Mr. Yunnus' Revolution - Microfinance and Its Many Iterations

Mr. Yunnus sure was onto something when he founded the Grameen Bank, the world’s first microfinance institution.  The concept that micro loans could have a significant impact on the well being and growth of a community was truly transformative, and many business models have since sprung from his first initiative.  Although Grameen founded microfinance it was Kiva that digitized the model, bringing peer to peer (P2P) lending to the 21^st century. 

Other business models then built on both Grameen and Kiva’s revolutionary adaptations of microfinance, one of which was peer to peer credit loans.  On such adaptation is Vittana – a peer to peer lending platform focused on providing loans to students in developing countries.   I recently had the chance to have dinner with Mora Mcleon from the Africa America Institute, and she made an astute observation....Microfinance is a fantastic model for providing capital to communities seeking to develop, but in order for those communities to truly rise out of poverty, it is important to increase the level and depth of education.  The Africa America Insitute focuses on doing just that – providing capital to students in Africa seeking a higher education in business. What Vittana has done successfully, is adapted the micro lending model to a part of society that is usually forgotten as we view it as a public good – education.  

I would argue that loans to both micro enterprises AND education is necessary for the alleviation of poverty, and that both models are making great strides to simplifying the way individuals in the developing world can help. 

For those of us who believe that more should be done to tackle problems within our own country before we focus on the developing world, I have good news. LendingClub.com just scored 24.5m last week from Morganthaler, Norwest and Canaan.   This platform seeks to simplify the process through which individuals can loan money to one another, for anything.  We have Mr. Yunnus to thank for this revolution in lending, and I sure hope we carry this momentum forward.  

Tata Announces World's Cheapest Water Filter - BoP Strategy

The new buzz word (acronym) I’ve been hearing over and over again is BoP – Base of Pyramid.  According to a World Bank report, there are 1 billion people living on a dollar a day or less. More importantly to the concept, however, there are 3 billion people that live on $5 or less a day.  BoP experts believe that this massive group of people have urgent needs that need to be fulfilled, and they also have some form of income to provide in exchange for the fulfillment of these needs.   I recently had the opportunity to speak with Josh Tetrick, the founder of 33needs.com - and his main argument is that it can be profitable for companies and startups to focus on this segment (the BoP), and is passionately working to convince companies to do so.  You can learn more on his venture at 33needs.com

Seems like the idea is taking hold – Tata launched the world’s cheapest car a few years back, and has now announced the world’s cheapest filter.  894 million people lack access to clean water  - a clear need – and this filter aims to provide families with clean water for 200 days.  The filter is estimated to cost 21 dollars, or approx 10 cents a day for clean water.

Another startup targeting the BoP is D.Light, which sells solar powered lanterns, which also double up as phone chargers.  “One in four people don’t have electricity in the dark” is the lead quote on their website – and if they can create a dependable source of light for cheap enough, this provides a massive market opportunity.

Ultimately I wonder if startups alone will be able to fulfill these needs – there are few if any good distribution systems in third world countries, creating a massive barrier to the selling of these BoP solutions and products.  Nestle  has one of the world’s most expansive and robust product distribution networks in the world – if it were to volunteer its distribution platform to such startups, I think we’d have a winning strategy.  Without the ability to leverage these existing and costly distribution networks, I’m not sure how a startup for profit company could quickly make it to breakeven….

Here's what the filter looks like :