by Jennifer Gong, KF9 Tanzania

The Blue Sweater is a book that recounts the experiences of Jacqueline Novogratz, social venturer and founder of the Acumen Fund. The book contains a string of stories, but the most poignant is the tale behind the title of the book. When she was young, her uncle gave her a blue sweater, which she eventually outgrew and donated away. It would turn out that the journeys of Novogratz and the blue sweater would eventually cross paths a decade later in Rwanda – She, jogging along the dusty roads of Rwanda and it, covering the small frame of an African boy.

A few weeks ago, I had my own “blue sweater” moment. I was in the Mbagala community collecting journal updates when I spotted Salehe sitting nondescriptly behind 30 other people. He would have been no different than any of the other YOSEFO clients there, except for the fact that he was sporting a dark blue cap with a large “V” in front. Instinctively I rushed over and, as I had suspected, two swords crossed over it, creating the symbol for the University of Virginia. I went to UVa, and I could not help think of the fellow student who discarded his old cap and whether if he ever thought it was going to end up as a prized possession of a Tanzanian boy. Unlike Jacquline’s blue sweater, the cap was not mine. Nevertheless, it did not fail to create a sense of wonder that in a world so vast, such a connection could be made.

A rare few will have a story like Jacqueline’s. But for those who do not have the opportunity to travel far and wide, there is Kiva. I love this organization because it allows anyone to experience a connection, a small “blue sweater” moment. In fact, it does one better. The incident revealed to Jacqueline how “our actions – and inaction – touch people we may never know and never meet across the globe”. But through Kiva, we can see who we are impacting halfway around the world. And though we may never physically meet our borrowers, the amazing journals posted by Kiva Fellows open the doors into the lives of microfinance clients all over the world.

I hope during this season, all lenders can experience and celebrate moments of connection. Happy holidays!

By Kimia Raafat, KF9 Ecuador

With the holiday season upon us and Kiva Gift Certificates flowin like Cristal and Dom Perignon in a Diddy rap video, I figured it would be a good time to review with lenders (both old and new), the process of a Kiva Loan.  Here is a link to the video me and my best friend, Emily Enberg made for the Tongal/Kiva Video Contest…  Happy Holidays!

http://tongal.com/app/submissionDetail.action?id=640;EL1474 

Kimia Raafat is a Kiva Fellow (KF9) at a new Kiva partner, D-MIRO  in Guayaquil, Ecuador.  If you would like to know more about D-MIRO please visit the Partner page or Lend!

At a high-level roundtable meeting of the All Party Parliamentary Group on Microfinance/Microcredit (APPG-MF) on the 10 December the Department for International Development (DFID) opened a consultation on the design of a major new capacity-building fund for microfinance in Africa. This is currently being designed at DFID in partnership with the World Bank. You can now view the minutes of the meeting at the APPG’s website.

DFID have just released a concept note, which outlines the rationale, approaches and activities that are proposed for the fund. Further consultations are ongoing with microfinance institutions and other bodies, and RESULTS will be preparing a response to the concept note for feedback to DFID. If you have any comments that you would like to be incorporated into this response we would really like to hear them at julia@results-uk.org

The Microfinance Association has been operational since the summer of 2009. Its aim is to provide training and accreditation for those working in the rapidly growing area of microfinance.  We recently met  Ademola Tosoye  to find our more about how the Assocation might be relevant for those looking for entry level roles in international development. Read the full report at  http://www.careers.lon.ac.uk/output/Page647.asp#J and visit our facebook page for a link to a London microfinance event on March 24th 2010 http://www.facebook.com/#/internationaldevelopment

According to the Oxford dictionary, the definition of ‘SUCCESS’ is as follows:

• noun 1 the accomplishment of an aim or purpose. 2 the attainment of fame, wealth, or social status. 3 a person or thing that achieves success.

Another definition found on the internet: (n) The achievement of something desired, planned, or attempted.

So what is success for you?

This post came out after talking to a friend who decided to leave her HR job to follow her passion of working with microfinance. She said: I don’t feel fulfilled with my current job and I have been doing it only because I did not have an opportunity like this.

Sometimes you might have to abdicate from your dreams to achieve other priorities, but try to think for how long more you can stand this position and if the time has not arrived to follow your dreams.

Have you ever watched the video “What leads to success?” from TED ?

SUCCESS: PASSION – WORK – GOOD – FOCUS – PUSH – SERVE – IDEAS – PERSIST

“Do it for LOVE. Not MONEY” – “If you do it for love, the money comes anyway”

Steve Olson wrote:

• Success means knowing I do the right things for the right reasons.
• Success means not compromising integrity.
• Success means I share with those who need my help.
• Success means I give my time to my family.
• Success means providing value to others.
• Success means living up to my commitments.
• Success means building a community – not a network.
• Success means looking in the mirror and liking what you see.

He believes that money is the by-product of living a successful life – not the measure.

Try to list everything you looove doing. Now, can you think of a way to do what you love and get the SUCCESS that YOU want to achieve? If you said yes! Lucky you! Go for it!

