Going High Tech: Selfish Reasons

Image by liewcf via FlickrOne big reason I want to go super high tech with my microfinance startup is because I want me and my small core corporate team in New York City to be able to see all aspects of all our operations in near real time. I want my lenders - people who might put in that $100, that $200, at no interest - to be able to see much of the action in the field. I want them to experience that last mile as much as possible.

We are in microfinance, we are not in some kind of a data collection business. But I'd want my folks doing the last mile to think we are in a data collection business. People in the last mile collect data. People in the middle mile - us, the corporate team - make sense of that data. People in the first mile - the lenders - get served some of that data in palatable ways.

Microfinance Alone Can't Cure Poverty

Image by uncultured via FlickrMicrofinance is no magic bullet. Microfinance alone can't cure poverty.

Good governance, I think, is the first precondition. Yunus saw that. That is why he tried to launch a political party in Bangladesh a few years back. But looks like the politicians in Bangladesh have managed to unlaunch him instead.

Focus, Focus, Focus

Image by Austin Yoder via FlickrAt this blog I want to switch to talking primarily about microfinance and the technologies and business practices primarily related to microfinance. The idea is to keep a steep learning curve. The idea is to communicate. The idea is to enter into conversations.

I have done a lot of reading and commenting on broad developments in tech, and I want to keep doing that, but so far that has been the primary thing by a wide margin. I want to narrow that margin. I want to start talking primarily about microfinance.

The three broad conceptual jumps I have made - moving from a non profit model to a for profit model, moving from a low tech model to a very high tech model, and doing the last mile under the same brand name everywhere through the franchise concept - have to be visited again and again.

I Love This City

Every time a train slides into a train station, it feels like an action movie to me.

I love this city. I love the package deal.

I love the energy in Manhattan. I love the mini Global South of the outer boroughs. Every town on earth is represented here.

New Order: Crystal

(Via Soraya Darabi)

Bill Gates On Education: Making Sense

Image via CrunchBaseBill Gates: The Washington Post: How teacher development could revolutionize our schools

Over the past four decades, the per-student cost of running our K-12 schools has more than doubled, while our student achievement has remained virtually flat. Meanwhile, other countries have raced ahead. ...... For more than 30 years, spending has risen while performance stayed relatively flat. Now we need to raise performance without spending a lot more. ....... When you need more achievement for less money, you have to change the way you spend. ....... the single most decisive factor in student achievement is excellent teaching. It is astonishing what great teachers can do for their students. ...... we do very little to measure, develop and reward excellent teaching ....... The value of measuring effectiveness is clear when you compare teachers to members of other professions - farmers, engineers, computer programmers, even athletes. These professionals are more advanced than their predecessors - because they have clear indicators of excellence, their success depends on performance and they eagerly learn from the best. ....... t. The United States spends $50 billion a year on automatic salary increases based on teacher seniority. It's reasonable to suppose that teachers who have served longer are more effective, but the evidence says that's not true. ....... Perhaps the most expensive assumption embedded in school budgets - and one of the most unchallenged - is the view that reducing class size is the best way to improve student achievement. ...... get more students in front of top teachers by identifying the top 25 percent of teachers and asking them to take on four or five more students. Part of the savings could then be used to give the top teachers a raise. ..... 83 percent of teachers said they would be happy to teach more students for more pay

This Guy Jack Dorsey

Image via WikipediaI am reading this profile of Jack Dorsey in Vanity Fair, and it has started to feel eery. I guess I have not known some details about the guy I should have known. First let me say I am an admirer. But I also threw a gauntlet his way recently: Jack Dorsey Also Has A FinTech StartUp. It was all in good faith.

I'd compare my work into Nepal's democracy movement of 2006 to Jack Dorsey's work on Twitter. The difference is my work was so cutting edge, I have not officially been given credit yet.

But look at some of these lines:

Urban strolls are one of Dorsey’s favorite activities ......

Get out of town. Someone just described ME! Urban strolls are one of my favorite activities. The article also says the guy's dream job would be to become Mayor of New York City. Wow. First time I am hearing this. I knew he endorsed Reshma 2010, but I did not realize he was all that political. Warms my heart.

