Wokai Adventures

Don’t Patronize, Please

Jessica Lee

Jessica Lee volunteers in her free time with Wokai’s Bay Area Chapter as Business Strategy Associate. You can write to her (jessica dot lee at wokai dot org), or visit her blog to get in touch.

 Al Hammond: “…Most of what Mr. Karnani says seems just silly—armchair theorizing. His numbers are wrong—as we have already explained in detail elsewhere, although he does not acknowledge the criticism.  And he misquotes me and attributes words to me that I’ve never spoken, thus underscoring his questionable scholarship and the sloppy editorial work of the journal that published him. But it is his larger critique that is more troubling.”

 Aneel Karnani: “Al, I am sorry that you are not happy with my article…that certainly was not my intention…I take scholarship seriously, and would appreciate it if you would substantiate the charge of ‘questionable scholarship.’”

The above email debate between Ashoka’s Al Hammond and University of Michigan’s Aneel Karnani was posted (with permission) on Next Billion’s blog last Thursday. Their exchange was sparked by an article that Karnani wrote back in December. The article, “Romanticizing the Poor,” was published in the Stanford Social Innovation Review, and it was provocative.

In the article, Karnani argues that market-driven solutions to global poverty are in need of a serious reality check because they assume that poor people are rational consumers and innovative entrepreneurs when in fact they aren’t. To Karnani, this romantic picture of the poor gives multinational companies (MNCs) in the tobacco, alcohol, and consumer products industries license to exploit poor people with harmful, unnecessary products; and it encourages the misguided notion that microfinance is a realistic means of alleviating poverty. For Karnani, the real harm comes when governments begin deferring their responsibility in the fight against poverty to the rosy market. Karnani pleads, “More Government, Please.” A few quotes from his article:

“But poor people seem to lose control more often, for reasons that reflect the realities of their daily lives.”

“Mounting evidence suggests that just being poor hinders people’s ability to make good decisions.”

“I have found little evidence suggesting that poor people are particularly discerning consumers or creative entrepreneurs.”

There is nothing romantic about the poor or being poor – anyone who has experienced poverty can tell you that – but please don’t patronize the poor either because:

1.    Change needs to come from the bottom level. The quest for growth in poor countries has been long and elusive. In his book The Elusive Quest for Growth, William Easterly shows that in the past 50 years, foreign aid, capital investments (both in machines and humans), population control, policy reforms, and debt forgiveness aren’t the answers when it comes to explaining growth. When Easterly spoke at Stanford last spring, he concluded his talk by admitting that experts can only do so much to understand and promote growth. Instead he focused on the individual, specifically on the idea of the creative individual and individual responsibility. 

2.    Entrepreneurship isn’t classy. I agree with Karnani in that governments need to stay involved in the welfare of the poor by investing in infrastructure and reforming policies, but we’ve seen that neither government investments, nor policy reforms are the elixir to sustained growth and improved lives. Before we dismiss the poor as incapable of an entrepreneurial life, we need to consider for a moment that entrepreneurship isn’t just for the elite. Sure, poor people with cool ideas may not have access to the training, resources, and funding that their wealthier counterparts have, but all that can come with time and experience, while the vision of those ideas can never be taught.

3.    Not all MNCs exploit. It’s suspicious that the only examples Karnani refers to in his article are MNCs in the tobacco, alcohol, and consumer products industries. What about, technology? Cell phones have penetrated developing-country markets at rapid rates, leading to interesting and beneficial services that run off the mobile platform, including mobile education (mEducation), mBanking, and mHealth. In the nascent field of mHealth, for example, the cell phone is quickly proving to be an efficient means of healthcare delivery in areas where health infrastructure is severely lacking. The introduction of mobile phones in the developing world means greater connectivity, which means more access to information and heightened transparency. The case study of fishermen in Kerala is a compelling one. When healthy incentives align all players in the value chain, and value is delivered to each player – MNCs, governments, nongovernmental organizations, and the poor people themselves – you can’t call that exploitation anymore.

