The entry of banks such as Citigroup or Spanish giant BBVA into the microfinance arena has undoubtedly wrought some positive changes. Competition has spurred more industry development, driven down interest rates, and expanded the offerings of microfinance institutions (MFIs) to include new products, such as savings accounts, mortgages, and insurance.

However, competition brought on by big-name players means that existing MFIs must adapt to the changing tide or face a losing battle against the deep-pocketed titans. For one thing, many institutions are surviving by taking cash in exchange for equity – a double-edged sword because now they are able to grow their business but are also expected to satisfy shareholders. The example of Mexico’s Banco Compartamos is given; the bank had a successful IPO last year but has been heavily criticized for its high interest rates.

Also equity-financed is SKS Microfinance of India, in which venture capital firm Sequoia Capital made a USD 11.5 million investment last April. SKS also sold USD 44 million of its loans to Citigroup last May. Its plan is to reach four million new customers, but “unless we have capital markets interested in microfinance, there’s no way we could get to that many borrowers,” said Vikram Akula, CEO and founder of SKS.

Commercial funding has, perhaps inadvertently, made it more difficult for the poorest of the poor to access loans. Al Amana, Morocco’s largest outfit, has seen a tripling in the average value of its loan sizes since it commercialized because smaller loans are relatively more expensive to service. As a result, the proportion of borrowers who are women – who used to be the principal target market for microfinance – has declined steadily, as previously reported by MicroCapital.

Another concern is that major financiers have tended to lavish their attentions on Latin America and Eastern Europe, to the neglect of the very poor in Africa and Asia. According to the Consultative Group to Assist the Poor (CGAP), 75 percent of cross-border funding has gone to the former two regions, which are already the most developed microfinance markets in the world.

One potentially troublesome development, according to the article, is the emergence of consumer loan products for the poor – if used irresponsibly they could lead to debt accumulation, and many countries lack consumer protection laws that would stave off predatory lending.

“We have two objectives,” said Rafael Llosa, founder of commercialized Peruvian MFI Mibanco, which has had to start offering consumer loans in order to remain competitive. “One of them is to have a social impact, but we also look to be profitable. If we decide to only have a social impact, we won’t have resources to grow.”

By Stephen Son

Additional Resources:

TIME: “The Big Trouble in Small Loans”

MicroCapital.org article, April 7, 2008: “New York Times Reports on Controversial Microfinance Giant Banco Compartamos of Mexico”

MicroCapital.org article, April 2, 2007: “Sequoia Capital Leads USD 11.5mm Investment in SKS Microfinance based in India”

MicroCapital.org article, May 16, 2007: “SKS Microfinance, India, and Citibank Announce USD 44mm Financing Programme with Support from Grameen Foundation”

MicroCapital.org article, April 22, 2008: “MICROFINANCE PAPER WRAP-UP: Stemming the Tide of Mission Drift: Microfinance and the Double Bottom Line, by Christina Frank”

The Peruvian MFI’s parent organization, Pro Mujer International, and the Grameen Foundation’s Growth Guarantees Program are evenly splitting a USD 400,000 guarantee behind the loan, which Pro Mujer Peru will use for on-lending to women in rural areas of the country. It amounts to the highest leverage yet on financing provided by a Peruvian commercial bank to an MFI.

Last month, Pro Mujer International was the recipient of a USD 650,000 investment by the Calvert Foundation and USD 150,000 by MicroCredit Enterprises, as reported by MicroCapital. In April, Pro Mujer Peru began offering microinsurance to 43,000 borrowers.

Banco de Crédito del Perú has its origins as the Banco Italiano, founded in 1889 and renamed in 1942. It is currently a publicly-traded commercial bank with 237 offices throughout the country and more than 12,000 employees. As of March 2008 (Google Finance), it had assets of PEN 46.8 billion (USD 17.3 billion) and a debt-equity ratio of 1,422.10 percent. Its return on average assets was 2.13 percent. It has a BBB- credit rating from both Standard & Poor’s and Fitch Ratings.