Finally, there are only a few more days to 2010 and there is not a better time to think about it. Try to make your own definition of success and share it by adding to the comments! Good luck!

[a quickie from the fellows blog]

By Brian Kelly, KF9, Armenia

After making several visits to various borrower communities in the rural villages throughout Armenia, I started to notice a familiar figure emerge.  Each village seemed to have a mayor.  Not a mayor in the traditional, sash-wearing, top-hat donning, political scandal-causing sense, but a mayor of microfinance.

In these villages usually there is a central gathering place, often a community center where the credit officers meet borrower groups to finalize paperwork, originate loans, provide information on the products offered, or even collect payments and make disbursements.  But usually this community center is only the starting point, and individual visits are necessary to track down specific borrowers at their homes – often also their place of business.  Usually for new clients, these home visits are a critical part to the assessment process for a candidate for a new loan.  Well it turns out that finding borrowers, even in villages populated by less than five hundred residents, can prove surprisingly difficult.  After all, the borrowers work long hours which can involve trips to and from their fields, tending to their livestock at a community barn up the road, or even not-so-brief detours spent at a neighbor’s house catching up over a chatty Armenian coffee.

Usually after making initial contact in the village, the credit officer is then off to go find certain people individually, sometimes at a loss for how to get there.  Enter the mayor.  The mayor, usually the most loquacious one in the community center (sometimes not even there for loan purposes) and the Chief Gossip Officer of the area, quickly volunteers himself to help track down borrowers and be of any and all assistance possible.  He hops in the backseat of the two-door Lada Niva 4×4 without being asked and starts navigating towards the borrower before the credit officer knows what hit her.

Along the way the mayor happily glad-hands fellow villagers, gives his account of general village goings-on, and points out what everyone’s business is, who they are related to, and any other pertinent info he sees fit to divulge.

Sometimes the first try of a certain location is unsuccessful and the borrower cannot be found.  Without missing a beat, the mayor takes charge, “This way! Her sister lives just around the corner, she is probably there!” And we follow loyally in hopes of finding the client in question.  Without the mayor, we would be stumbling around blindly.  And maybe we are anyway, but at least it feels official.

The mayor serves an important role.  He acts as the finger on the pulse of the community, offering up whether its healthy or facing hard times.  How the latest crop has turned out.  Whose sons are off working in Yerevan or Moscow to help support the family.  He is the chief librarian of all local gossip, a favorite pastime in Armenia.  And despite the bad rap it often gets, gossip can be useful in a tight knit community in which a credit officer might be trying to develop an understanding for potentially new clients.

Sometimes it’s the little things that can interest me most; this is definitely one of them.  An enjoyable insight into the not-so-insignificant role that these village socialites play in helping credit officers here.  And I’m sure the credit officers are thankful, especially when they get the warning of a less-than-friendly neighborhood dog at the 3rd house on the left just around the next bend.

Brian Kelly is a member of KF9 meeting top brass in villages throughout Armenia, and plans to run for mayor of Yerevan in 2010. He enjoys gossiping, learning about microfinance, and cutting red ribbons with oversized scissors.  To support Armenians on Kiva.org, check here for fundraising loans. Happy Holidays!

By Brian Kelly, KF9, Armenia

After making several visits to various borrower communities in the rural villages throughout Armenia, I started to notice a familiar figure emerge.  Each village seemed to have a mayor.  Not a mayor in the traditional, sash-wearing, top-hat donning, political scandal-causing sense, but a mayor of microfinance.

In these villages usually there is a central gathering place, often a community center where the credit officers meet borrower groups to finalize paperwork, originate loans, provide information on the products offered, or even collect payments and make disbursements.  But usually this community center is only the starting point, and individual visits are necessary to track down specific borrowers at their homes – often also their place of business.  Usually for new clients, these home visits are a critical part to the assessment process for a candidate for a new loan.  Well it turns out that finding borrowers, even in villages populated by less than five hundred residents, can prove surprisingly difficult.  After all, the borrowers work long hours which can involve trips to and from their fields, tending to their livestock at a community barn up the road, or even not-so-brief detours spent at a neighbor’s house catching up over a chatty Armenian coffee.

Usually after making initial contact in the village, the credit officer is then off to go find certain people individually, sometimes at a loss for how to get there.  Enter the mayor.  The mayor, usually the most loquacious one in the community center (sometimes not even there for loan purposes) and the Chief Gossip Officer of the area, quickly volunteers himself to help track down borrowers and be of any and all assistance possible.  He hops in the backseat of the two-door Lada Niva 4×4 without being asked and starts navigating towards the borrower before the credit officer knows what hit her.

Along the way the mayor happily glad-hands fellow villagers, gives his account of general village goings-on, and points out what everyone’s business is, who they are related to, and any other pertinent info he sees fit to divulge.

Sometimes the first try of a certain location is unsuccessful and the borrower cannot be found.  Without missing a beat, the mayor takes charge, “This way! Her sister lives just around the corner, she is probably there!” And we follow loyally in hopes of finding the client in question.  Without the mayor, we would be stumbling around blindly.  And maybe we are anyway, but at least it feels official.

