to iinnovate, a podcast about innovation and entrepreneurship with Julio
Vasconcellos and Matt Wyndowe.
Hello and welcome
to another episode of iinnovate. We mentioned last week that this
week we would have Philip Rosedale from Linden Lab, the makers of Second
Life, in this episode, but unfortunately we’re going to have to push
that back a week due to some technical difficulties. But as a
special bonus, we’re going to be featuring a question to Philip from
former Intel chairman and CEO, Andy Grove. So I hope you enjoy
We also wanted to
make a quick announcement that this episode marks also the launch of
video for iinnovate. So, check out or blog iinnovatecast.com for
the latest updates as well as all the video content, including some
additional parts of the interview that aren’t featured in this podcast.
I also wanted to take
this opportunity to welcome our newest member of iinnovate, Min
Li Chan. Min Li is a great addition to the team, and Matt and
I are really excited to welcome her on board. We’re looking
to include leaders and innovators on the podcast from a wider variety
of fields, and Min Li has helped us with launching that with this episode.
In today’s episode
we are happy to bring you a true leader and innovator in the field of
microfinance, Alex Counts, the president of the Grameen Foundation.
Alex was trained under Dr. Muhammad Yunus, who is the founder of the
Grameen Bank and this year’s recipient of the Nobel Peace Prize.
Today the Grameen Foundation impacts an estimated 11 million people
worldwide and continues to grow in its global reach of impact.
It was truly a pleasure to welcome Alex to the podcast. We hope
you enjoy the interview and thanks for listening.
We’re here in Palo Alto with Alex Counts, who is the president
and CEO of the Grameen Foundation. Welcome to the podcast Alex.
you. It’s great to be here.
Alex, what is microfinance and what is the relationship between the
Grameen Foundation and the Grameen Bank?
is an industry, or we think of it more as a movement, to try to bring
financial services that we take for granted, loans, deposit services,
insurance, that are actually so critical to us living our lives, even
in the wealthy countries, and bringing those financial services to the
poor. A much higher percentage of them work for themselves than
in the case of our country. And for them, financial services are
even more important, but right now they’re only available in most
cases through loan sharks, who charge very high interest rates.
What we’re trying to do is create a movement or an industry to serve
them efficiently, and so they can have the financial services that they
want and need, at a reasonable cost, and that, the surplus they generate
through having these services gives them the liquidity they need and
financial management in pools they need – becomes a pathway out of
poverty. Grameen Foundation is focused on taking microfinance
models that have been very successful in Bangladesh and bring them here
in the National Grameen Bank that won the Nobel Peace Prize; model this
in Bangladesh to a huge extent with six million clients.
The Grameen Bank has been credited with sparking the microfinance movement
about 30 years ago. So what has changed in those 30 years and
what sorts of innovations has Grameen actually perpetrated in that 30
of all, the term microfinance and microcredit didn’t exist back then.
Back then, the expectations were that you might be able to get some
portion of your loans back; and so as a result, you could use whatever
came back to lend a second time. Because the performance has been
better than expected, both in terms of recovering the principal, and
also recovering the costs of providing the service through interest,
we now talk about microfinance not only in terms of preserving a loan
capital but meeting all of the costs of providing the credit to the
poor. That achievement, it’s really developed from a development
project focus to developing a new business model serving the poor, rather
than a development project focus. The other innovations that you’ve
seen and that we’ve been involved in relate to bringing other financial
services, such as insurance and savings, that compliment credit, which
was the original focus, and also bringing non-financial services, piggybacking
on microfinance infrastructure providing health, nutrition, education,
empowerment approaches that can benefit women and children. These
can be done much more efficiently through the microfinance infrastructure
and we only had a dim awareness of this 30 years ago, but now there’s
a whole innovation about how to use this infrastructure serving close
to 100 million families to provide things more than just credit and
maybe more than just financial services.