Pro Mujer Peru was established in 1999 as the third Latin American affiliate of Pro Mujer International, a New York-based non-profit that seeks to improve the lives of women and their families in Latin America. Pro Mujer Peru began its credit operations with a grant from the U.S. Agency for International Development (USAID) in 2000 and mainly serves southern Peru from its base in the city of Puno. As of year-end 2007, it had a gross loan portfolio of USD 8.5 million out of USD 9.4 million in total assets. Its debt-equity ratio was 91.61 percent and it had more than 39,000 active borrowers. As of June 2006, Pro Mujer Peru has an alpha-minus credit rating from the MicroRate agency.

By Stephen Son

Additional Resources:

Oanda: FX Converter

Grameen Foundation: “GF and Pro Mujer International Secure More Than $1.2 Million for Pro Mujer Peru”

MicroCapital.org article, May 16, 2008: “Calvert Foundation Makes Microfinance Investments Totaling $1.6m in Banco Solidario, Unitus and Pro Mujer”

MicroCapital.org article, May 26, 2008: “MicroCredit Enterprises Invests $150k in Pro Mujer”

MicroCapital.org article, April 11, 2008: “Microfinance Institution Pro Mujer Peru Offers Microinsurance to 43,000 Borrowers Via ING’s and Grupo Wiese’s InVita”

Banco de Crédito del Perú: Historia; Clasificaciones Internacionales (Spanish)

Google Finance: LIN:CREDITC1

MIX Market: Profile for Pro Mujer Peru

In 1993, the Equity Building Society was a mess. Technically insolvent, having poor board oversight and incapable management, the predecessor to Equity Bank of Kenya saw a 54 percent non-performing loan portfolio, KES 33 million (USD 500,000) in accumulated losses, and liquidity of 5.8 percent. Today, it is the highest capitalized bank in Kenya with USD 250 million of equity, two million customers, and plans for expansion. This paper finds seven lessons to be learned from the remarkable reversal of fortunes for Equity Bank.

The overall theme is that the bank has been able to successfully manage an environment of continuous change. With the help of outside consultants, it was able to implement new or refined products and procedures, new credit strategies, and a “strategic alignment approach,” in which it developed a mission, values, and vision along with a specific plan in 2004. Within a year, the organization ensured that all employees were aware of and bought into this plan. The bank also re-tooled its Board of Directors in 2000 and invested heavily in new IT teams and systems.

The first lesson is a commitment to customer focus. Equity employed strategies that included marketplace marketing, social and community activities, product re-pricing, longer hours, manager-customer interactions, customer surveys, and the implementation of a new IT system that drastically cut customer service times. All this was a survival-instinct approach to establish grass-roots, relationship-based banking.

Lesson two is the bank’s ability to market itself via word of mouth and focused public relations. Instead of spending large sums on expensive marketing tools, it has relied on the “buzz” generated from customer word of mouth. Also, managers and staff have gotten involved in community meetings, press releases have been used to build the company’s image on a national level, and senior management have attended key events, such as the African Business Leaders’ Forum – all of which have aimed to cement the Equity Bank brand.

The third lesson has to do with instilling a corporate culture. Since 1993, there has been an emphasis on a professional demeanor and dress code on the part of employees, and a set of core values for the bank has been defined.

The next lesson is the optimization of corporate governance practices, one of Equity Bank’s major weaknesses cited by the Central Bank of Kenya in 1993. In 2000, four new Directors were introduced to the Board, and a year-long process through 2005 developed a Code of Corporate Practices and Conduct for each member to abide by. Each Director is also subject to a bi-annual performance assessment.

Lesson five is Equity’s management of donor inputs. The bank has been the recipient of sizable grants from international organizations; in 1997, it received KES 70 million (USD 900,000) from the European Union-funded MESP program for on-lending, staff training, and study tours, and funding received in 2000 from UNDP-MicroStart was used to strengthen the bank’s operations. A steering committee was created to manage these inputs, and the relationships established between Equity and donors have consequently helped boost the bank’s market reputation.

The sixth lesson is Equity’s commitment to remaining broad-based. This involves the maintenance of mass market delivery channels; Equity has been expanding its national presence by means of branches and ATMs, with more ATMs installed since 2006 than any other Kenyan bank. Also, so-called “mobile branches” have been deployed to serve rural areas.

