Beyond Chile's Single Story » microfinance

The Girl Effect: From Wokai to Voz

Leslie — Tue, 04 Oct 2011 04:01:07 +0000

I am honored to take part in the Girl Effect blogging campaign. Tara Sophia Mohr, a leadership coach for women who writes beautiful poetry and an inspiring blog, initiated this campaign with the following call to action:

Last year I organized an collaborative effort of bloggers coming together to write about the importance of investing in girls in the developing world. I’m doing it again this year but BIGGER, aiming to mobilize 1000 bloggers to write about The Girl Effect on October 4th.

The statistics are sobering, but fundamentally, there is more to be hopeful about than to despair about. There is actually so much to be excited about: We now know that when girls are educated just a few additional years in school, they marry later and suffer less spousal violence. They grow into women who can support themselves and their families, often pulling their entire communities out of poverty. There is a growing awareness among decision makers, policy folks, and the philanthropic public that investing in girls is smart investing to end poverty and human rights abuses.

Spreading that world-changing idea is what The Girl Effect Blogging Campaign is all about. I want to invite you to add your voice to the Blogging Campaign on October 4th. It’s not about being an expert. It’s about having a touchpoint of care, connection, interest in this issue – and sharing about that on your blog.

I first watched the Girl Effect video right when it came out in 2008. It made me shiver then, and it still makes me shiver now. Please take two and a half minutes to watch it. If you´re reading this in email or RSS, click the headline.

That summer I met Courtney McColgan and got very involved with Wokai.

I scribbled this storyboard for a Girl Effect-style video to explain Wokai´s mission — to create opportunity for those living in poverty in rural China — to the world in a memorable visual form.

We never ended up making the video, but it sure did get my imagination going!

Now, three years later, I´m here are Start-Up Chile, surrounded by dozens of brilliant entrepreneurs.

The one who most embodies the spirit of the Girl Effect is Jasmine Aarons. Jasmine studied product design at Stanford. Her specialty is human-focused, need-driven design, and she has brought this mindset to her fashion workshop in the suburbs of Temuco, in the south of Chile. Jasmine is teaching Stanford product design methodology to Mapuche seamstresses, to create fair trade fashion for the global market. She is also a nice person with a gorgeous sense of style.

Yeti from the Start-Up Chile team visited Jasmine at her studio and made this awesome video:

Journey of Action, a brother-sister filmmaking team that is traveling through Latin America to document the work of Gen-Y changemakers, also traveled to Jasmine´s studio to profile her:

Read more about Jasmine and her work here at MadeByVoz.com

To me, the Girl Effect is way of approaching the world. The Girl Effect is acknowledging that every girl, every woman can make a difference. All you need is time and inspiration (and a healthy dose of education, health care, family planning and LOVE!) These things should be within reach for every female, in California, China, Chile and beyond!

I invite you to write your own post to support the Girl Effect campaign. Here are some ideas to get you started.

What does the Girl Effect mean to you?

What’s Happening with Microfinance in Andhra Pradesh?

Leslie — Fri, 03 Dec 2010 10:29:33 +0000

I wrote this piece for MyKRO. Curious to hear what you think.

Today I listened to this Global Prosperity Wonkcast with David Roodman:

A crisis is unfolding in India’s microcredit sector that– beyond its immediate effects on borrowers and lenders– will greatly affect the future of financial services for the poor. I’m joined by David Roodman, senior fellow here at the Center for Global Development and author of the forthcoming book Due Diligence: A Guide to Microfinance (which he has shared step by step on his Open Book Blog). David recently traveled to Andhra Pradesh, the epicenter of the crisis. On the Wonkcast, he leads me through the story of the explosive growth of Indian microcredit– and its sudden fall from grace. [more]

The microfinance crisis in Andhra Pradesh has been compared to the situation in Nicaragua, which I wrote about for MyKRO last year. I haven’t been following the news all that closely, and the podcast gives a fascinating overview. I found the following points particularly thought-provoking:

Entrepreneurial journalists found out that as many as 30 microfinance borrowers had committed suicide in the state of Andhra Pradesh. This put the dark side of microfinance into the spotlight, and made it a political issue.
When compared with other personal finance options in India, microfinance is a mass production with low-quality service. Microfinance Institutions (MFIs) are more aggressive about repayment, unlike moneylenders (who charge higher interest rates but are like “parasitic organisms… who don’t want to kill the host.”)
Investors might be part of the problem, and not just part of the solution. The “bottom of the pyramid” gospel says that microfinance should commercialize, so it can scale and provide more opportunities to more people. The “social investors” promoting this gospel have good intentions, but their drive for scale might have lowered the service standards for these organizations.

