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hello i'm tyler i an assistant professor
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of entrepreneurship here at the wharton
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school today I have with me David Sims
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who's been involved in various leader
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leadership capacities over the past
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thirty years with an organization called
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opportunity international which operates
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in 28 countries using microfinance tools
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to try and address problems associated
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with global poverty so David thank you
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very much for being here with me today
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I'm looking forward to getting some of
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your insight on this very interesting
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space well Tyler thanks for the
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invitation I'm looking forward to our
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conversation and just delighted to be
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here wonderful so maybe we can start off
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with just a basic question for those of
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us who don't know can you see just a
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little bit about what microfinance is
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and how it actually works to try and
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address global poverty sure at its core
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microfinance is about bringing financial
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tools to people that wouldn't otherwise
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have access to them so that's small
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savings small loans small insurance and
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training we like to think about it as a
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ladder if you think about a ladder
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that's helping people move up out of
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poverty frequently it's missing the
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bottom two rungs and microfinance is a
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way in which we can rebuild rungs on the
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ladder to help people that are living on
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a couple of dollars a day move up out of
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poverty that's terrific and can you tell
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me is there anything unique about the
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approach that opportunity International
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takes to this versus some other
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microfinance organizations that are out
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there well I'd start by saying there's a
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lot of great microfinance organizations
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so lots of people doing great work
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across the globe and there's 200 plus
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million people that are being served
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across the globe with microfinance last
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year opportunity helped about 14 million
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people have the ability to transform
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their lives their children's futures and
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their communities we like to think that
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we really are anchored in a couple of
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places we like to go where others don't
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we went to sub-saharan Africa to start
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banks when nobody in the right mind was
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thinking you could run a savings led
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institution in banking we were
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innovating in the micro insurance space
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to provide life insurance for people
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when there was no way in the world you
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could think about how do you do life
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insurance in HIV ravaged
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communities in sub-saharan Africa given
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the economics of the market we've
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started small holder farmers rural
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outreach where the pure business
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economics from what they taught us here
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at Wharton don't make sense if you can't
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really think about why I know there's
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going to be changes in technology that
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are going to allow us to do that so
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we're opportunity really is unique is
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innovating at the base of the pyramid
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listening to the customers and saying
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how do we serve you what are your needs
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and let's figure it out together well
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it's really terrific now one of the
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things that I've read that opportunity
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focus is on is entrepreneurship amongst
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your clientele could you talk a little
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bit about that and how venture creation
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feeds into poverty reduction sure let me
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use I could use either of two examples
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but I guess the one that's sort of
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nearest and dearest to my heart which is
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also one of the the newer innovations if
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you will and the opportunity portfolio
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Tyler is that several years ago we were
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at a global conference in the Dominican
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Republic and the woman that was running
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the program there chief operating
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officer was making loans to women that
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had started private schools it was kind
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of interesting who's making loans -
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these are women that started schools
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because the kids in the Dominican
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Republic didn't have a chance to go to
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government schools if they didn't have a
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birth certificate well long story short
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but we ended up using that idea to go
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create a pilot to save jisse elsewhere
