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