According to Nextbillion.net, LeapFrog has established the first ever fund dedicated solely to investing in microinsurance (for more posts on the subject you can go here) throughout the world. Jim Roth, the fund’s founder, said that this $137 million fund will look to invest in the wide spectrum that has become microinsurance.

“Driven both by local experiments, by cooperatives of microfinance institutions, and the involvement of larger, multinational insurance companies, the sector has developed. After the first wave of relatively easy products, like group-based life insurance, insurers are now looking to more complex issues: health, life-stock, or crop- and weather insurance for smallholder farmers.”

LeapFrog’s entry into the microinsurance space will likely be well received by India’s Finance Minister, Pranab Makherjee who has called for insurance agencies to provide more microinsurance products to rural customers. LeapFrog has stated that South Asia, and India in particular, is a major priority for them. In an effort to accelerate the impact that microinsurance can have on the world, the Microinsurance Network held its first meeting earlier this month in Germany. There entrepreneurs, major insurance companies, NGOs, and other organizations gathered to discuss issues including ““client protection, social performance, impact… public-private partnership, climate change and the need for a microinsurance marketplace.” Shortly afterwards, Dirk Reinhard, Vice Chairman of the Munich Re Foundation and member of the Executive Committee of the Microinsurance Network, said the following:

“Microinsurance has a huge potential and will play an increasingly important role in fighting poverty and helping the poor better cope with their risks. We strongly believe that we need to get the key stakeholders involved to overcome the many challenges: The regulation, policy and supervision experts need to provide a legal framework that facilitates the development of sustainable microinsurance products. The insurance industry has the insurance knowledge needed. The microfinance institutions, NGOs, co-operatives and self help groups know the demand and have access to the clients. Last but not least, we need donors to help finance the often very costly development and research necessary to come up with good solutions on how to serve the poor. We strongly believe that if one of these four groups is missing, the development of microinsurance will be much more difficult. The conference is the tool to get the players around the table and discuss the challenges and solutions.” [Source: Microcapital.org]

Hot of the heels of this initial meeting, a number of conferences have been sprouting up to be held in the following months. The MicroInsurance Summit Asia is to be held in the first week of August, and the 6th International Microinsurance Conference will occur in November in the Philippines.

Microinsurance has the potential to be a game changer, as it can help address many of the criticisms often levied on microfinance on its own. Virkam Akula, the founder of SKS Finance stepped away from the day to day operations of SKS so he could devote his energies to microinsurance products in 2008. Likewise other innovators are searching for this missing link in the financial puzzle.

Check out Nextbillion.net’s post about the ACARA Challenge. They have what appears to be 8 great social businesses still in the running. You can see them here. One interesting observation is the number of innovations concerned with clean cooking stoves or fuel.

Nextbillion.net interviewed the Rajesh Joseph, CEO of LabourNet, a social enterprise aimed to help informal urban labour continue to find employment, job security and training. Shital wrote about this venture back in July.

The organization’s holistic approach is one that I believe is crucial for actually building successful entrepreneurs within India. Here is a an excerpt and a diagram of their model:

Urban informal workers – who are only becoming more common in India’s cities as rural-urban migration intensifies – generally struggle to find consistent work, lack any type of insurance, and are unable to save, which precludes the crucial process of wealth accumulation. LabourNet has positioned itself as an orchestrator between labor and clients. Using a computer database and an SMS platform, LabourNet is able to match appropriate laborers to its clients. It offers a simplified and reliable labor solution to clients like a construction company building a supermarket or a family in need of a maid, while at the same time providing job security to the workers. And it’s not just a middleman. It provides social services such as a bank account, health insurance, ongoing training, and even childcare for the many women using LabourNet’s services. Any profits are plowed back into worker welfare and scaling up the organization.

Go here for the whole story.

Unitus Capital, an affiliate of Unitus, is looking for an Associate in the Financial Advisory division. Here is a detailed description from Nextbillion.net:

Position Description: The Associate is a key member of our team, and this position presents an excellent opportunity to work on a variety of groundbreaking transactions, provding exposure to different capital raising assignments and financial advisory services.

