Sunday, January 31, 2010

Another Trip to the Field

On Saturday we ventured into the field again to meet with VPOs and learn about their businesses and how we can help them. Joining us were two consultants with Vision Spring, a non-profit dedicated to improving the access of the poor to eye care. We wanted to see what kind of eye care was available in the poor communities and whether Vision Spring's program could be offered through PT Ruma's network of VPOs. In addition to myself, there were two other "Bankers without Borders," Elaine Chang and Sultan Haider. They are doing a project for PT Ruma looking at reporting requirements for running both the social and business sides of the operation. The link below should give you access to photographs taken of the trip.

The first VPO we visited was in an "upper" low class (poor) neighborhood in the peri-urban Tangarang area on the outskirts of Jakarta. Ibu Marni is one of PT Ruma's most experienced VPO. In fact she runs a "hub" of 18 VPOs and makes more from that activity than from her direct sales of 10-12 per day. Her husband earns about $150/month as a construction worker. They have two children, one in junior high and one in senior high school.

After discussing the air time sales business the Vision Spring consultants inquired about the availability and quality of eye care for the community. Ibu Marni reported that the neighborhood is regularly serviced by itinerant sales people offering eye tests and reading glasses for around IR300,000 (US$30). Such sales are always made on a 10 month installment basis. She said she could do this business as well if she could offer the same credit terms. She herself had never had an eye exam so one was conducted for her. It turned out her vision is pretty good--20/20 in one eye and 20/30 in another.

We moved on to another VPO not too far away but in a distinctly less affluent neighborhood. Sirma, a recent high school graduate, runs her her business through her family's "wareung" or roadside stand. Her business also seems to be going quite well. She makes about 10 transaction per day and contributes 10-12% of her household's total income.

Finally, back closer to the city, we visited Ibu Trirahyu, a VPO in Tomang, a very poor neighborhood along the river. This was quite a remarkable visit. Ibu Trirahyu was actually the first VPO "hired" by PT Ruma. She has learned that if she increases her "working capital" (her balance of air time in her account with the wholesaler) she can actually increase her sales without requiring any additional outside financing. She understands that only a portion of her cash flow from sales of air time represents her profit and if she retains some of the profit she can grow her business. This is a lesson we must learn to replicate with other VPOs who see their sales constrained by a lack of inventory (air time balance with the wholesaler) and who request bridge financing to consummate their sales. This often causes delays in the delivery of air time to their customers even though they have already paid the VPO for it.

After our meeting with Ibu Trirahyu, we took a short walk through her neighborhood. In spite of the incredible density and poverty we were impressed by its relative orderliness. Many dwellings had small gardens of potted plants and cages with song birds hanging from the windows. Everyone was very friendly to this strange group of foreigners wandering along the tiny lanes that endlessly twisted through this vast area housing thousands of poor families. I asked about the level of crime in the neighborhood and was told it was actually quite low. Everyone knows everyone here.

Thursday, January 28, 2010

The Progress Out Of Povery Index

So how would one measure the “social bottom line” of an enterprise that is dedicated to assisting the poor in raising themselves out of poverty? As described on the Progress out of Poverty web site, Grameen Foundation has spent considerable effort and resources addressing this question and, as a result, developed country specific indices (PPI) for about 30 countries that measure the relative poverty level of individuals and households at a particular point in time. Using this tool social investors and entrepreneurs can be assured that a social enterprise is indeed targeting the poor with its programs and the social impact of these programs can be measured over time.
The indices are derived from large, current national income or national expenditure surveys conducted by census bureaux or the World Bank. These surveys contain up to 1000 data points which are consolidated into about 100 discreet categories such as size of household, education levels, dwelling characteristics, durable goods ownership etc. These are then subject to regression analysis to produce 10-12 simple questions which predict with a high degree of probability an individual’s or household’s likelihood of having a specific income level.
PT Ruma is using the PPI for Indonesia to identify potential poor entrepreneurs to train and deploy as Village Phone Operators (VPOs). Yenni, the young lady pictured in an earlier post, has a PPI score of 46. According to the PPI Index for Indonesia, this means that her household is 80% likely to be living below a daily per capita income of $2.50. The money she earns as a VPO therefore, makes a significant contribution to her household’s well being. Perhaps this may mean that her little sister, seen kneeling beside her, will one day have the opportunity to finish high school.
Below are the 10 questions used to determine a potential VPO’s PPI score and likely income level:
1. How many members does the household have?
2. How many household members aged 5 to 18 are currently attending school?
3. In the past week, how many household members ages 11or older worked or had a job/work/business?
4. What is the main source of drinking water of the household?
5. What type of toilet does the household have?
6. What is the household’s main flooring material?
7. What is the household’s main ceiling material?
8. Does the household own a refrigerator?
9. Does the household own a motorcycle?
10. Does the household own a television?

Tuesday, January 26, 2010


As my first posts have not created much of a rhythm for this blog I thought I would step back and try to put more context around what has brought me to Jakarta and what my role is here. I hope this will lead to a more fluid and interesting story that is easier for me to write on a more frequent basis. Everyday I have fascinating experiences but I haven’t managed to put them into a format that makes it easy to share. I guess there is an art to blogging and as this is my first attempt I ask for you indulgence as I try to find my muse.

After retiring about one year ago I began looking for meaningful activities where my experience in international banking and consulting could be impactful in socially relevant ways. I am very grateful to Grameen Foundation for giving me this opportunity to be a volunteer on its project to help launch a social enterprise in Jakarta called PT Ruma. “RUMA” is an acronym that comes from the words Rekan Usaha Mikro Anda which means “your micro-business partner.”

