Archive for the ‘PEOPLE’ Category

Jumping the shark

Sunday, December 12th, 2010

The $64 billion microfinance industry is currently in a state of flux with diametrically opposed business models driving its participants. Off the back of the traditional ‘welfarist’ model of not-for-profit organisations, an ‘institutionalist’ model has emerged that is generating massive profits for big business. Is it just plain wrong to profit from the poor or will innovative business thinking allow microfinance firms to have their cake and eat it too? Dr Bronwen Dalton, citing a forthcoming journal article by Arjun Bisen and herself, suggests it’s time for a reality check.

Microfinance

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When economist and Nobel laureate, Muhammad Yunus, established his first microcredit program in 1976 the objective was to provide a ‘hand-up’ rather than a ‘hand-out’ to the impoverished masses of Bangladesh. His motto was ‘business with a social objective.’ Yunus’s initial microcredit transactions were a series of loans to 42 women in rural Bangladesh with the grand total of US$27, which enabled them to avoid doing business with usurious loan sharks.

Yunus’s microcredit model of issuing small loans at interest rates of 0-20 percent with no collateral requirement was formalised into the Grameen Bank in 1983. The bank has now loaned more than $9.8 billion and operates in over 100 countries. Despite having no collateral requirement or legal recourse against defaults, over 97 percent of loans are repaid in full.

Interestingly, 97 percent of Grameen’s clients are still women. Yunus recognised early on that female empowerment is a successful means to lift whole families out of poverty. Although Grameen expanded its product portfolio from standard loans to credit, insurance, emergency loans and savings products, Yunus’s loan model was the template for microcredit providers around the world until the late 1990s when traditional banks and entrepreneurs entered the industry.

As an increasing number of financial institutions were lured by the massive profit potential of microcredit, a more diverse set of beliefs and ideological perspectives pervaded the industry. The power balance eventually shifted towards large donor coordinating agencies that controlled the funds on which most microcredit agencies depended. Many of the larger entrants into the industry shared an agenda based on neoclassical interpretations of economic development. Microfinance, as it became known, was the perfect instrument for these new players to turn a profit and improve their social standing.

In the US especially, the concept of microfinance fed into a meta-narrative, a bigger story: the ‘American Dream.’ For many entrepreneurs who came from humble beginnings it tapped into a philosophy around the power of the individual, rational choice and the capacity to turn your life around.

There are now over 10,000 Microfinance Institutions (MFIs) globally with an estimated $64 billion in capital. In 2006, just 3,300 were in operation. In the US, 50 percent of aid funding is now allocated to microfinance initiatives. The world’s largest bank, BNP Paribas, has a microfinance division, as do ANZ, NAB and Westpac in Australia.

This inevitable scenario has raised the ire of Professor Yunus, who voiced grave concerns at the United Nations earlier this year. ‘We created microcredit to fight the loan sharks, [not to] encourage new loan sharks,’ he said. ‘Microcredit should be seen as an opportunity to help people get out of poverty in a business way, not as an opportunity to make money out of poor people.’

Some economists have warned that the massive injection of investment funds into the industry will create a bubble that could burst with catastrophic consequences for investors and borrowers alike, should the rate of defaults increase.

With a global average interest rate of 35 percent on microcredit loans, this scenario is not out of the question. While the majority of MFIs manage to make a profit without over-burdening their clients financially, some are no better than the predatory loan sharks that microfinance was designed to subvert, charging 100 percent or more in interest.

One of Mexico’s largest not-for-profit microfinance entities, Compartamos (‘let’s share’ in Spanish) became Compartamos Banco, one of the country’s largest banks, after a 2007 IPO that raised over $450 million. It now charges its 1.2 million borrowers an average annual interest rate of over 80 percent. Compartamos’ exorbitant charge has been blamed for excessive loan rates across all Mexican financial institutions. Fellow MFI, Tee Creemos, averages an incredible 125 percent!

Interest rates on microfinance loans average 35 percent worldwide. Microfinance can fail to deliver on its objectives by other means as well. This is particularly true of large countries such as India where programs don’t always operate in areas where they can benefit the most people. In many areas microfinance initiatives have been creeping up towards the middle classes.