The mayor serves an important role.  He acts as the finger on the pulse of the community, offering up whether its healthy or facing hard times.  How the latest crop has turned out.  Whose sons are off working in Yerevan or Moscow to help support the family.  He is the chief librarian of all local gossip, a favorite pastime in Armenia.  And despite the bad rap it often gets, gossip can be useful in a tight knit community in which a credit officer might be trying to develop an understanding for potentially new clients.

Sometimes it’s the little things that can interest me most; this is definitely one of them.  An enjoyable insight into the not-so-insignificant role that these village socialites play in helping credit officers here.  And I’m sure the credit officers are thankful, especially when they get the warning of a less-than-friendly neighborhood dog at the 3rd house on the left just around the next bend.

Brian Kelly is a member of KF9 meeting top brass in villages throughout Armenia, and plans to run for mayor of Yerevan in 2010. He enjoys gossiping, learning about microfinance, and cutting red ribbons with oversized scissors.  To support Armenians on Kiva.org, check here for fundraising loans. Happy Holidays!

This is part two of a three-part series, “How Then Shall We Help?”

Last month I stated that decreased suffering does not necessarily follow increased prosperity. In many cases, increased prosperity simply leads to new kinds of suffering. Helping our neighbors materially is not enough. It would be easy to assume from those reflections that the answer to the question, “How then shall we help?” would be this: Plant churches, hold evangelistic crusades, distribute Bibles, and get people saved. As Jesus said, “For what will it profit a man if he gains the whole world and forfeits his soul?” (Matt 16:26) Why, then, does HOPE waste its time doing economic development when it could be focusing solely on the real work of preaching the Good News? The core issue here is whether our efforts should focus unilaterally on the spiritual condition of humanity.

The truth is this: We cannot ignore our clear call to generously give to the poor—and not just because it amplifies our words. Throughout Scripture (over 2,000 biblical passages) we are called to help the poor in tangible, material ways. Humans are not simply spiritual beings which happen to exist in a physical state. The needs of the present must be met while we seek to address the needs of the eternal. Why?

• The Bible says our faith is void without it. “If a brother or sister is poorly clothed and lacking in daily food, and one of you says to them, “Go in peace, be warmed and filled,” without giving them the things needed for the body, what good is that?” – James (James 2). Viewing compassion and justice as a “means to an end” (to get people saved) illustrates a troubling disconnect between body and soul. Our concern for the poor should be a natural and generous outpouring of our hearts, which have been transformed by Christ. As James said, if we ignore suffering, of all types, in our communities here and abroad, even if we share an encouraging word, “What good is that?”

• The historical Christian Church has embodied it.”Nothing has contributed to the progress of the superstition of the Christians as their charity to strangers…they provide not only for their own poor, but for ours as well.” –Julian. As the anti-Christian leader of the Roman Empire, Julian made this comment in 360 A.D. History indicates that the early Church saw people as more than spiritual beings. It was that radical generosity which provided fuel to the message of Christ. Early Christians, it seems, as Tim Keller describes, “were promiscuous with their charity” and it showed in the Church’s rapid growth in that time.

• Jesus taught and practiced it. “Which of these three, do you think, proved to be a neighbor to the man who fell among the robbers?” – Jesus, in the Parable of the Good Samaritan. Jesus, as Creator and Almighty God, chose to come and live among us, the poor. His Incarnation alone speaks to His concern for more than just our souls. He came from heaven to live among us on earth. While on earth, he healed the sick, befriended street-dwellers and prostitutes, and cared for the poor. In response to Jesus’ question above, someone in the crowd answered, “The one who showed him mercy.” Jesus replied to him, and to us, “You go, and do likewise.”

There is a problem if we view our sole purpose as Christians to proclaim the Gospel verbally. It illustrates a severe disconnect if we overlook the physical, emotional and social condition of our neighbors in our attempts to introduce them to Jesus. Further, our acts of service must not be viewed as a “means to an end.” Certainly, radical generosity opens doors to proclaim the Gospel. But, the Good Samaritan was not heralded because his mercy led to a conversion. He was heralded because countercultural compassion is the only appropriate response from a person whose heart has been transformed by the love of Christ. Thankfully, this is not an either/or proposition.

Next month, final reflections in the series, “How Then Shall We Help?”

(Chris)

My last day in the country was the beginning of the Bangladeshi weekend – Friday.  That meant somewhat less traffic, a blessing to be sure.  I spent three hours, starting at 10am, with my former research assistant, Abdul Mannan Talukdar.  He is the first Area Manager in the history of Grameen who started as a loan officer (a position now called “center manager”).  He is immensely proud of that, as he should be.  An area manager oversees 8-10 branches, each of which are staffed by about seven staff (almost always including a university-educated branch manager) and serves several thousand clients.  He told me about his journey, culminating in that historic promotion, dating from when I last saw him, in 2006.