The company was conceived by two talented young Indonesians, Aldi Haryopratomo, currently at Harvard Business School working on an MBA, and Budiman Wikarsa, an MBA from the Kellogg School of Management at Northwestern. Both earned engineering degrees at Purdue and have extensive experience working in consulting for companies like BCG and McKinsey. They have put together a very impressive team of young Indonesians, who I will try to introduce in subsequent posts, to implement the mission of the company which is “empowering the poor and the poorest with profitable microfranchise business opportunities and delivering socially relevant products and services to underserved communities.”

Grameen Foundation’s role has been to organize initial support for the company in the form of both finances and technical assistance. Qualcomm corporation has partnered with Grameen to provide grant money and assistance with the technology that drives Ruma’s business model. Sean DeWitt is the Grameen’s manager on the project. He coordinates the contributions of assistance from various sources, including me, and provides advice to the leadership team on social enterprise management.

My introduction to the concept of the “social enterprise” came through reading Professor Muhammad Yunus’ book Creating a World Without Poverty. Dr. Yunus won the Nobel Peace Prize in 2006 for his pioneering efforts in developing micro credit for the poor. The basic premise of the book is that poverty can only be eliminated by creating business opportunities for poor people so that they, through their own initiative and ingenuity, will lift themselves out of their impoverished condition. This will require, Dr Yunus posits, social entrepreneurs such as Aldi and Budi, who are willing to invest their resources in “social business” which manage to both social and an economic bottom lines. Investors in a “social business” forego an economic return unless and until the social bottom line objectives are achieved.

PT Ruma’s Articles of Association provide that dividends cannot be paid to shareholders unless and until it is sustainably achieving its social mission as defined by scorecard targets derived from the “Progress out of Poverty Index” (PPI) created by Grameen Foundation for Indonesia. The PPI is itself a fascinating and ground breaking concept that I will write about in my next post. If you are interested in reading about it in detail I recommend you go to

Saturday, January 23, 2010

Visit to the Field

It has been an interesting and busy first week here in Jakarta. It was certainly my intention to be posting more frequently and I’ll try to do better in the second week. I’ve been struggling a bit with the technology (Tech-boy where are you when I need you?) I’m trying to get some pictures into my submissions.

Tuesday the 20th was the first day in the office. The morning spent coming up to speed on PT Ruma’s operations since inception in August. Generally a very good story. Financials are tracking pretty much to plan, but as with any start-up, not everything has gone according to expectations. Nevertheless, the progress to date is impressive and optimistic.

PT Ruma’s basic mission is to create business opportunities for measurably poor people in Indonesia. Using Grameen Foundation’s “Progress out of Poverty Index” (PPI) which they have developed for quantifying a household’s poverty level, suitably “poor” entrepreneurs are indentified for becoming “Village Phone Operators” (VPOs). Originally, VPOs were just that. They would have been one of the few people in the village (or urban slum neighborhood) with a phone and would provide telephone access to everyone else without a phone. However, as the price of cell phones declined dramatically, more and more people have phones. In fact, it’s quite amazing to see how common they have become.

The issue, and opportunity, has become the sale of “air time” for the phones. The poor must prepay for their air time (called pulsa—my first word in Indonesian Bahasa) and they cannot afford to buy it in large amounts. Typically they want to purchase IR5,000 to 10,000 at a time. (This is roughly 50 cents to a dollar.) PT Ruma has organized itself to be a mass provider of these small increments of air time to the poor through poor VPOs they have trained and service through a network of field officers (FOs). As the field officers themselves often may also fall under the poverty line they too are part of PT Ruma’s mission of providing opportunities for the poor.

The picture above was taken at the home and place of business of one of the VPOs outside the city of Sarang, about 100 km west of Jakarta. We went to visit her because she is the top performing VPO in the district. She is in the yellow blouse serving tea to my colleagues Sean and Okky. We learned that she had to drop out of high school because her family could not afford the $120 annual cost to send her to school.

Monday, January 18, 2010

It was a little more the 24 hours door to door from the house in SF to the hotel in Jakarta. Came via Taipei, 13 and a half hours in the back of a China Airlines 747. Then another 4 and a half hours to Jakarta. Met at the airport by a driver who spoke no English but that was not a problem. Hotel is just down a large boulevard that goes through the financial district and is two blocks for Grameen’s office. Very convenient. Had a quick dinner with Sean DeWitt, my contact at Grameen and Budiman (Budi)Wikarsa, PT Ruma's Managing Director, and the head of Sales and Marketing, Okky Irawan. Great satay and Indonesian beer that you would mistake for Heineken.

As expected, Jakarta is much changed from the last time I was here. I look forward to being out and learning more about the city, country and its people. So far, it’s a delight to be here.

Saturday, January 16, 2010

PT Ruma

I am leaving tonight for Jakarta on a three week project to assist PT Ruma, a recently formed social business in Indonesia that provides profitable business opportunities for the poor in under-served communities. GF has provided a start-up grant to cover PT Ruma’s first nine months of operations. I will be working with GF program managers and the leadership and staff of PT Ruma in developing internal financial systems and controls, advising on business strategy and reviewing the business plan in anticipation of securing the next round of financing for the business. I am very excited about this opportunity and will be sharing my experience via this blog. Hope you find it interesting. Feel free to send questions. Next post will be from Jakarta.

Friday, January 15, 2010

Bankers without Borders

What do international bankers do when they retire? They can become “Bankers without Borders” with Grameen Foundation, a global non-profit organization that combines microfinance, technology and innovation to empower the world’s poorest people to lift themselves out of poverty. (Go to to learn all about GF and to learn about the “Bankers without Borders” volunteer program.)