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in the world are there people trying to
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do private schools these are private
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schools where the tuition per term maybe
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ten dollars just to give people a sense
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of you know people starting schools on
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their back porches in the outskirts of
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Kampala and Uganda as an example in in
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Africa well those entrepreneurs end up
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being really good banking clients that
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by giving them loans and training the
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chance for savings they're creating a
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small business a small business that
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helps educate kids hires teachers hires
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people that are preparing food hires
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construction workers to build buildings
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and I could take you to a school in
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Uganda where a woman
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started school on our back porch and
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there are 900 children today in a
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three-story building well that's an
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example of financing an entrepreneur
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that the entrepreneurs doing job
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creation and the job creation and the
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education of children is a key core to
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poverty alleviation as I'm sure you know
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from all of your research
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yes that's wonderful now one of the
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things that you mentioned was you do
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training for entrepreneurs now as
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someone who does training for
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entrepreneurs in a very different
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context this is really interesting today
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right can you talk a little bit about
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what you do pragmatically to support
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entrepreneurs in these countries that
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don't have some of the infrastructure
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and some of the you know the basic
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considerations that you need to start a
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venture you know in North America yeah
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and I can do it in two different places
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if I do where the predominance of our
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training occurs opportunities core
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operating model is called a trust group
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we bring people together 90 plus percent
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women turns out that they're better
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clients they pay back the loans well and
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they take their profits and pour them
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back into food for the family and better
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housing and whatever so most of the
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clients that we serve are women but we
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bring them together in weekly or
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bi-weekly groups and that group meeting
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gives us a chance to actually do some
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kind of business training now these are
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basic business training but it's things
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around customer skills it's things about
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should you loan to your clients are you
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providing credit to your clients or what
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does it cost you to provide credit to
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your clients when you have a loan that
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you've borrowed from opportunities so
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basic training around the value of
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savings the value of customer service
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its core simple business to people that
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would be in in America or certainly at
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Wharton but it's not core to the people
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that may never have had any kind of
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education in their own lives but they've
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had to become entrepreneurs if I gave
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you the other example go back to the
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woman leading the school well she needs
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help in running a small business she
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needs to know okay I'm hiring people I'm
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trying to do things with a staff of 35
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or 40 in
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her case with all of the teachers and
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and support staff supporting that school
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in Uganda so what we're trying to do is
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to bring training to her to help her run
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a small business which is much bigger
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than a typical microfinance business and
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kind of some of the neat stuff we're
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doing right now is saying how do we use
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technology how do we use tablets and
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cell phones which she now has access to
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what kind of training can we bring to
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her what kind of training can we bring
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to her teachers in order to help them be
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better at doing their jobs in the places
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in which they were administering the
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kids so that's fascinating so if I
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understand correctly in these
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third-world contexts you're using
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tablets iPads technologies you know
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associated to the first world to deliver
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entrepreneurial training so is there a
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lot of access to this technology it's
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just something that you you know can use
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the scale up in the third world so it's
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interesting to just see over the last
