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Archive for December, 2010

crowdsourcing or private equity in sheep’s clothing?

December 30, 2010 Leave a comment

I have been following the crowdsourcing revolution with a very keen eye for the past year and its developement has been outstanding. Crowdsourcing is simply using the power of  the internet to harness capital for small businesses, but  simultaneously have a social impact. The people who invest in these businesses do not receive any equity in the business and simply provide the capital that is repaid. The aim of crowdsourcing is to remove the barriers to launching that most small businesses tend to go through at the seed capital stage which in many instances is not attractive for angel investors or private equity or venture capitalists. Kickstarter(https://www.kickstarter.com) is a fantastic example of this revolution, the platform funds creative people who wish to launch their own businesses. I have however just come across a site that calls itself a crowdfunding platform but on further scrutiny looks to me like  another angel investor/ venture capital platform. The crowdsourcing label has been used to get traffic to the site but I was really disappointed with it: small businesses have to pay 100 dollars to submit their proposals, the site is stuffy and stiff and exactly what I would expect from a private equity house, they are Microvest ventures (http://www.microventures.com/) and I am sure what they are doing os noble in some way but this does not fit the crowdsourcing tag at all!

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To strangulate or to regulate? Microfinance at a cross roads in India

December 7, 2010 Leave a comment

The recent spate of suicides in the Andhra Pradesh state (45 in total over 2 months) largely attributed to individual borrowers inability to repay their loans has made a whole host of commentators say that the microfinance bubble has burst. My view is that it really ‘hasn’t burst; all that has happened is that industry is at a critical cross road in terms of regulation and introducing some kind of control over the activities of microfinance institutions. Ultimately these institutions are playing a part in terms of creating financial inclusion for hundreds of thousands of India’s poor so lets not throw away the baby with the bath water-lets focus on bringing in sensible regulation that regulates and does not strangulate the industry. For example regulations should cover interest rates and their transparency as well as the possibility of capping them, over indebtedness needs to be considered and MFIs need to be made to act responsibly in this respect. It’s definitely a time for dialogue between India’s Central Bank and the actors in the microfinance industry. Let’s not lets these poor people have dies in vain.

Categories: microfinance india