Scot OverdykeJournal #1
This summer I am interning as a financial analyst at the Overseas Private Investment Corporation (OPIC), a small, US government agency devoted to stimulating American direct investment in developing countries. For those not familiar with the organization (no, I’m not referring to the oil cartel), OPIC functions something like a development bank for US businesses and investors operating in emerging markets. It distinguishes itself from other development finance organizations such as the IFC in the duality of its mission – 1) to support the growth and expansion of American business (including small enterprise) and 2) to help strengthen local economies in the developing world through the infusion of capital and American business expertise.
OPIC is interesting in its private sector approach to international development. In essence we find the United States government facilitating partnerships and capital flow to businesses in emerging economies that might otherwise prove too risky for American investors. Successful projects result in increased revenue generation for American shareholders, job creation and economic growth in impoverished countries and political legitimacy for the United States government which facilitated the transaction. It’s a win/win. Furthermore, the agency has proven itself to be not only self-sustaining from a budgetary perspective, but quite profitable in its returns to the US treasury.
It should be obvious why the organization is appealing to an aspiring MBA with a background in international development. Specifically, I will be working in the microfinance division of OPIC, supporting direct investment in MFIs and micro investment vehicles throughout the developing world. Again, our role as government facilitator enables us to connect American investors with profitable investment opportunities in microfinance by helping to ease risk associated with emerging markets and provide leverage for equity investors. Interestingly, there has perhaps never been a time more prescient for OPIC than today, in the midst of a global financial crisis in which credit lines to MFIs and emerging markets have absolutely dried up since late 2007. It’s a tremendous opportunity to utilize the tools we learned at Columbia Business School to have a real impact on people in need.
Journal #2
After a couple of months here I’m not surprised to learn that OPIC was recently rated number two in the “Best Places to Work” evaluation of small government agencies. The organization seems to attract people of talent and character, and a steady stream of interns assures a certain level of youthfulness and dynamism in what might otherwise be a very quiet working environment. It never ceases to amaze me that DC can attract top talent from graduate programs around the world, oftentimes paying us little more than the experience itself as a reward—and yet they see no shortage of applicants! I think it speaks to the idealism of my generation, the current strength of the federal brand and, finally, the obvious glum outlook for private sector employment.
The work of the OPIC interns is as varied as the organization, itself. Some work in the office of investment policy in the enforcement of environmental and worker rights covenants associated with government loans, others in legal affairs – structuring contracts and seeking private counsel in areas outside their core competencies and, of course, there’s a large number of us working as financial analysts – divided between small to medium enterprise, investment funds, political risk insurance and large finance projects. The microfinance group is housed within the small business department and currently provides debt financing in a number of ways: directly to specific MFIs, to MFI networks and finally to microfinance investment vehicles. We define microfinance as an asset class extending beyond the mere provision of credit and seek out innovative solutions to common problems in the field (foreign exchange risk, tier II MFI financing, complex investment vehicles, liquidity provision, etc…) with a specific emphasis on some of the world’s poorest, most marginalized countries.
As an analyst, my tasks are fairly predictable: company assessment and credit analysis for loan proposals of microfinance projects. The best part of the job is the opportunity to meet practitioners from banking, development and consulting agencies in both the private and public sectors. Microfinance is still very much a young industry and it enjoys tremendous support from governments, international institutions, nonprofit organizations and philanthropic foundations across the world. Someday the sector may mature beyond subsidies as private banks continue to innovate around the challenge of costly financial service delivery in poor and rural areas. In fact, it’s happening already and success stories emerge daily (the most often cited is Compartamos in Mexico).
Journal #3
After weeks of analyzing investment structures and deal terms for microfinance investments from 30,000 feet, I decided that it was finally time to actually see first-hand what the industry looks like from the ground level. So I recently scrounged together what remained of my social enterprise fellowship savings and purchased a ticket to Uganda to get a snapshot of the microfinance industry from the perspectives of the practitioners and beneficiaries.
Upon arriving in Kampala, Uganda I set out to meet with various administrators of BRAC Uganda – one of the newest and now largest MFI networks in the country. Originally from Bangladesh, BRAC is seeking to integrate microcredit distribution with the provision of social services including youth and gender empowerment, agriculture training, business training, and community health. While meeting with a number of women’s groups involved in the group lending program I was extremely impressed with their basic financial acumen and procedural understanding of the lending process. Whether through training, intuition or experience, they seemed to easily negotiate the concept of compound interest in ways I never seemed to in my capital markets classes!
After a few days with the generous people of BRAC Uganda, I was privileged to travel with an agricultural business extension-ist from ACDI-VOCA – a large, American nonprofit organization with an excellent reputation in value-chain enhancement and agricultural techniques. We spent a week in the northeaster reaches of Uganda working with extremely marginalized communities to help disseminate information of post harvest handling techniques. The generosity of these people in Kitakwi, Uganda cannot possibly be overstated. I was reminded constantly of my time in the Peace Corps and left that region with a newfound respect for farmers and a deeper appreciation for the effects of climate change on indigenous people (these subsistence farmers are currently suffering from an enormous drought).
Finally, I was able to meet briefly with representatives from MapSwitch Uganda, a microfinance distribution network that provides technology solutions and distribution platforms in the form of mobile banking and self-contained ATM machines. It was especially interesting to witness their problem solving prowess in arranging for the provision of ATM cards and mobile banking services to some of the poorest inhabitants of Uganda.