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decade how much the world has has
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changed in the use of technology so at
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the proprietor level at the school
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proprietor level there's access to this
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kind of technology but even among our
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clients even across India across
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sub-saharan Africa well over two-thirds
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of our clients and these are people
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living on a couple of dollars a day have
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access to a cell phone and it turns out
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if you think about it what's really
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exciting is the pace in which banking
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services are now being rolled out across
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technology you'd know that in Kenya you
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know a greater over a hundred percent of
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the GDP now it's a total transaction
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volume flows through cell phones you
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know Kenya which is at the tip of the
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spear if you will the farthest along but
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Bangladesh the same thing I think brac
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is now perhaps have has the biggest
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programme through its be cash programme
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with technology and they're doing that
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because if you're a poor person living
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in the developing world you have to get
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on a bus you have to spend time you're
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away from your business you're away from
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your family you could be gone for hours
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in order to go visit a bank or go get
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cash or you could have a bank in your
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hand with your cell phone as long as
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there's a cell tower nearby
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so technology in the developing world is
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just rapidly surpassing anything that
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we're even doing in this country with
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the exception that smartphones aren't
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yet there they're too expensive which is
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part of the issue and the other issue
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with smartphones is they chew up battery
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and if you don't have access if you're
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not on the grid we have to solve the
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energy issue to solve the smartphone
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issue sure I'm sure and you get a sense
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that the entrepreneurship training that
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you're doing with these clients makes a
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difference in their businesses we do we
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do because you just do basic repayment
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rates and how are we helping people
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succeed you know our repayment rates
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across the globe or 98 to 99 percent I
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spent five years of my career with a
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large bank in America to be unnamed at
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this point but I can assure you that
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with our credit card portfolio in the
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u.s. we didn't touch anything like 98 to
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99 percent repayment rates some of that
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is because you're helping people
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understand how to use credit properly
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and that takes training it's an
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opportunity you earlier your question
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was what's different about us we have
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never thought it was just about
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providing savings and credit in the
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absence of training because we think
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then you're not equipping the people
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that are uneducated they just haven't
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had the chance to learn how do you
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what's the power of savings why is
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credit useful and how do you get in
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trouble if you get over indebted how do
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you actually keep customers and build a
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business those kinds of core training
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concepts allow them to succeed and we
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want them to move out of poverty and
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without that kind of training we think
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it's less likely that they could succeed
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so from our start 45 years ago we
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believed in the power of training plus
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credit savings insurance as what was
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required and so we've been involved in
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this for the past 45 years you must have
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a very broad sense of how the trends
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have evolved in terms of you know
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microcredit training all of the rest may
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be going right back to the genesis of
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the industry I mean if you're looking
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across that historical scope you know
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what impressions do you have
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about how the field is evolved has
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training evolved with it is this
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something that we still see or is it
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starting to be a situation where the
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commercialization of microfinance is
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leading to it looking more like
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traditional banks and some of this
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training maybe goes along out the door
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with that yeah no that's a that's a
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great question I if I think about the
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industry it's clear to me that the
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products have evolved in the innovation