I think you’ve said before that you’d like for microfinance to
be more than just a financial product and more of a platform and this
is what you mean.
right. Whenever we do economic analysis or even demographic analysis,
the most marginalized parts of the population are kind of a rounding
error. We look at the wealthiest 20% or 40% or 60% and we say
the poorest must be some fraction above that. What microfinance
has done, because no one else had done it, is actually go to the poor,
go to their doorsteps, and ask them what financial services they want,
and if they want them, to provide them; to get data on what they’d
borrow, what they’d pay back. What we see is once you have that
relationship with them, then it’s more than a product, it’s the
world’s largest aggregation of institutions with a direct relationship
with the poor, not as a rounding error, but as people with financial
needs and non-financial needs. When you think about that infrastructure,
and you realize most MFI’s meet face-to-face with their clients every
seven days. So in terms of educating them about products, providing
them with services, there are 52 opportunities a year, direct contact
opportunities. You already have that because of the credit and
the financial services, but you can do so many things with that on that
platform. Just to give one simple example: in Bangladesh and in
poor countries, just like in rich countries, there are a lot of health
myths. People assume certain things about nutrition, and in this
country it’s the Atkin’s diet or something that is out there, but
there are health and nutrition myths in this country that are mostly
harmless. People gain a few pounds, lose a few pounds, were sick…
When there are health myths in a third world country and someone has
a health crisis, it can be a life or death situation. So because
of these contact points between the educated people who work for microfinance
institutions and the poor, you have 50 opportunities a year in most
cases, to shatter myths, to provide accurate information on health,
on nutrition, on political participation. Grameen can let six
million families know on seven days notice if there’s a new government
program that they should be benefiting from but don’t know about;
and that can change the whole dynamic if there’s a disease that’s
striking livestock, that is true or just rumored to be true. For
us, information like that is a convenience; for the poor it can be a
matter of life or death. And there’s really no other platform
that exists, except for perhaps governments, which are not terribly
efficient in most cases, in which they have that direct relationship
seeing more than 50 times a year, having contact with, doing business
with, half-a-billion of the world’s poor.
I’d like to turn a little bit in terms of what your vision is for
Grameen in the future. One of the things we did before this podcast
was reach out to some of our audience that is really interested in microfinance
and ask them for some questions. Jessica Flannery, who is one
of the people who started Kivo.org, she asked,
“What is Grameen’s expansion strategy for the future?” And
as a followup, “What role does Africa play in that expansion strategy?”
think our vision at a conceptual level and that Dr. Yunus has articulated
very well is the idea of achieving a real breakthrough, a historic breakthrough
in the question of not poverty, because there’ll always be people
that are relatively poor and relatively less poor, but abject poverty,
absolute poverty. We want to put that in museums, and to break
through the cynicism that the poor, the absolute poor will always be
with us. The high level, that’s our vision. The way that
you do that through microfinance and complimentary approaches, is you
really need to measure what’s happening to the poor when they borrow,
because some borrowers in some programs in some regions of some countries
achieve a very rapid progress, two to three years in the matter of poverty.
Others, it’s a very long time, or even people stagnate before they
get to the poverty line or fall backwards. So being able to rigorously,
but in a time-sensitive way get data, about what’s happening to the
borrowers, we as an industry have a long way to go and we’ve tried
to develop a tool, Grameen Foundation, for our partners that we’re
making freely available and in an open-source kind of way, and we’re
going to be developing it in more and more countries. Once we
have that data, we’ll also be able to counter the argument that we’re
just doing; we’re making money off of the poor. We’re making
money off them, but the poor are making money off of us. But we
can’t prove that now like we should be able to do. And in Africa,
I’m very excited to say, that where we’ve only been active really
in two to three countries in sub-Saharan Africa, Northern Africa, we’ve
had a bigger role, we are bringing into our board, literally in about
ten days, a very bold Africa strategy. And I’m in fact here
in the Bay area raising money to launch it and had some early successes.
To go into a significant way into eight other African countries and
then after that into another four from the two we’re in now.
One of the things I’m very excited about is working with other social
movements. There are other movements: there’s the Women’s
Movement, there’s the Movement against AIDS, there’s the Environmental
Movement, that all sorts of synergies are not yet explored and that
one of the most exciting ones is the movement, the one campaign and
the work that Bono’s been doing, and that’s been one of the inspirations
is to join forces with the one campaign and everyone associated with
that to really have a much more aggressive attack on poverty in Africa,
which is arguably the only region of the world that’s moving backwards
in terms of poverty.
