Dave Richards: Executive
Dave Richards, a former executive of RealNetworks®21 (Real) in Seattle, WA, has opened a new chapter in his ministry in the high tech world to include the world of microfinance. His energy these days is to understand how to best help those who are poor in developing countries around the globe to receive help, not in the form of contributions, but in the form of small loans. In 2007, I asked him the following question: How has your career in software high-tech prepared you to work with microfinance? Here’s what he had to say.
I worked in the software industry since my college summer jobs. First, as a programmer, then, as a product manager, next, as new business development manager, then, as a manager in software development, next, as a manager in marketing/P&L software business, then, as a builder and manager of software and [internet] services business unit. Most of my energy during my career has been figuring out how to build a scalable software product so the software business can make a profit. I discovered that one has to create significant productivity improvements into the software program that allow the end user to do things that they have previously not been able to do, for example: listen to a radio station on your PC from wherever you are in the world while all the time expanding the user base to a large number of people. When I joined RealNetworks®, it was a relatively small company with a few million customers using the RealPlayer audio/video software. I led the RealPlayer business to expand dramatically. Today, there are more than 350 million registered RealPlayer users around the world (and continuing at more than one million new installs per day). Today, this product is the foundation of Real’s consumer business, which now represents eighty percent of their $350 million in global revenue. Among the huge number of complex strategic and operational issues you encounter building a scalable software/technology business is the need to create a very crisp and clear plan for both the technology and how you are going to take it to market. The competition is sometimes ferocious. As an example, Microsoft® was threatened by what RealNetworks was doing and spent multiple billions of dollars to stop the RealNetworks from its development. About two years ago I learned about microfinance from my father, Dick Richards. My dad has been involved in serving on World Vision boards for the last fifteen years, first in Canada, then on the World Vision International board. In a conversation, he told me about this new grassroots movement in certain countries where World Vision was doing development projects. They were experimenting with giving out small loans to women to enable them to start or expand a microbusiness. The results were amazing! At the conclusion of his service to the World Vision board, he was asked to become the chairperson for a new World Vision microfinance fund that is called Vision Fund. I was really intrigued with the whole idea of using the power of financial services to enable poor people in developing nations to create their own wealth. I had lots of questions which sent me on a new learning curve. Questions like: Would these poor people pay back their loans? Why charge them interest? Why not just give them these small amounts of money instead of making them repay? I had been a supporter of WV for many years. Our family sponsored a child and helped fund other international development emergencies. I think that I had become pretty much resigned to the fact that the best I could do was help relieve a bit of pain for a few poor people in developing nations. I had very little hope for my donations helping people to actually break out of the generational cycles of poverty. Then I started reading books on pioneers in microfinance and other people who were investigating alternative ways of thinking about economic approaches to defeating poverty. I wanted to know their stories. I found a few good books. I found it very difficult to easily find resources which gave me the “whole story” on poverty along with what approaches were actually having lasting impact. As a result, I started my own blog, initially as a way to help me collect my thoughts and share with a few friends. Through my dad’s contacts, I was invited to join a five year planning session with World Vision International around the concept of microenterprise development with a focus on microfinance. This was an extremely helpful learning experience for me as I got to see the inside scoop on how microfinance was growing at an amazingly fast pace in more than twenty countries where World Vision was working. I also learned the little, unhappy secret about development organizations like World Vision, which helps poor people groups with improved water, healthcare, agriculture practices, nutrition, education, etc. It is almost impossible for them to leave an area development project, even after their self-imposed policy limit of 15 years in any one place. Why? The number one reason is that there is not enough local economic activity to continue to support the ongoing maintenance of the infrastructure/services that World Vision has built up. The local economy can’t support the maintenance on the water well, pay the teachers in the schools, pay for the medicines and medical staff, to name a few. So World Vision either has to stay on or