Another problem arising from the rapid growth of microfinance is ‘mission drift’ within the not-for-profit sector. With an increasing amount of resources allocated to microfinance initiatives, aid organisations can forget their original agendas of distributing traditional forms of aid to the poorest of the poor. The movement which broke away from traditional banking and economics in a bid to ‘fix’ the system has come full circle; transforming into an industry that values commercialisation and adheres to conservative economic views.

The arguments for commercialisation are firmly based on conventional economic mechanisms such as markets, individual rational choice, and supply and demand. However, many argue that it was these same economic mechanisms that pushed the poor, particularly the poorest, out of the system in the first place. The same is happening in the microfinance movement: the poorest are once again being excluded and so are the actors that best served them – non-profits, donors, and government.

Edition 30: Networking

Monday, November 29th, 2010

Business21C Weekly is now available through the iTunes Podcast directory. To subscribe directly via iTunes, go to the Advanced menu in iTunes and select Subscribe to Podcast. Then paste in the following URL: http://www.business21c.com.au/podcasts/feed

Business21C Weekly is broadcast on Sydney’s 2SER 107.3 fm radio station at 9:00 am each Monday morning.

What does networking mean to you? A room full of strangers, a feverish exchange of unwanted business cards, the compulsive public recital of your elevator pitch?

Well, things have moved on. And in this edition of Business21C Weekly we’re joined by three women who know: Suzi Dafnis, community director of the Australian Businesswomen’s Network, Dominique Antarakis, writer, editor and small business owner and Jet Swain the vision behind launch of business21c.com.au. (Did we mention it was award-winning?)

Networking has had a bad wrap because we forgot why we were doing it. Social media and a new networking etiquette allow us, says Suzi, to ‘make deep connections with people who know what you are on about’.

How do you avoid pushing yourself – and your business ideas, however brilliant – on to others and learn to attract people with shared interests to come to you?

The key to great networking is the personal touch – be the person you are and you will attract meaningful connections.

Edition 22: India

Saturday, October 2nd, 2010

Business21C Weekly is now available through the iTunes Podcast directory. To subscribe directly via iTunes, go to the Advanced menu in iTunes and select Subscribe to Podcast. Then paste in the following URL: http://www.business21c.com.au/podcasts/feed

Business21C Weekly is broadcast on Sydney’s 2SER 107.3 fm radio station at 9:00 am each Monday morning.

India has been under the spot light and all over our media in the run up to the Commonwealth Games. And if you believe what you read, it’s all ill-fitting curtains and broken bathrooms.

So we flip the coin. What stories does India have about us? We ask New Delhi-based risk management consultant, security analyst and veteran soldier, Rahul K Bhonsle what Indian’s think of when they think of Australia. Is it all cricket, coal, koalas and attacks against Indian students?

Is Australia seen as a regional player, or as an over-willing partner of the United States in international affairs?

And we speak to ex-pat and Queen’s Baton Relay organiser, Jason Dwyer, as he follows the Baton in the closing hours of a 340-day marathon around 70 countries and every Indian State and Territory. Surrounded by armoured vehicles and hundreds of waving school children, Jason describes the thrill as they close in on New Dehli and the opening of the 2010 Commonwealth Games.

Creative Innovation 2010, the wrap

Friday, October 1st, 2010

What kind of man walks onto a stage in a foreign city – where he has few acquaintances and fewer friends – and declares the newly opened public building in which he is standing an architectural mish mash? What kind of a speaker at a creativity conference declares the ‘chucking around of paint around should be confined to nursery schools and universities but the bit in the middle is about learning what needs to be learned’.

The event was Creative Innovation 2010, hosted by leading members of Melbourne’s art and business community, headed by leading Soprano and social entrepreneur, Tania de Jong.

The speaker was Austin Williams, Director of the Future Cities Project, in the UK and author of The enemies of progress, (Societas, Exeter, 2008). For the first hour of deep conversation during which he shared a stage with Edward de Bono and Rufus Black, Rhodes Scholar and Master of Melbourne University’s Ormond College, the audience would have been forgiven for thinking Williams had walked on to the wrong stage at the wrong event.

‘Excuse me, sir, the conflict resolution course meets next door.’

