they simply won’t be able to raise that money. Secondly, these NGOs want to offer new products – such as savings – but they need more money to develop these sophisticated products. Overall, she observed, commercialization has been a positive vehicle for achieving social missions.

That said, as the microfinance sector has grown and reached more clients, Iskenderian observes a worrying trend: the percentage of women clients has been declining rapidly. If you take that figure as a proxy for the organizations’ focus on poverty, then this decline indicates commercialization may be bad for achieving social missions. At this, Coleman interjects and mentions that, with all the fury over Compartamos, it is interesting to note that Compartamos’ percentage of women borrowers has actually stayed stable during and after their IPO. Personally, I am not sure that the best metric for measuring MFIs social impact is the percentage of female borrowers; this back-of-the-envelope thinking (and the lack of dissent among the audience) worried me a bit.

In her answer, Zafar pointed out that commercialization is necessary to sustain growth rates; Kashf grew 86 percent in 2007 and 90 percent in 2006. She offered four specific stages of a MFI’s commercialization:
- get your money back
- be efficient and achieve cost effectiveness
- reach the capital markets
- take deposits and offer financial services

Kashf is at step four – they are setting up a bank as well as maintaining its current foundation model. The biggest challenge of step four – taking deposits – is to keep transaction costs low. Kashf is going to try a branchless banking approach and see if that can keep costs down.

On the lending side, Kashf is looking at the bottom rung of entrepreneurs: small businesses needing $800 to $2000 loans. According to Zafar, the thinking behind this is all about job creation in low-income communities. The key is getting from income generation (self-employment) to small enterprise (hiring others), which creates a multiplier effect in BoP communities. To make a dent in the lives of poor households, you need to make them part of the financial system.

Coleman’s second question was simple: should there be a cap on interest rates?

According to Mary Ellen Iskenderian, “just because you can charge a certain interest rate doesn’t mean you should.” In the case of Compartamos, she noted, there hasn’t been any competition; as a result, Compartamos has been allowed to grow up as an inefficient organization. Covering costs is one thing, she noted, but if you aren’t pushed by competitors, then you can do whatever you want to. The good thing about the Compartamos IPO is that it is bringing this competition into Mexico. In sum, she says there should be no interest rate caps, because they would discourage competition and innovation.

In her answer, Zafar brought up the Bolivian market, where pre-commercialization microfinance rates were at 70 to 80 percent. But in the past 10 years, when Bolivia has become perhaps the most-commercialized microfinance sector in the world, the interest rate has dropped to 35 to 45 percent – a decrease that Zafar chalks up to competition. At the same time, the original players in that market may charge a higher rate because of the risk they’re taking on.

There is also a moral element at play. In Pakistan, moneylenders charge 200 to 350 percent – compared to Kashf’s 36 percent. Zafar noted, “I cannot stress this enough: you cannot put a cap on interest rates.” If you do, she says, you doom commercialization. According to Zafar, Kashf is sometimes considered usurious and has been called out in the press as such. Ultimately, the ethics are important – could Compartamos have brought their rate down from 90 percent to 70 percent? Maybe they could have – which Zafar sees as a moral, not a business, question.

The third big question to the panelists was about new technologies and branchless banking – what kind of affect they would have on the sector. In her response, Iskenderian noted that operational inefficiencies have to be brought down for microfinance to scale. Unfortunately, the real problems facing MFIs aren’t going to be solved by branchless banking; rather they are straightforward but difficult nuts to crack.

First off, there’s a primary human resources challenge – how do you hire enough staff when your organization is growing at 90 percent per year? And how do you retain them? (Zafar nodded vigorously as Iskenderian described this issue. I was sitting next to Kashf’s CFO, Khaled, who was also nodding his head.)

The second issue facing MFIs is technology-related – but not cell phones and wireless. Rather, it’s about basic, back end systems and MIS that can be adapted to the unique needs of microfinance. Not sexy stuff, but critically important.

Kashf, according to Zafar, has seen some great results with technology. They just started a cell phone project, and worried that they would have high training costs – teaching their borrowers how to use the drop down menus and SMS on phones. That wasn’t the case at all; their low-income clients picked up on the user interface quickly – which taught Kashf that “you have to trust your clients.”

The problem with the cell phone project wasn’t technical – it was regulatory. Thankfully, the woman who runs the State Bank of Pakistan has been helping them deal with these issues. (Mentioning this, Zafar observes – laughing – that there’s no coincidence that the problem got solved by a woman.) The other problem for Kashf’s mobile banking pilot was with the telco – working with them to develop the back end systems to get client information quickly and cleanly. This is not news, really – we’ve been talking about this in the BoP universe for the past 2 years.

At this point, the audience began to ask questions. The first asked about know your customer (KYC) regulations, and how they have been an issue for growing MFIs. For Kashf, KYC has been a huge issue, in addition to anti money laundering rules. Documenting who your client is can be really hard in Pakistan, because not even 35 percent of Kashf’s clients have national identity cards that are required to register with the bank. So, to meet KYC requirements, Kashf has to do social mobilization and help their potential clients get cards – this market building is an extra cost for Kashf, and is something we see throughout the microfinance industry.

One of the day’s final questions asked if there is a risk of there being too much money chasing too few opportunities. In response, Iskenderian pointed out that CGAP just put out a report on risk in microfinance – and ‘too much money’ was the number one risk. Data in the report show that 82 percent of all microfinance clients worldwide are being served by just 2 percent of the MFIs. (This is a staggering number; I had no idea the gap was this big.) There’s also another tier of MFIs that we can start to develop – and help consolidate. The vast majority of MFIs have 3,000 borrowers or fewer – and WWB believes that you need to have at least 5,000 to really be sustainable.

How does that consolidation happen? It will vary by country. For example, in Colombia, WWB had two MFIs merge and then partner with BBVA to create a specialized microfinance bank. From Zafar’s perspective, it’s not as much about mergers as it is about scale – how do we reach all of these people who don’t have access?

Overall, the event was well organized, well attended and well run. I left with a better understanding of microfinance and the challenges it faces. I was especially struck at how easily Iskendarian and Zafar can move from discussing the business aspects of microfinance to the social aspects. Their organizations seem to have been able to merge these two goals – financial sustainability and poverty alleviation – without compromising either.