Everyone has the right to invent and innovate, and to make decisions to buy things without judgment, and if you can free yourself from a life of poverty in doing so, that’s a beautiful thing. “Freedom is just another word for entrepreneurship.” I believe in that.

Note on Image Sources: cartoon is from the Economist, photo is from the Washington Post. 

Bill Gates, Mosquitoes, and Microfinance

Hongqing Chen

Hongqing, from Wokai's Seattle Chapter, has written a wide variety of posts for this blog, chronicling her experiences with microfinance.  She invites you to debate the ideas she's shared here. 

Should microfinance be for profit or not-for-profit?  Bill Gates' recent words have made me think more about this question. 

“Bill Gates playfully frees swarm of mosquitoes” read a recent headline from the TED (Technology, Entertainment, Design) Conference.

"There is more money put into baldness drugs than into malaria," Gates quipped, triggering laughter. "Now, baldness is a terrible thing and rich men are afflicted. That is why that priority has been set."

I agree with Bill about 20%.  The main reason why there has been more investment in developing baldness drugs than in malaria, in my humble opinion, is that there is (a lot of) money to be made in the former.  The fundamental principle of market economy provides more incentive to developing drugs for vanity because people are willing to pay premium prices for them.  The priority was set not because rich men are afflicted, but due to the fact that a large population of lower-, medium-, and upper-middle class men and women (especially baby boomers) want to look good for a small price. 

The following message is from the World Health Organization.

Malaria and HIV are two of the most devastating global health problems of our time. Together they cause more than 4 million deaths a year. Both are diseases of poverty, and both are causes of poverty. To a considerable extend, both are concentrated in the same geographical regions. The resulting co-infection and interaction between the two diseases have major public health implications.

 HIV-infected people must be considered particularly vulnerable to malaria

I agree 100% with the above statement that malaria is a “disease of poverty.”  Effective drugs are available, but (for reasons we can all speculate) out of reach for poor people. 

Bill Gates’ comments got me thinking about a long-debated issue.

To eradicate poverty, a root of the evil, Grameen and ICICI banks proved that microfinance is an effective tool.  While the number of MFIs worldwide has mushroomed to over 7,000 in the past decade, many have failed for lack of…

Sustainability

This has got to be the most frequently used word these days.  Or maybe I have been noticing it more because I have been associated with different people lately?  I think that sustainable living requires sacrifice by humans in terms of convenience, speed, and/or cost.  While many are motivated by conscience, more are motivated by the need of survival.  Thus, high energy costs are good for promoting environmentally-friendly behavior.

Similarly, sustainable growth in microfinance cannot be achieved by donations.  To attract capital, MFIs need to tap into the capital markets.  Thus, they need to attract investors with healthy returns.

To Be or Not To Be (Profitable)

That is a crucial question.  I had the pleasure to discuss this topic with friends in Wokai and people I’ve met in the microfinance community in Seattle.  On the same day when Bill Gates’ playful act was reported on Yahoo!, I met with Chevenee Reavis, Senior Manager at Unitus and picked her brain on this very subject.

"We emphasize a commercial approach to eradicating poverty," she explained.  Here's my summary of her ideas:

•    Without proper checks and balances, capitalism promotes greed.  “Where is the soul?”  “What is the limit of excess return?”
•    A commercial approach can allow for reasonable returns while limiting exploitation.
•    Using a commercial approach, MFIs can become more efficient and sustainable.

Unitus' success stories regarding MFIs it has helped and micro entrepreneurs it has assisted demonstrate the power of this approach.

A Reformed Capitalism

For more ideas about this question, I turned to Muhammad Yunus' book Banker to the Poor, published in 1999. 

I believe in the central thesis of capitalism: The economic system must be competitive.  Competition is the driving force for all innovation, technological change, and improved management.

Another central feature of capitalism is profit maximization.  Profit maximization ensures the optimal use of scarce resources.  This is the feature of capitalism that led us to create the image of a greedy (almost bloodthirsty) person in the role of profit maximizer.  We have presumed that the profit maximizer has no interest in achieving social objectives… .

