Wokai Adventures

Mobile banking & microfinance

Courtney

I recently read a great article from CGAP on mobile banking & microfinance. The article provides a great overview on mobile banking. It introduces the industry, discusses the challenges faced and makes note of the implications down the road with implementation.

See: Download cgap_banking_on_mobiles_6.2008.pdf

One issue the article left out – and many articles on the topic leave out for that matter – was how mobile banking affects the personal touch of microfinance. In microfinance, a loan manager is the person collecting repayments each month from their clients. If you eliminate the loan manager and replace her with a mobile phone, will the change affect the client’s repayment rate?

To answer the question, it helps to think of what machines do and do not replace in my own life.

Take my flight from Los Angeles to San Francisco this past weekend. My mom dropped me off at the airport. I put my credit card in a machine that gave me my ticket. I then proceeded through security. A man checked my ID and a machine checked my bags. From security, I went to get a drink. I put my ATM card in a machine to get cash. I then put my cash in a machine to get a bottle of water. Heading to my gate, I then boarded the plane, where a flight attendant checked my ticket. After a short flight, I arrived in San Francisco. I de-boarded the plane and headed to the subway. I put my card in a machine to get a ticket. I took the subway home.

So where did a machine not replace a person?

My mom, the security check man, and the flight attendant.

What do these three people have in common? They all provide a service that cannot be replaced by a machine. In the case of my mom, no machine can replace the affection, care, and love our mom’s shower us with everyday. And, more importantly, in the case of the flight attendant and the security check, they are there to provide individualized service. They have to think and act according to each and every individual situation --- something a machine is not yet able to do.

Take these lessons and apply them to our previous situation with mobile phones replacing loan managers. Loan managers create a bond with their clients. That bond is established through constant interaction through group meetings and and business transactions. That bond plays a significant part in motivating on-time repayment. When we eliminate some of that interaction and rely on a machine instead, I wonder whether or not the results will be the same. Something tell me no.

We experience this in our own lives when we pay a credit card bill online. Every now and then, I am late for a payment – whether that be because I forget, I ignore it, or I am just plain tapped out. Now if I was making that payment to a person - say Mr. Citibank came to my door every month to get the payment - chances are I would never miss it.

There is something to be said for face-to-face interations and the importance they play in microfinance. Now if we can find a way to increase face-to-face interactions with that technology, while allowing repayment functionality, that would be the sweet spot.

Microfinance in Beijing?

Casey

My friend Meagan Dietz just passed on to me an interesting news blurb about a new initiative to launch microfinance pilot programs in Beijing. Given my past blog entry, Beijing is the last place that I would have imagine microfinance to pop up in China. Even with all of the growth and development, there are millions (literally) of microentrepreneurs here, but I would have assumed that the loan size necessary to start a microenterprise would be so high that this wouldn't be the ideal place for microfinance to launch.

When I have some free time, I'm looking forward to going around to the small stands of drink vendors, snack makers, and bike fixers in my area to get a better idea of the credit demand. What is their daily cashflow? Where do they currently get their capital? What types of loan products would they need?

Check out the translation of the news blurb below (Thank you Zhu Bo for doing this translation):

Beijing to Launch MFI within 08

Beijing is expected to launch its first microfinance institution (MFI) before the end of 2008, on a trial basis, said Huo Xuewen, vice director of the Beijing Municipal Commission of Development and Reform in a recent press conference on Beijing’s financial development.

The coming MFI is called Beijing Credit Re-guarantee Co. It has a registered capital of CNY 1 billion, the majority of which is from city finances. A number of state-owned enterprises in Beijing will also become shareholders.

The vice director said only 5% of the group are large-sized enterprises. Small and medium-sized enterprises constitute the majority of the shareholders. Beijing now is trying various means to establish an “associated-finance”, promoting the growth of the medium and small-sized enterprises and solving their problems in funding.

In the two or three years, the share-holding investment market in Beijing is going to expand, said vice director. (Xiao Ren)

http://www.sinofile.net/clients/amcweb.nsf/amcA/303468404822F1494825749500195D77?opendocument

Olympics & the New China

Casey

Wokai is the thick of Olympic activity with our office only a 5 minute bike ride from the Worker's Stadium, an Olympic venue hosting Soccer, Boxing, and various other events in Beijing. The highlight of my week was leaving the office at 1:20pm to meet my friends for a 1:30pm boxing match.