That’s a photo of a microfinance borrower in Andhra Pradesh, from this Indian news website.

Andhra Pradesh : Micro Finance becomes ‘Macro Curse’ for people The past few years have seen the entire microfinance sector grow exponentially. As with any other boom, suspicion always exists on whether a bust is just around the corner. This is especially true in the current international setting; with a major financial bust that humbled Alan Greenspan to admit he was “in a state of shocked disbelief”.

In hindsight, it might seem obvious that the years of heady growth directly resulted in the sub-prime crisis and credit crunch. This heightens the sense of unease over the rapid growth of the microfinance industry and one is often seized of whether we are sitting on a bubble waiting to burst.In the case of microfinance, a bubble will be created if a significant number of members are funded beyond their repayment capability.

The atrocities of the Micro finance men on the consumers is increasing day by day. Already two people have committed suicides in the Srikakulam and Warangal districts and some suicide attempts.Since past two days the people have attacked the offices of microfinance and destroyed the infrastructure.

Read the rest here.

Overall, I think that the situation in Andhra Pradesh is devastating and tragic, but should not be interpreted as a blanket statement that microfinance is harmful.

I think that the key issues in microfinance are education and customer service. It is absolutely crucial that borrowers know how to use their loans, and that the MFIs provide real service. I think education and customer service should take precedent over commercial scale.

What do you think?

Links I Like: Post-Halloween Hangover Edition

Leslie — Wed, 03 Nov 2010 02:29:32 +0000

My dad laughed at me for sending so many Halloween updates, so this post is for him! May you continue to laugh at your Halloween-loving daughter!

My favorite holiday did not disappoint: concert, karaoke, visit with my favorite drag queen, opera… I really am such a lucky girl!

Here are my favorite Halloween-related links of this week:

Who Says You Can’t Celebrate Halloween in Rural China?

Wokai Fellow Evan Kornbluh posted this gem (with photos including that one ) about the Halloween party he hosted in Yilong County, complete with jack-o-lanterns, masks, candy, and holiday spirit.

However, there can be a flip side to Halloween fun, if school officials say: No Horsing Around

Lately I have been addicted to The Good Men Project, a web magazine that features all kinds of real stories about what men really think about things. This piece about a high school student’s unjust suspension for his awesome Halloween costume, especially caught my eye:

As part of his school’s spirit week, Dan Depaolis, a senior at Hamilton-Wenham Regional High School in the Boston area, was suspended for dressing as a medieval knight and riding a horse to school. If anything, he should be getting an award, not a suspension…

And what would Halloween be without sweet treats? Sweet treats can symbolize larger themes of globalization, outsourcing, and our increasingly connected world.

I stumbled upon this thought-provoking post by Kriszia Vengua, a Filipina freelance writer and entrepreneur. She writes:

At my local supermarket, there’s an aisle that still sells Chips Ahoy and Oreo cookies with the “Made in the USA” stamp on it. And people still buy it, even when there’s a cheaper pack of Oreos and Chips Ahoy that’s made in Thailand a couple of aisles down.

“Can they honestly do what I do?” a US based transcriptionist wrote on a job board once “How can someone from halfway around the world do what I can I do for that price? How can they be better?”

The answer is simple: they receive the exact same training, get the same amount of experience, in a country where labor prices are low, and English happens to be an official language.

There’s no accent needed in typing words. When that transcription comes in, you can hardly ever tell that it was typed by someone thousands of miles away. It’s essentially the same Oreos, the same Chips Ahoy.