In Bangladesh, the difference in status, and career track possibilities, between someone with a Masters Degree, and someone without one, is much greater than here in the United States.  In fact, it is still inconceivable to some of my university-educated friends in Dhaka that Mannan is serving as an Area Manager, even after his 29 years of outstanding service to Grameen Bank.  I mentioned to several of them that he was now an Area Manager, and they “corrected” me, saying that he was a Program Officer (the deputy to an Area Manager).  Mannan is a colorful character, with an endless supply of stories, ranging from amusing to poignant, not to mention an ability to perform magic tricks, as well as experience as a director of village and semi-professional theatre productions.  Talk about a Renaissance man!

After I bid him good-bye, I went to have tea with my former Grameen Foundation colleague Tania Ashraf.  The daughter of a renowned Bangladeshi diplomat, she is now happily engaged, and she graciously introduced me to her quietly charming fiancé.  She is working for the World Bank’s office in Dhaka, and seems to be enjoying it.

Finally, I had one more cup of tea – and delicious appetizers – with Humayun Kabir, the just retired Bangladeshi Ambassador to the United States.

Ambassador Kabir was the first in a long line of Bangladeshis who have extended their uniquely gracious sense of hospitality to me.  He and his wife welcomed this 20 year-old into his home when he was a junior staff member in the Bangladeshi embassy in Washington in the mid-1980s.  (I was preparing myself to go to Bangladesh, and trying to learn the language.  He answered a letter I wrote to the embassy to see if someone would host me during the winter break of my senior year in college.)  He is a big fan of Grameen’s and is passionate about helping promote vocational training in Bangladesh during his retirement.

Before long I was off to the airport, and then en route to Dubai, where we have a regional office led by a remarkable Egyptian woman named Julia Assaad.  What a week it was – unforgettable, like each of the many trips I have taken to this very special nation that is transforming itself before our eyes!

Looking for a way to rate or find a good nonprofit for your end of the year donation?  A new resource, Philanthropedia is a new interesting website which provides a way of finding a nonprofit which fits your giving needs through expert analysis.  This website also runs a blog which can be found here.

I arrived at the Grameen Complex at 10:30am on Thursday, after having visited my old dentist (who does quality work for a fraction of the price charged back home).  Before I began my first meeting, I noticed the almost frenetic activity around me in each office I entered.  My good friend Mir Akhtar Hossain, who heads Dr. Yunus’ person staff, was so busy he could barely catch up with me – much less indulge in our traditional lunch of chicken biryani down the road in Mirpur One.  Even after thirty-three years in existence, complacency has hardly taken root in the Grameen family of companies.

My first meeting was with Nazneen Sultana, one of the first women to head a Grameen Company.  Grameen Communications’ main job is to serve all the information technology needs of Grameen Bank – hardware, software, you name it.  With the transition to version 5.0 of the Grameen Banker software Nazneen and her team developed, Grameen Bank’s management not only can track each client’s savings and loan activity, but also to manage payroll, H.R., accounting and much more.  Quite an accomplishment!

Now, working with a firm in Japan, Grameen Communications is on the brink of moving to an electronic passbook and a virtually paperless Grameen Bank.  As she is almost entirely focused on Grameen Bank’s needs, Nazneen is not interested in selling this software to other microfinance institutions (except possibly in Bangladesh).  She voiced support for Grameen Foundation’s Mifos software platform, and asked to get a briefing on the current status.

Later in the day I had meetings with Professor H. I. Latifee, the head of Grameen Trust, Imamus Sultan, the head of Grameen Kalyan, and Lamiya Morshed, the director of the Yunus Centre.  I was excited to learn that Grameen Trust has registered its own NGO in Zambia called “Grameen Zambia”, that Grameen Kalyan is moving ahead with using telemedicine to take its health program (now operational in 51 sites nationwide) to the next level, and that the Yunus Centre is close to launching a website dedicated to Dr. Yunus’ breakthrough idea — Social Business.  I promised to send updated information about the two social businesses GF has launched – Grameen Capital India and Grameen-Jameel Pan-Arab Microfinance – well in advance of the public launch of the website, so she could profile them.

My evening was spent back at the hotel, visiting two friends who worked for CARE-Bangladesh in the 1990s, my colleague Sabrina Quaraishi who was in the country gathering information about the Grameen Scholarship program that GF supports, and Ahasan Habib, our technical advisor in Indonesia who has done so much to contribute to the success of microfinance in the areas of Banda Aceh worst affected by the 2004 Tsunami.

At the end of the day I was pooped – and trying to imagine how all the thousands of Grameen staff around the country felt after a day of exertions that were certainly more taxing than my own.

I awoke on Wednesday in what we in the U.S. would consider a large tin shed.  As the manager had warned, mice had run amok in the rafters at times during the night.  Fortunately, I was able to tune it out after a while.  Soon I was off to the Zianpur bazaar to say my goodbyes to the local Grameen staff, the teachers at the high school whom I had always been close to, and others in the community.  I felt quite emotional by the time I jumped on the back of a motorcycle and headed to Aricha, where I would get a public bus to Dhaka.