The final lesson in Equity’s transformation is its human resource management. Often times the bank has had to look to the outside for its human resource needs, and it has had to be deft about creating new positions or reassigning longer-serving staff to make room for new hires. Those new hires who struggle with adjusting to Equity Bank’s culture, meanwhile, are given adequate time to do so and, if they cannot, are encouraged to leave the bank.

By Stephen Son

Managed by I&P Management (Indian Ocean) Ltd., the fund will provide its clients equity financing and advisory services that include corporate governance and environmental management practices, mostly in its home countries of Madagascar and Mauritius. Investments in other nearby Indian Ocean countries, such as Comoros and the Seychelles, will also be considered.

MicroCapital has reported several notable transactions involving the IFC this year, including a USD 45 million deal last week with Britain’s Standard Chartered Bank, a USD 33 million investment in Centro Financiero BHD of the Dominican Republic in April, and, in February, a partnership with Citi to support the expansion of micro-lending in Bangladesh, a USD 20 million loan to MFI Banco Ficohsa of Honduras, and a USD 50 million investment in consumer finance company Micro Provident of Botswana.

Established in 1956, the IFC is a multilateral institution within the World Bank Group based in Washington, DC. It seeks to promote sustainable private sector investment in emerging economies worldwide. It has a cumulative committed portfolio of USD 790 million worldwide, making it one of the top three global investors in microfinance by volume. As calculated from its 2007 financial statements, the IFC’s return on assets was 6.46 percent, and its debt-equity ratio was 186.98 percent.

The I&P Capital II fund was established in July 2007 and has raised EUR 37.5 million (USD 58.4 million) for investment in ten to fifteen companies in a variety of sectors, including tourism, financial services, information technology and telecommunications, agribusiness, and infrastructure. It is not clear whether the fund has any other backers. I&P Capital II is the successor to I&P Capital Indian Ocean, a EUR 10 million (USD 15.6 million) fund established in 2003. This fund has been fully invested in seven companies and has been able to exit three of them.

By Stephen Son

Additional Resources:

IFC: “IFC Invests in Private Equity Fund to Support Small and Medium Businesses in Africa’s Indian Ocean Region “; 2007 Annual Report; I&P Capital (II) Ltd

MicroCapital.org article, May 19, 2008: “International Finance Corporation (IFC), a Member of the World Bank Group, to Invest $45m in Britain’s Standard Chartered Bank to Expand Microfinance in Africa and Asia”

MicroCapital.org article, April 24, 2008: “International Finance Corporation (IFC) to Invest $33m in Dominican Republic’s Centro Financiero BHD, a Provider of Microfinance and Other Financial Services”

MicroCapital.org article, February 25, 2008: “Citi teams with IFC to Support Expansion of BRAC Microlending in Bangladesh with USD 22M, Part of USD 55M Financing Deal”

MicroCapital.org article, February 22, 2008: “International Finance Corporation (IFC), a Member of the World Bank Group, to Lend $20m in Debt and Invest $400k in Advisory Services to Banco Ficohsa of Honduras”

MicroCapital.org article, February 5, 2008: “International Finance Corporation (IFC) Invests $50m in Consumer Finance Company Micro Provident Botswana (Letshego)”

The source of the funds and the nature of partners being sought are not immediately clear from the statements by Cerge Remonde.

Remonde, in a discussion with local organization Citizens Movement for Good Government in the Visayas region, added that the administration is committed to providing three million entrepreneurs with sufficient credit to create six to ten million jobs in the Philippines by 2010.

To facilitate microfinance in the country, President Macapagal-Arroyo has already been able to encourage a decrease in microfinance interest rates from 12 to 10 percent, according to the provisions of the General Banking Act of 2000. MicroCapital reported in February that the government was directing microfinance institutions to look into lowering interest rates for their borrowers.

Remonde said that since 2004, the government has disbursed PHP 232.8 billion (USD 5.5 billion) to 3.8 million microfinance clients via local microfinance institutions and organizations, resulting in 2.2 million new jobs. Repayment rates have been 98 percent, with 92 percent of borrowers being women.

MicroCapital’s recent coverage of microfinance in the Philippines includes a study by the Mindanao Microfinance Council on the benefits of microfinance to its beneficiaries in April, a USD 1 million grant to the Philippine government for microinsurance by the Japan Fund for Poverty Reduction in March, a microfinance housing product rolled out by the Philippine central bank in March, and a USD 34 million line of credit received by Producers Rural Banking Corporation for microfinance activities in February.

