Friday, May 28, 2010

The Microfinance business environment in 55 countries

This first-ever report from the Economist, looks at the commercial viability and sustainability of microfinance in 55 countries. An objective scoring of the business environment for microfinance is probably correlated with overall environment for low-cost entrepreneurs in each of the 55 countries. In this particularly study, the researchers appear to have covered a very wide set of factors:

  • The institutional and regulatory framework for microfinance: Regulation of microcredit operations; Formation and operations of regulated/supervised specialised MFIs; Formation and operation of non-regulated MFIs; Regulatory and examination capacity

  • The general investment climate: Political stability; Capital market stability; Judicial system; Accounting standards; Governance standards; MFI transparency

  • The level of institutional development: Range of MFI services; Credit bureaus; Level of competition

  • Each of the countries in the study were assigned a score (0=worst to 4=best) for each of the factors above, and a composite (index) score was computed:

    (Click to enlarge)

    Bangladesh, home to Grameen Bank, is smack in the middle of the pack. The report also ranks the countries using scores for Regulatory Framework, Investment Climate, and Institutional Development. Of the the three areas, Institutional Development seems to best capture the sophistication of the financial services infrastructure. Some might find it surprising that Credit Bureaus are starting to take hold in many countries in the developing world, including the top three ranked countries Peru, Bolivia, and the Philippines.

    Many countries in the developing world are full of aspiring entrepreneurs. Microfinance was historically designed to help meet the most basic needs, but nowadays Microfinance institutions are rolling out more sophisticated financial products. I hope the Economist refreshes this study on a regular basis.

    Thursday, May 27, 2010

    Kitchen Appliances: A Portable Refigerator and Stove

    Featured in the pages of the WSJ late last year, the $70 ChotuKool portable refrigerator is the opening salvo in the intense competition for India's consumer appliance market. The market is large enough that Indian firms are investing R&D money to come up with low-cost alternatives to traditional household appliances. $70 is still a steep price for many of the world's poor, so many will have take out microloans or pool their resources in small collectives to afford these products.

    Here's a related example from the same WSJ piece: First Energy's Oorja (biomass) stove. The stove costs $23 and the pellets needed to use it, cost about $5.50/month.

    Wednesday, May 26, 2010

    Low-cost Toilets

    Having enough clean toilets is a major problem that plagues most developing countries. Growing up I remember walking through slums in the Philippines and being taken aback by where people "did their business". To a much lesser extent, homeless people in the US face the similar problem of lack of public restrooms.

    A recent article in the Economist puts a spotlight on the social and public health impact of the absence of latrines. Having to go out in the open is an embarrassing experience for most of us, but for poor people in developing countries, out in the open is their only option. Add the fact that socioeconomic class consciousness is much more pronounced in developing countries, one can understand why having to do so regularly becomes a traumatic experience (especially for women).
    ... Surprisingly, some of those who have to defecate in the open do not mind. Some rural men, and even women, quite enjoy a social squat in the bushes. But for many, and certainly for those who must live with its consequences, it is a disagreeable practice. Women and, especially, girls often find it embarrassing. Many women in South Asia contain themselves by day and wait till nightfall before venturing into the shadows. Girls at African schools without latrines often drop out rather than risk the jeers of their male contemporaries. Slum-dwellers in Nairobi have to pick their way through streams of sewage and take care to avoid “flying toilets”, plastic bags filled with excrement that are flung with desperate abandon into the night.

    Without piped water to wash their hands with, let alone to drink, the open-air defecators and another 800m people with access only to primitive latrines are inevitably carriers of disease. If they could wash their hands with soap and water, they could block one of the main transmission routes for the spread of both diarrhoeal diseases and respiratory infections. As it is, patients with water-related diseases fill half the hospital beds in the poorest countries, and dirty water and poor sanitation kill 5,000 children a day.
    The article mentions two low-cost alternatives a non-profit dedicated to improving toilet and sanitation conditions worldwide, and Peepoo -- a single-use, personal, and biodegradable toilet alternative.
    ... Outfits like the World Toilet Organisation, based in Singapore, now believe you have to make lavatories “as sexy as mobile phones” if you are to get people to accept them, and that means literally selling them. Once people have invested some of their own money in a loo, they will use it. The World Bank confirms that the most successful sanitation projects involve only a small subsidy.

    Where building a fixed latrine is not possible—slum-dwellers seldom own the land they live on, or have much incentive to improve a site to which they have no legal rights—entrepreneurs may help out. The Peepoo is a personal, single-use bag that the Swedish founder of the company, Anders Wilhelmsen, describes as the hygienic version of Nairobi’s flying toilet, intended, to begin with, for the same Kenyan users. Sealed by knotting, it acts as a micro treatment plant to break down the excreta. Since the bag is made of degradable bio-plastic, when it has served its primary purpose it can be sold with its contents as fertiliser. Indeed, the hope is that a market will develop in which the same people will trade in the bags before and after use. Each will sell for 5-7 cents, about the same as a conventional plastic bag, and though a subsidy will be needed at first, the operation is meant to become self-sustaining, and indeed profitable.
    Below are videos that explain the vision behind both Peepoo and the World Toilet Organization. Mark your calendars, World Toilet Day is on November 19th!

    The Peepoo

    World Toilet Organization (the other WTO)

    UPDATE (6/1/2011): PRI's The World interviews Arno Rosemarin of the Stockholm Environment Institute, on the importance of low-cost/sanitary, ecological toilets.

    Tuesday, May 25, 2010

    Semi-regular Dimes

    (A list of recent articles and other links.)

  • KQED Forum show on the state of Microfinance:

  • Winners of the 2009 CGAP Photo Contest: I stumbled upon this slideshow a few weeks ago and am still enjoying some of the stunning images from the most recent 4 contests (2006-2009).

  • A tour of Experimental and Development Economics: My recent survey of test-and-learn (experimental design) methods to measure the efficacy of development/aid programs.
  • Monday, May 24, 2010

    Conversations for a Better World

    Conversations for a Better World is a new site sponsored by the UN Population Fund. A "shared blog on population, gender, and health", this week's theme is Cell Phones and Social Change. They kindly asked if they could reprint a post I wrote for the O'Reilly Radar -- I enthusiastically said yes!

    In "Mobile banks in the developing world prove simpler is better" I argue that frugal innovations like mobile banks have much to teach financial services companies in developed countries.