Windows Over The Years

Steve Jobs: iPad 2 Announcement

Empty Spaces/Young Lust: Pink Floyd

(Via Fred Wilson)

The Kiva Story

Image via CrunchBase
Image via CrunchBaseMatt Flannery: 2007: Kiva And The Birth Of Person-To-Person Microfinance: started Kiva in 2005 ..... a growing network of microfinance institutions (MFIs) in more than thirty countries ..... MFI partners post the profiles of their loan applicants to the website ..... small loans via PayPal ..... e businesses pay the lenders back over a period of about a year ..... the human connections we build between lenders and borrowers have brought new lenders ..... One night, she invited me to come hear a guest speaker on the topic of microfinance, Dr. Mohammed Yunus. ...... my first exposure to the topic ..... the page in our workbook that asked: “What are your Career Goals? Matt ‘s Answer: “I want to live in the Bay Area and be an entrepreneur.” Jessica’s Answer: “I want to go to Africa and do microfinance. ...... “Spend as much time together as you can during the first year of marriage.” ....... Her task was to locate as many VEF businesses as possible and measure impact. She asked questions like “Do you take sugar with your tea?” and “Do you sleep on a mattress?” ...... Instead of poverty, we could focus on progress ..... I followed Jessica with my camera through Kenya and Tanzania ...... Using a set of culturally specific questions, Jessica worked to ascertain the quality of life of those she interviewed ...... the painful decisions familiar to anyone who has lived in poverty—whether to pay school fees, put food on the table, or buy medicine for a child suffering from a curable sickness ...... The $500 needed to buy an initial inventory and start a store was too great a barrier. So everyone walked. ...... a self-regulating lending marketplace where microfinance institutions could raise loan capital online to fund projects ...... business plan software ..... forced us to think about costs, revenue,
Image via Wikipedia and, most importantly, our plan for growth. ...... Jessica is an extrovert and very good at developing a web
 of connections. ....... a ten-page “feasibility plan” document printed from our business plan software. It was for an organization we called “Kesho.org.” In Swahili, Kesho means “tomorrow.” ...... It’s eerie reading the plan after all that has happened since then ...... During the period of a loan agreement, investors will receive frequent, real-time updates on the progress of SMEs working to pay back the loan. ...... a beta round involving fifty friends ..... $5,000 in capital for operational costs for the first year, and how we hoped to raise $150K in our first year of business in loans to the poor ....... an historical tension between the donor/lender desire to “know where my money goes” and the recipient organization’s need for efficiency ...... whether it was better to be seen as a charity or as a business ...... breaking existing mental models proved harder than it looked. ...... started to go to microfinance events and conferences ...... the UNDP Global Year in Microcredit Summit at the U.N. headquarters in New York ...... If microfinance is going to have a significant impact on world poverty, the argument goes, then MFIs will need to be integrated into the global economy and tap into the capital markets ...... 50 percent of our users would not lend on the site if Kiva adopted the for-profit model. ...... the vast majority of MFIs don’t qualify for commercial grade investment ...... We began to see person-to-person debt capital as a bridge for MFIs on a journey from donor dependence to tapping into the capital markets ...... almost every U.S.- based microfinance institution was incorporated in this country as a nonprofit. ...... Scalability and commercialization were big questions ..... A cloud of legal uncertainty began to hover over our idea ..... Whenever money is being exchanged between two people, someone in some government somewhere will begin to take notice ...... whether or not you are issuing an investment product to the public. If you are, things can become complicated ...... The SEC maintains a definition for what is and what is not a security. If the SEC rules that you are issuing securities, they require that such securities meet a long list of requirements. ....... a legal minefield ..... the topic of organizational type as it relates to raising money from the public ...... When we were at the end of our rope, the phone rang ..... A third issue was the U.S. Patriot Act ...... One of the first MFIs we were thinking of connecting with operated in Gaza, another in India ........ the process of asking for permission had taken a toll on us. We had reached a point where we didn’t live and breathe this concept anymore. It was no longer rewarding and we had lost touch with the reason we had started at all ....... it would be extremely difficult, if not impossible, to get much traction on the business unless we figured out a way to just start ...... we resolved to “just start” ..... Money and organizations are secondary, people are primary. ...... lending money is all about information exchange. In a sense, money is a type of information ....... Every time you load our website, it should be different ..... a dynamic where philanthropy can actually become addictive ...... We appeal to people's interests, not their compassion. ...... Whenever it is possible to collect data from the field, we collect it. Over time, we will display as much information about our partners, lenders, and borrowers as possible and let the users decide where money flows ...... the lender assumes the default risk. ..... Create loans between people, not necessarily organizations, where Kiva acts as a platform and MFIs act as distributors ..... The SEC seemed to me like a gigantic black box ....... One day, I just decided to cold call the SEC ...... even large scary organizations are made up of normal people and there is a lot to gain by simply reaching out to them in a transparent way ...... if we return interest to users on the Internet, we run the risk of being seen as a securities issuer ....... if we remove the interest rates from the service, the SEC would be unlikely to take notice and consider these loans as securities .... We would have to launch without interest rates on the site. ....... a short, memorable brand can be incredibly important in launching a company ..... I was able to buy it from the squatter for a clean $600. That was perhaps the best $600 I ever spent. ...... my electric guitar for a logo. We had a logo a week later. That was perhaps the best use I ever got out of that guitar ..... Moses Onyango is a pastor in Tororo, Uganda ...... Moses was ready to post and administer the loans of seven entrepreneurs in his community. ....... We emailed about 300 people, and all seven businesses were funded in a weekend. That was April 2005, and we raised $3,500 in a few days. We were blown away; everything worked. It was better than we expected. ....... Moses blogged his heart out, chronicling the intimate business challenges and successes ....... a sustained mental and emotional connection ..... These tiny, interpersonal loans were creating a consciousness that didn’t exist before. ....... At that point, I knew every user in the database. Then a stranger showed up: Premal Shah from PayPal. ...... Jessica and I were confessional, careful, thorough, strategic, and technical. Premal was passionate, charismatic, brilliant, wildly enthusiastic, and reckless ...... Premal continued to focus primarily on building support within both Ebay and PayPal for a corporate microfinance effort. ...... We told Moses to find fifty qualified entrepreneurs in Tororo by October ..... I had received nearly a thousand emails to my Kiva address. I checked the database logs and saw that we had raised about $10K that morning and that all the loans on the site were sold out. Why? We had been featured on the home page of DailyKos, one of the world’s largest blogs. Over a million people had read about Kiva that day and hundreds were actively discussing it online. ...... many of the emails were from MFIs all around the world ...... I heard from MFIs in Bulgaria, Rwanda, Nicaragua, and Gaza. ..... an overwhelming feeling: pain. ..... how much it actually hurt to not fully pursue a passion .... I quit my TiVo job the next Monday. Every day since has seemed more colorful. ..... Pretty soon I was surrounded by a tight group of true believers and my previous pain of distance was leavened by the blessing of community ...... Ebay supported Premal’s decision and to this day supports Kiva by donating to us free payment processing ..... Just a few months into our full commitment to this project, we had assembled an energetic nucleus of people ready to build something big. We hunkered down in Premal’s house and worked there, unpaid, for the first six months ..... The most pressing challenge we faced was to get more businesses on the site ....... creating a partnership program whereby microfinance institutions could use our site as a platform to attract low-cost debt capital—one borrower at a time ....... Signing up partners onto our system presented a significant challenge. We were facing the broken record of criticism that “it won’t scale.” ...... In response to the question, "What is your greatest need?" he overwhelming answer was, "Money for peanut seeds." ...... Fay learned of Kiva through an Internet blog in early 2006. He contacted Kiva ...... Tier 1 MFIs, the largest and most established, account for just 200 of the approximately 10,000 MFIs in existence ...... Many of the 9,800 MFIs are extremely small, opaque, unsustainable, and often impossible to contact internationally. We call this the “long tail” of MFIs ..... Our ability to take risks and dip into the long tail is what differentiates us from the microfinance investment funds ..... no previous credit history or formal, traceable identity .... they use reputational collateral and a hope for future access to funds in order to enforce repayment. ..... It took three months after the DailyKos event to get our first set of MFI partners on the site. By the fall, we had around twenty. As of April 2007, we have nearly forty ...... Sometimes, though, reality surprises you and the picture becomes more colorful than your wildest imagination ...... we needed to quickly expand our partnership base and work with well-vetted, growing, and transparent institutions ...... Africa currently represents only 10.4 percent of microfinance world-wide; the greatest areas of concentration lie in Southeast Asia and Central and South America ..... Microfinance has scaled best in places where crowds of people live in close quarters. Dense