You can go here to apply.

The World Resources Institute (WRI) and Nextbillion.net recently published a great interview with C. K. Prahalad on the role of private enterprise in development and poverty alleviation. Prahalad is the author of The Fortune at the Bottom of the Pyramid and one of the pioneers of the idea of BOP (the 4 billion people living on less than $2/day in developing countries).

One of the key points Prahalad makes during the interview is on sustainability in emerging markets. Often the efforts of developing countries to focus on sustainability are seen as detracting from their economic growth. Prahalad encourage a shift in focus from compliance with regulation to opportunities for innovation. He believes that the needs of the BOP will force businesses to understand social and environmental issues and become agents of change.

For example, I expect to see waterless detergents. I expect to see biodegradable packaging. I expect to see construction which is totally green. I also expect to see a lot more renewable energy sources. I think the world is begging for new business models, and I think the pressure is on, and therefore I expect a lot of innovations.

Prahalad also discusses how the idea of the role of private sector in poverty alleviation has become mainstream over the past five years and emphasizes the importance of highlighting success stories in this field (which is also one our of the goals here at TCI),

Success inspires others to follow. Part of it is good analytics, part of it is frameworks, but a lot of it is good models. Even if the model doesn’t apply to my company, the fact someone else has done it gives me the confidence to go try. So what we need is for iconic companies doing things at the bottom of the pyramid to be highly publicized.

The full interview can be seen Youtube and transcript is available here.

D.light Design is looking for a Head of Sales & Marketing:

D.light Energy Pvt. Ltd. is looking to hire an experienced and creative Head of Sales & Marketing (India) to rapidly develop a pan-India distribution channel capable of reaching deep rural, while building a powerful global brand from the ground up. This position is based in Noida, UP India and will report directly to, and work closely with, the Country Head (India) to continuously launch innovative and affordable lighting and power consumer products and marketing strategies.

You can read further at Nextbillion.net.

But what really has us excited is the excitement at the consumer level.  If you have a chance, visit D.light’s website to see hear some of the remarkable stories of their customers and how light has impacted their lives. And also take a look at the letter that D.light just received from a resident in Orissa living in D.light’s first 100% solar village. We’ve got thousands and thousands of villages to go, but a very exciting start.

From a Nextbillion.net article on this disruptive company aiming to provide solar energy to India’s rural poor. This article emphasizes what is one of the most important aspects of a successful business, partcularly startups, which is knowing your customer and focusing on developing your entire business model to what they need and want.

To start, I want to say that my mind has been racing despite sleep deprivation and jet lag since I touched down in Mumbai at 0135 IST this morning. This is the first I have set foot in India since 2005 and thus my first visit since the inception of TC-I, which makes the experience all the more exhilarating. But on to the post …

In the past, I have criticized microfinance’s shortcomings, particularly with regard to its inability to actually stimulate significant job creation. However, I also have recognized that despite its downfalls, microfinance still serves as a useful tool in the arsenal of a poverty alleviation strategy.

Now, microfinance has come under more scrutiny, as opponents argue that this financial product actually hurts the interests of the poor and that it can lead to the romanticization of the bottom of the pyramid, creating dangerous consequences. These new arguments further support my point that microfinance is relative to other approaches not an effective tool in combating poverty.

In an article  in the Financial Times, Milford Bateman criticized microfinance as damaging because it:

• [creates a] shortage of funds for small and medium-sized enterprises (SMEs), which can be damaging because SMEs are a proven route to sustained growth and development
• accelerates proliferation of informal-sector microenterprises (e.g., kiosks, shops, subsistence farms) instead of industrial ventures

[Source: India Development Blog]

These points mirror those I have brought up before.  Nextbillion.net features another article criticising microfinance. In “Romanticizing the Poor,” published by the Stanford Social Innovation Review, author Aneel Karnani argues:

Rather than viewing the poor primarily as consumers, people interested in economic development should approach the poor as producers. The best way to alleviate poverty is to raise the real income of the poor by creating opportunities for steady employment at reasonable wages.

