Wokai Adventures

In honor of election time...

Courtney

But keep in mind this is no way an opinion. It is merely an celebration of the impact of youth in this world. Its amazing what a video by 6th and 7th graders can do..

China's Development Policy Goes Rural

Leslie Forman

Leslie is Wokai's Online Social Media Director.  She lives in San Francisco. 

I just came across this excellent clip from CCTV, highlighting how China has shifted the focus of its development to rural areas, with a focus on microfinance (hat tip to Rich Brubaker):

Last year, when I was working for the American Chamber of Commerce in Shanghai, I interviewed Wang Li from Citi, who appears in this clip.  She described how the Citi Microentrepreneurship Awards in October 2007 served as a stepping stone towards the broader expansion of microfinance in China.  I am impressed to see how quickly these changes have occurred.  As Courtney explained, the impact for Wokai could be huge! 

China has also recently transformed its rural land policies, allowing farmers to trade or rent the land on which they work. 

As writes Robyn Meredith in an interesting column for Forbes:

China is dramatically transforming policy for the nation's 730 million farmers. For the first time since Mao collectivized farming in 1955, China's farmers will have a free market for the land they till. This is a historic change for China, and lest anyone miss the significance, Beijing announced it on the 30th anniversary of the last major set of rural reforms, which marked China's first steps towards capitalism. ...

in the third quarter, China's gross domestic product growth rate slipped to "just" 9%, lower than economists expected and down from last year's 11.9% growth rate ... Beijing has calculated that if China's economic growth falls below 8%, there is a serious chance of political instability.

In other words, providing more options for rural development could create new opportunities for overall growth, beyond the export production that has been affected by the global financial crisis.  Rich Brubaker suggests that the impact could be huge for China's fragmented agriculture industry, food distribution systems, and consumers. 

One lesson that came up over and over in the business forums I attended in Shanghai is that aligning your organization's objectives with those of the Chinese government is one of the most important things you can do.  So, for Wokai, this official support for both microfinance and rural development is especially excellent news!

The Market Needs a Self-Correcting Mechanism

Jay Liew

Jay Liew is a high-tech startup entrepreneur focused on the intersection of cloud computing, Software-as-a-Service (SaaS), and mobile applications. He wants to change the world with technology or die trying. When not playing ice hockey, he finds time to sleep. Jay holds a B.S. degree in Computer Science.

As a technologist, I've always passionately believed in the power of technology to change the world. However, that power can be abused. I think that in today's market, greed simply caught up with men who used technology to walk over the line. 

I recently read this interesting New York Times Op-Ed titled "The Rise of the Machines"

"BEWARE of geeks bearing formulas." So saith Warren Buffett, the Wizard of Omaha. Words to bear in mind as we bail out banks and buy up mortgages and tweak interest rates and nothing, nothing seems to make any difference on Wall Street or Main Street. Years ago, Mr. Buffett called derivatives "weapons of financial mass destruction"

In other words, this entire economic mess, impacting the world ... stems from some math formulas.

An important counterpoint to this comes from Muhammad Yunus, father of microfinance, in this short insightful Business Week video:

He says that the market needs to find its own self-correcting mechanism. The more speculative you get, the more you must set aside for a "rainy day" fund.  A government bailout is akin to running to mommy and daddy for help. This mechanism needs to be designed right now, right when we need it the most, right when we're feeling the pain the most. Because when times are good, we're not going to be convinced that we're going to need that rainy day fund.

Now that's good advice, at the 100,000 foot view that encompasses the global economy. Diving in to the 100 foot view, the microentrepreneurs that Wokai funds learn how to "self-correct" their business every day. We don't just say, "Hi there, lucky winner. Here's some money from some unknown person across the globe who found your picture on the Internet. Hope this helps, and good luck!"

A certain % of the microloan is allocated towards the microentrepreneur's education and training (e.g. how to budget, domain knowledge specific to the business, etc.) - which in turn increase the odds of success by a few orders of magnitude. With even higher microloan repayment rates, Wokai is then able to recycle these loans and fund even more microentrepreneurs. It's a positive cycle that slowly rids the world of poverty.

Wokai is not a free handout.  Fundamentally, microfinance is about empowering people to lift themselves out of poverty. Yes, they have to work for it and at times, self-correct.

Citigroup enters China Microfinance

Courtney

Commercial Banks & Microfinance? In China?

While its a surprise to see banks entering the China microfinance sector, its no surprise that Citigroup is the US bank leading the charge. Citi Foundation has long been involved in China microfinance - funding various MF initiatives and programs across China. We are excited about this large step towards the commercialization of microfinance in China through the integration of banks into the sector. We are even more excited that the bank leading that movement is Citigroup as they have a real understanding of the space, specifically in regards to China.

How does this affect Wokai?