It's amazing what China has created for the Olympics. During the Olympic countdown, every time either a Westerner or Chinese person mentioned the Olympics, he or she would inevitably bring up the subject of one of various issues, whether it be protests, pollution, or the Tibetan conflict, sabotaging the "coming out party" China has dreamt of for the past few years as it anticipated the Olympics.

Ten days into the Olympics, everything in Beijing seems to be going flawlessly. All of the serial Olympic attendees that I have talked to so far claim that this is either THE best or one of the best Olympics that they have attended. I met an American Olympic water polo player who said, "the Olympic Village in Athens pails in comparison to Beijing...In Athens, they hadn't even completed construction by the time we moved in. Here in Beijing, everything, down to the last detail of the fish and fountains in each of the hundreds of small gardens surounding our dorms, is perfect."

Three of my friends were here visiting for the past ten days. It was interesting to see the city from their eyes. They came to China expecting Tai-Chi, traditional architecture, and Chinese medicine. Instead, they were welcomed with the new CCTV tower, latest Apple Store, MacDonalds, and the Bird's Nest. (See pics below). 

What's most amazing is that the Beijing that they see is completely different than the city that I moved into 2 years ago. When I arrived in Beijing, there were only a handful of good Western restaurants, bars, and grocery stores. Today, at least three or four swanky modern spots open up every weekend. I would guess that at least half of the shopping and dining areas that are now being frequented by Olympic visitors were still under construction a month and a half ago. The Starbucks where I am sitting writing this blog only opened its doors about two weeks ago.

Its crazy to think where Beijing and the res tof China will be 5 years from now, let alone 5 months from now.

Is that a bad thing? Is that a good thing? Is it good that China open its doors and completely wash its red hands and put on western gloves? People have mixed opinions on this. I personally don't think its an all or nothing outcome. I like the way Beijing has been moving forward works. Beijing is still China. It is American capitalism with Beijing kwarks. For instance, next to the apple store you still have a Chinese pharmacy, Chinese medicine doctor and local supermarket. And all of those are next two or three 6 story living quarters for old Beijiners. Beijing seems to do a fairly good job of mixing the old with the new.

It is the Shanghai that I worry about. It reminds me of New York on steroids. Shanghai seems to have completely wiped away the Chinese-style buildings and quaint local eateries for Ritz Carltons and fast-food joints. Not sure if that is the direction wants to ultimately head. But unless one of the 175 readers of this blog is someone important from the communist party, not sure if we can change that direction.

Bird's Nest in Chaoyang.

Beijing's CCTV tower in the Central Business District.

Apple Store opened two weeks ago in a new outdoor mall area in Beijing's Sanlitun area. The Apple Store's neighbors include a four story Addidas building, Nike Store, North Face, Cold Stone Ice Cream, and five star hotel.

Produce, Share and Collaborate

Courtney

Guess how many man hours it took to create wikipedia?

100,000,000.

And guess how many man hours we spend parked in front of the boob-toob watching TV every year ? 

200,000,000,000.

Now imagine what we could do if given the motivation and the platform to use those 200 billion hours producing, sharing and collaborating like we have done to create wikipedia.

After spending two weeks in venture capital world, I am not worried about the platform. There are people like Lukas Biewald exploring innovative ways for us to spend our time. Today its Facestat, but tomorrow who knows. Lukas wants to explore how we can use the internet to create a better marketplace for the exchange of ideas and services, while make that bartering process fun and rewarding. I have no doubt that he will find the answer. And we will all be that much happier, more knowledgeable, and more fulfilled because of it. 

It is the motivation that I wonder about.

How do we motivate people to produce?  According to fellow blogger and friend Jake DeGrazia, people naturally want to produce and share (just as much as they want to consume.) They naturally want to collaborate because the most rewarding productions are collaborations.

But I thought we naturally act in our own self interest? We think about what is best for ourselves first and what is good for our neighbor second. Could Hobbes be wrong? Man does not act in his own self interest, but instead acts for the good of the whole?