I would venture to argue that Williams was in exactly the right place at exactly the right time, and indeed cleverly placed by the conference organisers.

Why? Well let’s start with the words ‘creativity’ and ‘innovation’. Put the two together, add the name of just about any industry, and you’ve got the title of at least ten conferences in Australia alone, this year – back of the envelope calculation, granted.

We’ve had creative innovation in design, in accounting, in management consulting, in education, in health, we’ve had regional innovation events, skills creativity events, innovation for the young, the old and the young at heart. Business21C can put its hand up for hosting its own creative and innovative event this year, innovatively disguised ‘funky thinking’.

In fact, there’s been so much talk about creativity and innovation since the GFC undermined our belief in the financial system, that quite possibly the least creative thing you can do right now is host an event with either of those words in the title.

But de Jong and her colleagues recklessly put the two words together and staged an creative innovation extravaganza at Melbourne’s newly built Recital Hall, last month. And they pulled it off with style.

CI2010 worked. More than that, in places it was fabulous. One session even got a standing ovation – and that doesn’t happen often when there’s a management consultant on the platform. I have been trying to fathom why. It was not the impressive list of speakers. After all, in 2010 event organisers have to compete with the likes of TED.com who provide brilliant speakers 24 hours a day to a broadband connection near you. It wasn’t the musical interludes that punctuated the proceedings gracefully, either. It was, I believe, how the speakers were put together on stage: the brilliant and the brilliantly bolshie, the creative and the critical. And kept there. Panel sessions were up to two and a half hours long. No whack-up-your-powerpoints,-say-your-piece-and-sneak-off. Speakers spoke, and the audience drilled. Uncompromisingly, sometimes less than coherently, but relentlessly, for three whole days.

During that time, more than 30 speakers covered topics as diverse as pig farming, mental health, responsible design, irresponsible design, education, play, meditation, neuroscience and brand building for cities. And, in some miraculously found moments between all that content, we were entertained and soothed by a variety of artistic pursuits rarely associated with business discussion, from cartooning to piano, singing and painting.

But why are innovation and creativity taking up so much airtime in business discourse?

Either we are determined to become socially and environmentally responsible all of a sudden, or developed economies are waking up to the thought that they have to come up with new ideas to remain globally competitive. (After all, Australia, you can’t keep digging stuff out the ground and flogging it on, forever.)

The two schools of thought on this go something like…

  1. Western economic nations have painted humanity into a tight corner with their focus on growth, consumption, more growth, more consumption. We are running out of just about everything we need to survive as a species: space, water, fuel, food, clean air. This is a big thorny problem, one that some say can only be tackled by new kinds of thinking.
  2. It’s a matter of economic competitiveness. Take a look at statistics on patent registration around the world. Now compare them to those on national economic growth. There is a correlation. China, India and Korea have shown five, three and two and a half fold growth in the number of patents registered per capita of population in recent years. In developed nations, patent registration is slowing. In the UK and in Japan there’s negative growth. It seems, perhaps, new ideas are drivers of economic growth.

Whatever the reason, creativity and innovation are without doubt the new business black. But does the constant picking over of what creates creativity and sparks innovative thinking work? Or is it mid-life crisis navel gazing of mature economies in search of meaning?

To Austin Williams our potential to innovate is massively restricted by risk averse, precautionary parameters about what innovation should look like: sustainable, responsible, socially acceptable, for starters. Creativity, he says is stifled from birth.

But that’s just what he says. Thirty other speakers gave their insights and thoughts on creative thinking and innovative thinking practice over the three days of Creative Innovation 2010. Some agreed with Williams, some didn’t. But it was the diversity of thought and the opportunity to challenge that set CI2010 apart. Without critical thought and the confidence to challenge, can there be true creativity or meaningful innovation?

Short summaries of some of speakers key points are below. Videos will be online shortly and we’ll link to them as soon as they are. Have a browse, and see what you think.

Professor Jonathan West, Australian Innovation Research Centre, The innovation myth

The myth of innovation is that it arises from creativity. Innovation results from a lot of hard work over a long time, testing, creating and commericialising. Innovation is about changing the system into which the innovation plays. The 3 most important innovations of 20th century are: fixing energy into nitrogen, the atomic bomb, and containerisation (the container system for transport). In common they have the creation of a large scale and complex system to support them. For containerisation, it was a matter of reengineering a whole international infrastructure: ships, ports, dockers, trains, trucks and so on, but once achieved, global trade exploded.