find another nongovernmental organization to take their place. No real actual economic development has taken place. This system simply sets up dependency welfare. Although well intentioned, they are not creating self-sustainable communities. Enter microfinance. World Vision is super excited about the potential of microfinance to give them an “exit strategy” for their area development projects. They can actually hope to one day pack up and leave a project area because there will be enough economic activity for ongoing self-sustainability. World Vision can move their resources to the next community in need. Wow! This was one of the “ah hah” moments for me. It was a road forward for development work from one of lack of hope to one of hope. Next in my journey into microfinance I was introduced to Unitus and I found an organization (not explicitly Christian, I might add) which had a vision for microfinance which caught my interest. They had identified that the number one issue with microfinance was not whether it “worked” (in defeating poverty – that has long been established, even the stodgy UN declared 2005 the year of microcredit!), but that most poor people didn’t have access to microfinance. Today only about sixteen percent of those who needed microfinance have access to it. The growth for access overall was very slow. Why? Because microfinance is primarily being driven by nongovernmental organizations based primarily on donations – public and private. Unitus has a vision to dramatically accelerate access to microfinance to the people who can benefit from it by connecting up the multi-trillion dollar global capital markets with the microfinance banks. So, instead of a MFI (microfinancial institution) staying at serving a few hundred or a few thousand clients, a MFI could quickly scale to tens and hundreds of thousands of clients. Not only would they then become self-sustainable (a huge benefit as they can continue to operate and serve the poor indefinitely), but they would start to have a major economic impact on whole counties, states and even countries. An extremely fast growth of an organization (and business) is a very difficult operating challenge. So, the MFIs need partners who can help them not only with raising capital, but also in scaling up their operational capacity. That’s where my experience and know-how comes in handy. Bono, lead singer for U2, has said, “My generation wants to be the generation that ended extreme poverty.” Muhammed Yunus, founder of Grameen Bank (pioneer in microfinance), says that future generations will visit poverty museums to understand what poverty is and wonder why it took us so long to address it. I resonate with both of those visions and I see a path forward that is doable. I am officially a member of the board of Unitus. I continue to be excited about the opportunity to serve in this role with this organization. I have made and continue to make the move from high tech to microfinance. The skills learned in one are beneficial to the other. Why do I want to work with the extreme poor on the globe? It is part of the Story of God that I have become sensitized to over the last few years. There are all kinds of innovative ways to live with his Story. This one looks like it is going to be fun as well as a great learning experience. Here is a story about a recent recipient of microfinance monies. Nazimunisa is forty-eight years old. She has a daughter who is eighteen and lives in Avalahalli, India. She has taken a current loan of $274 and has been a recipient of loans since 1999. With her loans she has created a tailor business and is also a clothing and vegetable shop owner. Here is her story. Nazimunisa came from a very poor family of daily-wage laborers. Before joining Unitus’s MFI partner Grameen Koota (GK), Nazimunisa worked as an incense roller, earning about 22 cents for every 1,000 sticks made; her husband ran a small food shop. When business was good, their family could meet basic needs, but when business slowed they had to pawn family jewelry to stay afloat. Looking for ways to smooth her family’s income through rough times, Nazimunisa joined GK in 1999. With her first loan of $91, she bought a sewing machine and started a successful dress-making business. After expenses, Nazimunisa used her profits of $6 to $9 per month to do maintenance on her home and pay for her daughter’s education. By 2004, Nazimunisa was in her fifth loan cycle from GK. She used her subsequent loans (ranging from $136 to $274) to invest in the family’s store. They first sold clothing from their shop, but when garment prices fell, Nazimunisa and her husband reopened the store as a vegetable stand. With subsequent loans from GK, they added a new roof to protect their produce during the rainy season and bought a refrigerator so they could sell high-profit perishable goods. With the help of GK’s microfinance services, it took less than one generation for Nazimunisa and her family to lift themselves out of poverty. In the past six years, Nazimunisa has started three successful businesses, and her family’s income is comfortable and sustainable. She and her husband hope to open an even larger store and build a new house with their future loans from GK. Nazimunisa also hopes for her daughter to complete school and go to college.You can visit Social Venture Partners to discover more about Dave and his ministry.