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Lessons from the Front Line of Microfinance

Published 12/13/2012 by Global Communities

Why It’s Better To Be Needed Than Loved: Lessons From The Front Line Of Microfinance

To maximize your company’s impact, seek to be needed and to play where others won’t, instead of vying for admiration.
By Kaihan Krippendorff
This article originally appeared in Fast Company.

Elissa McCarter is the Vice President of Development Finance at Global Communities.
Here is a quick personality test: Someone offers you the opportunity to move to Armenia for several years, with minimal support or finances, to turn around a badly performing, indebted microfinance program. Do you raise your hand?
Now, there is what I want to say I would do, and what I probably would actually do, and they are radically different choices. While I would probably press my hands firmly into my lap, lest my intent be mistaken for a raised hand, I would like to brag I had the guts Elissa McCarter had. She volunteered to take on a challenging, albeit rewarding, mission to turn around the microfinance program-supported Catholic Relief Services in Armenia. After three years, her success led to similar roles in Zimbabwe, Türkiye, and the Middle East.
Her work was not unlike that of any turnaround manager: negotiating with financial backers, organizational restructuring, and operational redesign. But her subsequent path underscores how a fundamental strategic principle may help you with your business or your career: It is better to be needed than loved.
Face it: Somewhere under that story you spin for your clients and bosses, there is a drive to be admired, honored, and accepted by those whose opinions matter, acknowledged for our work. We seek prestige and prominence. In fact, when we pretend we don’t want these things, we are often motivated by the hope that by being seen not to want them, we will be admired even more.
Now, there is nothing wrong with this. Indeed, it is driven by a fundamental human need. But consider the strategic cost of seeking admiration.
After eight years traveling the globe, turning around microfinance programs, McCarter decided to return home to the U.S. to set up the micro-credit program for Global Communities, formerly known as CHF International. As she dug into the challenge of taking her experience turning around programs to build a new one that works well, she looked intuitively not for being admired but for being needed.
Her group decided that rather than focus on the typical target of microfinance programs (individuals and very small businesses), they should focus on that awkward next tier of businesses too big to be startup sole proprietorships, but too small to be of interest to traditional banks. Their average loan amount is $1,500 to $2,000.
Instead of delivering the entire program on their own, they chose instead to “do the heavy lifting” that typically pushes traditional banks away from lending such small amounts to small borrowers.
“We recruit borrowers, do due diligence, monitor loans, and use the bank’s capital,” said McCarter.
In other words, her program focuses on what is needed and not being met and carefully avoids duplicating what is being done by others.
To be able to do profitably what others see as an unprofitable service, Global Communities adopts a unique operating model. Their bankers offer flexible schedules, available “whenever the customer calls,” according to McCarter. They drive for a hyper-fast turnover, giving borrowers approval often within one week. And in order to do this, their bankers know their neighborhoods. They may spend 10 hours a day walking their neighborhoods, talking to constituents, getting that kind of critical risk-assessment data you can’t get from spreadsheets.
The results have been spectacular. Global Communities’ Development Finance portfolio, for which McCarter serves as CEO, has grown from $40 million to over $150 million in assets under management and now spans 15 programs in nine countries. They are filling a critical gap, particularly in the Middle East, in which the finance sector grossly under-invests in small businesses.
The key lesson of their success is to seek to be needed, to play where others won’t, rather than seek admiration, which usually leads to doing what others are already doing. That way you maximize the impact you have and so, ironically, warrant even greater admiration. Here are 3 questions to ask yourself to accomplish the same:

What impact do you want to have? What mission are you pursuing?

What are others already doing to pursue this mission?

What gaps can you fill? What are people not doing? Where can you step in?