We live in a complex world, with complex systems. Innovation is inefficient because it is about system change and we design our systems to be impossible to change.

Andrew MacLeod, CEO, Committee for Melbourne, Melbourne Innovative City

Presented the concept that the branding for the city of Melbourne should be the new paradigm in internatonal aid – to foster private and public sector development for investment, and for Melbourne to become to private sector investment and administration of international aid, what Geneva is to public sector investment and administration of aid.

Edward de Bono, Rethinking the future

Climate change is not the biggest problem facing humanity – the poor quality of our thinking is. And the fact that we don’t understand just how poor it is. Creative thinking has been trained out of us, because it hasn’t been valued. Now we need a Palace of Thinking where new ideas can be looked at and explored. Only by improving our thinking can we improve the ways we deal with some of the big issues facing us.

Michael Smith, CEO, ANZ Bank, Innovation and the rise of Asia – new opportunities, new risks

The rise of Asia offers new opportunity and new risks for business. ANZ Bank is one of fastest growing banks in Asia. Any large business that does not have a strategy that engages in Asia is exposing itself to risk. Successful strategies to compete in the Asian market must be innovative.

What do you need to innovate:

  • Shared mindset
  • Shared logic
  • Shared discipline (how to collaborate and create new knowledge accross organisations, not just recreating existing knowledge.

Claire Penniceard, Pork farmer, Failure, farming and food security

Claire Penniceard bred and raised hardy independent self managing beef cattle, on a zero input enterprise – no supplements no hay, no fertilizers. She bred grand champions but it was not economically or environmentally sustainable. She was the best, but the best was not good enough.

Having explored issues of dietary energy and food security around the world within parameters like environmental sustainability and animal friendliness, she walked off her successful beef farm to go into pig farming. It takes 74 of best beef farms to equal in production what one great pig farm does. Now she produces nine million dollars worth of export quality pig. They are housed and managed to enact all their natural life.

Dr Peter Farrell AM, CEO, ResMed, Innovation and entrepreneurship, the engines of economic growth

Entrepreneurs are often considered to be risk takers. They are not. They are opportunity seekers. Innovation is not creativity but requires it. Innovation occurs when a concept is anointed by the marketplace, when someone writes you a cheque. When we apply a new technology to something we know it’s called productivity, but when we apply it to something new it’s called innovation.

Stefan Cassomenos, Pianist, conductor, composer, From improvisation to composition

Failure is part of the creative process, and Cassomenos believes his entire process of composition depends on failure in some way before creativity is born.

Professor Patrick McGorry, Executive Director, Orygen Youth Health, Australian of the Year, Mental health and mental wealth

Australia’s health is its greatest natural resource, yet mental health is seriously neglected. It effects four to five million Australians and is the greatest killer in Australians under the age of 40.

Yet in terms of mental health care, an apartheid system exists: compare the facilities provided, staff numbers, visitors even flowers delivered to a patient with breast cancer, to those someone hospitalised for a mental health problem receives.

Professor Stephen Heppell, Director, ULTRALAB, Playful learning and why we all need cheering up

Play in learning is joyful, it surprises, challenges and engages. It teaches us to cope with the unexpected. Yet we lose sight of playfulness on our learning journey through life. We have to put play back into the centre of learning if we are going to be flexible thinkers, able to cope with change and with the unexpected.

Professor Peter Shergold, AC, The Centre for Social Impact, Empowering communities to transform democracy

Exciting and innovative stuff happens at the margins often on poorly funded pilot programs, where needs are greatest. The challenge for Australia is to become a hot bed of social innovation – political innovation and community innovation, drawing on a history of such initiatives as bush nursing.

Mark Scott, Managing Director, ABC, Building the digital town square

Fifty people in rural Australia are taking production skills and facilities to the communities, teaching people to put their stories online. If we can collaborate and share our stories we will understand each other more and have a real national conversation recognising the choice and expertise of the community is just as interesting as anything the ABC has to offer.

The experience of the Q&A audience which is growing every week has shown the value of audience led current affairs.