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in the industry I think has evolved
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faster than the training has because I
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mean I've been around for 32 years not
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the full 45 but I've seen from
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individual loans to group loans to
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savings nobody was doing savings early
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on to insurance to these education and
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agriculture smallholder farmer so we've
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had huge growth in the types of of
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products but we haven't kept the
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evolution to do cutting-edge training as
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much as I think we need to and I think
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some of that is the cost structure of
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delivering training is expensive because
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you're bringing people it's expensive
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for the clients to come together in
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weekly meetings and it's expensive for
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us to send stay eff out there to do it
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so I think that the technology now is
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giving us the mobile technology is
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giving us an opportunity to turbocharge
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training and to allow training to catch
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up and I think for the banks that you
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mentioned which clearly want to do more
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in this space
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there's several billion people on earth
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living on less than $2 a day the future
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markets for our financial big financial
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institutions are still in that level of
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billions of people for them to help
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these people succeed as good customers
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they know they need training we need a
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cost effective way to deliver training
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so that they become good customers and
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move up out of poverty that's just
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terrific so I want to pivot back a
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little bit to another question about
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entrepreneurship as someone who's
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involved with this you know at the
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Wharton School you see a lot of ventures
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you see a lot of ideas good and bad and
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one of the characteristics of these is
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that most fail is this something you see
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with these micro enterprises and if so
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how do you deal with losing your money
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with an entrepreneur well it does I mean
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the things about the power of the model
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the operating model is that because we
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start small we start with the average
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first time loan is around a hundred and
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eighty dollars so it's a small amount of
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money it's put into a group setting
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where people are mutually supporting one
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another they're guaranteeing one another
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so the repayment rates can be supported
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because others in the community make
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sure that the business succeeds but
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where people from the outside may not
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see the power of this model is in the
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developing world Tyler if you were sick
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and you couldn't go to your market stall
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in that day that would mean that you
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don't have any income for that day which
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means that you don't have any income to
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buy food for your family for that day
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now if you weren't in a group you
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wouldn't have somebody that may be able
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to step in and help support your
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business maybe they'll be in the market
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stall next to you and they'll handle
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your business for the day while you're
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sick you're in the same trust group
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because you've mutually guaranteed one
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another they'll also share their tips
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about how they're succeeding and growing
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their business with newer people that
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are part of these trust groups so you
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you minimize the risk early on and then
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the natural entrepreneurs the people
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that really have the ability to grow and
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scale businesses migrate out of a group
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based lending into an individual loan
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and those go up over time so that you're
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you're watching the risk profile as
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people prove that they have a business
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model that succeeds as they get more
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money and as they have more income they
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get larger loans they get to the point
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they're hiring people and growing a
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business
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that's kind of the way you're managing
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the riskiness of microfinance and with
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these lending groups are there any
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considerations that you have when you're
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putting together the group's do you try
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and keep women with women or men with
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men are people from certain plans and
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castes together or is this you know
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these are the people who came and wanted
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a loan and we put them together and and