I don't know about man. But I do know about Curtis. 

late last night, I got an email from Wokai supporter Curtis Chin. Curtis told me he had read our piece, Does Wokai need a "girl"?,  and decided to produce a Wokai video...for the hell of it.  Check it out.

Curtis is a living, breathing example of Jake's philosophy. And so is Ketty who is lighting up the NPR news lines spreading the word about Wokai. And Ben who is snapping photos of the Beijing Olympics and selling them to raise funds for Wokai. And Alice who is looking under every rock and tree to find more Wokai supporters.

And they are not alone. We have 70+ more Wokai volunteers who are just as active in brainstorming, testing and executing ways to make Wokai surivive.  

People do naturally want to produce. And i think they want to collaborate too. They just need the platform and a little motivation to do so.  

Quiting Wokai

Casey

So I wanted to quit Wokai for the 40,000th time yesterday. And yet today I am still here, working at Wokai. Go figure.

What was the straw that broke (or didn’t break) the camels back?

After working until midnight the night before, I started my day with an email from Courtney:

“I know you are busy Casey, but I think this was kind of a half-assed effort.   Some of the points in the meeting minutes I wrote were not included. And it looked subpar.  I know I have not been around to help out as much this week and last, but that is mainly due to the new job and figuring out how to do things. We will get this figured out, but I need your help here over the next month. "

Harsh right?

My immediate reaction was, "I am not fit to run Wokai. Now that Courtney can't save my butt fixing up the junk work I produce, things are going to go kaput".

Yes. In short, I flipped.

And I think I get why I flipped. The story of my name, Casey Wilson, is actually pretty interesting. My mom is 100% Irish from Minnesota. Both of her parents came from 12+ person Irish Catholic families from the farmlands of Minnesota and by chance, both their family names were Casey (don't worry, I'm not a product of incest...no blood relation). So, when my grandparents met, fell in love, and married, my grandma had no need to change her maiden name. They ended up having six very Irish Catholic children, one of which went to the convent, another of which went to seminary school.

Flash about forty years forward....My parents got married at a secret wedding with only 4 attendants, and then headed down to Death Valley for their honeymoon in an old Volkswagen van (the type with the cool pop-up tent roof). The next morning my father (who was 60 years old at this point) went for a run at four thirty in the morning and came back with an inspired idea. He woke up my mom and said:

"Joanne, I have an idea. When I was running it came to me that you need to be a mother. Your mother was such a wonderful example of a mother to you, you in turn with your loving nature would be a wonderful mother and should have the experience of raising a child of your own [he already had four children from two separate marriages by this point, the first, my sister Gayle, was from one of those World War Two marriages when soldiers married right before heading out to war to ensure that their genes went on even if they didn't make it]. The story of your parents is so romantic that the child should carry on the name Casey. It will be Casey Barrios Wilson if it's a boy [my father's middle name] and Casey Louise Wilson if it's a girl [my Grandma's first name]."

My mom thought he was totally insane and spent the rest of the day mulling over whether she had just made the worst decision of her life marrying this crazy man.

Flash two years forward....I come out of my mom and instead of screaming "it's a girl!", my father screams "it's Casey Louise!".

My mom says that the Irish Catholic within her makes her instantly react to criticism with a sense of guilt, before analyzing whether or not the claim is accurate and she in fact did anything wrong. While I grew up in a Christian Scientist environment where everyone analyzed their world down to the smallest atom, the Irish Catholic Guilt must live on in my "Casey" name.

Now back to my email.

In retrospect, my reaction was a totally irrational thought and the work I produced was fine. That Irish guilt in me just weighed its strong arm for the day while I comtemplated the things that I could move on to after I quit:  enjoying the Beijing's Olympic games, heading back to California to hike to my hearts content in the back hills of Berkeley, or maybe even going back to teaching sea-kayaking in the San Francisco Bay [my only real job so far]....

These waves of feeling on top of the world and then hopeless in trying to actualize a bigger than life idea are crazy. And pretty entertaining to look at in retrospect. I am sure Courtney enjoys them too. Those Irish Catholics and entrepreneurs out there might relate.

Nike & China 2008 Olympics

Courtney

The Nike ads for the Chinese Olympics crack me up. Hats off to Nike for getting local and understanding Beijing humor. I only wish we could do something similar with Wokai videos. On second thought, there is nothing humorous about poverty alleviation. I think we wil stick to something more along the lines of the girl effect.