December 16 was Victory Day, a national holiday to commemorate the successful conclusion to the 1971 War of Liberation.  It is a day for celebrating all things Bangladeshi, including the founding fathers who led the battle for an independent nation.  En route to the capital, our bus passed by the national monument to the martyrs of the liberation period – it was teaming with people, rich and poor, educated and illiterate, who had come to be part of the festivities and remembrances.  Many times over the years I have heard Professor Yunus exhort Bangladeshi audiences that the best way to honor the heroes of the founding of Bangladesh was to work to liberate the country from poverty.  For such a young nation with the idealism of the freedom struggle still fresh, it is powerful imagery that I have seen be a strong motivating force.

After returning to my hotel, I started my way to the home of my old friend Rotun Kumar Nag.  I refused to take the overpriced car service offered by my hotel, and went by public transit instead.  As a result, I was a bit late.  But once I arrived, Rotun and his wife – a retired Grameen executive who served for 12 years – entertained me with delicious Bengali food and all manner of gossip about Bangladesh and Grameen.

When I had arrived at Dhaka’s international airport 21 years ago this month, Rotun had been one of the three officials sent by Professor Yunus to receive me.  In the months that followed, he helped me learn the language and culture of Bangladesh and Grameen.  In the process, he became a lifelong friend, while he rose up the ranks to become a zonal manager, the most senior field-based position in Grameen Bank that entails overseeing hundreds of staff and roughly 200,000 clients who are in different stages of struggling to overcome poverty through microfinance.

JM left this morning. Now I’m in a scramble to get all the information I need from people, but before everyone starts leaving for vacation. It seems like a lot of people take off the week between Christmas and New Years. I have almost finished CERISE-which is a tool that evaluates the social impact of an MFI. I’m eager to see the results. Now I’m also working on an operational cost analysis in an attempt to measure the cost of Kiva to the MFI. Since Kiva does not charge the MFI interest on funds, this study is an attempt to discover the effective interest created by additional work and other expenses. It should be plenty to keep me busy. Only three more weeks working at CEPRODEL! Time is flying…

By Sheethal Shobowale, KF9, Peru

Counterfeit money is a very serious topic in Peru.  There is so much false money floating around that it is extremely possible that at some point or another, you will try to buy some fruit from the woman selling fruit on the corner and she will return your bill or coin exclaiming, “falso!” (false!)

This has happened to several of my friends during my time in Cusco.   One friend tried to pay for our salsa class with a 5 soles coin.  Then someone else paid with a larger bill and got his coin as change.  “Falso!” exclaimed the person who received the change and looked for my friend who gave the false coin to return the useless metal to the proper owner.  In another incident, another friend of mine found out he had a false 50 soles bill (ouch!) and was just happy that the checkout person at the store he tried to pay for his meal with it didn’t punish him more than just return the bill.

In fact, I wonder if Peruvians knowingly give foreigners fake money because they are less likely to know how to check carefully.  Perhaps simply not wanting to lose the money, as plata (money) is a precious commodity here in the commerce-centered world of Cusco.

Having false money is like holding a hot potato or the Old Maid while playing the card game.  Whoever has the false bill is pretty much stuck with it, because there’s simply no way to get rid of it.

I found out I had a false 5 soles coin (equal to about $2.50), when I tried to pay for my one and only cuy (guinea pig) meal in Tipón, the capital of cuy in the Cusco area.  The waiter would not accept my coin and returned it to me and asked me to pay with another coin.  I looked at him and said “¿Cómo podría ser?” (How could it be?)  But then he showed me why he knew it was false.  I just had a shrug and put the useless coin back in my coin purse.

After this incident, (simply as an experiment mind you I tried to buy some fruit with my newly found falso.  Even in the dark, the fruit woman knew it was false and gave it back to me.  I then tried to pay my combi (bus) fare and the collector also returned it to me.  After these two failed attempts to part with the Old Maid, I was resigned to keep the coin as a souvenir of my travels to Peru.

Like most businesses in Cusco, the MFI I am working with, Asociación Arariwa, also will not tolerate false bills in loan payments.  When members make their loan payments, the loan officers write the member’s initials in pencil on the bill so that the Caja (treasury) can check each bill for falsos. If a fake bill is found, the bill is returned to the owner during the next monthly meeting, much to the chagrin of the person who paid with the bill.

I recently went to a loan disbursement meeting in which Daphne, the loan officer, returned a 50 soles bill to one of the members.  It was an upsetting incidnet, as the woman who used the bill herself did not know it was fake.  And what is more upsetting is that she has lost a precious 50 soles because it is likely she will not be able to use the false money to pay for anything.

