November 2012Customized Learning

Combining Profitability and Social Good

Profitability Social Good

In the last three years, Anne Nakawunde has gone from managing contracts and operations at her Microfinance Institution (MFI) to being named CEO. Like many MFI leaders today, she is navigating through a period of rapid growth and greater complexity as she guides her company from being a regulated MFI to a full commercial bank. “The biggest challenge right now is finding the right investors with like minds who share the same vision and mission as we look to scale up the business to be a commercial bank,” Nakawunde says.

Since its origins in Bangladesh, microfinance has created entrepreneurs out of the world’s impoverished by giving small sums to people with economic activities who do not otherwise qualify for traditional bank loans. As microfinance has evolved to include savings, insurance, and other financial products, more and more low-income entrepreneurs have been included in the financial system and have been able to sustain and grow their businesses and their families’ livelihoods.

Nakawunde’s institution, Finance Trust (Uganda), has averaged 30 percent annual growth in recent years. A group of women founded it in 1984 and today, the institution has a portfolio of US$44 million serving 150,000 customers in 30 branches nationwide. The organization’s goal, according to its leader, is to be the preferred microfinance institution in Uganda.

For Nakawunde, participating in the Advanced Leadership Program co-designed by the Women’s World Banking (WWB) Center for Microfinance Leadership and the Wharton School has enhanced her abilities as a decision maker. “I cannot say that I am the same leader,” admits Nakawunde. “The way I make decisions is well guided and well thought out. The program has really helped me grow in my career.”

The Advanced Leadership Program aligns with the Wharton School’s three strategic pillars — innovation, and social and global impact. In addition, it builds on Wharton’s strong partnership with WWB, where it is a founding member of WWB’s Center for Microfinance Leadership.

Gaining a Global Mindset

Wharton faculty challenge MFI leaders to re-think current mindsets by answering these questions:

  • What can you do as a leader to integrate your institution’s social mission with its business strategy, rather than pursuing two separate bottom lines?
  • How do you think about microfinance opportunities from a global perspective, and champion the microfinance “brand” beyond your own institution?
  • How do you bring an innovation and customer-centric approach to your products?

To date, 50 of the world’s top-rated MFIs have sent nearly 100 representatives to the Wharton-WWB Advanced Leadership Program, including both veteran leaders with the mission of MFIs “in their DNA” and senior managers with commercial banking backgrounds who are new to the microfinance industry. The program’s goals include building a global understanding, increasing strategic and critical thinking, and driving stronger customer-centric innovation, with a focus on understanding the financial needs of microentrepreneurs, particularly women.

WWB brings its own expertise to the program, sharing with participants examples of its customer research-based approach to product design. WWB works with its microfinance partners to understand the needs of low-income women and men and the gender dynamics in households that influence financial decision-making. This information results in the design and delivery of innovative financial products tailored to the needs of microentrepreneurs.

Wharton’s approach links theory with practice — giving participants state-of-the-art tools, and the chance to apply them on innovation-learning teams. The two-way learning between faculty and participants focuses on critical thinking, encouraging students to question assumptions and to learn from each other. Many program participants say the program and interaction with peers have helped transform their thinking and business models, resulting in dramatic changes in their performance.

“Leaders coming out of the program recognize that they need to flex their leadership style and engage teams in different ways. They’re doing more listening, delegating, and allowing others to arrive at answers,” explains Elizabeth Lynch, director of WWB’s Center for Microfinance Leadership.

Nakawunde says the program has enhanced her strategic thinking and negotiation skills, and appreciates the program’s focus on customer-centricity. “It really drives what we do — customer experience is one of our priorities. We think about what they want and what they want to achieve at the end of the day.”

HP Singh, chairman and managing director, Satin Credit Care Network, Ltd., an MFI serving 300,000 customers in northern India, credits the Wharton course with making him a more engaged leader. “I used to never be a good listener, but now I listen to different points of view and then make a rational decision,” he says. “The biggest challenge for us is to fully leverage all of our human resources — to be nimble, flexible and always on our toes to innovate. If we can perform in the best possible manner according to our abilities, we can move the ship forward.”

Singh considers the Wharton-WWB program content “far richer” than other programs offered in the executive education market — “stretching my intellectual ability beyond the threshold of even my own organization.”

Realizing Social Mission while also Being Profitable

MFI leaders face unique challenges as they work to maintain their social missions while also being profitable. These aren’t mutually exclusive goals, say program participants. “You can do both because when you are achieving your financial goals, you are growing with your customers and improving their livelihoods,” says Nakawunde. “The secret is in the numbers — you can reduce operational costs and improve on the delivery channels because if you have the right delivery channels, you will be able to attract as many people as possible.”

When Indian MFIs were hit with a funding and indebtedness crisis that began in late 2010, the entire industry was taken by surprise by the global repercussions. Singh’s firm weathered the crisis well, growing 40 percent last year alone. “The Wharton training and WWB follow-up coaching made us a little better prepared and allowed us to steer our own organization forward,” says Singh.

Mary Ellen Iskenderian, president and CEO, Women’s World Banking, agrees, and expresses optimism for an industry that has gone through challenging times. “More MFI leaders recognize that the increasing complexity of their markets calls for a new level of strategic leadership. If they are going to be able to strengthen their institution’s commitment to serving low-income clients while building the sustainability of their operations, they need courses such as ours to keep at the top of their game.”