All the same. These are a treat for all you ex-Beijingers...

Straw: the answer to China's green problems?

Courtney

Max Perlman from the Green Dragon Film Project�is a man with many interests, much like myself. A uniting theme in his interests is China and the environment. He recently turned me on to a relatively new environmental movement hitting China by storm: building homes out a straw.

They call it strawbaling

What is straw-baling?

The idea is simple. Take straw, bundle it into straw bales, stack it up, coat it in clay and there you have it:a strawbale building.

Photo: Two strawbalers at an Adventist Development Relief Agency (ADRA)�site location in Inner Mongolia

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Why does it work?

Since straw is hollow, when it is bundled into bales and incorporated into walls for construction, it acts as an excellent thermal insulator. Straw bale buildings require 50%-68% less fuel to heat during the winter and eliminates the need for an airconditioner in the summer. The fuel savings and reduced pollution & CO2 release are the basis of straw bale building's economic and environmental sustainability.

What is the impact?

China is the world's largest Green House Gas emitter. One of the main reasons for this is China's heavy reliance on coal. Coal is the source for over 80% of China's energy. If China can decrease energy consumption, they can cut down reliance on coal. The easy "low-hanging fruit" way to do this is to look at housing construction. Homes are built with little focus on energy conservation and energy efficiency. With over half of the world's construction taking place in China between now and 2015, its time to start paying attention.

Rural areas allow an easy location to do this. They are interested in cheap and easy construction. The typical home is a red brick building (as shown below.) A straw bale building beats out the red brick building in terms of energy efficiency. Due to the added insulation the straw provides, strawbale buildings cut red brick home energy consumption by 75%. And the cost of building a strawbale building is even competitive, if not cheaper, than red brick buildings.

Photo: A typical red brick building found in rural areas in China.

Unfortunately, what is not competitive is the up front capital costs of strawbale machinery. A strawbaler is quite expensive, around 3,000-4,000USD. Since the income for a rural inhabitant averages around $300USD - and that is just enough to get by -then it would take a lifetime or two to save the total amount for one strawbaler.

How you can help?

ADRA is working with the Max on a project entitled Strawbaling in Rural China. They have developed programs to teach rural Chinese how to strawbale and are raising money to obtain the machinery to get them started.

Go on their site and make a contribution. Even one dollar will make a difference. Some interesting statistics:

• $1 will reduce greenhouse gas emissions by 1 ton
• $22 will offset the average American's greenhouse gas emissions for a year
• $70 will ensure 1 home is built
• $100 will train one Chinese builder in strawbale construction techniques
• $3,500 will subsidize the purchase of one straw baler and guarantee at least 50 homes are built during the 2-year project period

Unitus brings unique perspective to China microfinance

Casey 

Yesterday, Devin from Unitus came to our office here in Beijing to talk about the wrap up of their whirlwind two and a half week exploratory trip through China. Along with meeting with all of the Beijing based players in microfinance, like the China Association of Microfinance, UN Development Program, Planet Finance, and Hope International, they also trekked out to microfinance institutions in four different provinces around China, Inner Mongolia, Shaanxi, Sichuan, and Ningxia....quite a trip!

Photo from Ningxia

Photo From Sichuan

 

 

Photo from Inner Mongolia

 

 

It was fascinating to hear their take back from their MFI visits. Their initial conclusion of which MFI they think has the most potential to take off in China was the opposite of what our guesses have been based off of field trips to this group of MFIs. They liked the leader who was willing to break the envelope and do what has never been done before. This reaction fits with the Unitus model of investment in which the way that they have been able to achieve such incredible success, helping MFIs with a few thousand borrowers scale to between 100,000 and a million clients, is by investing in those visionary leaders.

To give those of you who are not familiar with Unitus a little background, Unitus is a microfinance accelerator that partners with small MFIs that have the potential to scale, and provides these MFIs with the technical assistance and capital (either in the form of debt or equity investments) that they need to achieve rapid expansion. Unitus' model has been incredibly successful around the world, especially in India. 

