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microfinance

The values and benefits of microfinance lending to the world’s poor are mixed; but they have overall proven to be a mechanism for lifting individuals out of poverty.  The system of proving microloans is a well-oiled machine providing finance to individuals in low resource areas. One micro lender wants to go a step beyond microfinance and provide the poor with much needed savings and insurance products.To continue to help the poor life themselves up, Microlending pioneer Accion has called for more financial products typically common in the developed world.

These financial products such as insurance, saving accounts, and ways to move money are sophisticated tools many in the developed world don’t think twice about, but for the world’s poor these products are rarely available.  Accion, based in Boston, announced they would begin investing in start-ups that are working to provide more variety of financial tools to people around the world.  Unfortunately, business models and technology to deliver financial tools like savings accounts is much less tested in rural and poor areas. The lack of longevity in testing and practice causes many venture firms to be wary of investing in start-ups.

Accion’s Venture Lab will invest $10 million in ventures seeking to expand financial tools beyond microfinance.  This is not to diminish the effects and needs of microfinance, but to continue to take the poor a step beyond microfinance.   Accion’s first investments include Salud Facil, which helps low-income individuals in Mexico pay for health care, and Varthana, an Indian company financing low-cost private schools.  In addition, the fund is investing in payment companies in Asia and Mexico as well as a start-up in Hong Kong attempting to use data to improve credit scores.

Other investors are also offering money for financial products in the developing world. LeapFrog Investments has dedicated $135 million to bring insurance to underserved markets. Those in poorer income brackets need financial services beyond credit. Constant innovation and testing must be continued to find self-sustaining and profitable financial products to developing markets. Accion Venture Lab will continue to invest in start-ups to help them do the testing they need and continue to innovate in providing insurance and savings products to low-income individuals. Accion’s model is to help the start-ups and if they fail, to take the lessons learned and start over. Ultimately, the goal is improving the credit and lives of the world’s poor.

– Amanda Kloeppel

Source: Bloomberg Businessweek

A Penny Saved, A World Changed? Diverting
Let me start by saying that I love my dog.

When I’m not working on this blog I am teaching English to Ethiopian immigrants here in Columbus, OH. I work mostly with adults and so far the class has been a great experience and I learn a few neat things as I teach and converse with the students. Just the other day we spent a long time learning the new term “pet”. Most English speakers will be able to recognize that word and meaning right away because they have heard it or used it many, many times and they have the linguistic competence to use the word without thinking much about it. The first step of explaining the new word was easy enough and led to the understanding that these “pets” where animals. We would ask “Did you have any pets back home?” “Yes, three cows and a goat.”

We spent a few minutes more explaining the difference between domesticated pets and livestock and continued with the day’s lesson. One man asked whether pets should be called “it” or “he/she”. After answering that man’s question I realized how much we really do love our pets. To many pet owners their animals are almost human. I’m much more than guilty of being “that dog guy”, I will talk to the dog of a stranger in a foggy park at dusk, I will share the bed with my dog and I’ll even talk to the dogs’ owners sometimes.

That being said, my dog is a dog. She (I still can’t call her “it”) may seem almost human, but she is just a dog. I was thinking about this recently as I stopped in the store to buy some dog food. My healthy, four-year-old dog eats generic, dry, boring dog food that comes in 50 lb. bags. Walking around the dog care aisle I saw designer foods that cost a hefty penny more and I remembered the simple fact that people love their dogs. But, what about the difference? One national name brand dog food is about $12.50 for about 18.5lbs. of food. One designer name brand food cost $29 for 15 lbs. Even if we disregard 3.5 lb. difference in favor of the cheaper alternative that gives us about $16.50 saved. Now, $16.50 saved for every 15lbs of dog food will add up to a significant sum by the end of the year, especially with multiple dogs.

What if that money went to help other humans, other people? The idea of diverting isn’t anything new, save a bit of money on things here and there and give to a greater cause, but it does work. I’m not saying that we shouldn’t love animals, or that we shouldn’t occasionally spoil the creatures we spend so much time with, but maybe we could take a chunk of that saved change and share it with our human brothers and sisters as well, be it through groups like The Borgen Project or any organization you’d like.

– Kevin Sullivan

Photo: DoggySpace