Sensible Microfinance Research, Findings and Media Coverage

It has been a difficult couple of years, in terms of having microfinance researchers, practitioners and the media working together constructively.  Naturally, there have been some notable exceptions to this unfortunate trend, and some of the damage has been done despite good intentions, if not outright idealism.

One positive voice in this charged environment has (perhaps surprisingly) been the Economist, which has been fairly balanced as well as engaged during this entire period, having  recently written about about a landmark — and controversial — study about  the impact of microcredit in Bangladesh that others mostly failed to cover.

But rather than rehash all these difficulties, let me draw your attention to a new article in the Economist.  The article makes an obvious and important point (one that is covered towards the end of the blog): a new research report (not to mention common sense) suggests that, at least in the context studied, any given form of microcredit will not be relevant or helpful to all poor people.

To me, this does not mean that entire classes of poor and unbanked people can’t benefit from any form of microcredit or microfinance, but rather that people need to be connected with those products that meet their needs.  (Though others could view these findings differently.)  In any case, this finding is a strong affirmation of Fonkoze’s approach to segment the poor and serve each segment with a suite of products designed to meet their needs – a concept captured graphically with its “staircase out of poverty.”  It also reinforces the concept of “human centered design” as it applies to microfinance, a topic about which Grameen Foundation recently issued an important report.

The main thrust of the Economist article is analyzing a new study that looked at what happened when one group of people was offered microloans and another, comparable group was given microgrants.  Basically, those who took the loans benefitted.  The same was true of people who were given the microgrants, an approach that is at risk of becoming the next international development fad, or as the Economist terms it, a new “panacea” (but I digress).   It is important to note that these were truly microloans (average size: $113) and microgrants (average size: $140).   They were given in a very poor environment: rural Mali.

The results were pretty impressive.  The Economist summarized them thus: “Both the loans and the grants had clear positive effects among the beneficiaries; more land was cultivated, use of fertilisers increased and profits from self-employment rose in comparison to the families that were given neither.”  Furthermore, “the positive effects of both loans and grants that the researchers found show that many poor people face liquidity constraints that prevent them from investing in capital.”  [Emphasis added.]

In a second part of the study, some of the people who declined microloans were selected randomly and given microgrants, and there was no measured impact – prompting speculation as to why this was the case.  (Above I share my unproven theory, which is that the discrepancy in impact is related to the appropriateness financial products.)

Regarding Fonkoze, this is an endorsement of the idea that for some poor people, grants (often referred to as asset transfers) are the most appropriate product, which is a pillar of the CLM program (the bottom step of Fonkoze staircase).  Other studies have confirmed how effective such “graduation programs” can be when they are delivered competently.

Regarding research and microfinance, about which I have written before (such as here), let me note that later this week I will be participating in a seminar on “Lean Research” being pulled together by colleagues at Tufts University and MIT.   (Kim Wlson of Tufts talks about “lean research” in this interview.)  I am not sure what lean research means exactly; I asked the organizers to define it for me as I prepare my presentation, sparking an invigorating exchange.  In general it seems to describe research that is done in practical ways that are designed to maximize the role of – and benefits to – the research subjects, and minimize the costs and other potential negative impacts to those being studied.  If it turns out to be an interesting gathering, I’ll report on it in this blog.

Also, Grameen Foundation is working towards publishing a third in its series, “Measuring the Impact of Microfinance” – which is meant to demystify and present in a balanced and non-technical way what recent impact research says about microfinance’s performance and potential.  Kathleen Odell has volunteered to do the research pro bono once again (in other words, as part of her academic appointment at Dominican University), and we are raising some money to cover the costs of printing and distributing it in the fall of 2015.  So, stay tuned.

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CRECER recognized as Truelift Leader

Alex Counts:

I have written about Truelift, a learning and recognition initiative that Anne Hastings of Fonkoze has served with me on the governing body of. Here is excited news about Truelift’s recognition of a leading microfinance institution in Bolivia that shares many characteristics with Fonkoze.

Originally posted on Truelift:

200x200_logo_crecer_peque We are excited to announce that Crédito con Educación Rural, or, CRECER, is the first Latin American organization to achieve the Leader milestone for its adherence to the Truelift Pro-Poor Principles. In the areas of, “purposeful outreach to people living in poverty” and “tracking progress of people living in poverty” this organization has reached the highest possible standards of success in accordance with our principles.

CRECER is a microfinance organization based in Bolivia whose mission is to, “offer, with excellence and warmth, financial products along with development services in order to improve quality of life, preferentially of women and their families.” Bolivia ranks 108th on the Human Development Index, measured by average educational attainment, income, and life expectancy; this ranking demonstrates a clear need for pro-poor services.

This rapidly expanding organization, created in 1999, is inspiring hope in the lives of the impoverished, ambitiously reaching all 9 departments in…

View original 1,143 more words

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Human-Centered Design and Other Blog Topics

 

Believe it or not, but I blog on platforms other than this one.  In fact, some of them have relevance to Fonkoze’s journey.  Let me highlight a couple of recent ones.

A few days ago I posted a blog related to my visit to J/P Haitian Relief Organization, which was started by the actor Sean Penn in the aftermath of the 2010 earthquake.  They use TaroWorks, a technology tool developed by Grameen Foundation (my day job).  I was able to tack the visit onto my trip to Haiti for the Fonkoze Family Coordinating Committee, which I Co-Chair.  That meeting focused on the importance of Fonkoze being a member-based organization (and what that means in practice), and how SFF was working to increase client retention.  As a result of that visit, I encouraged J/P HRO and Fonkoze to consider some areas for collaboration.