Our reaction on the above mentioned MFI head and perspective on evaluating MFI leaders here more generally is that of course we want to see leaders that want to grow and expand, but along with that, we want to see proof of measurable results and a realistic vision. From my perspective, the regulatory situation in China is so vague, that microfinance institutions and investors cannot bank on the fact that regulations will change in a definite amount of time, or predict, when regulations do change, what form they will change into. I don't know if it's possible to speculate in the microfinance sector in China. For example, the idea of making a loan now based on the guess that regulations will change within the next three years and institutions will be able to freely lend to MFIs seems pretty scary in this environment. 

The whole meeting with Unitus yesterday left me with a lot of questions. International microfinance practioners, Courtney and myself included when we first started up Wokai, come to China with wide eyes, innovative ideas, ready to take big risks and push the envelope. The longer they're here and learn about the subtleties and complexities of microfinance in China, they tend to tone down their vision and become more part of the status quo here. Playing by the traditional rules, not straying too far from what is currently being done and the traditional models. Then, you talk to the people who have been in the sector for say ten years, and they are even more toned down and pessimistic about the ability for mass scale change and innovations to occur in the microfinance sector here. They are grounded in reality. Not much can happen here until there is regulatory change that allows for mass scale microfinance development. However, many of them have lost the fire necessary to, once regulations change, get in there, get their hands dirty, and create growth and change in microfinance here. 

So, I see a Unitus, see their energy, optimism and enthusiasm, and wonder, "Have we all gotten too soft and passive? Are they right that we just need to keep pushing the envelope, searching for a model that works?" or, "Is China a different can of beans? Do you have to play by it's rules and come up with a new model adapted to the complexities of China, maybe pushing change at a slower pace, to create that growth and development in microfinance?". I have no idea what the answers are to those questions. It will be interesting to see how things unfold. 

Does Wokai need a "girl"?

Courtney

I recently had a dinner party at my house for "China ex-pats" - Westerners that have lived in China and now have returned to the normalcy of Western civilization. I enjoy getting people with the China connection together as the group gets tight pretty quick. I guess its because people feel an instant bond with those who have undergone the same experience. Only a handful of people in this world can relate to devouring late night jian bings (AKA "pancakes from heaven " as my roommate would call them), visiting the creepy yet still interesting bar scene of San Li Tun over and over again, and heading to work on the sardine-packed Beijing bus at 8am.  Got to love China...

At the dinner party, I met Leslie Forman. Leslie lived in Shanghi and Jiaxing for 18 months in 2006 and 2007. She now works for Papillia, a startup that provides online communications and fundraising software for non-profits. Leslie brought up the idea of a video for viral marketing. But what was different about her idea from ones mentioned in my previous entry is that her video has no pictures and no spoken words. It is just text and music.

So where did the idea come from?

Leslie showed me her inspiration: www.thegirleffect.org. The video is part of a web campaign for a non-profit called the Girl Effect that aims to increasing access to microloans for women. Take a look at their 2-minute video below.

Pretty awesome, right?

I think this video rocks for three main reasons:

1. Keep it simple stupid.No pictures. No dialogue. No interference. Just words. With just words, the Girl Effect is able to tell a simple story. A story that is amazingly illustory despite the lack of images. A story that sticks with you when you leave the video and go to bed and that lingers with you to work the next day so that you patronize your poor co-workers with monopolizing lunch time convo about women and microfinance. (Or maybe that's just me.) 
2. Don't exclude anyone. There was not one microfinance peice of vocab in that whole video. It is funny that the premise of the video is to mobilize funds for microloans for women and that the video never metions the word once. I love it. You do no need to be a microfinance expert to understand the video. Wording is simple and ope enough to allow anyone viewing the video to "get the gist."
3. Give the miro/macro look. Make To Stickauthor Dan Heath highlighted this point in his blog peice, Deconstructing the Girl Effect. The video is effective because it uses one image to tie together the micro and macro vision. It starts from the ground level, with a girl, and then builds to the major issue, 600,000,000 girls with the same problem. We are left still thinking about the girl, but with an understanding of how she fits into the bigger equation.

Leslie and I have started brainstorming on a Wokai Effect ourselves. According to Dan Heath, we need to take the Wokai Fact Card (Download wokai_fact_card.pdf) , boil it down, and come up with a 2-minute pitch about Wokai. And that pitch has to be simple enough that anyone can understand and want to get involved.

