Even a year gone since the failure of Lehman, fundamental questions remain regarding the core underlying assumptions of our financial system. Though currently derivatives trading and black boxes appear out of favour, what will replace them in terms of helpful and productive uses of capital still has yet to be determined. This question was what the Conference on Social Capital Market’s, or SoCap09 tried to give some structure to; while the trend towards sustainable investments and long-term ROI seems to have taken the place of actively managed funds seeking 20x returns.

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Set up as a “201″ panel discussion, the moderator asked the audience and participants to be honest, avoid soliloquys and “pitches” and stick to the business of user-worthy advice.  Matt Flannery, co-founder of Kiva.org, Steve Newcomb, co-founder of Virgance (new owners of this blog), and Ben Rattray founder of Change.org then answered questions designed to help fledgling business idealists through the realities of what it takes to rally social change.

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In 2009 it is expected that 1 billion cell phones will be sold worldwide.  Asia Pacific will increase its uptake from 1 in 4 to 1 in 3.  The New York Times recently reported that India adds more cellphone connections than any place in the world with 15.6 million added in March alone.

Cell phones are a hidden indicator of emerging market performance.  They open new markets by reducing distances and by increasing access to information.  This in turn stimulates efficiencies in productivity and amplifies commerce which improves local economies.  Increased wealth creates independence and leads to a more educated population which in turn, drives market-driven policy making and other reforms.

In 2005, the Grameen Foundation set the stage for emerging market cell phone adoption and launched the the “Village Phone” business in rural Bangladesh, publishing a how-to manual and setting up micro-finance loans to villagers in towns that had no access to telecommunications.   Four years later, entrepreneurs have finally caught on and despite the downturn, the last 6 months has shed light on a few innovative initiatives that have been announced in a variety of sectors around the world.

In February, the Gates Foundation in partnership with a worldwide consortium of mobile industries teamed up to announce the Mobile Money for the Unbanked (MMU) initiative.  With a goal of supplying 20 million people with mobile financial services by 2012, this program will enable those in developing countries to carry out mobile banking from their phones in order to protect and grow their money.

Several new projects in the area of HIV/AIDS education have also been announced recently.  Several providers are developing text messaging services to deliver HIV/AIDS health management services (medication regimens, appointments, advice/consultations).   And Project Masiluleke, borne of the social incubator Pop!Tech, will begin its first phase with 1,000,000 broadcast text messages to the general South African public on both HIV/AIDS and TB for a year. Metropolitan Life, an insurance company in South Africa has partnered with CellBook to provide an information booklet on HIV/AIDS that can be downloaded onto the cellphone.

The future of well-designed social innovation programs should take a look at the realities and economics of what is driving health and welfare in emerging markets.  Cell phones are a truly universal technology platform that will provide critical resources to populations of all class and trade.  Hopefully, the iPhone Labs aren’t the only place smart developers are spending their time in.

image credit: marceloconsultario on creative commons

Shazam figures out what song you’re listening to.  A pocket flashlight (not to mention a light saber) is only two taps away.  And Yelp can get the phone number, directions and even a review of the place you’re trying to find and meet your friends at in a quarter of the time directory assistance, Safari, Google or any mapping software can do it.

So, why wouldn’t our love affair with the iPhone help us make the world a better place?  Why wouldn’t our obsessive usage create perfect opportunities for capturing micro-donation portals to make contributions to the micro-finance or giving sites of Kiva or Global Giving?  What about a carbon calculator that lets you immediately link to an offset purchase equivalent to the inquiry? It would seem that millions of tiny donations could add up to lots of impact.    It seems possible, and even more so fun.  But does it really add up to a smart fundraising play?

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Responding to the sharp economic downturn facing the nation, a group of seven leading nonprofits that offer lending and support services to small businesses are taking swift actions to help entrepreneurs challenged by higher costs, declining sales, and tightening credit.

Leaders of the seven organizations came together last month in Albuquerque, NM, to share their approaches, including: customizing their counseling and coaching services to help businesses adapt to the economic downturn, implementing new technology and reconfiguring staff to increase loan production, and developing new loan products and financial counseling services for credit-challenged customers.