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that's how it goes it's a great question
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there's a bit of art and science to it
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because 90 plus percent of our clients
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are women they still tend to be women in
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some countries there are a hundred
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percent women in other countries it's
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mixed gender you're trying to build
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group cohesion where people are going to
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work with one another
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but one of the most powerful things I've
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ever seen in my life
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is when we started in Rwanda more than a
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decade ago right now that was post
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genocide some of your viewers may be
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familiar with the Hotel Rwanda which was
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the movie version of the atrocities that
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that were just so devastating to that
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country but as you're there today to see
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the transformative power of people that
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have committed to reconciliation and
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working together it's absolutely
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transformational to you as a person that
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might visit it in our trust groups in
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Rwanda there are people that are working
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together helping one another succeed
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mutually guaranteeing one another's
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loans and they would have been in the
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two opposite tribes back in the day
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really and those people are working
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together so the power of reconciliation
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and putting groups together that art and
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science shows we believe that the part
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of the work that we do which is really
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helping to transform communities is
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building bridges where previously there
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could have been hostility and so when
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you're looking at doing things like
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building communities and addressing
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poverty as the outcomes of your efforts
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this gets into one of the really tricky
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things in any sort of social outreach
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which is how do you assess your impact
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can you give me some insight into what
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opportunity's doing to try and line up
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cause and effect and actually show that
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you're moving the needle on this yeah
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yeah it's you sound like a donor
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throughout history for as long as we've
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been around opportunity has always
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talked about that we have a triple
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bottom lines unlike most people that go
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to Wharton they're used to one bottom
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line we said no we think there's three
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that we care about the first everybody
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would understand there's financial
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performance
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are you sustainable a non-profit world
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your revenues exceed cost if you can
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continue in business and the truth is
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the opportunity model is sustainable so
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if we didn't raise another donor dollar
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the microfinance institutions in the
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field would continue because that
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revenues exceeded cost so they're
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operating businesses and the model of a
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donor dollar that helps them grow more
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rapidly allows them to continue to serve
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so first bottom line is financial
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performance second for us was went
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around scale
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so how many people are we serving and
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for all of 45 years if you said how many
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clients this opportunity serve any given
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point in time we could tell you today
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we're actually serving 14 million people
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back when Kim and I wrote our first
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check we were serving a thousand people
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1983 so that's been some pretty
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phenomenal growth but to your question
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then people would say but what's going
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on in the lives of our clients
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so the third bottom line for us we call
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transformation what are the outcomes
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that we're achieving that our clients
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are achieving in their lives their
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children's futures in theirs communities
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and for most of history I could regale
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you with story after story of fabulous
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life change around the people who have
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opportunity today that didn't before and
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how their kids are in school and they're
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in a better place but I couldn't give
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you metrics but in the last three four
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years and and I was part of the core
00:18:45
team that was really pushing on this
00:18:47
again the power of technology we started
00:18:50
to equip our loan officers with tablets
00:18:52
or cell phones so that when they're
00:18:53
going out to visit clients were actually
00:18:55
collecting client data we're able to
00:18:58
collect does the client have a cement
00:19:00
floor are the kids in school in
00:19:03
particular are the girls in school
00:19:04
because very frequently the girls are
00:19:06
the ones left behind
00:19:08
go fetch water do the things that the
00:19:10
girls can do because it's your not
00:19:13