By Stephen Son

Additional Resources:

Oanda: FX Converter

Philippine Daily Inquirer: “Gov’t has P80B for microfinancing”

MicroCapital.org article, February 14, 2008: “Philippine Government Advocates Lowering Interest Rates for Microenterprises”

MicroCapital.org article, April 28, 2008: “Mindanao Microfinance Council Looks to Conduct Study on Microfinance Penetration and Benefits in the Region”

MicroCapital.org article, March 25, 2008: “Asian Development Bank and Japan Fund for Poverty Reduction Provide USD 1 Million Grant to the Philippines for Microinsurance”

MicroCapital.org article, March 4, 2008: “Bangko Sentral ng Pilipinas (BSP), in Agreement with Housing and Urban Development Coordinating Council (HUDCC), Rolls Out New Housing Mircofinance Product for the Economically Active Poor”

MicroCapital.org article, February 28, 2008: “Producers Rural Banking Corporation (PRBC) Receives $34m Credit Line for Microfinance Activities in the Philippines”

Finethic Microfinance is a SICAR, a French abbreviation for an investment company for risk capital, that raises funds from institutional investors for lending to MFIs worldwide. Established in July 2006, it is managed by Swiss institutional fund managed Fundo SA and advised by Symbiotics SA, a consulting firm for microfinance investment. By November 2006, it had raised nearly USD 10 million in capital. Finethic does not maintain any financial information on its Web site and does not report to the MIX Market, the microfinance information clearinghouse.

FINCA (Foundation for International Community Assistance) is an international non-profit founded in 1984 and based in Washington, DC. It pioneered the “village banking” concept that extends microcredit loans to poor entrepreneurs, and it has a network of affiliated institutions in 21 countries around the world.

MicroCapital has recently published a profile of and interview with FINCA founder John Hatch, as well as a profile on the organization itself. Other major recent transactions have included a USD 3 million loan to FINCA Kyrgyzstan from the responsAbility Global Microfinance Fund in March, a USD 4.7 million loan to FINCA Kosovo from the European Fund for Southeast Europe last August, and USD 3 million in lending from Microfinance Loan Obligations S.A. to FINCA Azerbaijan in April 2007. Also, FINCA was the beneficiary of a special album that was sold on Apple Inc.’s online iTunes Music Store late last year.

FINCA Armenia was established in 1999. As of year-end 2007, it had total assets of USD 21.6 million, with a gross loan portfolio of USD 21.6 million. Its return on assets was -0.93 percent and it had a debt-equity ratio of 174.37 percent. Active borrowers numbered more than 18,000. FINCA Armenia does not report a third-party evaluation of operations to the MIX Market.

FINCA Kyrgyzstan was founded in 1995. It has USD 35.1 million of loans outstanding and more than 67,000 clients. It does not report a third-party evaluation of operations to the MIX Market.

By Stephen Son

Additional Resources:

CGAP: List of Recent Transactions, Mar-Apr 2008

Finethic: News

Fundo: Factsheet

MicroCapital.org article, March 6, 2008: “WHO’S WHO IN MICROFINANCE: John Hatch, Foundation for International Community Assistance (FINCA)”

MicroCapital.org article, May 12, 2008: “PIONEERS IN MICROFINANCE: Village Banking Innovator Dr. John Hatch of FINCA (Foundation for International Community Assistance)”

MicroCapital.org article, March 26, 2008: “WHO’S WHO IN MICROFINANCE: The Foundation for International Community Assistance (FINCA)”

MicroCapital.org article, March 18, 2008: “Luxembourg-based responsAbility Global Microfinance Fund Loans $3m to FINCA Kyrgyzstan”

MicroCapital.org article, August 22, 2007: “European Fund for Southeast Europe (EFSE) Provides USD 4.7 Million Loan to FINCA Kosovo”

MicroCapital.org article, April 23, 2007: “Switzerland-based Symbiotics Intermediates a USD 3 mn Loan from Microfinance Loan Obligations to Foundation for International Community Assistance (FINCA) Azerbaijan”