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I have this idea that if an institution has at its base, principles that are environmentally sustainable and socially just, and that the main goal of that institution is truly to serve, then it won’t be able to fail when times get tough.  To put this theory to the test I went searching recently for some stock or institution that remained unscathed in the face of the recent market collapse.  It didn’t surprise me at all, as a firm believer in the idea of microcredit, to hear that the institution of microfinance indeed is not feeling any strain whatsoever these days.

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ACCION Investments will take a 20 percent share in the bank, investing up to $2.5 million as part of a new capitalization program. Existing shareholders, including international investors such as Incofin, FMO, Stichting Hivos-Triodos Fonds and Stichting Triodos-Doen, and Tanzanian investors such as InterConsult Ltd., Parastatal Pensions Fund and almost 70 private Tanzanian individuals, have invested a total of $2.7 million in the capitalization. At the same time, Akiba has contracted ACCION International to provide the bank with a senior management team, as well as short-term technical assistance in order to expand the bank's portfolio and outreach to thousands of Tanzanian microentrepreneurs.

John Lwande will serve as Akiba's new managing director, under contract with ACCION. Lwande brings more than 19 years of leadership, management skills and product expertise to the post, having directed operations for microfinance institutions and commercial banks in Tanzania, Zimbabwe, Kenya, Malawi and Zambia.

Akiba's goal is to grow substantially beyond its current footprint of six branches, presently centered in Dar es Salaam, Arusha and Moshi. The bank has just over 98,000 depositors and a total deposit base of TZS 36.3 billion. Among these depositors, it has 16,000 microcredit customers, and a total loan portfolio of TZS 25 billion.

"Our investment demonstrates our belief in, and commitment to, Akiba and the Tanzanian microenterprise market," said Enrique Ferraro, managing director of ACCION Investments. "The bank has shown great recent progress, has an excellent record as a deposit-taking institution, and a solid group of international and Tanzanian shareholders," he continued. "We're proud to be even more deeply involved with Akiba."
ACCION's relationship with Akiba began in early 2002 through an institutional assessment exercise. ACCION subsequently provided technical assistance to the bank’s microfinance operations, in training, product design and marketing, and eventually provided full-time advisors. Its increased participation in the bank reflects not only its faith in Akiba, but also a rapidly expanding engagement in African microfinance overall; ACCION recently launched a rapidly-growing microfinance bank in Nigeria, and has also recently announced the launch of microfinance operations in Ghana through a partnership with Ecobank.

Via: (ACCION International)

Do yourself a favor, and go watch the introductory video on the new KivaB4B site, which makes the most clear, compelling connection between entrepreneurs like yourself, and people in the countries that microfinance serves. It shows, side by side, the similar needs and activities we all have as entrepreneurs — a little boost, a bit of advice, and a lot of encouragement and community.

In a powerful synergy, Kiva, one of the top players in this realm, has partnered with Advanta, a credit issuer that is highly supportive of small businesses, to create KivaB4B. It’s simple really: You as a business owner put money towards someone via Kiva, and Advanta matches it, dollar for dollar, up to $200 a month. This may sound small, but think about it this way: If only 1% of Advanta’s 1.3 million customers put even $50 towards this, that would mean $1.3 million going to these people. Dollars that go a lot farther then they do here, making for a potentially significant positive impact for people just like yourself, really.

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The Person-to-Person (P2P) lending marketplace is an exchange where outsiders are allowed to lend at market rates and anyone who passes the underwriting is allowed to borrow.  This space has grown in part due to the  tightening of the conventional credit markets.  Forbes recently posted a fantastic overview in their Entrepreneur’s Guide to Person-To-Person Lending Sites for those interested in seeking funds in the P2P marketplace.

A quick question for any well-informed IE reader, is there a site that offers P2P services to non-profits or social enterprises with lower service fees and interest rates?

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Each organization will recruit and hire a graduate student for the internship, which will pay a $7,000 stipend.

As part of the $280,000 program, Citi Foundation also is funding FIELD, the microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination, a research group housed at the Aspen Institute in Washington, D.C., to manage the project and train the interns in data collection methods.