The moment we open the door to making a social impact through investments, investors will start putting their investment dollars through this door as well.  Initially, some investors will divert only a part, and maybe a small part, of their investment money to social enterprises.  But if social entrepreneurs show concrete impact, then this flow will become larger and larger.  Soon, a new type of investor will begin appearing on the scene --- those who will put all or almost all their investment money into social investments.

If the social enterprises can demonstrate high impact and creative enterprise designs, a day may come when personal profit-driven enterprises will find themselves hard-pressed to protect their market share.  They’ll be forced to imitate the language and style of social enterprises to stay in business.”

Ten years later, organizations like Kiva and MicroPlace are featured in the Wall Street Journal. Ed Bland, President of Unitus, was recently featured on Bloomberg News to discuss this work. 

I believe that profit seeking is the ultimate motivator for human nature.  A reformed capitalism can be achieved only when the day Dr. Yunus envisions, when profit-driven enterprises are forced to imitate social enterprises to stay in business! 

So Bill, we need to find a way to make eradicating malaria, AIDS, and poverty so profitable that everyone wants to be part of it!

P.S. Here's a great article that Bill Gates wrote for Time Magazine that describes these efforts in more detail: http://www.time.com/time/business/article/0,8599,1828069,00.html 

Editor's Note: Corrections and amendments added 2/19/09, following comments from Ms. Reavis.  Thank you so much for your feedback!  We look forward to others' comments as well. 

Chopsticks Challenge: San Francisco’s Chinese New Year Street Fair

Alice Wu

Alice volunteers at Wokai as the President of our Bay Area Chapter. She can be reached at alice dot wu at wokai dot org

How do you get a frugal old lady in Chinatown to make a donation to help others?  You need a patient and friendly volunteer who speaks her language, a fun game, and a true story that touches her heart.

Last weekend, Wokai participated in the San Francisco Chinatown’s Chinese New Year Community Street Fair. We wanted to promote Wokai, bring in donations, and get our team together for a good time. We accomplished all of these objectives and came home with many pleasant surprises.

Photos by Bijal Shah, who volunteers as Vice President of Business Strategy for Wokai's San Francisco Bay Area Chapter.  Click here to see more of these photos on her blog. 

If you’ve watched the reality show “The Apprentice,” our experience was very similar to that competition. We had two days and limited resources and human capital to raise as much money as we could and spread the word to as many people as we could. We had raffles to win tickets for our future events.  We gave out bottled water with any donations. We had Wokai T-shirts for sale.  We tried face painting to attract kids, so that we could talk to the parents.  And we decorated our booth with balloons, posters, and beautiful blossoms.

None of the above worked as well as our Chopsticks Master Challenge --- a simple game to see how good people are at picking ping pong balls in water with chopsticks. It took a $1 donation to play. If you can pick up 6 balls in 10 seconds, you win a Wokai T-shirt plus everyone’s respect. If not, you still get a small consolation price of your choice. No matter what, you win because you get to donate $1 to help someone in rural China get out of poverty.

As you can see in Bijal's photo album here, everybody had a great time.

About 15 enthusiastic volunteers took turns standing at our booth for 16 hours over two days. We had attorneys, CPAs, bankers, consultants, etc. If all of us had spent the time doing our professional work and billing our clients, we could have made thousands of dollars. The truth is, what we gained from this weekend’s volunteering experience went way beyond what money can measure.

That's Liz and Christina, posing with our Wokai poster. 

Please allow me to share my most touching moment of the weekend with you.  Even though I speak perfect Mandarin, one third of the people at the fair were Cantonese-speaking Chinatown residents. It wasn’t until Virginia, our best-Cantonese-speaking volunteer, showed up, that were we able to correctly communicate to them what Wokai is all about. So when Virginia convinced a Chinese old lady to take out a dollar bill from her completely worn out wallet, and happily donate it to support our cause, I knew we were making a difference. It could be the story of our borrower that triggered something in her memory back home or it could simply be her competitiveness in mastering the chopsticks techniques, but we made her smile and we helped someone in her home country at the same time.

