Does Microfinance Really Work?

An August 2006 article titled "Fortune at the Bottom of the Pyramid: A Mirage" by Michigan professor of business strategy Aneel Karnani takes the field of microfinance to task for being, in the end, ineffective.

This fervor suggests that microcredit really must help the poor. And many have made grand claims to this effect, including Yunus, who said, “We will make Bangladesh free from poverty by 2030.”⁴ Somewhat less ambitiously, the State of the Microcredit Summit Campaign Report 2006 states that “microcredit is one of the most powerful tools to address global poverty.”

Yet my analysis of the macroeconomic data suggests that although microcredit yields some noneconomic benefits, it does not significantly alleviate poverty. Indeed, in some instances microcredit makes life at the bottom of the pyramid worse. Contrary to the hype about microcredit, the best way to eradicate poverty is to create jobs and to increase worker productivity.

Women's Initiative Business Trainer Nika Quirk thinks Karnani's analysis too one-sided. She comments:

Enjoyable article showing how the modern world gets stuck on singular solutions to complex issues--especially trendy solutions.

The complexity of economy-work-family-community is not honored by either a singular focus on microlending or on increased labor opportunities with large organizations. As we continue to see in the U.S., employment opportunities without accessible/affordable child care and flexible work-family policies are not a total solution for ending women’s poverty.

This work-family dilemma can also be exported to other countries as they move to a Western-style economy.

How about funding a healthy blend of labor employers, small entrepreneurs and worker collectives? Diversity is key in the health of any ecology.

For example, I think many of our clients would benefit from working as a collective in some way, perhaps forming buying clubs to enjoy economies of scale in purchasing supplies, materials, inventory; sharing the cost of services such as a bookkeeper; or sharing facilities like office or storefronts. Saving on these costs could create capacity to spend on labor to increase production. It also extends our model of working as a community.

Capitalism focused on large organizations (as it does in the U.S.) inhibits both small business and collectives (especially since they are still often viewed as socialistic).
-- Nika Quirk

Here's an overview of the debate between Karnani and his colleague, C.K. Prahalad, whose book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, called forth Karnani's disparaging response. And here are some other, varied perspectives on Karnani's piece.

Radio Annoucements Help You Reach Your Audience

Sometimes publicizing an event is an afterthought to planning the event itself. But I’ve found that publicity is equally important, especially if you don’t want to have dreams the week before where no one shows up and there are empty seats and only a handful of staff to soak up the words of your guest speaker.

Public Service Announcements (PSA) can help with getting people to your event. A PSA is no substitute for an individual phone call inviting your circle of supporters to an event, but it can help to cultivate new people and remind people to come to your celebration.

Often Bay Area businesses partner with a not-for-profit to do an event. If you are a small business owner, how many times have you donated something for a silent auction or provided food or services ... and not received visibility for doing it? Write a PSA and see if it will get picked up by a radio station…you’ll be doing yourself and the nonprofit a favor.
Getting a PSA aired can be hit or miss. Here are a few things to keep in mind so that your PSA won’t get overlooked:

1. Know who the public affairs director is at a station and address the PSA to them
2. Write 15 second and 30 second versions of your PSA and practice it out loud to make sure it falls in that time range
3. Once you send the PSA, usually 4-6 weeks before the event, follow up with the public affairs director on the phone

Last week Women's Initiative had a PSA aired on La Raza for our Fruitvale Grand Opening today. La Raza was a natural pick to pitch a PSA to because we have already done some paid advertising with them and they are going to come out to the grand opening and help us celebrate with the La Raza van.
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Sharing Green Secrets with Competitors

By: Karuna Jaggar

While I'm on the subject of the Business Alliance for Local Living Economies (BALLE) Conference ...

I was inspired by many of the business owners I met at the BALLE conference, but two in particular stood out for their lesson in the ways that sharing and openness with the competition actually benefit the business.

Judy Wicks, of Philadelphia's White Dog Café developed an entirely organic, local, cruelty-free menu for her restaurant and bar.

Judy defines her mission in four parts: serving our customers, serving our community, serving the earth, and serving each other. Click here for more information on her vision.

Don Shaffer, of San Francisco's Comet Skateboards introduced new environmentally-friendly adhesives and other materials into his line of skateboards.

The website states, "We are working with companies and universities worldwide to assist in developing "Green" BIO BASED epoxies, reinforcements, and coatings for the future." Click here for a rundown of the elements of Comet's manufacturing process, and a list of links to companies they work with and organizations they support.

Both might easily have decided that this was part of their niche, their unique appeal. Instead, both decided to go out and educate other business owners, to share their ‘secrets’ and sources with their competition. Not only did this mean that there is more of a good thing, but it meant that rather than losing market share---as traditional business theory might expect---they were in fact rallying other business owners to help them grow the market!

"Local Living Economies" and Our "Green" Graduates

By: Karuna Jaggar

I was very energized to participate in the 5^th Annual Business Alliance for Local Living Economies (BALLE) Conference last week. BALLE’s vision is to build a sustainable global economy which consists of Local Living Economies, which create long-term prosperity and economic empowerment. The three pillars of this model are

• local business ownership
• economic justice
• environmental stewardship.

The parallels with our work are obvious. At Women’s Initiative we use business ownership as a tool in building economic independence, and in turn social and political empowerment. While environmentally--and socially--responsible businesses have not historically been an integral part of our training model, in fact we find that they are very much part of our clients’ visions.

Clients come to us because they are not thriving in the wage labor market. They also come because they don’t like how traditional business is done and want to do business according to their values. As women who have struggled on the margins of the economy, their values include paying a living wage and creating quality, family-friendly jobs.

Their values also include environmental stewardship, and a majority of clients report making environmentally-friendly choices in their businesses. That is: they go above and beyond simple recycling to make conscious decisions about product and materials sourcing, waste and packaging reduction, pollution, and energy consumption.

Despite clients’ willingness to spend more money on materials, products, etc. in order to uphold their environmental values, they often represent these as individual, personal choices, not as business decisions.

I do think that there can be something overwhelming about identifying one’s business as “green” in some undistinguished way, without acknowledging that the business owner has made headway in some areas and not necessarily in others. But I think we can do more to help clients identify the ways their businesses are already environmentally responsible and think about developing this niche in addition to stretching to become even “greener.”