Why do you think it is the case that Africa has been so underserved
in microfinance today?
don’t know. You people have theories about dispersed populations
and the fact that the transaction costs are much higher. I think
that’s probably part of it. That’s why we’ve made a big
investment in Grameen Foundation and in our Grameen Technology Centre,
which is operating in Seattle, with which we’ve been able to track
volunteers and staff who have a deep commitment to taking technology,
which has transformed all of our lives, that are in the richest billion
people in the world, and figuring out how that they can also transform
microfinance institutions and microfinance clients. And we’ve
made some early small successes, but we think that the biggest things
are in front of us, and those technology applications, breakthrough
applications for the core and the MFI’s that serve them, that’s
going to help most countries in Africa, or let’s say in Indonesia
or Philippines where you have many, many islands and people dispersed
among islands. The transaction costs are very high there.
They can be brought down to some extent with respect to technology.
And then I think that in sub-Saharan Africa, I just don’t think that
a leader of Dr. Yunus’ caliber has come forward yet, who is an entrepreneur,
who has very high ethical standards, who has that total package who
can become the kind of focal point for the movement and be the inspiration.
There are some great leaders, but no one has emerged yet, and I think
when you have a leader, and then you can bring the power of technology,
I think Africa may leap over the rest of the world.
Could you speak a little bit more about the role of technology in microfinance
and how you think, more specifically web and mobile technologies are
going to impact microfinance going into the future?
think there are two broad categories. One of which is, I think,
that technologies have a potential to be what I call a business in a
box for the poor. We’ve experimented with two things so far,
one is kind of a, we call a village computing centre, where we’d set
up a borrower with about $1000 to have two computer terminals, a printer,
and to basically be like a mini Kinkos. That worked pretty well
but the whole financial model, to scale it, we never could quite figure
out in that form, so we’ve done a few pilots, modestly successful.
What has worked better is a mobile phone. People want to make
phone calls, figure out how to do their business more efficiently.
They want to know whether to sell their produce in Nairobi or some other
town. Well, in the past you needed to send someone there, now
you call. So this can bring new efficiencies to business and many
other things, but the potential when you have the phone, technology
business in a box, brings in all sorts of things related to telemedicine,
distance learning, that are not fully explored, and where you have illiteracy
you can get the voice recognition technology in many languages down.
This opens up all sorts of doors that distance and language may close.
And so we’re making an investment and trying to set up borrowers with
mobile phones, which then on that platform, you can build many other
things which still need to be developed. The other big application
of technology is to help the MFI’s track their loans and transfer
money much more efficiently than is being done now. Tracking the
loans, the software that has been developed for the microfinance industry
across the board is not very good. Even if it is working, it’s
not scalable. So we’re developing an open source solution, which
is really a platform of common data standards that we customize and
will be a breakthrough in the market. We call that project “Mifos.”
We’re now doing beta testing in Tunisia and in India. The other
area is about the technology developed in the Philippines to transfer
money from cell phone to cell phone using the text messaging technology.
If you can do that, imagine where you could reduce the number of contacts
between the bank and a woman on a remote island in the Philippines from
once a week to twice a month. But still, the money can be paid
on time through her phone. Also imagine that a loan officer doesn’t
need to receive cash, and then carry that and potentially be mugged
on the way home, but all he does is he observes a woman sending it from
her mobile phone, or his mobile phone to an account in the bank, and
so it becomes cashless and riskless. And so these are a couple
of the ways we see technology transforming microfinance like it transformed
all of our lives in the last 10 or 15 years.
Does microfinance always work?
sometimes breaks down or at least stagnates for a time in the wake of
major natural disasters, civil unrest; also where there are major pandemic
health crises that affect every family or most of them in a society.
And I think in general, not every person that borrows from an MFI is
going to thrive, and maybe they need additional products or bridging
products that take them from destitution to microfinance readiness.
