The success of the Academy Award winning “Slumdog Millionaire” has highlighted the plight of slum dwellers in Mumbai (formerly Bombay). As seen in the movie, Mumbaikers (residents of Mumbai) face a plethora of problems, including surviving the Hindu-Muslim conflict.

Mumbai is a divided city. A city divided by class, by caste, by politics, by religion. On December 6, 1992, the Babri Mosque was destroyed by Hindu nationalists. Immediately after the demolition, angry Muslims took to the streets all over India. Hindus soon began to fight back. Some of the most violent confrontations occurred on the streets of Mumbai. Approximately 150,000 Muslims fled the city and 100,000 took shelter in hastily erected refugee camps in predominantly Muslim areas. Communal clashes have broken out periodically throughout Mumbai since these riots.

The following is the first in a series of posts that will compare mechanisms for peace through microfinance in other conflict-affected areas – namely Indonesia, Sri Lanka, Ahmedabad, and Yemen – and discuss their applications to my hometown of Mumbai.

Indonesia

The 1999-2000 conflict between Muslim and Christian communities in the province of Maluku resulted in more than 5,000 deaths and displaced about a quarter of the population. The communal conflict was fueled by religious antagonism between local militia groups. The local economy was negatively affected as the market for goods and services was divided along religious lines. This also restricted the movement of potential clients.

During the conflict, most formal and semi-formal financial sources were difficult to access, while moneylenders expanded their exploitative practices. Locally established microfinance institutions (MFIs) initially worked with one religious group to develop a steady source of staff workers and a client base. With limited resources, internally displaced persons (IDPs) became micro-entrepreneurs. New MFIs, such as Mercy Corps, established themselves to provide even more affordable sources of finance for entrepreneurs. By the end of the conflict, MFIs were working with a more mixed religious client base.

Impact of microfinance on conflict management

During the conflict, one of the rare opportunities for interaction between Christians and Muslims was a common marketplace, located at the border between the two communities. By receiving microfinance loans, local traders interacted and maximized the interdependence of the two communities, despite the religious differences. In one case, two fishing communities belonging to the same neighborhood, but of conflicting religious backgrounds, began to work together after both received microfinance loans. Market forces, facilitated by microfinance services, surmounted religious divisions.

Applications to Mumbai

Much like in the Indonesian case, formal business such as banks and government offices decreased levels of support after the Mumbai Riots. The lack of sufficient jobs and the associated frustrations led to an unstable population that was easily provoked by religious and militia groups such as the Hindu nationalist Shiv Sena. Much like Indonesia’s urban situation, the riots and ensuing conflict after the destruction of the Babri Mosque segregated the region into religious factions. The Indonesian microfinance case study poses a suitable example for application in Mumbai - perhaps a market can be created at the border of the Muslim and Hindu communities. This market could act as a way for both communities to exchange goods and capitalize on their interdependence. By developing a vibrant and sustainable informal market, Mumbaikers could begin to address the high unemployment rate and curb membership in radical political and militant groups.

Corporate social responsibility and sustainability issues are often thought of as a three-legged stool: the environmental aspect, the social aspect, and the financial aspect, and how they overlap. But how does environmentalism overlap with microfinance? And how would an MFI define being a “green” business?

Microfinance institutions (MFIs) are already considered a sustainable way of investing. MFIs help to alleviate poverty and in the process develop both individual responsibility and communities. Many MFIs focus on economically marginalized populations. Clearly, MFIs have the social and financial aspect of sustainability down.

Let’s take a deeper look at the environmental aspects of MFIs.

Most MFIs are located in developing countries, where environmental impact is already much less than industrialized countries. Most are small organizations, with limited budget to expend on waste, and are service-oriented, with little dependency on natural resources beyond energy and office supplies. Urban MFIs make use of economies of scale in dense population areas. Some rural MFIs might lack basic utilities that consume resources.

However, every organization has a measurable impact on the environment. Think of an average day in an MFI business: employees arrive at the office, they might work to educate users, they check on borrowers, and they report to investors.

To put this in an environmental framework, let’s make a chart with each activity, possible concerns to measure, and possible resolutions:

This chart is just an example to point out that even a socially progressive and financially sound business like a microfinance institution has environmental impacts and concerns. Many MFIs already address these concerns through their standard operating procedures. But every organization can analyze itself with an eye to becoming ecologically sound.

MicroPlace has recognized the unique environmental concerns of MFIs by creating new Green Investments that focus on the most environmentally sustainable organizations and borrowers. Going “green” is a process, not a destination.

MicroPlace’s definition recognizes the process with an inclusive definition to encourage all MFI borrowers to take steps towards becoming a “green business”. The definition is also exclusive enough that investors in Green listings can feel confident those organizations have taken steps to reduce their environmental impact and distinguish themselves from the rest of the pack.

This means we are all taking steps together to truly make the world a better place, financially, socially, and environmentally.

http://www.necel.com/csr/en/report2006.html

We are thrilled to have Riddhi as a guest blogger here at MicroPlace.  After attending eleven schools, living in two countries on two different hemispheres, fulfilling the dream of going to a U2 concert, obtaining two degrees in urban planning, working at two microfinance institutions in India and a loan fund in San Francisco, and reading “Banker to the Poor,” Riddhi now has a cat and works for a labor organization in San Francisco that strives to empower its members by fighting against injustice and exploitation.   As you can see by her blog post below, she has had some great microfinance experiences.