The future is not a place we are going is a place we are making.

Austin Williams, Director, Future Cities Project, Constructing communities, a contradiction in terms?

What is it about communities that politicians are trying to capture and bottle and sell back to us as the elixir of new ways of living? Why is it the community motif which means local and parochial is becoming central to national agenda? Three key elements of a healthy community are: voluntarism, purposefulness and autonomy. Initiatives like the big lunch which funded neighbourhood lunch events in the UK, are corrosive and insular. Is the world around you your neighbourhood or is it a bigger place? Communities are things of flux and change and should transcend the merely local. We are being taught to be good citizens rather than to be educated citizens – but through education comes citizenship.

David Rock, CEO, Results Coaching Systems, The neuroscience of creativity

We have a very small capacity for solving problems in a linear way. Most of the problems we solve at work are too big for our conscious resources so we have to access the unconscious which, relative to the conscious area of the brain is like tapping into the Milky Way.

The neuroscience of insight is the culmination of five years of study on how we can have more insights.

The four faces of insight are:

1. Awareness of an impasse, you need to stop and focus on what is not working.

2. Reflection reflection is required for insight to occur, because insight requires low electrical activity. Insights like the ring of a quiet mobile phone at loud party. Anxiety stops insights because it creates electrical signals which can drowned out the quiet electrical signals of insight.

Reflection is internally focussed. It’s relaxed and low effort.

You only need about 2 seconds of quiet to have the insight

Even a tiny threat can inhibit problem solving and insight.

3. Insight, at the moment of insight, dopamine-like substances are released. Having an insight changes the brain and packs a lot of positive energy.

4. Action, insight brings short term urgency for action. Action increases attention density. Attention density deepens insight.

Michael Rennie, Managing Partner, McKinsey and Co, Necessity is the mother of invention

Working at McKinsey and Co is working with the crack troops of western capitalism. Yet Managing Partner, Michael Rennie talked about bringing love to business – a place where there is more likely to be fear. There are two parts to innovation – the creative idea and and making the idea useful and applied. We are all creative. We don’t allow for reflection at work and most of our insights don’t happen at work.

Business21C was a sponsor of Creative Innovation 2010.

Business21C, Issue 02, Launch, 14 September 2010

Sunday, September 26th, 2010

On September 14, 2010, we launched Business21C, edition 02, and we did it in style. It was an evening of insight and entertainment as five leading thinkers from academia, business and public policy, took to the catwalk to share their stories, holding the audience enthralled throughout.

Then followed an hour of conversation, connection and exchange – the outstanding dynamic of any Business21C event – as guests picked over the stories shared from the catwalk, with the speakers and with each other, enjoying the remarkable harbourside location at the Museum of Contemporary Art, and Business21C hospitality.

We recorded the event, and each of the talks is available below for you to view. Enjoy, share and send us your thoughts.

Dean Roy Green opened proceeding with ‘Working with genius’, the story of how world renown architect Frank Gehry was attracted to the idea of a new building for UTS, one that will house UTS Business. In his words: ‘I like the problem’. But with a Gehry project, getting the architect on board is merely the first step in a long, creative, often unmapped and always shared journey. A Gehry building is an iterative process, informed by what its occupants need , in this case, what UTS Business is striving to become.

Craig Davis, Chief Creative Officer of Publicis Mojo in his day job, took to the catwalk to explain why, at the dawn of a post-advertising era when global brands are more powerful than ever before, consumers are equipped by the new connectivity to make brands accountable for how they do business. With BrandKarma.com, the world’s first brand-centric social media platform, Craig has has created a platform to do just that.

Miriam is Chief Executive Officer of the Centre for Policy Development, the organisation that hosted Pavan Sukhdev’s recent tour of Australia. Pavan Sukhdev is Special Advisor to the United Nation’s Environment Program’s Green Economy Initiative. Miriam tells the story of why she believes Sukhdev’s work is critical to changing way we interact with and account for the use of our natural resources, and why she believed it was so important to bring it to the attention of the Australian community.

Entrepreneur and financier, Martin Rushe, is fascinated by the opportunities that alternative energies present in a world that will inevitably move its dependence away from fossil fuels. At the launch, and in the Business21C magazine, Martin asks what’s viable, what’s plausible and what’s mythical? He also presented an animated analysis of the maths behind carbon capture and storage.

