Recently, I came across United Prosperity, a organization which is similar to kiva.org guaranting loans to entrepreneurs in poor nation. I took some time to contact and talk to the founder to hear more about the organization. Here is the snapshot of the interview.
Hello Bhalchander, Welcome to nrimoneyreallymatters.com.
Thank you for taking time to talk to me about your organization, United Prosperity (UP). I looked at the http://www.UnitedProsperity.org website and it looks inviting. You made real good progress in the past few months.
1. Before we talk about United Prosperity (UP) which is making waves in the media recently, let’s get to know you. Please go ahead and introduce yourself to the readers.
Vijai, Thank you very much for giving this opportunity to talk about United Prosperity. I grew up in Pune, India and live in the SF-Bay Area. I did my Bachelors degree from IIT Bombay and after working for two years with Tata Motors did my MBA from IIM Bangalore. I subsequently worked with Wipro, Microsoft, Mphasis and most recently Infosys and led several multi-year projects in financial services and insurance. Since September 2007 I left my job with Infosys to set up United Prosperity and since then I have enjoyed seeing this idea become a reality.
2. UP is your brainchild, share with us how the idea was born and evolved?
Having grown up in India I had noticed on numerous occasions that the poor were borrowing money from their employers, friends, shop keepers or others to meet their family needs. The amounts they borrowed used to be pretty small E.g. Rs. 500 ($12). This always puzzled me and I sometimes wondered why banks would not lend to them.
Fast forward several years later I was consulting with an organization called PMI. PMI does mortgage guarantees. i.e. A mortgage guarantee offered by PMI allows people who cannot put the 20 % down payment to get a mortgage and achieve the dream of home ownership. In case the borrower is unable to payback the mortgage PMI will cover the losses of the bank upto a certain extent. So it struck me that if one can get a $500,000 mortgage with a guarantee, why cannot we make microloans available to people using a guarantee.
United Prosperity builds on the same idea. In case the microfinance institution lending to the poor entrepreneurs defaults on its loan to the bank, then the micro lenders or guarantors on our website will cover the losses up to a certain extent. With the guarantee the bank is more open to making a loan to the microfinance institution which lends to the entrepreneurs.
I have been fortunate to get the support of my team mates Chiradeep Vittal, my wife Shubha Shankaran, Ashok Parameswaran and several dozens of volunteers who have helped us start United Prosperity. We also got great pro bono support from institutional supports including Cognizant, who built the website, Netsuite who provided us the accounting software, several law firms who did the legal research and books2taxes.com which does the accounting for us.
We became operational in the summer of 2009 and have supported more than 200 entrepreneurs so far.
3. Tell us in general about UP and its mission/vision in elaborate.
Our mission is to allow people to combat extreme global poverty and multiply the impact of their microloan through loan guarantees.
There are small entrepreneurs all over the world who cannot afford to start and grow their business alone. Expanding their business may be the only means to adequately feeding their family or sending their children to school. However, banks do not lend to them without collateral, and that’s where people like you and I come in.
We can become a compassionate social guarantor with United Prosperity by providing an interest-free cash collateral or microloan guarantee for an entrepreneur on our website. Based on our microloan guarantee, the bank makes a loan which is nearly double our contribution. No minimum amount is required, and on loan repayment we get our money back.
4. Do you really think by helping or lending needy entrepreneur, you can abolish poverty? How is it possible? You are also just helping like any other charity organization.
Abolishing poverty is not going to happen overnight, but studies have shown that through microcredit people do improve their livelihoods and come out of poverty over a period of time. Microfinance is not the only way to end poverty but it is a highly sustainable way. It is also one of the few programs which have scaled to a good extent.
5. From outside, UP seems like a copy cat of Kiva.org, another micro finance lending institution. The model seems to be same except the way you lend to the Micro finance institutions. From your answer, it is seems to be totally new idea with a similarity to Kiva.org. If that’s so, tell us the difference.
With other international lending models, the loan made by individual lenders goes to a microfinance institution which in turn lends to the entrepreneurs. In our case, the loan made by the individual lenders serves as collateral or guarantee which is deposited with a lending bank. Based on the guarantee, the bank makes a larger loan to the microfinance institution which in turn lends to the entrepreneurs.