MicroCapital.org article, November 5, 2007: “iTunes, Independent Online Distribution Alliance (IODA) and Natalie Portman Team Up for ‘Big Change: Songs for FINCA’ Compilation, Proceeds to Benefit International Microfinance Organization FINCA”

MIX Market: Profile for FINCA Armenia

FINCA: Kyrgyzstan

The credit-linked notes to be held by the IFC will be backed by loans made to MFIs in sub-Saharan Africa and South Asia by Standard Chartered. The notes are officially issued by Microfinance Institutional Loans for Asia and Africa (MILAA), a special-purpose vehicle set up by the bank. The transaction is the first of its kind for the microfinance sector and is the latest piece of Standard Chartered’s USD 500 million microfinance facility, established in 2006 as a part of the Clinton Global Initiative.

“We are building an asset class for investors who are looking for more microfinance opportunities in emerging markets,” said Lars Thunell, IFC executive vice president and chief executive.

MicroCapital has reported several notable transactions involving the IFC this year, including a USD 33 million investment in Centro Financiero BHD of the Dominican Republic in April, and, in February, a partnership with Citi to support the expansion of micro-lending in Bangladesh, a USD 20 million loan to MFI Banco Ficohsa of Honduras, and a USD 50 million investment in consumer finance company Micro Provident of Botswana.

Established in 1956, the IFC is a multilateral institution within the World Bank Group based in Washington, DC. It seeks to promote sustainable private sector investment in emerging economies worldwide. It has a cumulative committed portfolio of USD 790 million worldwide, making it one of the top three global investors in microfinance by volume. As calculated from its 2007 financial statements, the IFC’s return on assets was 6.46 percent, and its debt-equity ratio was 186.98 percent.

Standard Chartered has also received attention for its microfinance activities this year, including its involvement in a currency swap on behalf of MFI Faulu of Kenya in April and a USD 2.8 million loan to the China Foundation for Poverty Alleviation (CFPA) in January.

Though based in London, Standard Chartered Bank focuses its business in Asia, Africa, and the Middle East. The result of a 1969 merger between two banks that originated in the British colonial era, it now has annual revenue of USD 11.1 billion. The bank’s support of microfinance includes 48 MFIs in 15 countries in Africa and Asia, and its outstanding portfolio totals USD 180 million. As of year-end 2007 (financial statements), Standard Chartered’s return on assets was 0.91 percent and its debt-equity ratio was 93.48 percent.

By Stephen Son

Additional Resources:

Reuters: “IFC and StanChart deal seeks to boost microfinancing”

IFC: “IFC and Standard Chartered Bank Collaborate on the Launch of Innovative Credit-Linked Notes to Improve Financing for Microfinance Sector”; 2007 Annual Report

MicroCapital.org article, April 24, 2008: “International Finance Corporation (IFC) to Invest $33m in Dominican Republic’s Centro Financiero BHD, a Provider of Microfinance and Other Financial Services”

MicroCapital.org article, February 25, 2008: “Citi teams with IFC to Support Expansion of BRAC Microlending in Bangladesh with USD 22M, Part of USD 55M Financing Deal”

MicroCapital.org article, February 22, 2008: “International Finance Corporation (IFC), a Member of the World Bank Group, to Lend $20m in Debt and Invest $400k in Advisory Services to Banco Ficohsa of Honduras”

MicroCapital.org article, February 5, 2008: “International Finance Corporation (IFC) Invests $50m in Consumer Finance Company Micro Provident Botswana (Letshego)”

MIX Market: Profile for IFC

MicroCapital.org article, April 29, 2008: “Microfinance Institution Faulu Kenya Unveils $7.8m Plan to Become Bank, Expand”

MicroCapital.org article, January 28, 2008: “Standard Chartered of England, and China Foundation for Poverty Alleviation (CFPA) of China, Sign Loan and Co—Operation Agreements to Provide Microfinance Loan Facilities in China”

Standard Chartered Bank: Annual Report 2007

The FUNDEA and FADES loans were issued under the auspices of Incofin’s Rural Impulse Fund, which requires borrowing institutions to conduct some of their business in rural areas. The fund was established as a SICAV (a European collective investment scheme) in 2007 and had USD 38 million in assets as of last September.