Karnani’s argument reinforced my point that most people are not entrepreneurs and would prefer a job with a stable salary than one in which they acted as their own boss.

I empathize with these arguments. We have seen that research into the actual effects of microfinance is unclear at best, and in a world of limited financial resources, allocating capital to financial products with little tangible return seems wasteful.

Another study conducted by the Brookings Institute leads us to believe that in reality, larger firms are both more productive and pay higher wages to employees than smaller firms. The study also indicates that larger firms are overwhemingly formal in nature, in that they fully are integrated into the legal and tax structures of their environment. But most importantly, this study tells us that the presumed jump from a small, informal firm to a large, formal one does NOT actually occur.

Put simply, the study espouses the idea that providing microcapital to individuals operating in the informal secor will not lead to them growing into real, substantial businesses that will create jobs for others. Instead other entrepreneurs, with higher talent levels, will come in to displace these microentrepreneurs altogether!

By this logic, it appears that investing in microfinance enterprises will likely NOT lead to the creation of companies that will serve as engines of growth and livelihood creation. So why is this finding so critical to our approach to accelerating poverty alleviation? In understanding this shortcoming of microfinance, we also understand that the private sector alone will never be able to successfully provide the tools needed for poverty alleviation.

SMEs require the support and coddling of their governments to succeed. For example, cultural and legal views on things like bankruptcy must be fashioned in a way that favors true entrepreneurship.  Both the Brookings study and SSIR papers recognize and embrace the need for government action in the endeavor to stimulate job growth. The Financial Times’ Bateman sums up this point well, abeit harshly, in his article:

“Economics 101 shows conclusively how critical savings are to development, but only if intermediated into growth- and productivity-enhancing projects. If it all goes into rickshaws, kiosks, 30 chicken farms, traders, and so on, then that country simply will not develop and sustainably reduce poverty.” [emphasis added]

Not long ago, we had written about Envirofit, a company that manufactures and sells clean burining high-efficiency cookstoves to consumers in India.

Nextbillion reports that they have already sold 10,000 stoves and are ramping up production quickly. Of course, its a drop in the ocean, but definitely a great start. Congrats!

PepsiCo Foundation has awarded two grants, totaling $76 million, to sustainable water and sanitation efforts by WaterPartners and Safe Water Network. The PR release describes each program. WaterPartners will use the award to implement their WaterCredit program:

The WaterCredit program in India has two main components: first, to provide traditional grant funding directly to local non-government organizations to install pipes, faucets and storage cellars in impoverished communities, reaching some 60, 000 people. The second component is to establish a loan fund that will empower communities to expand access to safe water for an additional 60, 000 people over the course of the three-year project. This model produces a “multiplier effect” for impact based on a single source of funding and is the first time PepsiCo Foundation has applied micro finance as a strategic vehicle to advance water and sanitation improvements.

The idea of building community-based water supply projects through a combination of grants and loans is new to the water sector. Until now, nearly all water projects facilitated by other organizations have been funded entirely by grants, even when the individuals served by the project have the means to share costs.

Bridging microfinance and water is a topic that NextBillion.net covered earlier this year, so this is a connection that is working well in some regions and with the support of different organizations, such as ACCESS Development Services and Hindustan Unilever Limited. The vision behind this is that communities may not be able to afford methods that purify water and make it safe for drinking, but using microfinance models allows them to collectively take a loan and repay until they eventually purchase the system.

Safe Water Network will focus on developing water systems and raising awareness around the issue:

Working with non-governmental and community organizations and the private sector, SWN will address the critical water needs of nearly a quarter million people by supporting the development and implementation of water systems that will reliably provide neglected populations with safe, affordable water. The methods include rainwater harvesting, village-level water systems and “water kiosks.” Safe Water Network programs also work to mobilize and educate communities to raise awareness and provisions to create and maintain permanent clean water supplies. SWN will receive $3.5 million during a three-year period based on annual progress.