Our model has several advantages:
a) Doubling of impact: Since the bank makes a loan which is nearly double the guarantee amount, there is a doubling of impact for the individual microlenders.
b) Mitigates foreign exchange risk: Since the loans from Bank to Microfinance institution(MFI) and MFI to entrepreneur are in local currency, foreign exchange risk is mitigated for the MFI and the individual lenders.
c) Local linkages: Our guarantee facilitates the creation of local linkages between domestic banks, MFIs and poor entrepreneurs. In the course of repaying the loan, both the entrepreneur and the MFIs develop credit histories that will enable them to access more funds at a later date with a lower guarantee percentage, or even without a guarantee. MFIs also get to form relationships with banks and offer other products like savings, insurance, money transfer etc. through the bank.
d) Manages risk better: We get the additional benefit of monitoring of the loan by the bank which is not available with other person to person models. We are also focused on those living in extreme poverty typically, living on less than $2/day.
6. You kept mentioning about “Guarantees”. What exactly is a guarantee? How does it different from direct lending?
A loan guarantee is an agreement between a guarantor, a lender, and a borrower in which it is agreed that a guarantor will repay the loan if the borrower defaults. You can learn more about guarantees going to our website at http://www.unitedprosperity.org and clicking the about us link.
7. Your loan/entrepreneur profiles are very limited and centered towards India only. Why and any reason?
We only launched this summer and we eventually plan to roll out to other countries. We will launch in other countries once we have greater traffic to fulfill the need.
8. I see all the guarantees are going towards group of entrepreneurs? Why aren’t they individually listed?
We try to reflect the local lending model as much as possible. Most of the microcredit lending is group and we reflect that.
9. Do you think you are competing against Kiva.org for loans and lenders? How you see yourself placed against Kiva.org which has grown manifolds in recent years?
Kiva has done a great job in popularizing online microlending. United Prosperity is focused on entrepreneurs in extreme poverty and offers greater impact for individual microlenders with mitigated foreign exchange risk.
10. KIVA is also helping people to get out of poverty and UP just jumped in the same bandwagon. Why someone has to shift their strategy from KIVA to UP? Is there any added advantages?
As I mentioned earlier, our model is totally different from Kiva. We are not
lending, we are only giving guarantees to the loans. We avoid the foreign exchange risk. May be both of our destination might be similar but the path we are taking has lot of more different and more benefits for both sides.
11. I see many features lag in UP compared to KIVA like forming a team, communicating with other members etc., Are you plan to add them soon?
We have the groups feature on our community site : http://unitedprosperity.ning.com. Members can form groups and communicate amongst themselves here. However, one cannot assign a guarantee to a particular team. We plan to add that feature in some time. We will be also be adding the gift certificate features by the end of this year.
12. What are you plans in getting the word around?
We have largely used social media marketing to get the word around – facebook, twitter so on. We recently got a google adwords grant and plan to use that for increasing visibility. We will be soon introducing a gift certificate feature for members to invite their friends and family. We also look forward to people like you and others writing about United Prosperity in their blogs and telling their friends.
13. Do you plan to expand your offerings to other nations? If so, anything currently on the works?
Yes, we plan to expand to countries other than India, but the expansion plans are still at a very early stage. Apart from that there is also an ample need in India. The World Bank estimates that 456 million Indians (42% of the total Indian population) now live under the global poverty line of $1.25 per day (PPP). This means that a third of the global poor now reside in India.
14. What are the ways, others can help your organization?
The easiest way is to sign up on http://www.unitedprosperity.org and start guaranteeing loans. It is very easy to sign up and one could start with even $10. Apart from that you could tell your friends, post a link to United Prosperity on Facebook or Linkedin. You could also write about United Prosperity in your blog and help spread the word. You could also choose to volunteer with us if you could spare around 8 hours per month.
Thank you again Bala. I appreciate your time and all the best for success. I know it is not an easy task to setup an organization legally of this big with a strong motive too improve their life style of poor and needy by bringing us altogether. It is a noble cause and hope you will get more support from the community.
Hope you all enjoyed my interviewer the founder of United Prosperity, Bhalchander. As a contributor and lender myself in kiva.org, I recently joined UnitedProsperity.org few weeks ago and started making few guarantees. It was a simple process and gave me full satisfaction by providing opporunity to help needed entreprenuer directly for their growth and improved life style. I always feel lucky to have enough to help needy and find different avenues to do so. Kiva.org and UnitedProsperity.org are doing a great job giving us these new avenues.
I strongly believe in the Chinese proverb, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”
Go ahead and make a difference in lending your hand to others by lending your money, start with just $10 or $25. Your money is not earning these days sitting in a bank account; let it at least do some karma to you. If you have any questions about UP, please don’t hesitate to comment here. I will try my best to get answers for them.