Thank you to everyone who donated to us. Every dollar counts and we will use it wisely. Special thanks to the gentleman who was obviously a chopsticks master but purposely tried not to win so that we could keep the T-shirt. Most importantly, I want to thank our volunteers, led by our events associate Christina Zhao, and special thanks to Liz and August for your generous donations of time and money. You all did a fantastic job with endless enthusiasm. Wokai’s Bay Area chapter will be back next year. By that time, Wokai will be bigger and better and have a lot more chopstick masters for sure! 

Wokai Launches Microfinance Platform to Address China's Urban-Rural Divide

Note: This is Wokai's first official press release.  To regular readers of this blog, our launch announcement may not be new information, but we thought you'd be interested in learning more about Wokai's founding and vision. Thank you again for all your support! 

Click here for more detailed media features, including links to published articles and contact information.

Started by 25-year-old Americans Casey Wilson and Courtney McColgan, Wokai enables enthusiasts worldwide to fund loans for entrepreneurs such as pig farmers and teahouse owners

Oakland, California – February 5, 2009

Wokai, a nonprofit organization that enables people in China to build small businesses and lift themselves from poverty, announced today the launch of a microfinance platform that allows individuals to support rural entrepreneurship initiatives –- primarily for women –- with donations as small as $10.

Wokai (www.wokai.org), whose name means “I start” in Chinese, partners with rural microfinance institutions to address China’s vast urban-rural divide. Donations fund microloans ranging from $300 to $900 that help borrowers in rural China build better lives for their families. Wokai updates contributors with news on their borrowers’ repayment status and business developments, and once each loan is fully repaid, the original contributor may reinvest these funds to support another borrower.

Currently, Wokai partners with two Chinese microfinance institutions, Chifeng Zhaowuda Women's Sustainable Development Association, and the Association for the Rural Development of Yilong County, which lend to entrepreneurs in Inner Mongolia and Sichuan, respectively. Wokai has a rigorous evaluation process, requiring that these institutions be financially transparent and have an on-time repayment rate of 95% or higher. Wokai’s team also works closely with the local loan officers, to train them to report their impact in the field.

So far, Wokai has brought together 196 contributors from 16 countries to assist more than 40 entrepreneurs in building pig farms, tea houses and other ventures. Donors can help to fund projects at www.wokai.org.

Why China?

“The need for our organization stems from inequality -- inequality between the United States and China; and inequality within China, between urban and rural areas,” says Courtney McColgan, who founded Wokai with Casey Wilson in 2007. “We dreamed of a way to bridge that gap through technology, to allow people on one side to help those on the other –- seamlessly, informally and individually.”

The two Americans met while studying advanced Chinese in Beijing in 2006. Casey had come to build a career in economic development. At Tsinghua University, she met Courtney, who had been researching microfinance in China for three years. The two students traveled together to the Ningxia Center for Environment and Poverty Alleviation, a microfinance institution west of Beijing. Here Casey realized how microfinance works on the ground in rural China: “We saw three people working in a run-down office and a group of loan officers riding their motorbikes through the desert to collect repayments from lamb farmers.”

When visiting borrowers, they learned about the personal impact of these loans. “Microfinance allowed us to go from existing to living,” explained Shu Liangang, a farmer. “Existing is merely finding enough food to eat, but living is truly feeling the substance of life, our hearts, and minds.”

Soon after this trip, Courtney McColgan returned to the United States to begin her finance career. She now works as an analyst at Draper Fisher Jurvetson in Menlo Park, California, and has remained actively involved with Wokai.

Casey Wilson stayed in Beijing for her first job out of college: Co-Founder and CEO.

From an Idea to a Platform

Wokai has since grown from an idea into a dynamic nonprofit organization. Today, Wokai has offices in Oakland, California, and Beijing, and active chapters in San Francisco, Seattle, and New York. These chapters, which raise awareness about China philanthropy in their local communities, include more than 75 volunteers.

Larry Sun, who volunteers as Product and Technology Director, explains: “I was born in China and now work as a Software Engineer in Test at Google. I love being able to apply my professional skills to manage Wokai's product roadmap. This gives me a great way to give back and stay connected to my homeland.”