There’s no emotion attached to the process: an order is placed, and someone fills it. Someone craves a cookie, they buy one.

The emotion lies more on the buyer: a friend of mine swears that the imported cookies tastes better. I admit, there’s a subtle difference, but it’s all a matter of preference. For someone who just wants something sweet, the difference is negligible.

I highly recommend reading her whole post. I once interviewed with a consulting firm in Washington D.C. that helps big companies enter emerging markets. As part of my final interview, I had to give a presentation on investing in the Filipino food processing industry. Her anecdote about the Oreos would have fit right in!

And, last but not least, the best way to get rid of a post-Halloween hangover is to begin celebrating the next holiday. Colin Nissan puts a name on this holiday, in McSweeneys:

IT’S DECORATIVE
GOURD SEASON, MOTHERFUCKERS.

I don’t know about you, but I can’t wait to get my hands on some fucking gourds and arrange them in a horn-shaped basket on my dining room table…

Thanks Cooper for that profanity-strewn link! Have a great day

Wokai Front and Center on Huffington Post!

Leslie — Mon, 18 Oct 2010 00:30:41 +0000

This morning, when I clicked through from this post about Krystal Ball and Generation Y in politics, to this one that Krystal Ball herself wrote for the Huffington Post, I found a Wokai ad front and center! Those that know me know that I used to lead Wokai‘s marketing efforts, and I am so impressed to see this in such a prominent, mainstream location, with such a concrete and easy-to-understand message. Congratulations to everyone involved.

On “doing well & doing good” – a reaction from Mongolia

Leslie — Sat, 09 Oct 2010 20:54:15 +0000

This adorable little girl lives at the ger camp in the Semi-Gobi Desert, the place where we rode camels. I chose her photo to illustrate this post, because I think her stylish coat and practical boots exemplify the type of consumerism that improves the lives of everyday Mongolians.

While I was in Mongolia, the insightful and prolific Akhila Kolisetty featured this quote from Jacqueline Novogratz, founder of the Acumen Fund:

You told me that you don’t like the phrase ‘Doing well by doing good.’ Yet, that’s what comes to mind for many when they think about social investing. What does it mean to you?

It implies that there are easy solutions. That the perfect way to change the world and end poverty is if we all can make a lot of money doing it. But when you look at poverty and what it takes to break through entrenched systems, high levels of fatalism, unbelievable levels of corruption, incredibly bad distribution, no infrastructure, you are not going to make a lot of money and serve the poor in a way that they can afford. You may make a lot of money and serve the poor in usurious ways that keep them poor forever, like many of the mafia services do, but if you want to provide systems that are fair and affordable, and that they can trust into the long term, building them takes a long time. Over time as you really hit scale, you will make money, but we’ve been in some of our deals for six or seven years and we feel we’re just starting.

I like Akhila’s response, which includes these words:

At the end of the day, “doing good and making money” is all a myth that we have deceived ourselves into believing. And perhaps it’s a marketing tactic of social businesses. But I’m sorry, but you can’t do both. Sure, you can ensure your social business is sustainable, but you, yourself are not going to be rich. In fact, your lifestyle and salary will probably be comparable to the lifestyle of non-profit employees. There is no difference between the two. Joining a social business is not a way to get rich or make money – it’s ultimately simply another way to empower the poor and work towards social justice. And I hope we can change our language to reflect this truth.

Click here to read the rest, and while you’re at it check out the rest of her excellent blog, Justice for All! I wrote her an email in response, which included these words:

I am writing this from Ulaan Bataar, Mongolia. Good businesses in this country include cell phones, satellite TV, car repair products, warm coats, solar panels, tourism, stuff for kids. All of this stuff makes life better for ordinary people, and makes money for the companies who sell it (though probably not a lot given all the things that Novogratz mentioned.)

The little girl’s coat and boots are probably imported from China, and purchased with cash brought in by hosting foreign visitors. The family has lots of livestock, so it probably produces most of its own food. But in this modern world, with solar-powered TV and foreign friends, a family cannot live on salty milk tea alone!