Just so you don’t get stuck with the hot potato, here’s some ways to tell if your money is counterfeit:

For bills -

• The color of the number (whether 10, 20, 50, 100 or 200 soles) should change when you wave the bill back and forth.  It will go from a light purple to a dark purple or blue
• The paper should be thick and of quality stock.  You can pull opposite sides of the bill to tell the thickness.  After having Peruvian money for a while, you will be able to tell the proper quality
• The portrait etching should be intricate, with no detail left out.  The quality of the carving is key
• There should be a shadow of the portrait when you hold it up to the light

For coins –

• The weight should be heavy.  After handling Peruvian coins for a while you will be able to tell if a coin is lighter than it should be
• The coin should be round and well-formed
• The color should be a light and shiny silver and for 2 and 5 soles, light and shiny gold
• The coin should be smooth without pock marks or rough parts
• The engraving should be smooth and detailed

I’ve gotten pretty good at this recently.  Whenever I get a 50 soles bill as change for a purchase in which I’ve paid 100 soles, I make sure to check if the bill is fake using all the methods I described above.

So far no Hot Potatoes or Old Maids for me!

Sheethal Shobowale has just finished her placement at Asociación Arariwa in Cusco, Peru and will be moving to La Paz, Bolivia to work with Emprender in January 2010.

Please consider supporting South American Kiva entrepreneurs by clicking here.

According to an article published in the Wall Street Journal on th 15th of this month, “As Microfinance Grows in India, So Do its Rivals.” Indian moneylenders, it seems,  have been enjoying a comeback of sorts, riding the coat-tails of micro-lending.

While group lending and microfinance are by no means inseparable concepts, the two have traditionally gone hand-in-hand. In their 2005 publication, “The Economics of Microfinance”, Beatriz de Aghion and Jonathan Morduch explain how  group lending implies a transference of part of the risk of small-scale lending from the microfinance institution to the borrower and therefore often permits micro-lending where otherwise it might be too risky or costly.

In Grameen Bank replicator fashion, group lending is certainly the modus operandi in India where the MIX Market reports over 16 million active microfinance borrowers, and a gross loan portfolio of over USD 2 billion. Still, elsewhere in the world, such as in a number of rapidly expanding Eastern European microfinance industries, individual loans are the norm in microlending.

For those unaware with group lending methodologies, essentially the practice entails forming groups of borrowers and prospective borrowers (typically of 3 to 10 members) responsible for the repayment of loans taken out by other group members. This practice, while extremely powerful in overcoming barriers to greater financial access such as information asymmetries and in skirting traditional collateral requirements, does impose stringent compliance conditions on group members; typically it is microfinance institution policy that if a single member of a group fails to repay her or his loan, all group members are cut off from access to borrowing from the institution. It is in this context that the WSJ article referred to above argues that group lending practices may cause some microfinance borrowers to resort to borrowing from money lenders in order to repay microfinance loans and therefore retain access to further microfinance borrowing.

Borrowing to pay off loans is not unheard of in microfinance. In fact, at least two ‘overindebtedness crises’  have occurred as a result of just this practice in Bolivia and Bangladesh during the late 1990’s. In a nutshell, an overindebtedness crisis occurs when borrowing to repay micro-debt spirals so out of control on such a large-scale so as to threaten the viability of multiple major microfinance institutions in a country. In both the Bolivian and Brangladeshi cases, contracting macroeconomic conditions resulted in borrowers’ facing heightened difficulty in repaying loans that had been taken on from microfinance institutions served as triggers for the crises.

While the global macroeconomic environment may be partly to blame for the chain-borrowing outlined in the WSJ article, the phenomenon taking place in India (that can hardly be termed a ‘crisis’ as such) has placed moneylenders as the source of the back-up loans. Interestingly enough, this stands in direct contrast to both the Bolivian and Bangladeshi cases wherein it was from other microfinance institutions that microfinance clients were borrowing in order to pay off their original microfinance loans, not moneylenders.

The fact that loans from moneylenders are generally much more expensive than microfinance loans begs the question ‘why wouldn’t microfinance clients pay off their debt with microfinance loans rather than with pricier loans from moneylenders?’ One potential response to this question could be that moneylenders, as noted in the WSJ article, typically do not practice group lending and thus may offer preferred terms of borrowing. Still, that the borrowers noted by the article as resorting to money lenders for help in repaying their microfinance loans original loans were all issued by microfinance institutions reality would seem to depict that borrowers prefer cheaper, microfinance group loans over pricier, individual moneylender loans.

Another explanation for this phenomenon could be that credit bureaus and/or information sharing between microfinance institutions in India prevent borrowers from taking out multiple microfinance loans from various institutions at the same time. Still, while credit bureaus such as CIBIL and the Financial Information Network & Operations‘ Sayana Ravi credit bureau are rapidly expanding and improving, evidence from the field maintains that such initiatives remain far from fully operational and informal information sharing are still patchy at best.

A third possible explanation as to why overburdened microfinance borrowers are turning to moneylenders for loans to help repay microfinance debt in the absence of perfectly functioning credit bureaus could be that there simply aren’t other microfinance institutions from which to borrow. This possibility, noted in the WSJ article as supported by practitioners in India, is further corroborated bylow industry penetration rates found in the country.

Each of these possibilities is likely to hold some truth and, as such, the first steps of an adequate policy response to the situation would be to fortify credit bureaus whilst increasing resources for the microfinance sector and, where possible, practitioners should be encouraged to diversify micro-loan products to provide more options for individual borrowing. Still, the responsible researcher must try to move beyond knee-jerk negative perception of moneylenders and view them as an important institution in expanding financial access–if for a high price.