In the future, the founders plan to expand the scope of Wokai’s platform to build personal connections to a broader spectrum of philanthropic projects in China.

Quick Facts about China and Microfinance

- According to a recent report published by China's Agriculture Ministry, city dwellers earned 3.36 times more in 2008 than their rural counterparts, and this divide was wider than it had been in 2007.

- In 2007, China passed Germany to become the world’s third-largest economy, but approximately 200 million people in China live on less than $1.25 a day.

- Muhammad Yunus won the 2006 Nobel Peace Prize for inventing and popularizing microfinance. An economics professor at Chittagong University in Bangladesh, he initially lent $27 of his own money to a group of local women suffering from the 1976 famine. Since then, microfinance has been used in many developing countries.

- Microfinance in China has been quite successful in providing livelihoods for individual families, but government regulations limiting local investment have hindered its nationwide expansion. In the mid-1990s, the United Nations Development Programme invested heavily in building 300 microfinance institutions in China, and about 100 of those still operate today.

About Wokai

Wokai is a person-to-person giving platform for China. A 501(c)(3) non-profit organization, Wokai connects contributors worldwide with people in need in rural China, to help them start small businesses. Wokai relies on events, grants, corporate sponsorships and individual donors for funding, and will eventually cover costs through the optional 10% donation that contributors can add when funding a project. To learn more, visit http://www.wokai.org.

Wokai's Founders, Courtney McColgan and Casey Wilson

Map showing the locations of Wokai's current Field Partners

Cuye, a loan officer with the Chifeng Zhaowuda Women's Sustainable Development Association, counts a repayment from Rurnequ, a borrower

Zhuang LiPing, a rabbit farmer in Yilong County, Sichuan, who has built his business with assistance from the Association for the Rural Development of Yilong County in Sichuan Province

 
A herdswoman in Ningxia Province, who Casey and Courtney met on their initial microfinance research trip

Click here for more detailed media features, including links to published articles and contact information.

Building a Microfinance Career: Meet Che Wong

Hongqing Chen

We at Wokai get lots of inquiries about building careers in microfinance.  Hongqing Chen, from our Seattle Chapter, has been researching this very question, and today she shares the story of one young professional in this field: Che Wong. 

On my first visit to Washington CASH, I met Che Wong.  Coincidently Jim Thomas knows Che too as she used to work for Community Capital Development (CCD) as a counselor.  Today, I had the pleasure to learn more about her experiences in microfinance.

That's Che with another Peace Corps Volunteer.  Photos courtesy of Che Wong. 

“I have always wanted to work in microfinance and learned about Muhammad Yunus in school,” Che started.  She then said that she always wanted to work in the non-profit organizations dedicated to community development.  I was impressed.  I went through MBA and Ph.D programs in finance without knowing the term.  Students now are much better served.  As our conversation went on, I gathered the following facts about this extraordinary young lady:

Che graduated from University of Oregon with a BA in business administration with a focus on micro entrepreneurship.  She then went to Cape Verde in Africa as a Peace Corps Volunteer.  For one and a half years, she worked on HIV awareness and microfinance, among other duties. 

It was interesting to hear about Che’s experience in Cape Verde.  In order to communicate with locals, Che had to learn to speak the local version of Portuguese.  She spent most of her time explaining the microfinance program to people.  At first people thought those were not loans but grants.  One of her favorite cases was about a young man.  He borrowed $500 to buy tools and the first animal to start a butchery shop.  She found his operation techniques fascinating.  When he obtained an animal to butcher, he would go around the village asking people what part they would buy until the last piece of the animal was sold.  Then he could do the butchering and send meat to those people.  Che became one of his clients too.

Market in Cape Verde.

Santo Antao, Cape Verde.

After that experience, she came to Seattle, first working for CCD then became a loan officer at ShoreBank Enterprise Cascadia, a subsidiary of ShoreBank Corporation.  At the end of our conversation, I thanked Che for her time and promised to continue it in the near future.  There is so much I need to learn from her.  I thank Washington CASH for bringing her to me.