After three years of studying various microfinance case studies, I decided to venture abroad for a more hands-on experience. The first microfinance institution (MFI) I worked for was based in Southern India and focused on an urban lending program. As a rather young MFI, it strove to rapidly expand its presence throughout the metropolitan region. Their expansion goals involved opening two new branches and training approximately twenty more people every month – eventually building a clientele base of approximately 40,000 in just three years. This speed of growth certainly enhanced their fiscal fitness and ability to generate substantial returns on equity, but did they really address the needs of their clients? Read more …

CGAP, a microfinance policy and research center housed by the World Bank, held a microfinance photo competition recently and the results are stunning.  You can see the full results here, but some of my favorites pictures are below:

Read more …

We are cheering as the plane departs…Africa-bound.  A MicroPlace crew has the good fortune to be going to Kenya with Sara Snow.

As a green living expert, Sara’s innovative ideas and tools have been incorporated into households across America to help people green their lives. From nutrition tips, to green giving, Sara has reached millions with the message that being green is as important as ever. Now Sara has her eyes on microfinance – small loans to the world’s working poor put toward their businesses to lift themselves from poverty – as a green and sustainable way of using dollars as a force for good. Read more …

Recently, Vikram Akula spoke at the Sillicon Valley Microfinance Network  here in the Bay Area.  Let me give you five reasons to be excited to see Vikram:

1.  He founded and is Chairperson of SKS, the fastest growing microfinance institution in the world – they add 400,000 new borrowers PER MONTH.  And you thought folks were friending you to their facebook page at a fast pace.

2.  He is funded by Sequoia Capital.  Yes, the VC firm Sequoia.

3.  If you’re still kicking around that old debate about should microfinance go commercial or stay social-justice oriented, Vikram reminds us that this is not the right question to ask.  (Hint:  see the first video below for the right question to be asking).

4.  Time magazine calls him one of the world’s 100 most influential people

5.  He is a darn good speaker.  You know how some folks with impressive resumes aren’t such good speakers?  Well, that’s not Vikram.  He made us laugh.  He inspired us.  He made us think.

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Yesterday, the 44th president of the United States was sworn into office. As work stopped across the country, Americans huddled in crowded rooms with colleagues, friends, and family to watch. The world changed when an African American became the most powerful man in the world when, as President Obama himself noted, 60 years ago his father might not have been served in a restaurant. He inspired us here at MicroPlace when he said:

“In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less. It has not been the path for the faint-hearted – for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things - some celebrated, but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom. Read more …

Microfinance is pretty revolutionary stuff.  Muhammad Yunus, father of microfinance, won the Nobel Peace Prize after all for its power to change people’s lives for the better. 

So when I was out in the field meeting some borrowers, it struck me that what folks were doing seemed, well, a bit less than revolutionary.  In fact, what the microfinance borrowers do with the loans seems downright ordinary.  Take Herminia, who knits baby clothes and sells them in a marketplace in Peru.  She took out some microloans to invest in her knitting business.  A knitting business.  This is the stuff of a Nobel Peace prize?

Hermina, microfinance borrower from Peru

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Blanca Méndez works at Oikocredit’s international office in Amersfoort, a lovely, green city in the heart of the Netherlands. We at MicroPlace know her as we work closely with Oikocredit on a daily basis to source many of the listings that you see on MicroPlace.  Blanca recently went to South America and wrote a series of blog posts on this trip. You can see all her posts here.

Not only do microentrepreneurs stay loyal to a microfinance institutions (MFI) for years: they stay loyal for generations. I did not realize it until I met Juana Mayta Wanka, her son Leonardo Torres and his wife Karina Cori in La Paz, Bolivia. 

It was not easy to find their house. With much effort, the car rode up the very steep hill on the border of La Paz city. “There, that is the bakery,” said the FIE loan officer. While the loan officer rang the doorbell, I looked around for a bakery sign. The view down to the city was amazing! I was trying to find Oikocredit’s office in the jungle of buildings 500 meters below, when the small door opened, and Doña Juana greeted us a lovely smile. She is 63, but she crossed the garage and walked up the stairs to the second floor much quicker than all of us.

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Investors on MicroPlace have enabled 27,000 loans to date.  And it’s not just one Daddy Warbucks making one huge investment.  It’s lots of folks from all backgrounds, all walks of life, believing enough in helping someone to help themselves to take the plunge and make an investment.  Wow.

Muhammad Yunus, when he spoke at MicroPlace’s one year anniversary celebration, said:

“I get a chance to talk to various groups of people, trying to explain.  Sometimes a very difficult crowd, very difficult to get [the message] across, because they can not figure out why this thing should be like that.  Sometimes very friendly crowd.  Sometime bankers, those who are doing the conventional banking and look at me with disbelief.

The reason I am telling all these varieties.  I never met a group like this.  The investors.  For me, this is my first experience.  And I am delighted.  And I want to start with giving ourselves a big applause [insert wild clapping!].  It’s really something, it’s not just investing in eBay’s MicroPlace.  It’s also building a community by itself.  This is a community which believes in a common cause.  And that’s what makes a difference.”  (see the video of this here)

So who is this community?  Well, take a look at some of our investors on our flickr stream and what they have to say…

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