And that’s a whole area of innovation in the field right now, saying
subsidized programs, that maybe you subsidize from the profits of lending
to people who are doing relatively better, to get people prepared and
Grameen Bank has a very well-known program, called the Beggars Program,
or Struggling Borrowers Program, where they provide interest-free loans
and a mosquito net and an umbrella, and very basic things that will
just allow you to stabilize your life. You don’t make money
on it, although it is a loan, interest-free loan, you lose money on
it, but they generate a lot of excitement because people never thought
you could do anything for beggars, and it generates new customers because
within two or three years they give up begging, they don’t need the
interest-free loans anymore – they can join it in a regular way and
succeed. We’re trying from Grameen Foundation to take a version
of that program to Haiti, which is the poorest country in our hemisphere,
and again say that not everyone is ready for microfinance, but for those
who aren’t, we should be able to find ways relatively cost-effectively
to help make them ready.
I’d like to hear a little bit more about your own personal leadership
experience. What specific challenges leading a great innovative
organization have posed to you in terms of being able to set that organization
up in a way that it can continue to innovate beyond picking some of
the lower-hanging fruits and really making the big impact and note what
your vision includes.
Alex: If I look
at all the points in my career, having been in microfinance for 18 years,
I think the biggest single factor working in my favor was my naivety.
As a Cornell student I had this idea that this professor in Bangladesh
was doing something good and I should get involved in making it a global
success story, and I really wasn’t smart enough to know that that
was a very naive simplistic way of looking at world poverty. But
because I didn’t, I launched into it and made all sorts of mistakes,
but met enough people who mentored me and pointed me, and ultimately
the vision was kind of realized. Same thing of starting Grameen
Foundation, where if I had any more, any sophistication at all, I would
have realized that starting a non-profit with $6000 in seed capital
was ridiculous. I should have held out for people associated with
it to raise more and they might not have done that, but, not knowing
better, I launched, we raised money, columned it together. Now
that we’ve stabilized as an organization and are raising about $10
million a year and on course to raising $20 million a year by 2007,
and also raising volunteers and loan guarantees and other things that
aren’t cash, but that make an impact. At this point, the key
thing that we’re trying to do on all levels, at the board, at the
staff level, at volunteers and partners, is to just attract, is to set
our sights very high to attract and to keep top talent. I mean
the best people, you know, which takes a certain amount of humility
on my part because I’m constantly attracting people that are more
talented than I am, in one way or often in many ways. And so that’s
the key management challenge and personally is to be aggressive in bringing
those people in, again whether financial supporters, volunteers or colleagues,
and then to keep raising the bar and keep them interested in what they’re
doing so they stick around and make a long-term commitment.
For our listeners out there that want to get involved, what can they
do to make a difference?
Alex: I think
the first thing is to educate yourself; our website, GrameenFoundation.org
has a lot of information about figuring out if this is a movement, an
industry that appeals to you. You need to make an informed decision,
either as a volunteer, as a financial supporter, or as a profession.
There are many other excellent organizations, Axion International,
Opportunity International, for people that come from a faith perspective
and across the board, check them all out, different ones fit for different
people. There’s something called the microfinance gateway, which
is a kind of information platform for microfinance. There’s
also something else very important, this global campaign called the
‘Microcredit Summit Campaign’ which has set a bold goal,
that we’re going to come very close to reaching for 2005 in microfinance
and has now set other goals for 2015. So that’s the kind of
global rallying point for all people. Once you’ve connected
with the players, educated yourself, I think people, whether again they
want to do so in a volunteer capacity, in a capacity as a financial
supporter, or as an employee, people will find their niche if they just
have their own naïve idea that this is something that appeals to me,
and this is a movement that needs me, and I just need to spend some
time finding what it is, because as an industry, we’re making great
progress but we’re still very immature, we’re very fragmented and
have reached a small percentage of the efficiency and the scale that
we need to, to have the impact that we will. So there are many
ways that plug in and again the simplest way is to volunteer your time,
to volunteer your money, and to volunteer to educate yourself, to just
know what this movement is about and where it’s going.
Thank you so much for coming on; it’s been a pleasure.
you very much.