Having been trained as an economist, where borrowers are willing to pay moneylender prices for access credit, it is hard for me say that that they shouldn’t be allowed to. Still, if there is a means by which to provide improved services, it is reasonable to assume that it’s worth the investment.

The School for Social Entrepreneurs: Top 10 podcasts for social entrepreneurs.

[Hijacked From the Fellows Blog]
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By Brian Kelly, KF9, Armenia

I have alluded to it several times in the past in some of my posts.  While maybe writing a sentence or mentioning a few words here or there, I think it deserves its own post because it’s turning out to be one of the central themes of what I have learned here about microfinance in Armenia.  The Human Factor.

Understanding your constituents is a vital part of doing business anywhere.  I think in microfinance this becomes especially important, specifically in regard to the customers.  Understanding their needs and capabilities is paramount.  While the good Samaritan in us may want to cater to a customer’s every desire, that usually isn’t the most prudent business decision.  This applies in microfinance, as many of the borrowers are applying for a loan for the first time, and may not have the instinctive financial literacy that privileged Westerners take for granted while growing up with allowances, to savings accounts, to that first credit card.  If you offered your clients whatever they wanted, they would probably take too many loans for too much money and likely be swimming in un-payable debt within a year’s time.  This isn’t any profound revelation, and it’s exactly the reason we have credit scores and screening of loan eligibility anywhere loans are made.

But how do you screen a potential borrower?  Sure a credit score makes it easy, as do other types of official documentation like an annual salary.  But in thousands of locations all over the world, you don’t have credit scores or hard data to rely on.  You only have your intuition, the relationship with the client, and your ability to assess a situation on the fly.  This is not easy, and I am time and again impressed and amazed at how the credit officers here can seem to do this with stunning accuracy.  This is evidenced by impressively low 30-day Portfolio-at-Risk (PAR), which measures percentage of payments in the loan portfolio that are at least 30 days late, and is also the basis for employee profit-sharing bonuses at the end of each year.

Time and time again I have tried to tease the secret out of the credit officers, “Can you describe the client assessment process?” Or, “What are the key factors in determining whether a client can responsibly handle credit?”  Usually they just shrug as if it’s the first time they’ve had to quantify it and say: (I’m paraphrasing) “It comes down to the borrowers themselves, how they act with their family, and the general vibe I get from them.” No matter how many times I’ve asked different credit officers in different branches, I’ve never gotten an elaborate or analytical-based model to reveal their formula of sizing up a borrower.  Always just “The human factor.” Next question.

I’ve witnessed the process firsthand.  Accompanying credit officers on new client visits, while I hardly can understand Armenian, I do understand the way they look around at the client’s home (oftentimes also the place of business) and ask where the animals are (for an agricultural loan), or to see the title to the property to verify that they do have as many hectares as stated.  And on top of the physical observation of a potential or existing business, old-fashioned trust-your-gut-itness can be the most valuable assessment technique.  Trusting your gut is a great method to use when you know the client and care about their ability to successfully repay the loan.  After you have experience granting loans for the right reasons to the people who aptly deserve them, then relying on your gut can be your most powerful credit-granting weapon.

How does one develop these skills?  Well part of it is probably ‘natural talent,’ but it also involves caring.  The credit officers care about their clients.  If they plan to drop-in on them unscheduled, often they call ahead to ensure it’s alright.  They trudge through fields or along muddy roads to make visits.  They know their customers inside and out, and how their customers are perceived by their own communities.  They actually care about how the loan will perform, so as not to encourage the borrower into entering a debt contract that will later prove overwhelming.  They’re doing the basic function of what a credit officer should, in a responsible manner, and it works tremendously well.  And in microfinance this is usually the only option in the absence of credit scores and collateral.

Perhaps most importantly, credit officers aren’t rushing to sign up every possible borrower they can find.  I’ve listened to several heated conversations involving borrowers being denied loan amount increases, and one with a credit officer quipping, “this isn’t a market, you can’t just name any amount that you want and expect to get it…” Awarding commissions on the volume of loans originated, as often seems to be the case for US lending institutions, is an awful way to incentivize healthy lending practices.  Which is why rewarding credit officers based on PAR makes so much sense to me, because it encourages making the right loans to the right people, benefiting all parties involved.

While it is painful to say no to a client, it isn’t rare that they will end up getting a loan eventually, after they prove that they deserve it, or after the community has seen over time that they will be able to manage the responsibility.  Taking the time to get to know someone and establishing a relationship over multiple conversations often leads to a borrower receiving credit. If I had a tagline for the most important thing I’ve learned in Armenia, a strong candidate would be “Relationships are what make microfinance go.”

The best answer is sometimes the simplest one.  This doesn’t mean it’s the easiest.  But time after time I am reminded here in Armenia that sticking to what you know best, and trusting intuition based on personal interaction with somebody is the key to doing business, and doing it well.