populations bring down the transaction costs ...... We came to see ourselves as a technology platform for microfinance institutions alleviating poverty anywhere ...... fascinating to see the similarities and differences in microbusiness across disparate geographies ...... Lenders showed unambiguous preferences according to region, gender, and business type: Africans first, women first, and agriculture first. A female African fruit seller? Funded in hours. Nicaraguan retail stand? Funded in days. A Bulgarian Taxi Driver? Funded in weeks ...... We had completed our 501(c)(3) application in late 2005. By the summer of 2006, we were still waiting. .... For nearly a year, our application was stuck in a pile of papers somewhere in Cincinnati ..... seven out of ten users choose to donate 10 percent on top of their loan to Kiva. For instance, after making a loan of $100, the typical user chooses to pay $10 on top of the loanbringing the total to $110 ..... Float refers to the revenue from the interest accruing in one's bank account ..... Eighty percent of our users re-loan their funds after being repaid ...... Kiva is managing a fund that will grow at well over a factor of two every year for the near future. Kiva earns about 4.5 percent interest in its bank account ..... That summer, however, Kiva was crawling along at $1000-$2000 in loans and 25 new users a day. ..... Running out of options, I ran the idea of becoming a for-profit by the board, but they shot it down unanimously. ...... filming for Frontline World on PBS. ..... The 15-minute piece ....... Like being in DailyKos a year earlier, the Frontline event was a gamechanging moment for the organization ...... Overnight, our loan volume went from approximately $3K per day to approximately $30K per day ..... Our lender base before the piece was around 6K. Today, it is around 60K. Before the show, we had processed $500K total in loan volume. By April 2007 we had processed around $5.5M cumulative and have a goal of being at $12M cumulative by the end of 2007. The Frontline piece was fundamental in making this happen. ....... e took our nonprofit from a point of financial crisis to a relatively healthy state ...... PayPal donates free transaction processing to us, which means we aren’t charged the usual 3% of every transaction ...... single mindedness unlocked a potential I never knew existed ..... what people can achieve when they lay their egos at the alter of something greater than themselves ...... recipients resent benefactors even as they consume the aid. ...... A benefactor assumes that the poor need your help to escape. A colonizer assumes the poor cannot escape. However, both share a common assumption—the poor are helpless ....... interest rates, which turn a charitable relationship into a business relationship, empower the poor by making them business partners ...... a deeper integration between daily decisions and core values. ...... the mobile devices loan officers carry as information retrieval tools ...... A data-rich system is inherently more transparent. Transparency allows more accurate risk assessments ....... In many places, the Kiva website is serving as the first ever public record of a particular person’s existence ...... the Internet is a promising platform for housing portable credit ratings. One day a borrower moving from one MFI to another, or one country to another, will be able to point to a Kiva profile as a reference point for creditworthiness. ..... Although microfinance can be an amazing tool to fight poverty, it can also be quite harmful when placed in the wrong hands. Predatory lending, fraud, and mismanagement are commonly cited in cases of MFIs that get it wrong ....... extensive offline monitoring ..... an international auditing and visitation program .... This will help us communicate to our users the financial health of our partners, the truthfulness of the information posted on the site, and the extent to which we are fulfilling our mission of alleviating poverty ...... This model thrives on information, not marketing ...... default and delinquency rates will fluctuate ..... Crises in a particular region—political, economic, or natural disaster– will cause temporary drops in repayment rates that will eventually stabilize ..... I firmly believe that repayment rates will stabilize at well over 90 percent .... Kiva is different from the typical international development organization in that the platform will deliberately show the negative as well as the positive stories. Thus, in cases where things go bad, our lenders will know.

Twitter, Facebook, Tumblr, LinkedIn

Image via CrunchBaseSocial media is going to be so fundamental to all aspects of my company's operations that I have decided to put that into the DNA, into the culture. When you apply for a job with me, you email me the web addresses of your presences on these four platforms - Twitter, Facebook, Tumblr, LinkedIn - and a few paragraphs of who you are and why you are the best person for the job. That is where the conversation starts.

Obviously everyone on my corporate team is going to stay active on those four platforms. Obviously you are going to end up with some level of transparency, you are going to end up with what might look like a jellyfish organization. Overall I think that is a good thing.

Architecture in Helsinki: Contact High

(Via Soraya Darabi)