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"All of this innovation presents challenges and opportunities for regulators," says Elizabeth Littlefield, CEO of CGAP. "Policy will determine not only where branchless banking is allowed, but also which business models turn out to make economic sense — and how far they will go in reaching poor people."

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“Fostering small to medium enterprise will generate tremendous empowerment for individuals and their communities,” said Jim Bunch, director of investments at Omidyar Network. “Entrepreneurs are able to bring their passions and skills to market, creating economic and social value for themselves and their families. When these enterprises succeed and scale, this value can be shared with new employees, their families, and the community at large.”

Omidyar Network aims to create a level playing field for small to medium enterprise entrepreneurs by providing access to the financial products and services that are integral to their success. Access to financial services is an important component of economic empowerment, and microfinance has brought that access to approximately 100 million people who would otherwise not qualify for mainstream financial services. However, a gap in the size of loans continues to exist between what microfinance institutions can provide and the larger investments of commercial banks, leaving many small to medium enterprises without formal funding options.

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For the past five + years my family has been practicing different ways of sharing gifts for the holidays. We made gifts a couple of years. Then we decided to pool our funds and purchase one big gift for someone in the family that would inspire their lifestyle, creativity, and passion… This year we decided that no one really need anything and we would prefer to do something together as a family to improve the lives and economies of others- invest in a micro-fund.

Microfinance creates social lending networks that gives us lenders the opportunity to connect directly with borrowers who normally wouldn’t get the support of a bank. This allows people in poor countries and rural areas who don’t have access to traditional banks or don’t have the credentials necessary for a bank loan, to start a business. The neat things it that in all circumstances (weather your money is controlled by the organization through which you lend or you choose who your money goes to) you can more or less track your loan. This type of investment has already made profound impacts on developing nations as it funds businesses that support their local economies. Instead of weaving baskets to be sold in the global market, people are able to start water distribution businesses to improve quality of life in their own communities.

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Created to better educate and engage the world about how microfinance can help millions to help themselves, the site was designed to facilitate information-sharing, advance dissemination of best practices in the industry, and to improve networking and fundraising. Its new features include:

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Microfinancing, the loaning of small amounts of money to the asset-less poor, garnered worldwide attention last year when one of the leaders in this emerging field, Grameen Bank, and its founder Muhammad Yunus were awarded the Nobel Peace Prize.
Microfinancing reaches out to a massive economic underclass that has been shunned by the international banking and lending system by providing necessary seed capital for small ventures.

It may seem intuitive for some to believe it foolish to loan money to a person with no assets and seemingly little prospect of converting that loan into a profit and repaying it. Grameen Bank has proven that belief to be very wrong indeed. Grameen sees a default rate of only 2% on its small loans to the poor. Compare that to the 4.5% default rate on student loans within two years of beginning repayment in the US. The low default rate vindicated Grameen’s simple founding principle, that “the poor will repay loans.” The reliability of the poor to repay has also helped to make microfinancing economically viable for lending institutions in a competitive free market. In short, microfinancing has been one of the huge successes of social-capitalism.

What has propelled Grameen beyond vindication and to the Nobel Prize is that the vast majority of loan recipients have used the financing to reliably generate assets. Many borrowers, for instance, have started businesses selling phone services in their remote villages. Take the story of Sophia Nalujja (photo reprinted with permission of Grameen Foundation) of Uganda. She
has been a successful borrower from the Grameen Foundation in Uganda for many years, has started a couple businesses and more than quadrupled her farmer’s income. Stories like Sophia’s abound as
microenterprises represent an estimated 80% of total enterprises and 50% of urban enterprises in developing countries, where they are the main source of jobs for poor people.

You, too, can become a microlender at Kiva.org. Kiva provides an easy way for you to connect directly with microenterprise entrepreneurs all over the world. Photographs and thorough descriptions of the loan’s purpose make it fun to just surf around and see what people are doing to improve their lot in life. A typical Kiva loan is for right around $1,000 give or take and you can contribute as little as $25 to any project you wish to fund. Re-payment typically takes one year and you’ll receive a little interest on your investment or you can choose to make your money a gift to the entrepreneur.

Update: Our sister site Planetsave makes micro-loans a part of how they do
business, GO founder and Planetsave publisher Shea Gunther explains the
details here.