I’m curious to hear what you think

Foreign Young Professionals in China Mini Series #3: “Why China? Because I could.”

Leslie — Fri, 08 Oct 2010 03:27:18 +0000

I wrote this guest post for GeekMBA360, a blog I discovered when it featured Wokai about two years ago. I like this blog because it gives practical career advice from the perspective of a techie family man. I find that men and women give very different advice when it comes to careers, with men tending to say “where’s the money and power?” and women tending to say “what is your passion?” (My apologies for the gross generalization…) I appreciate the advice that Mr. GeekMBA360 gives to his many, many readers, and I enjoyed the opportunity to share my China story here. Below is the whole post, as it appears here.

—

Today I have a treat for everyone. Leslie Forman is a fellow graduate of University of California at Berkeley. She is a regular reader and occasional commenter on this blog. Leslie was a Latin American Study major at Cal, but ended up working in Beijing, China. Not only her journey is fascinating, she also writes an excellent blog called Beyond China’s Single Story.

I invited Leslie to write a guest post about her experience in China. Without further ado, it’s my pleasure to present Leslie’s guest post.

Written by Leslie Forman (http://www.leslieforman.com)

Originally from San Francisco, I have spent most of the past four years working in China. The other night Frank Chen from Vastsea Executive Search came to my Chinese school to give a presentation about the job search in China. He said that jobs for foreigners in China fall into four categories:

(1) English (teaching, writing, editing, speaking)
(2) Business Development (negotiating new projects, partnerships, and sales)
(3) Multinational Companies (in which the nature of the business is inherently global, and therefore needs a global staff)
(4) Entrepreneurship (my friend Joey, a creative and successful sculptor, often says, “China makes everyone an entrepreneur.” Just about every foreigner who has spent 5 or more years in China has launched a project of come sort!)

Most jobs involve more than one of these categories. For example, my most recent full-time job, with a British company now known as Yaxley China, included all four. I taught specialized, high-level English classes to Chinese lawyers, reporters, and engineers. I met with potential clients, and drafted proposals to describe opportunities for collaboration. My clients all worked for multinational organizations, in which they needed to communicate with clients and colleagues overseas. And a British entrepreneur started the company.

One of my best friends, an Aussie who has studied Chinese since high school, is a personal assistant to an entrepreneur who connects Australian investors with Chinese projects. Her job also involves all four of these categories, and she channels her obsession with Beijing’s music scene into BeijingGigGuide.com. I mentioned Frank’s framework to her, and she suggested that most foreigners who live in China for a while have careers that progress from one category to another. Many people start out teaching English, and then work for multinational companies, who utilize them for English editing and business development efforts, and then they eventually want to apply their skills and contacts to start something new.

My own experience has pretty much followed this progression. (Though I have not jumped into formal entrepreneurship. Yet.) I first moved to China in 2006, shortly after graduating from Berkeley, with an oh-so-appropriate degree in Latin American Studies. Why China? people always ask me. My short answer is, “because I could.”

A few days after my graduation, I thumbed through my well-worn copy of Delaying the Real World – an inspiring and practical book that should be on every adventurous twenty-something’s desk – and looked up just about every international opportunity listed.

Three months later, having spent the summer volunteering in English classes for recent immigrants, I started as an English Instructor at Jiaxing University, in a small-by-Chinese-standards city about two hours south of Shanghai, thanks to CIEE Teach in China. Next, I interned in the corporate social responsibility division of the American Chamber of Commerce in Shanghai, and helped a multinational ports company with its corporate social responsibility report. After a year and a half in China, I found myself homesick and returned to my hometown, San Francisco.

During my stint with socially entrepreneurial software startup there, I got very involved with a China-focused microfinance non-profit called Wokai. I then decided to move to Beijing. (I wrote more about my China story and China careers in general, in this post: How I Have Untemplated My Career in China.

