I can’t remember when I first heard the term “microfinance.” I may have read a feature story in the Vanderbilt University alumni magazine about fellow alumnus Muhammad Yunus (PhD, Economics, 1971), Nobel Peace Prize-winning Bangladeshi economist and founder of the Grameen Bank. Dr. Yunus is widely credited with introducing the theory and practice of microlending starting in the 70s.
Certainly, Josh and Chuck of Stuff You Should Know podcast fame were the catalysts for my direct involvement in microlending, through their championing of the Kiva organization. In fact, I joined the SYSK Team Kiva in mid-March of 2010, and I’m proud to report that our Team now has over 4,000 members who have made over 13,000 loans for a total of almost $400,000. The average number of loans per member is 3.4, so with my five loans, I’m keeping up. To date, I’ve loaned to women in Peru, Bolivia, Tadjikistan, and Ecuador (the first two loans, to two different Peruvian women’s collectives, have been completely re-paid). But enough about me.
It was with great interest that I learned that Jessica Jackley herself would be speaking on Love, Money, and Work: Social Entrepreneurship as a Career at the UMass Student Union Ballroom tonight at 5:30. In April 2004, Jessica and Matt Flannery started working on Kiva. A year later, the first seven loans were funded, for a total of $3,500; in November 2009, Kiva reached $100 million in loans. How did it all happen?
Ms. Jackley described her odyssey from a young girl troubled by traditional religious attitudes toward the poor to an influential entrepreneur dedicated to finding solutions to global poverty. As an elementary and high school student, she tried hard to be a “good Christian” and give conscientiously to charity, but she felt distinctly uneasy by the thought that no matter what she did, she could not alleviate very much of the suffering in the world; the natural reaction to feeling ineffectual was simply to ignore the problem. When she started her undergraduate education at Bucknell University in Pennsylvania, she was faced with the choice of what to study and decided to go with “What do I love?” She was interested in three questions and picked fields that would help her answer those questions. First, Who is in charge? That led her to study Political Science, with its emphasis on understanding structures and systems. Second, What is true? which led her to Philosophy, and third, How can I find my voice? which led her to study poetry, with its emphasis on words and their meanings.
After graduation, on an impulse, Ms. Jackley moved herself across the continent to California, where by chance she landed a job at the Center for Social Innovation at Stanford University’s Graduate School of Business. There, in Fall of 2003, she heard a talk by the afore-mentioned Professor Yunus and was inspired to go out into the field herself, to try to understand who the poor are and what they themselves want and need. In East Africa where she spent three months, she heard first-hand that the poor prefer loans and not hand-outs; they want to be partners in a relationship of equality. Over the next year, working with Matt, a friend and computer geek, she figured out a way to share the stories she heard with her own family and friends, via the Internet. Thus Kiva was born, an organization which allows ordinary people in the First World to connect with other people in developing countries, hear their stories, and help them out with micro-loans. From my own experience, it’s gratifying to realize that an amount as small as $25 will really help someone, an individual with a name and a face. Not only that, but my $25, when re-paid, can be easily be re-loaned to someone else.
Ms. Jackley emphasized that her trajectory from Liberal Arts major to businesswoman was not as unlikely as it might first appear. In fact, it was her background in the humanities that helped her speak different languages — that is, understand different ways of seeing the world — and make connections between problems and solutions. She concluded her talk by summarizing four lessons she learned about how to start and run a successful business. These are
- Lesson One: Know your mission by understanding who you are
- Lesson Two: Co-create with others, which means trust others
- Lesson Three: Iterate, and don’t be afraid to fail and start again
- Lesson Four: Remember that (Love + Money) > Money
If you love your work, you will believe in it and see possibilities where others may not, and tomorrow will be better than today.
Ms. Jackley’s current project is the for-profit company ProFounder, a website dedicated to crowd-sourcing investment capital for small businesses in the United States. I certainly wish Jessica much success in this venture!
I would be remiss if I discussed microfinance without mentioning that the practice has been heavily criticized recently, particularly with respect to high interest rates charged to borrowers. On the Kiva site, you can click on the tab “About Microfinance” to get background information on the issue, but of course you can also Google the topic to get a variety of opinions. Kiva does say quite clearly
Microfinance is also the idea that low-income individuals are capable of lifting themselves out of poverty if given access to financial services. While some studies indicate that microfinance can play a role in the battle against poverty, it is also recognized that is not always the appropriate method, and that it should never be seen as the only tool for ending poverty.
If I have a chance to learn more about economic development strategies and how to measure outcomes, I’ll write up my findings in another post later this year.