It could potentially be big. These big commercial players are going after the low hanging fruit, mainly the productive microfinance organizations that are getting involved in large size loans almost microenterprise size, well beyond the average Wokai loan size of $300. They are not going after the poorest of the poor who live in remote rural areas and need loans ranging from $150-500. Therefore Wokai is still in business serving those compeletly left out of the loop.We still have a mission to provide the 200,000,000 people living below the poverty line with access to financial credit. IN addition, the commercialization fo the sector can only mean good things for Wokai on the financial and legal side. One day - sooner rather than later - Wokai might be able to offer 100% of the loan back to contributors for removal from their Wokai account. Right now, contributors can only reallocate that money. it will be great to allow them the same benefits as on Kiva - a full 100% reimbursement.

See article below:

Citigroup Inc, the largest US bank, said yesterday that China's banking watchdog has approved its plan to open two microcredit firms in Hubei province, tapping the nation's vast rural market.

Citigroup, the first overseas lender allowed to establish such institutions in the country, plans to set up the two firms in Gong'an county and the city of Chibi, which are scheduled to open in the next few months.

The move comes as major rivals including HSBC and Standard Chartered are opening rural outlets in order to expand in the nation's underdeveloped regions and the government is relaxing controls on private financing to support thousands of small and cash-strapped manufacturers.

Citigroup, which has eight branches and 20 sub-branches on the mainland, was one of the first locally incorporated foreign banks in China. The financial giant, which has a stake in Shanghai Pudong Development Bank as well as de facto management control of Guangdong Development Bank, said Gong'an and Chibi have tremendous lending needs due to their rapidly developing agriculture and robust economies.

"We feel very excited and proud of being allowed to set up the microcredit firms," said Citi China CEO and Chairman Andrew Au. "It's a very important new element in the process of Citi's operation and investment in China. We deeply understand the urgency to expand finance services in China's rural areas, a goal we believe could be achieved by the mode of setting up microcredit companies."

See: http://www.chinadaily.com.cn/bizchina/2008-10/08/content_7086453.htm

Blog Action Day: Breaking the Tri-Cycle of Poverty

Leslie Forman

Leslie is Wokai's Online Social Media Director.  She lives in San Francisco.

Today is Blog Action Day, an event for which bloggers worldwide are writing about a single topic: poverty. All over the Internet, I've seen articles, videos, and widgets and the energy is pretty incredible.   

Microfinance is one of the most effective mechanisms for alleviating poverty worldwide. I am so excited to be part of the movement to expand the reach and impact of microfinance in China. I'd like to share this excellent story from Kiva Fellow Kieran Ball describing his unwitting introduction to the need for microfinance.

In 2006 I was fortunate enough to be travelling in China with my mum (that’s British for “mom” to any readers from the States). We had been there for a couple of weeks but were beginning to tire of the constant pollution in the cities, so we decided to head for the countryside on a public bus. Upon arriving in yet another small town, we realised the only way we were going to see the countryside was to flag down a rickshaw, essentially a three-wheeled pedal bike with a double seat at the back for passengers....

Curious to understand how, or indeed why, he had chosen to effectively take it upon himself to replace the internal combustion engine, my mother peppered him with questions. By the top of the hill we understood that he hired the rickshaw from a guy in the town for 200 Yuan ($25) per month, and that in the summer months this usually generated between 400 and 600 Yuan per month of revenue, but only 300 to 400 Yuan per month in the off-season. Most of his profits were sent home to support his family, leaving him just enough to live on. With a maximum profit margin of $50 per month, this didn’t amount to much.

By the bottom of the next hill we had discovered that to buy his own rickshaw would cost 1000 Yuan, around $150. My mum and I sat in silence, except for the sound of her translating to me, shocked at the idea that such a relatively small amount of money to us, would transform this young man’s life from one of eternally scraping-by to potentially doubling his monthly profits.

Click here to read his complete post.  Thank you Kieran Ball for sharing this incredible story.  Thank you Muhammad Yunus for inventing microfinance and sharing it with the world.  Thank you Courtney and Casey and the rest of the Wokai team for expanding the potential for microfinance to alleviate poverty in China.  Go Wokai! 

Wokai NYC Chapter President gets vocal at the China Insititute

  Courtney

Wokai New York Chapter President participated in a panel on China Microfinance held by the China Institute last Thursday. It was Meghan's first time speaking about Wokai in a public forum and she rocked the house! Way to go Meghan!

Speakers on the panel with Meghan included:

Didier Lamarche who is founder and CEO of Adam Smith Capital Partners, a private equity fund that invests in enhancing financial access in Asia.

Yana Watson who is a principal at Dalberg Global Development Advisors, a strategic advisory firm specializing in international development where she leads the microfinance practice area.

Jimmy Yan (Moderator) who is currently trustee on the NYC Employees Retirement System (NYCERS) as well as involved in NYCERS' activities in microfinance. 

Bhakti Mirchandani who has worked as Lehman Brothers Microfinance speacialist as well as worked with such organizations as Womens World Banking. She founded and ran the Global Microentrpreneurship Awards - a series of business plan competitions for microentrepreneurs in the developing world. To see her presentation, click  Download microfinance_overview_080904.pdf

NYC President Meghan Gill speaking about China Microfinance

The hearty crowd that attended the event to hear her speak.