Incofin was founded in 1992 as a limited liability co-operative company with social objectives, investing primarily in sustainable MFIs. It has 19 active investments in Latin America, Africa, Eastern Europe, and Central Asia. As of year-end 2006, it had assets of USD 10.6 million, of which USD 10.2 million was allocated to microfinance.

FUNDEA (Fundación para el Desarrollo Empresarial y Agrícola) is a non-governmental organization founded in 1997 in Guatemala that makes micro-loans to small and medium enterprises and the agricultural sector. As of year-end 2006, it had USD 10.0 million in assets, with a gross loan portfolio of USD 8.3 million. Its return on assets was 10.53 percent and its debt-equity ratio was 30.91 percent. Active borrowers numbered more than 12,000. FUNDEA does not report a third-party evaluation of its operations to the MIX Market, the microfinance information clearinghouse.

FADES (Fundación para Alternativas de Desarrollo) was founded in 1986 in Bolivia and provides micro-loans to enterprises that have no access to financial services. As of year-end 2006, its assets totaled USD 25.3 million, of which USD 20.0 million constituted its gross loan portfolio. Its return on assets was 2.31 percent and its debt-equity ratio was 302.10 percent. FADES had more than 20,000 active borrowers and was given a B rating by the Planet Rating agency in July 2006.

Sinapi Aba Trust is a non-governmental organization established in 1994 and registered in Ghana as a company limited by guarantee to support of the poor through microfinance and business training. It is a member of the Opportunity International Network, a worldwide Christian organization dedicated to development through microfinance. As of 2006 (performance chart), its loan book was worth USD 19.2 million (GHC 169.5 billion) and clients numbered more than 51,000. Sinapi Aba does not report a third-party evaluation of its operations to the MIX Market.

By Stephen Son

Additional Resources:

CGAP: List of Recent Transactions, Mar-Apr 2008

MIX Market: Profile for Rural Impulse Fund; Profile for Incofin; Profile for FUNDEA; Profile for FADES

Oanda: FX Converter

Sinapi Aba Trust: Achievements

The fund is led by the same team that was behind its predecessor, the Unitus Equity Fund I (UEF I). However, it will expand the focus of UEF I by investing in companies that “offer products and services that enable the world’s poor to create opportunities for themselves and their communities,” according to a statement.

“Our co-investment in the Unitus Equity Fund II reflects Legatum’s confidence in its management team, who have a proven track record of success investing in MFIs around the globe,” said Philip Vassiliou, managing director of Legatum.

Legatum and Omidyar will each be contributing USD 20 million to the investment. The announcement comes on the heels of Omidyar’s USD 9 million grant to Unitus, UEF II’s affiliated non-profit, in April.

Last week, MicroCapital reported on a new documentary released by Legatum and a number of partners about the Pioneers of Prosperity Africa competition, which awarded USD 350,000 in prizes.

The Legatum Group, founded in 2006 in Dubai, United Arab Emirates, is primarily a commercial investment firm that is also involved in advancing sustainable development. Its Web site does not maintain financial information about the organization.

Based in California, the Omidyar Network comprises a 501(c)(3) non-profit and a limited liability company (LLC) – making grants through the non-profit entity and investments in for-profits through the LLC. It grants to and invests in ideas and organizations that are expected to generate both financial value and social returns, including microfinance, scientific innovation, participatory media, and information networks. As reported in its 2006 tax return, the organization had USD 284.2 million in assets.

By Stephen Son

Additional Resources:

PR Newswire: “Legatum and Omidyar Network Invest USD 40 Million as Co-Anchors of Unitus”

MicroCapital.org article, April 29, 2008: “Omidyar Network Granting $9m to Microfinance Non-Profit Unitus”

MicroCapital.org article, May 13, 2008: “Documentary on Legatum Pioneers of Prosperity Africa Prize Released, Involves $350k Award for East African Entrepreneurship Sponsored by Legatum and John Templeton Foundation”

Entitled “Unlocking Africa,” the hour-long documentary follows the competition’s finalists – eleven entrepreneurs from Kenya, Rwanda, and Uganda plucked from an applicant pool of 453 – as they navigate their way through the finale round, which occurred last November. Each one makes a presentation about his or her business to a panel of judges from the sponsoring organizations, who then duly grill the subject on various aspects of the business – cash flow, pricing, market size, competitive environment, and so on. The jury deliberates, and in the end the grand-prize winner and five other winners are announced at a ceremony attended by the president of Rwanda himself, Paul Kagame.

