Microfinance:social networking meets social enterprise

Worldly young professionals are increasingly turning their attention and efforts towards a burgeoning new industry perfectly suited for the hands-on idealist.
Although the microfinance movement first emerged during the 1970s, it wasn’t until Mohammed Yunus and the Grameen Bank were jointly awarded the 2006 Nobel Peace Prize that it truly captured the public’s attention.  The media attention garnered by the prize combined with the exponential growth of global networks and web communities over the past three years has propelled the microfinance industry closer to its goal of providing high quality financial services to poor households throughout the world.  There are a number of microfinance organizations with offices in Washington, DC and, not surprisingly, they benefit immensely from the army of motivated and civic-minded young professionals living in the area.
The term microfinance refers to the sustainable provision of financial services to low income clients.  These services, which include credit, savings, insurance and money transfers, are intended to finance income producing activities, build assets, stabilize consumption, and protect against risks.  Microloans--loans provided by microfinance institutions (MFIs)—are different from traditional commercial loans not only because they involve smaller sums of money, but also because they are issued without collateral.  An individual’s ability to secure a loan from an MFI depends not on his net worth, but rather on his ability to pay off the loan in a reasonable amount of time.  Therefore, in microfinance, much energy is devoted to investigating and evaluating the repayment capacity of any potential borrower before he/she is granted a loan. 
YPFP member Chris Le works as a research and program assistant at the Washington-DC based non-profit Microfinance Opportunities (www.microfinanceopportunities.org).  According to Le, who is currently involved with projects in Pakistan, Peru, Malawi and Vietnam, Microfinance Opportunities specializes in financial education, microinsurance and client assessment, which includes market research for and impact assessment of microfinance programs.  The organization’s assessment of innovative microfinance programs is funded by grants from donors such as the Bill & Melinda Gates Foundation.
Another DC-area YPFP member, Mary Moseley, recently completed a fellowship in Senegal with the world’s first peer-to-peer microlending platform, Kiva Microfunds (www.kiva.org).  Kiva’s unique website allows a lender to select which microentrepreneur he wants to sponsor and then, by reading Kiva’s web journal, to observe the selected entrepreneur’s business progress.  Kiva fellows do a large part of the journaling for Kiva partner MFIs.  “The Kiva model has been successful because Kiva lenders value the social return on their investment (which they get via journal updates) more than any financial return," said Moseley.  "Microfinance organizations appreciate interest-free Kiva funding as it helps reduce their cost of capital."
The microfinance movement is just one part of a larger contemporary movement known as “social entrepreneurship,” wherein individuals apply the principles of capitalism to create innovative responses to social problems.  While the measure of a business entrepreneur’s success is based on profits and returns, the measure of a social entrepreneur’s success is determined by the impact the venture has on society. 
Ashoka: Innovators for the Public provides social entrepreneurs with living stipends for an average of three years, allowing them to focus full time on building their institutions and spreading their ideas.  “At Ashoka, we believe that the growth of the global citizen sector begins with the work of the individual social entrepreneurs who drive the sector forward by finding innovative approaches to respond to the new challenges and changing needs of their communities,” said Romina Laouri, a YPFP member who works in the organization’s Arlington, VA office.  “We want to create a world where everyone is a changemaker and individuals have the confidence and societal support to address the social problems they see.” 
These microfinance and social enterprise organizations represent only a fraction of those currently at work around the globe.  Bringing together a wide variety of players to take financial inclusion to the next level, in September 2008 the microfinance institution ACCION International launched the Center for Financial Inclusion (www.centerforfinancialinclusion.org), located in Washington, DC.  “After nearly 50 years of growth by nonprofit pioneers such as ACCION, Grameen, Opportunity, and many others, microfinance is now seeing new and increasing interest from private sector investors and providers,” said Caroline Mauldin, a YPFP member and communications officer for the Center.  “This presents us with an immense opportunity to learn from one another—and to achieve significant breakthroughs in the provision of economic opportunity for millions of poor men and women worldwide.” 
One can only imagine that, as more educational and commercial institutions take an interest and invest resources in microfinance, the field will continue to grow – and probably even more rapidly than it has over the past two years.