important in the society is the cultural
00:19:15
thing that we're trying to break that
00:19:16
sense of of not having the girls be
00:19:21
importance and with the use of
00:19:22
technology were then able to track
00:19:25
what's the status of people from a whole
00:19:28
range of social metric dimensions now
00:19:32
your academic colleagues are going to
00:19:34
say can you prove causality and I'll say
00:19:36
I can't prove causality but I can show
00:19:39
over time and we have reports on our
00:19:41
website opportunity org that would show
00:19:44
our we call it social performance
00:19:45
management will show you what percentage
00:19:48
of clients have access to potable water
00:19:50
today that didn't have potable water
00:19:53
what percentage of our clients have kids
00:19:55
in school that didn't have kids in
00:19:57
school previously what's the nutritional
00:20:01
situation do they have toilets huge
00:20:04
chunk of the world where we serve
00:20:05
there's no access to toilets in many of
00:20:09
the countries in the rural regions in
00:20:11
which we serve so we're able to now
00:20:13
start capturing that data and then track
00:20:16
it because our clients stay with us
00:20:18
that client retention rates are
00:20:19
phenomenal across the opportunity
00:20:21
portfolio and as long as Tyler you were
00:20:23
a client that was with us we'd track you
00:20:26
overtime that again can't prove
00:20:28
causality but we have lots and lots of
00:20:31
correlations so you're a client of ours
00:20:32
and you're moving up out of poverty
00:20:34
you're getting above that $2 a day of
00:20:36
income and moving yourself and your
00:20:38
family forward that's really wonderful
00:20:41
stuff and so when you start with your
00:20:44
clients and you start giving them small
00:20:46
loans and giving them on the path to
00:20:48
success then graduate them to larger
00:20:50
loans do you ever get them to the point
00:20:52
where you graduate them into the formal
00:20:53
financial system yeah and and
00:20:55
historically we used to say geez we're
00:20:57
not going to serve them we'd we'd work
00:21:00
up to a certain level and then they go
00:21:01
off to be the the bigger banks the ones
00:21:04
that anybody could name that are working
00:21:06
in Africa and it was funny our clients
00:21:09
would come back to us including this
00:21:10
woman that was at the school I mentioned
00:21:12
earlier and she said wait a minute those
00:21:15
banks wouldn't serve me when I was
00:21:17
starting my business not only would they
00:21:19
not serve me I wouldn't be welcome in
00:21:20
their Lobby because I'm a you know woman
00:21:24
in the rural area and I don't have any
00:21:26
assets so why would I want to go to them
00:21:29
now instead of serving continue to be
00:21:32
served by you so that has forced us to
00:21:35
say we think we need to stay with our
00:21:36
clients for a longer time period now and
00:21:39
some of our clients will be with us for
00:21:41
a very long time and have certainly
00:21:43
multi-thousand dollar loans this
00:21:45
particular woman would be tens of
00:21:47
thousands now that's unusual we don't
00:21:49
have lots of clients up up there at that
00:21:51
end of the spectrum but it has caused us
00:21:54
strategically to shift to serve clients
00:21:56
that are individual loan clients that
00:21:59
have more resources now because they
00:22:02
built successful businesses that we
00:22:04
never would have served back in 20 years
00:22:06
ago and then are you able to use some of
00:22:09
the revenue from those bigger loans to
00:22:10
finance further social outreach or does
00:22:13
this just sort of get rolled into the
00:22:14
bottom line
00:22:15
increases the health of the organization
00:22:17
it really is the the the bigger loans
00:22:19
and the ability to serve clients that
00:22:22
are you know in pure wharton terms more
00:22:25
profitable allows us to make sure that
00:22:28
we can keep reaching down to those
00:22:30
clients that are under $2 a day I mean
00:22:32
our core mission is how do we help to
00:22:35
eradicate extreme poverty that's what
00:22:37
really gets so many of us excited and
00:22:39
the people living on less than $2 a day
00:22:42
are really really hard to serve and
00:22:44
expensive to serve one of one of my
00:22:47
colleagues who ran our African operation
00:22:50
for many many years worked for a big
00:22:52
bank for 20-plus years in his career and
00:22:54
he came to me one day and he said David
00:22:56
you know what you're paying me to do
00:22:58
today and I said no Colin what am I
00:23:01
paying you to do today well in my old
00:23:03
job all of the clients that I had to get
00:23:06
rid of because they weren't profitable
00:23:08
those are the clients want me to go find
00:23:10
and serve so good you got it right so
00:23:16
this finding the clients thing is
00:23:17
interesting so you said that the people
00:23:20
living on two dollars or less a day or
00:23:22
expensive to to lend to are they also
00:23:25
expensive to find yeah yes and no if
00:23:30
you're out in the community if you're
00:23:32
out working in the places that we work
00:23:34
it's not that you can't find people it's
00:23:37
that certainly in the rural areas it's
00:23:40
expensive because you're still sending
00:23:42
staff out into less densely populated
00:23:44
areas so the core microfinance model
00:23:48
that others do and we have done many
00:23:50
urban based settings the pure economics
00:23:54
of the model work really well if you can
00:23:56
find a thousand clients within a hundred
00:23:58
yards of where you're sitting which you
00:24:00
can in India and Bangladesh Indonesia
00:24:02
places in the world that are really
00:24:04
densely populated the economics of the
00:24:07
bottle work better when we start going
00:24:09
to rural outreach in India rural
00:24:11
outreach in Africa and then the
00:24:14
economics become more difficult so it's
00:24:16
not that it's hard to find them but but
00:24:19
finding the number that you need per
00:24:21
hour of Steff time changes so you know
00:24:24
the economic model becomes the challenge
00:24:26
okay so the demands there
00:24:28
you just have to have the boots on the
00:24:30
ground to go serve it yeah yeah you got
00:24:32
it
00:24:32
that's terrific now looking ahead where
00:24:37
do you see microfinance going in general
00:24:39
and opportunity specifically yeah well
00:24:43
and I think we're still sort of among
00:24:46
the leaders in the pack here we've said
00:24:49
and I think the industry understands
00:24:51
that the power of microfinance and the
00:24:54
ability to do that rural outreach the
00:24:56
ability to drive cost down to get
00:24:59
training out through through things is
00:25:01
based on technology so we think that the
00:25:04
future really is around what's the role
00:25:07
of Technology and banking coming
00:25:09
together people may be familiar with the
00:25:12
term thin tech stands for financial
00:25:14
technology and we've agreed to a
00:25:17
partnership that will be part of our
00:25:20
banks in Africa will now be owned by a
00:25:23
fin tech company so opportunities sort
00:25:25
of at the forefront of the strain of
00:25:27
this change because when we looked at
00:25:29
what it was going to take to serve
00:25:31
clients and to make sure that we could
00:25:33
do it with safety and security for their
00:25:35
funds to make sure that we could do the
00:25:37
outreach to do the growth that we needed
00:25:39
to do all the regulatory compliance we
00:25:41
have to meet all the any monterrey anti
00:25:43
money laundering
00:25:45
rules and and terrorists things that all
00:25:48
banks have to do we have to do all those
00:25:51
same things too because we're running
00:25:53
regulated financial institutions so we
00:25:56
think the future around financial
00:25:58
technology bringing that into the
00:26:01
microfinance that marrying it together
00:26:03
finding ways that as the clients move
00:26:06
increasingly to the cell phones
00:26:08
smartphones will start to penetrate all
00:26:12
of that allows the FinTech
00:26:14
partnership to allow us to serve more
00:26:17
clients more cost-effectively and if we
00:26:20
want to reach those two billion people
00:26:22
on earth living on a couple of dollars a
00:26:23
day that's the way we think we can do it
00:26:26
and I think others in the industry also
00:26:28
are spending a lot of time and attention
00:26:30
now saying how do we do this we know we
00:26:33
have to how do we do it all right well I
00:26:36
think that is a perfect note to end on
00:26:39
inspirational and challenge and at the
00:26:41
same time
00:26:42
David thank you so much for taking your
00:26:44
time to be with us here today and
00:26:45
sharing your insight on microfinance and
00:26:47
really the vision for how to address
00:26:49
poverty using these financial tools
00:26:51
thanks very much
00:26:52
Tyler thank you really appreciate it
00:27:11
you