A story by: Wilson Mnzava, Microfinance Specialist: Head of Risk Management of SCCULT.

About SCCULT

The Savings and Credit Cooperative Union League of Tanzania (1992) Ltd (SCCULT) can trace its history to 1938 when the first SACCOS were registered in Tanzania.  At the eve of independence (1960) there were only three SACCOS. The number increased to 35 by the year 1964 necessitating the formation of the first national association for SACCOS named as The Savings and Credit Union League of Tanganyika Ltd (SCCULT). It is SCCULT’s vision to be a leading player in the cooperative microfinance activities in Tanzania and it is its mission to promote, develop and strengthen SACCOS in Tanzania by providing unique and diversified financial products and services in a competitive environment that will assist in the alleviation of poverty.

On December 2009, the First Microinsurance Agency Tanzania (FMiA) and the Savings and Credit Cooperative Union League of Tanzania (SCCULT) signed a partnership agreement. This agreement will help FMiA to protect SCCULT customers against catastrophic losses such as the death of the breadwinner, severe illness, or loss of assets including livestock, crops or housing.

Approximately 90 per cent of Tanzanians cannot access financial services. SCCULT, which makes its network of Savings and Credit Cooperative Societies available to those in rural and urban areas, offers a chance to see that these people are empowered and they are protected. This partnership wants to provide the solution to the lack of access to financial services and wants to ensure that once a family does not slide into poverty because of a shock

FMiA is a part of the Aga Khan Agency for Microfinance. Ccurrently, AKAM has micro insurance institutions in two countries. AKAM is a leading international financial institution and its objective is to achieve the double-bottom line of maximising social return while generating growth, expansion, and sustainability. By including the poor in the formal economy and providing a range of financial services and insurance AKAM can help to enhance quality of life and improve economic security. This is why FMiA’s partnership with SCCULT, to help protect its members against unexpected events that threaten their livelihoods, is an excellent fit.

SCCULT comprises about 1,010 cooperatives (SACCOS) an approximately of 250 individual members per cooperative, with a mission to promote their business growth and sustainability. It provides administrative and technical support and in turn FMiA can help provide protection to their clients’ households and their businesses.

Through this partnership, FMiA will be able to offer these clients health insurance, credit life and savings completion specifically tailored to the Tanzanian market through SCCULT’s cooperatives.

SCCULT and FMiA will use this partnership as a means of empowering clients to play an active role in the socio-economic development process which will ultimately help these communities prosper. Within five years, it is estimated that up to a million lives will be covered through this partnership. This will allow FMiA to guard more people from the possible blows to their incomes or their lives.

Awareness campaign:

We visited seven regions (province) to conduct awareness on micro insurance, we visited together with A consultant from Agha Khan Fund for Development Mr Allan Joe from Switzerland, Joy Kemibaro- CEO of FMiA and I.

Training:

We conducted training to all seven region visited, visited Kagera na Mwanza at Lake Victoria regions,  Kilimanjaro region, Arusha region, Dodoma, Morogoro and Cost region.

In training we were trying to let them knows there are THE SOLUTION TO PROTECT their lives.

A reporter asked me today what my goals are for Soap Hope, and I gave her the answer that most of my friends know by now: to teach 1,000 small businesses the Good Returns Model and thereby raise one billion dollars for anti-poverty microloan initiatives.

I’m pretty sure this reporter was shocked – she said, “How much?!,” and actually sounded a bit disappointed. I think she felt I was being naive. Others have told me to start with a more “realistic” goal.  I’d like to show you how I believe it is reasonable to raise a billion dollars for microfinance over ten years, with just a few key numbers:

50 small businesses just like Soap Hope
In each of 20 American cities
Each generating $100,000 in profits
Each lending their profits interest-free to a microfinance institution for just 1 year
Over a 10 year period.

50 businesses x 20 cities x $100,000 x 1 year interest-free loan x 10 years = 1 billion dollars.

Let me share some key milestones and goals with you:

• 2009 marks Soap Hope’s first full year in business
• I first discussed the Good Returns model in public in the summer of 2009, just a few months ago
• We’ve already had two small businesses in Dallas spontaneously ask us for help in implementing Good Returns in their own companies
• In 2009 we’ve formed partnerships with three non-profit microfinance institutions
• In 2010 we’ll be launching an organized effort to teach Good Returns to businesses
• Simultaneously we will define sustainability programs that help nonprofits become ready for Good Returns style investments
• In 2011 we’ll be working to form an insurance fund that guarantees the return of Good Returns investment capital to participating businesses, virtually eliminating participants’ risk

One billion dollars may sound like a big number – but when you break it down, it’s right within our grasp.  If you read my last post (We Need 166 More People To End Poverty Worldwide) you know that there are six million people in poverty in the Dominican Republic.  One billion dollars is just about what it would take to give each of them a microloan.

1,000 Good Returns businesses generating one billion dollars toward ending poverty through microfinance – I don’t think it’s naive at all. Let’s do it!

Regards,

Salah Boukadoum
Co-Founder, Soap Hope

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