Things are getting interesting. I am finally moving ahead and reading and studying about microfinance and finding a few new answers to my kind of ideal MFI.
What I discovered today while searching on the net is about an organisation kiva.org. What kiva does is that it has tied up with MFIs around the world. They provide the details on the microenterprenuers who need funding and kiva gets these directly from online users like you and me. Kiva gives the funds to the MFIs and the MFIs gives it to the microenterpreneurs. In return kiva gets reports on repayment of loans and passes it on to the lenders.
Kiva is an NPO so it seems for their cost, they get their operation cost through donations. I wonder how that is possible: running a well technical website, partnering with so many MFIs?
Apart from these if an MFI wants to register with kiva it has to be eligible:
1. Have 1000 active borrowers
2. History of lending 2-3 years
3. Registered as a legal entity in the country of operation
4. 1 year of financial audits
5. Preferred: have a profile on Mix Market (www.mixmarket.org)
What I liked about Kiva:
I like this whole concept of it being a microfinance ebay kind of website where you can choose enterpreneurs from around the world. I also liked that they take in MFIs with at least 2-3 years of experience and one that is legally registered.
But as a lender do not think that you are going to earn profits from lending. No, its a kind of charity that you give and the amount comes back to you after a few months and then you can decide either to give it again or keep it.
The profits goes to the MFI or rather I should say the interest goes to the MFI. And kiva, as i read takes no part of it. It is simple doing the charity work of providing normal people a platform to donate(lend). Somehow i quite don't believe in it. There must be some form of fees they charge to the MFIs who are on their site. There are no free lunches remember?
But yeah, the concept of a site getting people to contribute to specific enterprenuers really strikes well.
Thinking of this, how about an MFI that directly opens a kiva kind of site displaying all the potential enterpreneurs and get the donations directly from the lender. In turn the lender not only gets his money back but also profit on it!! and in case of loss the lender just gets his principal amount and the cost of operation is bore by the MFI!! Sounds excellent doesn't it?
Well see how well writing brings out the creativity, albeit helped ;) so yes i would put that as a proposition on getting the funds. It may be slow for any starter MFI but with time and with honesty and transparency and by giving profits to its lenders, it can succeed!! The lenders will be constantly given reports on the progress of their enterprenuer and it will definitely attract a lot of people even those who donate on kiva as unlike kiva who gives you the information and the way to give a loan, here you get profits on the amount you loan.
Remember I keep mentioning profits because interest limits the earnings of an interest charging institution, but profits, do not. The contra side is that there is tremendous risk involved because being a small busimess and assuming that the person we are lending to is no savvy Ratan Tata or Ambani, there is a likelihood that he might not be able to make profits.
That's where an MFI comes in and sees to it that only those client files that have a potential of making a profit make it to the website to minimize the chances of no profit or loss.
With that thought I shall continue my reading...
Thursday, May 29, 2008
Wednesday, May 28, 2008
Bad at my thesis!
I have to be honest that I have not been paying enough attention to my work for the past few months.
As I mentioned earlier that I was and am still interested in doing my thesis in Microfinance. I just read about how this microfinance bank in Mexico compartusbanco issued an IPO and has over 53% profit and how Prof. Yunus of the Grameen Bank is against another money lender in the disguise of Microfinance is out there exploiting the poor.
Now I read somewhere that it helps in your thesis that you just write down what comes to your mind and then later structure it. The best place to write is my blog! So these are just my views and thoughts and they are likely to be changed, bettered and polish with time but I need to clear of my head and start thinking so here it goes.
I am strictly against interest. be it 1% or 100%. I feel in today's age we just cannot avoid interest. It has become a vicious snake in our lifes. Turn anywhere and there is interest involved. Even in a simple credit or debit card! Either you get or you give.
My views on interest is obviously firstly rooted because of my religious beliefs that interest is not allowed.
Secondly, it is supported by the various examples I have read and seen, personally am afraid in my family and also of family friends who feel they can take a loan and get it repaid irrespective of all the other economic conditions and risks.
We have heard enough stories about how money lenders have exploited the poor with usurous interest rates and our own Indian farmers killing themselves when they fail to repay.
Therefore, I absolutely abhor, hate, loathe and all the similiar synonyms when it comes to interest!
So my idea behind my thesis, it may sound like a fairy tale, it may be rebuked, it may draw critism and many will say 'Oh that's simply impossible' is that I want to build a new model of microfinance based on the concept of profit and loss sharing.
What happens here is that you enter a partnership with the working poor and give them the funds, they put in the efforts and both of you share the expected profits on a preagreed profit and loss sharing ratio.
Example:
I give a microenterpreneur Rs 10000. We agree that he will purchase goods and trade them for a profit margin of say 20%. So he should earn around 2000 as profit.
I as the capitalist will take 30% and as he has put in the effort, he takes 70%.
AND.. very importantly, in case he fails or is unable to make profit, I do not charge him anything. no interest, no name-it-what-you-want fees.
All I want back is my capital. So he has to return only the principal amount.
Now the advantages of such a model would be that we would have more people coming forward, being confident to borrow money. Successful enterprenuers who know they have a good chance to make profit would not hesistate to come front as they are getting 70% of the profits with no interest involved!!
Now as good as this model sounds, I do know the limitation.