This summer, studying Chinese has been my focus. I take classes at a private language school, and have worked closely with my wonderful tutor. My goal is to be able to collect information in Chinese in the workplace. I have been able to do this in my part-time job with a Chinese marketing company. We interviewed Chinese employees of a multinational retailer about their job satisfaction levels, and I was able to analyze their responses and write about them for the American client. I have also been volunteering for the Jane Goodall Institute and tutoring an 8-year-old Chinese-American girl in English. I am also looking for a new full-time job. I am very optimistic about opportunities in this emerging economy.

Overall, China has been good to me. My original decision to move here, definitely the most random of my life, has exposed me to so many adventures and opportunities, and I’m glad to have taken this plunge.

Related posts:

*Added October 3, 2010. I found a job! I have not started quite yet, so I am not ready to tell the Internets about it in detail, but I can say that it is with a large company, in a new industry for me.

Nick Kristof on Nicaragua’s Savings Revolution

Leslie — Sat, 02 Jan 2010 01:02:37 +0000

I just read an excellent column by Nick Kristof of the New York Times about savings programs in Nicaragua. It seems like a natural follow-up to the post I wrote about reasons to resist microfinance in Nicaragua, as it presents a productive solution to the problems of poverty and usurious lending practices.

Here’s part of it:

Right now, the world’s poor almost never have access to a bank account. Cash sits around and gets spent — and, frankly, often spent badly.

“We used to buy a three-liter bottle of Coke every day,” recalled Socorro Machado, a 49-year-old homemaker in a village here in northwestern Nicaragua. That was a bit less than a gallon, and the cost of $1.75 consumed a large share of the family’s budget.

Then Catholic Relief Services, an aid organization, arrived in the village with a new program to promote savings. It provided a wooden box with a padlock and organized savings groups of about 20 people who meet once or twice a month, typically bringing 50 cents or $1 to deposit in the box.

Some of the money is lent out to start a small business, but the greatest benefit of these programs seems to be that they provide a spur to save.

“Now we buy a bottle of Coke just once a week, and we put the money in savings,” Ms. Machado said. She saves about $5 a month in her own name and another $5 a month in her son’s name and has plans to buy a computer for him eventually. [more]

No Pago! Reasons to Resist Microfinance in Nicaragua

Leslie — Tue, 22 Dec 2009 00:58:48 +0000

This post originally appeared on myKRO.org on November 16, 2009. I highly recommend clicking through to read the excellent comments from people who know more about Nicaragua.

“Why would borrowers in Nicaragua protest against microfinance?” my friend Michael asked me a few days ago.

Michael and I both majored in Latin American Studies at Berkeley. His email re-ignited my excitement for microfinance in Latin America. When I was studying abroad in Chile I interned with an organization called Accion Emprendedora, which sparked my interest in the intersection between business and social good.

Michael sent me this fascinating article: “No Pago” Confronts Microfinance in Nicaragua by Elissa Pachico:

Last January in northern Nicaragua, as a crowd of hundreds blockaded the Panamerican Highway late into the cool Monday night—soaking tires in gasoline before setting them on fire, hurling rocks at police and TV cameramen, bringing traffic to a standstill for 10 miles—the words once again began appearing in news reports and political speeches and inside the National Assembly debate halls: No Pago, No Pago!

In the months that followed, the refrain was hardly absent from the airwaves—not on May 12, when a group of 20 people smashed the windows of a truck belonging to a local microfinance organization, or in early September, when some loan officers were so harassed by protesters barricading their office doors and badgering the clients who attempted to enter that they decided to stop showing up to work altogether.

These incidents are only a few examples of the bad feeling that microfinance institutions (MFIs) have inspired among a section of the rural population in north and central Nicaragua. Confronted by the bold protests of the Movimiento de Productores, Comerciantes y Microempresarios de Nueva Segovia, or more colloquially as the No Pago (I Won’t Pay) movement, politicians are growing increasingly nervous that the group’s protests are scaring away international investors and could strike a heavy blow against the country’s shaky economy. (more)

Since reading this, I’ve researched like the committed and curious student of Latin America that I remember from college, perhaps for the first time for the 2.5 years I’ve been living in China.

So, why have the borrowers been protesting? Here are some reasons I’ve uncovered.