The grand prize recipient turns out to be AAA Growers of Kenya, a company that grows, processes, and packs vegetables for export to Europe. It receives a USD 100,000 prize, and the other five winners each take home USD 50,000.

As the documentary narrates the turns of the competition, it is interspersed with snapshots of each of the finalist companies. Ranging from a banana wine production facility to an interactive media firm to an international outsourcing call center, the businesses all seem to share some common traits: they are relatively young (none were founded before 1991), and they are imbued with their founders’ ideals of socially responsible enterprise. Each of these entrepreneurs is seeking a sustainable model that can simultaneously generate profits and give back to the community, but the larger subtext is that they want to see their homelands break free of the cycle of poverty.

The sentiment is drawn out in no uncertain terms by President Kagame: “It is becoming increasingly clear that entrepreneurship is the most sure way of development,” he says, “because entrepreneurship unlocks people’s minds and allows innovation to take place…. I think this is simply the backbone of everything.”

This thought is precisely the driving theme of the competition, and the documentary’s interviews with the judging panel serve as confirmation. For instance, Dr. Charles Harper, Jr., vice president of the John Templeton Foundation, speaks to a belief that foreign aid in Africa has and continues to foster a culture of dependency that does nothing to discourage poverty – whereas budding entrepreneurship on the continent is heralding the long-awaited promise of economic development.

The Legatum Group, founded in 2006 in Dubai, United Arab Emirates, is primarily a commercial investment firm that is also involved in advancing sustainable development.  Its Web site does not maintain financial information about the organization.

The John Templeton Foundation was established by influential stock investor Sir John Templeton in 1987 and has an endowment of USD 1.1 billion.  It has committed USD 249 million in grants since inception and paid out USD 44 million in 2005 alone.  It funds research in numerous different areas, including natural and human sciences, philosophy and theology, character development, freedom and free enterprise, gifted education, and world religions.

The OTF Group was founded as the Country Competitiveness practice within the Monitor Company, a consulting firm, in 1991 before it was spun off in 2000.  It leverages proprietary technologies to help show clients how to be competitive or foster competitiveness in emerging economies.  Financial information about the group is not available on its Web site.

The S.E.VEN Fund (Social Equity Venture Fund) was initially funded by a seed grant from the John Templeton Foundation and was co-founded by Michael Fairbanks, the founder of the OTF Group.  It also receives funding from Legatum and the Inter-American Development Bank.  As a non-profit, it provides monetary, organizational and intellectual support for the study of enterprise-based solutions to poverty.

The finalists:

• AAA Growers, Kenya (Grand Prize Winner): Growing, processing, and packaging vegetables for export to Europe.

• Enterprise Urwibutso, Rwanda (Winner): Premium banana wines; also construction, cattle farming, brick and tile production, bakery, restaurant, school facility, and a cultural troupe of workers.

• Good African Coffee, Uganda (Winner): Coffee from local farmers for export to global markets.

• Kencall, Kenya (Winner): International outsourcing call center.

• Tele-10, Rwanda (Winner): TV and radio broadcasting, Internet and mobile phone video broadcasting, and Internet service provider.

• Virtual City, Kenya (Winner): Automated supply-chain tracking.

• Color Creations, Kenya: Business advertising and branding.

• 3Mice, Kenya: Interactive media, including development of Web sites, intranets, and portals.

• Business Communication Solutions, Rwanda: Mobile public pay phones in Rwanda, Burundi, and the Democratic Republic of the Congo. Also call centers for Rwandair and Electrogas, and a taxi service.

• Cellulant, Kenya: Mobile phone interactive services, including ringtones, news, entertainment, movie listings, and mobile banking solutions.

• Semat Productions, Uganda: Radio station and radio advertising content.

By Stephen Son

Additional Resources:

S.E.VEN Fund: Pioneers of Prosperity Documentary

Pioneers of Prosperity: “Legatum Awards USD 350,000 Prize for African Entrepreneurship”