Pschologically- anybody can come and take the loan and how truthful can a microenterprenuer (a vegetable seller or a small trader) when it comes to the true amount of profits he has made. Isn't it much simpler to just charge him a fixed interest rate and how he makes his profit is his headache.
Yes, these thoughts are there at the back of my mind, but I rather be an optimistic than a pessimistic.
Surely, there is a way out there. There is a way that we can monitor and control our risks.
I just need to find out what it is.
Secondly, as far as the value of my thesis goes, as my guide tells me, who will be willinging to buy your thesis, the first thing that comes to my mind is anyone and everyone who is against interest!
We can have investors come together and show the world, that this world economy can run smoothly without having interest in it.
If a 100 people join hands and put in Rs 10000, we have Rs 1000 000 to start with!
Like I said, these are my thoughts as and when they come to my mind and I will be posting them so that I can refer back and may be get a few ideas from my readers.
As I mentioned earlier that I was and am still interested in doing my thesis in Microfinance. I just read about how this microfinance bank in Mexico compartusbanco issued an IPO and has over 53% profit and how Prof. Yunus of the Grameen Bank is against another money lender in the disguise of Microfinance is out there exploiting the poor.
Now I read somewhere that it helps in your thesis that you just write down what comes to your mind and then later structure it. The best place to write is my blog! So these are just my views and thoughts and they are likely to be changed, bettered and polish with time but I need to clear of my head and start thinking so here it goes.
I am strictly against interest. be it 1% or 100%. I feel in today's age we just cannot avoid interest. It has become a vicious snake in our lifes. Turn anywhere and there is interest involved. Even in a simple credit or debit card! Either you get or you give.
My views on interest is obviously firstly rooted because of my religious beliefs that interest is not allowed.
Secondly, it is supported by the various examples I have read and seen, personally am afraid in my family and also of family friends who feel they can take a loan and get it repaid irrespective of all the other economic conditions and risks.
We have heard enough stories about how money lenders have exploited the poor with usurous interest rates and our own Indian farmers killing themselves when they fail to repay.
Therefore, I absolutely abhor, hate, loathe and all the similiar synonyms when it comes to interest!
So my idea behind my thesis, it may sound like a fairy tale, it may be rebuked, it may draw critism and many will say 'Oh that's simply impossible' is that I want to build a new model of microfinance based on the concept of profit and loss sharing.
What happens here is that you enter a partnership with the working poor and give them the funds, they put in the efforts and both of you share the expected profits on a preagreed profit and loss sharing ratio.
Example:
I give a microenterpreneur Rs 10000. We agree that he will purchase goods and trade them for a profit margin of say 20%. So he should earn around 2000 as profit.
I as the capitalist will take 30% and as he has put in the effort, he takes 70%.
AND.. very importantly, in case he fails or is unable to make profit, I do not charge him anything. no interest, no name-it-what-you-want fees.
All I want back is my capital. So he has to return only the principal amount.
Now the advantages of such a model would be that we would have more people coming forward, being confident to borrow money. Successful enterprenuers who know they have a good chance to make profit would not hesistate to come front as they are getting 70% of the profits with no interest involved!!
Now as good as this model sounds, I do know the limitation.
Pschologically- anybody can come and take the loan and how truthful can a microenterprenuer (a vegetable seller or a small trader) when it comes to the true amount of profits he has made. Isn't it much simpler to just charge him a fixed interest rate and how he makes his profit is his headache.
Yes, these thoughts are there at the back of my mind, but I rather be an optimistic than a pessimistic.
Surely, there is a way out there. There is a way that we can monitor and control our risks.
I just need to find out what it is.
Secondly, as far as the value of my thesis goes, as my guide tells me, who will be willinging to buy your thesis, the first thing that comes to my mind is anyone and everyone who is against interest!
We can have investors come together and show the world, that this world economy can run smoothly without having interest in it.
If a 100 people join hands and put in Rs 10000, we have Rs 1000 000 to start with!
Like I said, these are my thoughts as and when they come to my mind and I will be posting them so that I can refer back and may be get a few ideas from my readers.
Thursday, May 01, 2008
15 days to complete my MBA?!
That is the deadline I have given myself. Why? Coz my family is coming down and I do not want to be bogged down by studies. But I am also happy that my parents will finally be with me! They are my strength and inspiration and I am so looking forward to having them here. I just know that everything will be alright.. back to high school once my parents are here.
My MA exams start on 26th May and I have a deadline of 31st for my Thesis (my own deadline) and well life couldn't be more busier. I have been bad at blogging coz I don't know what to write about these days. But I just read something about write... just write.. even though nothing comes to my head right now.. its good to write and keep your brain and fingers busy on the keyboard. Besides the good thing is.. my blog is hardly read by anyone..hehehe.
Well so I look forward to having my family with me and just having them with me. Things are looking great apart and all is fine.. The only thing need to make it perfect is - work!
So that is what I am off to do...
My MA exams start on 26th May and I have a deadline of 31st for my Thesis (my own deadline) and well life couldn't be more busier. I have been bad at blogging coz I don't know what to write about these days. But I just read something about write... just write.. even though nothing comes to my head right now.. its good to write and keep your brain and fingers busy on the keyboard. Besides the good thing is.. my blog is hardly read by anyone..hehehe.
Well so I look forward to having my family with me and just having them with me. Things are looking great apart and all is fine.. The only thing need to make it perfect is - work!
So that is what I am off to do...
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