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April 03, 2006

Why Pierre Omidyar is kicked about microfinance

It is well known that Vinod Khosla is a very active investor in microfinance institutions. Interestingly, so is eBay founder, Pierre Omidyar.

He explains why in an interview to FT:
“I believe microfinance has huge potential, not only to eliminate global poverty, which is remarkable, but also to help people achieve social, economic and political empowerment. But in order to have any real impact, microfinance companies need to sustain themselves and grow. And to do that they need to focus on profits, not only social outcomes.”

Omidyar also explains why his investment vehicle, Omidyar Network, invests not only in non-profit organisations, but also profit-making businesses (something that Khosla also seems to be doing):
“I have learnt that you if you want to have a global impact you can’t ignore business,” he says. “Nor should you. I don’t mean corporate responsibility programmes but business models that provoke social change. The big difference between companies and traditional charities is that companies can grow in a self-financing and sustainable way, while charities cannot, as they need a continuous injection of capital to survive.”

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.