High Interest Rates

Microfinance institutions in Nicaragua charge interest rates of as much as 21%. The protestors contend that this rate should be no more than 8%. Yes, 21% sounds like a large percentage of a small loan. However, microfinance institutions have high transaction costs, based on the labor-intensive process of managing repayments.

Though this is a much-cited reason for these protests, I don’t think it’s sufficient to justify the violence.

Encouragement from President Ortega

President Daniel Ortega has supported the protestors, with both explicit endorsements and direct involvement in a rival credit institution.

On July 12, 2008, Ortega visited the north of Nicaragua and made the following speech, as reported by Microcapital.org:

[He] called on the population to protest against MFIs charging usury interest rates in order to convince them to renegotiate their rates: “We need to end this policy of usury…go march and plant yourselves in front of the offices of the usurers…Be firm! The usurers don’t have any other option: either they renegotiate or they renegotiate”. Ortega did not cite a particular MFI, and several microfinance organizations in the region were forced to close their doors due to protests led by a group of farmers called Movement of the Producers of the North (MPCS).

Mr. Ortega, a onetime Marxist revolutionary who led Nicaragua from 1979-1990, was re-elected in 2006 with 38% of the vote. In his campaign, he pledged to end “savage capitalism” and bring in foreign investment to help the 80% of Nicaraguans who live on less than $2 a day.

The state also recently started a new credit union called Alba-Caruna, which uses aid money from Venezuela. The website venezuelaanalysis.com describes the program in this way:

Caruna is the body that administers funds made available for development projects in Nicaragua within the framework of the Bolivarian Alternative for the Americas (ALBA). Currently, ALBA’s member countries are Cuba, Bolivia, Dominica, Nicaragua and Venezuela. The Honduran government has announced that it too intends to join ALBA shortly. So Nicaragua’s experience is important as an example and model of the economic alternative based on solidarity and fair terms of trade that ALBA represents.

A peer reviewer responding to an article on the Global Integrity Report describes the organization in entirely different terms, as “a compatible private microfinance bank loyal to Daniel Ortega.”

Regardless of one’s perspective on Venezuela’s influence across the Americas, it is clear that Daniel Ortega has a personal interest in Nicaragua’s microfinance sector.

Reversed Social Capital

In the book Influencer: The Power to Change Anything, the authors cite Muhammad Yunus’ work with the Grameen Bank as an ideal example of a “high-level influence tool – the power of social capital”(173). The book defines social capital as “the profound enabling power of an essential network of relationships”(174). By organizing Bangladeshi craftswomen into solidarity groups, he built the social capital necessary to ensure that these housewives-turned-entrepreneurs would repay their loans on time.

I believe that in Nicaragua, the “No Pago!” movement has had far more success in leveraging social capital than the local microfinance institutions. As reported in the Latin American Herald Tribune, “The leader of the protesters, Omar Vilchez, said on La Primerisima radio that they would continue until Congress approves a debt moratorium and the microlenders suspend for three years asset seizures from delinquent borrowers.” Omar Vilchez also happens to be the former mayor of the town of Jalapa. He has denied direct connections to Daniel Ortega and Alba-Caruna. By attracting media attention, he convinced other borrowers to follow his example. In the words of Influencer, he turned “a me problem into a we problem” (181).

I argue that strategic use of social capital has contributed to the success of microfinance in many places, but in Nicaragua it has contributed to its failure.

One Borrower, Many Loans from Many MFIs

One borrower involved in the Jalapa protests had amassed $600,000 in debt, ostensibly from many different MFIs Taking out a loan to pay off another loan nullifies any poverty-alleviation effects, and locks borrowers into a cycle of debt. This is not only true in Nicaragua; a friend who served as a Kiva Fellow in Peru witnessed a similar trend there.

Ineffective Incentives Within MFIs

Both borrowers and loan officers need incentives that ensure the prompt repayment of loans.

Caroline Bressan, a Senior Portfolio Associate with the Calvert Foundation, explains in this excellent Q&A with Microfinance Focus.