Professor Jane Hall, Head of the Centre for Health Economics Research and Evaluation at UTS Business closed the evening with a look at the economic implications of the shift from last century’s hospital-based health care model to an emerging model of home-based care, more suited to our aging population and patterns of chronic rather than acute diseases. We know what kind of care we want, but do we know how we’re going to pay for it?

Governments on track for gender targets

Friday, September 24th, 2010

Just days before the federal election then Minister for the Status of Women, Tanya Plibersek, announced that a re-elected Gillard government would set a target of having at least 40 per cent women and 40 per cent men on Australian Government boards in five years’ time. Remaining positions would be held by either women or men.

New Minister, Kate Ellis, will oversee the introduction of the target and whether it is legislated in some form or is a more aspirational goal to be adopted variously by each Minister and department. The experience of the States, South Australia in particular, suggests that some form of legislation is required in order to get attention paid to the matter.

What might be more challenging is getting implementation of this target at individual board and committee level, which is the key to ensuring gender equality on the higher paid Government boards that oversee major assets. The top paid boards are the National Broadband Network (two female directors of nine), the Future Fund (one female director of seven) and Australia Post (two female directors of nine).

Take a look at the Women on Boards annual Boardroom Diversity Index for female representation on Federal Government boards and committees.

In NSW the Government has just released a consultation paper on strategies to increase the proportion of women on NSW Government boards and committees. It has asked Women on Boards (among others) for input on options such as setting a 50 per cent target and how this might best be implemented. Again, Women on Boards is stressing the need to get targets implemented at individual board level and the importance of annual reporting against targets. The consultation paper responses are due by 8 October 2010.

At the elected level women are not faring nearly so well. In a recent media release, we reported that the hidden outcome of the 2010 Federal Election was a sharp drop in the number of women in the House of Representatives from 28 per cent to below 25 per cent.

Just 37 of the 150 House of Representatives members are women. Of these 23 are members of the Australian Labor Party, giving them a respectable representation of women at 31.9 per cent. This is in large part due to the work of EMILY’S List, a financial, political and personal support program for progressive Labor Women candidates and Members of Parliament. EMILY’s List Australia has helped elect 139 women to parliaments across Australia.

The Liberal Party and its allies, the National Party and Liberal National Party in Queensland, are doing poorly in relation to gender with just 14 female members or less than 20 per cent. There are progressive women in the Liberal Party and a women’s committee but no formal structure or process for ensuring endorsement of female candidates in safe seats.

The numbers in the Senate are more heartening with 30 of the 76 Senators (39.5%) being female (as of 1 July 2011). These numbers are helped by the Australian Greens, who have six female Senators (67%) and the Australian Labor Party at 45%. Again, the Liberals are falling behind.

There are two key reasons for the fall in the number of women:

  • Nine of the 20 sitting members who did not seek re-election were women.
  • The Liberal National Party (LNP) of Queensland that won back the most seats from Labor has just three female members out of 21 (fewer than 10 per cent).

We have had feedback from our media release that the reason for the low numbers of female MPs is the fact that women don’t stand for pre-selection (they don’t want the job) or they don’t get the nod in a merit based selection process.

I suspect the fact that few women stand for pre-selection has more to do with the culture of political parties than it does with a lack of interest in politics on behalf of women. Many men do not realise how difficult it can be for women to break into – and then feel comfortable in – a club of men whose interactions and by-plays have little resonance with their norms and behaviours.

The merit argument is also trotted out to support the status quo – that is, if a man gets the job he must have been the best candidate on offer. In politics and government – as in all walks of life including business – merit is an arbitrary concept that means different things at different times. Fox example, if you are standing for pre-selection for the WA Liberals, there is merit in coming from WA, being a member of the Liberal Party and knowing the preselectors.

There is also merit in being a qualified, experienced professional woman in Australia in 2010, as business and politics need more of this group in leadership roles. It is time that our political parties took responsibility on this matter and actively encouraged and supported women to stand for pre-selection in safe winnable seats.

For all the statistics on the new look Federal Parliament go to the Boardroom Diversity Index.