So how do we get the everyday Joe interested in helping a poor person in China?

Leslie had a late night brainstorming session with a whiteboard and her cell phone (see below). If you can't make out her scribbles, I will do my best to summarize: China is developing at a rapid pace, especially in urban areas. Rural areas are not experiencing this same development. As such, rural inhabitants are moving into cities to find work. This is causing stress on resources, social tension, and uneven development. Wokai reverses this process by offering opportunity in rural areas. With a loan, a rural inhabitant can start a business, grow the community and create local-economies in rural China areas. This allows for more even growth, creating a better China and a better world.

I like this idea. But I question its universality. Does your everyday Joe understand this story?

Ask yourself: Why would my neighbor care about China? I think one may be able to find the answer to this question by taking on the macroview first. I think one could argue that a more stable, socially responsible, equitable China means a safer and better world in general. I think all would agree with that statement.

Now from that, how do we make the micro? Whats our girl? Whats our hook?

Sustainable Cities – the next revolution in microfinance?

Casey 

I had an interesting lunch yesterday with Paul Clifford, Director of Planning & Strategy at Cisco’s headquarters in China. Paul is heading up a $50 million fund through the China Development Bank(CDB) where Cisco and the CDB use their respective resources to implement a new, technology based, model of development.

One idea for the initiative is to create a new Sustainable City - a city in a rural area that would be completely wired, or shall I should say, wired-less and environmentally sustainable. While the traditional Sustainable City is a revolutionary concept in terms of development and sustainable growth, this would take the current model to a new level.

 

To give you an idea of what Clifford is talking about. Let's look at Dongtan. Dongtan is the world's first Eco-City. Dongtan was presented at the UN World Urban Forum by China as an example of an eco-city, and is the first of up to four such cities to be designed and built in China by ARUP. The cities are planned to be ecologically friendly, with zero-greenhouse-emission transit and complete self-sufficiency in water and energy, together with the use of zero energy building principles. Dongtan was planned to open, with accommodation for 50,000, in time for the Expo in 2010 in Shanghai. By 2040, the city is slated to be one-third the size of Manhattan, with a total planned population of 500,000. The project has fallen behind schedule, with Arup's architects expecting only a tenth of the expected population to be in place by 2010.

 

Think about the possibilities of one of these cities. Let's look at healthcare. In rural areas of China today, if someone contracts a disease such as cancer, his chance of survival is pretty close to zero. There are no doctors in areas to treat the disease, if those doctors do exist, they most likely cannot afford treatment, not to mention have the money to pay to go to a big city like Beijing or Shanghai for quality medical treatment. 

Cisco’s Sustainable City is one solution. Patients can obtain virtual medical consulting using Cisco’s streaming video and audio platform. At no costs, doctors can examine patients, do diagnoses, and create appropriate methods of treatment, providing treatment to clients who would have never dreamed of having access to modern medical services.

 

No think of the possibilities of microfinance in a Sustainable City. Paul brought up an interesting idea of placing a virtual bank next to the medical consulting area. This type of technology could not only provide a means of distributing capital to clients, but also provide them with access to a world of information and virtual markets that could provide them a new potential level of success and growth in their microenterprises. Imagine an organic farmer in rural Sichuan that could access market prices and coordinate with vendors at a boutique grocery store in Shanghai. Now she could sell her vegetables for five times the price as the market down the road from her village. She might even make enough revenue to rent neighboring land and hire others from her village to work in her microenterprise. 

Before, a loan would have enabled her to buy the seeds, fertilizer, and supplies to grow her crops, sell them at market, repay her loan, and have some extra cash to send her daughter to school. However, her income would hit a ceiling that she couldn’t pass as she maxed out the amount she could grow on her land. She and her neighbors would run into the same problem that Malthus predicted where Capital and Labor can only go so far until development hits a wall. With a Sustainable City, now she can actually be a part of growing a local economy.

 

It is amazing to think of the synergies between microfinance and technology. Paul has opened a whole new world of microfinance and technology interfacing that I did not even know could exist. Thinking in Paul terms, www.wokai.org doesn't seem like half the challenge it did yesterday...