From an investor’s perspective, one thing that can be done is to fund those MFIs that are working to create positive incentives for those borrowers that do make their payments on-time. One example of this is BANEX in Nicaragua. They are currently raffling a new truck at each of their problem branches only to those clients who have kept making their loan payments. Another possibility is making certain types of loan products available only to those borrowers with a clean payment record or by creating a separate loan name for those same borrowers such as an Excellence Loan or Gold Level Loan, thereby creating something that they could be proud of.

Another lesson learned from this crisis is to scrutinize not only the procedures and policies of an MFI, but also the implementation of these practices. With the growth we’ve seen in the industry over the past few years… credit policies were relaxed in favor of higher growth rates. Many loan officers were incentivized based on the growth of their portfolio alone. Instead of focusing only on growth, the importance of portfolio quality and knowing their clients should also be stressed in loan officer training sessions and reflected in compensation packages. If loan officers are incentivized in the right way, they will put more energy into choosing the right clients for the MFI and avoid repeating what happened in Nicaragua, where some clients took out loans with no intention to repay. (more)

Drop in Remittances

With the U.S. economy in recession, Nicaraguan laborers working in “el Norte” have not been able to send as much money home. I’ve heard that remittances are have dropped for the first time in Mexico, by 20% this year. And some Mexicans have sent money to support relatives in the U.S. Since Nicaraguans and Mexicans work in similar industries in the U.S., I think it’s fair to assume that the impact on remittances in Nicaragua has followed a similar trend.

Overall, Nicaragua’s “No Pago” movement can be seen as a “perfect storm” in which many factors contributed to the collapse of the microfinance ecosystem.

What do you think? I look forward to hearing your comments!

Note: I invite you to check out the insightful comments here.

Cow Dung, Poverty and Microfinance in Inner Mongolia

Leslie — Tue, 22 Dec 2009 00:57:55 +0000

This post originally appeared on the Wokai blog on January 27, 2009.

What does it mean to be green? How do energy sources relate to poverty alleviation in developing countries? Who should be making decisions about rural energy use?

I’ve been thinking more about these questions lately. We recently posted some new borrowers on Wokai, whose businesses focus on selling cow dung to burn as fuel. Here’s one such profile:

Several things stand out to me in Aodunsiqige’s profile: her daughter’s poetic name and musical ambitions, her family’s transition from selling millet to lending equipment to selling cow dung, her awareness of options and prices for winter heating materials…

Curious about the environmental impact of Aodunsiqige’s business, I asked my friend Jimmy Tran, who is a pHd student in Berkeley’s College of Natural Resources, writing his dissertation on air quality in China. Jimmy shared the following chart:

Source: World Health Organization. Download WHO_FuelForLife_2006

In other words, the energy content of dung is low, so you need to burn a lot to produce heat. Combustion is inefficient, and releases many toxic products, which are harmful to both climate and health. Much of the burning happens indoors, which exposes people directly to the smoke.

The use of dung for heating is most common in high elevation regions, where wood and agricultural products are scarce, meaning few alternatives exist. However, the dung is produced locally, which suggests that less energy is expended in transporting it to its destination.

Thanks Jimmy for sharing your expertise!

George, who recently returned from Inner Mongolia, says that dung is used for both cooking and heating homes. He visited a family that had an empty brick compartment in their house, that heated the room and the food cooking on the stove, and had the resulting smoke channel away through the chimney. They can also burn coal in the same compartment. Here’s a quick video he made showing what this looks like:

This reminds me of a blog post that Courtney wrote last year, about her conversation with Tracey Turner from MicroPlace regarding including a “green filter” on Wokai.org to differentiate borrowers using environmentally-friendly technologies. She wrote:

Are green borrowers necessarily “better” or more “worthy” of a microfinance loan than non-green borrowers? Is it right to create a “green” tier system? Shouldn’t the loan distribution be based more on need rather than a “green” factor? Why should Wokai empower users to impose their standards on the working poor? Shouldn’t it be based more on a redistribution of wealth than a redistribution of standards?