Wokai Featured on ResponsibleChina and WorldChanging

Leslie Forman

Leslie is Wokai's Online Social Media Director.  She lives in San Francisco. 

We'd like to send a huge thank you to Erica Schlaikjer of ResponsibleChina.com for her excellent reporting and enthusiastic support for Wokai.  This week Erica recorded a podcast interview with Casey and Courtney and wrote a more detailed article for WorldChanging.com. 

I especially like Erica's description of Wokai as "an online recycler of microfinance loans." 

 

Online Giving Marketplaces Conference at Stanford

Leslie Forman

Leslie is Wokai's Online Social Media Director.  She lives in San Francisco. 

This week Casey and I had the great fortune to spend four days at Stanford, learning about online giving marketplaces.  This has been such an amazing opportunity to learn from other organizations, in a very personal way. 

For the first three days, we met with the leaders of 16 different marketplaces from India, Colombia, South Africa, Argentina, Germany, Canada, and the U.S.  As the youngest organization (and youngest participants) in the group, we felt especially honored to be included.   A huge thank you to the Omidyar Network for making this possible!

The organizers brought in professional illustrator named Susan Kelly to transform these discussions into clear and colorful pictures.  Here is her record of our presentation on Wokai's chapter network, part of a session in which each marketplace shared a best practice.

Over the next few weeks, we'll post more here to share what we learned about diaspora, trust, technology, communities, and so much more. 

The final day the Stanford Social Innovation Review hosted a larger public conference  on the same topic. 

I had never heard the term Online Giving Marketplaces before this week.  It's a term that can be defined in many ways, and I really like this list of common characteristics by Lucy Bernholz, who hosted one of the sessions and is writing a book on the topic:

1:1 transactions between donor/lender and NGO/entrepreneur
Transparency
Feedback loops
Donor choice
Aggregating individual transactions (sometimes for intelligence)
Two flows in the markets - financial resources and information
Financial transactions are based on trusted information

In other words, online giving marketplaces transform philanthropy, making it more accessible and more like online shopping. 

And I sure hope that Dean Takahashi from VentureBeat is right when he says that "Social start-ups may prosper in downturn." 

Calling all Wokai Evangelists

Casey

After over a year of development, we are proud to announce that Wokai.org is almost ready for launch! However, we need your help to take the site from good to great, making sure the site functions smoothly, finding the kinks in the system, and maximizing the user experience. This Friday, we will launch the Wokai.org Pilot Program.  We're looking for 200 people to test out the site by making $50 in contributions directly to microentrepreneurs in Inner Mongolia, and providing feedback on this process.

Here is a preview of the Wokai.org site:

If you are interested, or if anyone you know is interested, there are two ways to sign up for the Pilot Program:

1)  Sign up on Facebook, by signing up to attend the Wokai.org Pilot Program.

2) Email Chris Glen in Beijing. ([email protected])

Once you have signed up, Chris will email you all relevant instructions and materials.

If you can think of any family, friends, or acquaintances that fit the Wokai.org Pilot Contributor mold, please continue to pass on the word.

We're counting on you to make Wokai.org a reality!

Givology: Another China P2P

Courtney

We have mentioned a couple Chinese/English P2P sites in China working in the same world social venture world we are including 51Give and QiFang. Now there is now another site to add to that list called Givology.

Givology is an internet community that empowers individual donors to connect with students and communities in need of education support. The name comes from the team's motto: "Give to learn, learn to give - where the philosophy of giving is something that can be mastered learning to give, " according to Givology vice president Xiang Li in a recent article in the Daily Pennsylvania. It was started by a group of University of Pennsylvania 2008 alumni, savvy in the ways of computer programming, to give donors a more participatory hand in education around the world.  

The site reminds me of DonorsChoose - a P2P platform that allows users to fund needs posted by school teachers around the country.

Givology is different from DonorsChoose in that:

1. It is international. Givology launched its site with a focus on China, but is opening up the model for use by other countries including Iran, Equador, India, and Vietnam. 
2. It focuses on individual students. On Donorschoose, teachers list very specific needs like books, pencils, computers, etc. On Givology, stduents tuition needs are posted. Donors can contribute an amount to give to an individual child.

Similar to Wokai, Givology has really honed in on the need for transparency in China  focusing on the issue of transparency. Transparency allows donors to see the exact use of their funds. This acts as both a check for the non-profit to make sure funds are going where they are intended and as as incentive for the donor to see the sctual real impact of their dollars. 

While transparency is important for any non-profit, it is even more important for Chinese-focused non-profits. Chinese non-profit world has a reputation for squandering money and for not ultizing funds for their marketed use. At Wokai, we have come across this opinion time and time again when trying to raise funding for Wokai. 

Fortunately, technology has allowed us to avoid this tension point altogether. Donors do not need to take our word for it, they can check in to track their funds any day of the week. They can see where they are in the process and what is the next step.

I think the next challenge is for sites like Wokai and Givology, who focus on the hyper specific need of P2P transparency in China, to work together. After all, we are targeting the same user base: donors around the world with a soft spot in their heart for China.