Yes and no. Some green technologies are beneficial in the eyes of both the user and borrower. For example, some of the microentrepreneurs we visited in Ningxia Province were using solar panels to decrease costs. Why pay for electricity when they can rely on solar energy for free? (Solar panels were donated to the village by a Chinese solar company.) Another borrower we spoke with used biogas to heat her stove. Her entire house was completely sustainable. In both these situations, using clean technologies and microfinance ultimately allowed borrowers to drive down costs. Such a situation allows both borrowers and users to gain from the combination of green and microfinance. …

Microfinance is about helping those in need and green efforts should be secondary to that. It is our intention to allow users to search by those most in need as well as those that use green business practices. In order to make it all work together, I think it is important to educate users about the green factor, why some borrowers can be green and other can’t. It will also be important to monitor non-green borrowers to make sure they are not being left behind because of the “green” filter. We intend to do so.

Overall, I think that Aodunsiqige’s business is a pragmatic way to apply the resources available in her community to meet a critical seasonal need. I am proud to support borrowers like her in their entrepreneurial endeavors. At the same time, there is much room for energy innovation in China. What if there were a more environmentally friendly solution that was both cheaper than local alternatives and presented easily-noticed benefits like improved smell and heat capacity? I’ve read about D.light Design, which makes solar-powered lights for India, and Suntech Power, China’s largest solar company, and I attended the latest event hosted by BEER (Beijing Energy and Environment Roundtable) and I am enthusiastic about the great work that people are doing to address these issues!

Obama, Microfinance, and China

Leslie — Tue, 22 Dec 2009 00:56:44 +0000

This post originally appeared on the Wokai blog on December 29, 2008.

Yes, there is at least one connection between these three words. Her name is Nancy Barry.

A trailblazer in the field of Enterprise Solutions to Poverty, her current work focuses on creating pragmatic ways for large corporations in China, India, Mexico, and Colombia, to create opportunities for the working poor in these countries. For many years she was the President of Women’s World Banking, an international microfinance network.

I just came across this article from an Indian finance website, describing her role as a close advisor to Barack Obama.

Named one of the most powerful women in the world, Nancy M. Barry, 59, the Founder and President of Enterprise Solutions to Poverty and former President of the New York-based Women’s World Banking, is no stranger to the limelight. Known to be a close confidant and friend of the Obama family, she is now expected to play a key role in shaping the new US regime’s relationship with India and Indians. President-elect Barack Obama’s mother, Ann Dunham, worked with her as the first policy change manager of Women’s World Banking, from 1992 to 1995.

Says Barry: I see in Obama many of the qualities of his mother: the capacity to get to the heart of the matter, the ability to get different factions to work for common cause, and a passion to work together in building economies that work for the majority.

I am so excited to hear that she will be closely involved with the Obama administration. I first learned of her connection with Obama from this New York Times article, which describes how Obama’s mother’s globetrotting work in anthropology and microfinance shaped his worldview. Nancy Barry describes Stanley Ann Dunham as “a very, very big thinker,” who “was not afraid to speak truth to power.”

I met Nancy in October 2007, when she gave a speech at AmCham Shanghai‘s Corporate Social Responsibility Conference & Awards, which I helped to plan. Here’s a description I wrote from that event:

In her keynote address, Nancy Barry, of Nancy Barry Associates — Enterprise Solutions to Poverty, argued that companies should move beyond philanthropy to create enterprise solutions to poverty. Drawing from more than 30 years of experience in emerging economies, she urged the audience to move away from “Random Acts of Kindness” and mobilize core capabilities to connect low-income people with global growth. “The biggest problem,” she said, “is that poor people don’t have enough money.” To address this, she described four key areas of activity: engaging small farmers as suppliers, creating decentralized distribution channels, developing products to increase income, and building enterprise networks.

In China, she has worked with China Mobile, Mengniu (a milk company), Proctor and Gamble, and several other companies. Here’s the presentation she gave at AmCham Shanghai on October 30, 2007. Download Nancy Barry 10.30.07

I am optimistic about the roles that Enterprise Solutions to Poverty and microfinance may play in Barack Obama’s foreign policy decisions.

*Note (added 1/16): Microfinance Gateway referenced this post here.