I have also published a blog on what I have learned about partnerships through working in the Arab World for the last ten years.  After a preamble focused on the history of Grameen Foundation’s work there, I boiled it down to 10 lessons.  I referred to this blog during my wrap-up comments at FFCC, since working in partnership — which can be very powerful and terribly maddening — is a central part of the Fonkoze journey, too.

Also on the Grameen Foundation “Insights” blog I wrote about the eMerge Americas conference, which was focused on jump-starting the idea of Miami becoming the Silicon Valley of Latin America.  Maybe this vision, if realized, will create opportunities for Haitian-America tech entrepreneurs in Miami?

Lastly, I published a blog about a conference Grameen Foundation organized in Mumbai, India around the concept of user-centered design in financial products, also known as human centered design and client-centered design.  Basically, the idea is designing financial products that are the most relevant to the needs of the poor, ideally in a customized way.  Doing so could have a major impact on client retention.  So could scaling up the Foundation’s adult education modules, so they were available to all clients who wanted them.  Anyway, I gave the closing speech at the Mumbai conference and here is the text of my remarks, and here is a final report from the conference in an easy-to-read format.

User-centered design is one way of describing what SFF, in partnership with the Fonkoze Foundation, is doing in an effort to come up with a new generation of products for its members.  It is not easy work, but it is what the Haiti’s poor need, and deserve.  More than ever, I believe Fonokze has the team in place to design and deliver those products.  But it will nonetheless take a massive effort to do so, and perhaps some lucky breaks from Mother Nature in the form of no major natural disasters for another year or two.

This coming Friday is the semi-annual retreat of the Fonkoze Futures Committee, which is focused on fund-raising for the family of Fonkoze organization — essentially spearheading a five-year capital campaign.  I have agreed to Chair this group for one more year.

Furthest afield from my work with Fonkoze, I published blogs, such as this one, about my time in Key West celebrating my 20th wedding anniversary with a bunch of my dearest friends, including the Carter Brothers Band who entertained us for seven straight nights with amazing music.

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Succession Challenges: No Easy Answers

March 29, 2014 Leave a comment

The recently-concluded meeting of the Fonkoze USA Board of Directors in Haiti was reportedly productive, motivating and enlightening. It was also the first in-person meeting of that governing body since 2006 that I did not take part in. Indeed, I am winding down nine years of service on that Board this year, in part due to a compromise made years ago that stipulated a maximum of three three-year terms for (almost) any Director.  (I only know that the meeting went well based on the fact that its Chairman and my successor, Matt Balitsaris, was kind and conscientious enough to brief me by telephone as a courtesy days after the meeting ended.)  question-mark1

This got me thinking about the larger challenge of succession planning in social sector organizations like those in the Fonkoze Family (Fonkoze Financial Services, the Fonkoze Foundation, and Fonkoze USA).

Like many social sector organizations with commercial aspects that launched in the 1990s due to a mix of management and conceptual breakthroughs, a booming economy (and a related boom in philanthropic activity), and fewer totalitarian regimes in power around the developing world, Fonkoze is struggling with how to replace aging talent on its staff and governing bodies. A related challenge is how to progressively turn over roles traditionally held by foreigners to Haitians. As with so many things that seem logical if not obvious, the devil is  truly in the details.

There are few easy answers. The values, insights, reputations and relationships of founders and long-serving employees and volunteers represent substantial assets that no organization would want to give up unless it had to. But sometimes, along with those assets come liabilities. Two examples: rigid views about how the organization should function, and holding on to roles that ambitious young talent yearn for (and may leave if they do not see a pathway to securing).   Figuring ways to gradually ease one generation of leaders into roles that maximize the assets they represent, but minimize their liabilities, is much easier said than done.  Overall, Fonkoze has dealt with this well (such as the case of Anne Hastings’ transition last year from a CEO role to a volunteer/governance role), but major challenges lie ahead.

For my part, I have said many times that when I leave my (paid) post of President and CEO of Grameen Foundation someday, I will accept no formal role in the organization for a period of at least five years.  While that would limit my ability to help the organization during that period, it would have one big benefit — it would give my successor room to grow without me looking over his (or hopefully her) shoulder, or even being perceived to be doing so.  Above all, I would not accept a seat on the Board of Directors, which I believe is a lazy and often counter-productive way of thanking and attempting to involve well-liked departing CEOs. (Though I believe putting or keeping a departing CEO on the Board can be the best option in some cases, such as with Anne’s retiring as CEO of SFF last year and continuing to serve on its Board, which I supported.)

Last year, Grameen Foundation elected its fifth Chairman — a wonderful man named Bob Eichfeld.  Within a short time of accepting the role, he asked me to write up an “Emergency Succession Plan” — essentially, what I would advise him and the other remaining leaders to do if I were suddenly killed or incapacitated.  This sounds like an obvious and sound practice, but it took me five months of procrastination before I wrote it up. Confronting ones mortality, in any sense of the word, is not easy for most people — and certainly not for me.

Interestingly, 8 1/2 years into my role with Fonkoze, I do not know whether any of the CEOs or Board Chairs have ever written an Emergency Succession Plan.  I expect amidst all the frenetic activity, punctuated by major natural disasters every few years that disrupt everything and prove to be major distractions and hardships, there has been thought to composing such documents but perhaps none has ever been completed.

Scarcity Blog (Part Two) Published

January 16, 2014 Leave a comment

I have just published the longer and I hope more interesting installment of my two-part blog on behavioral economics and in particular, on the implications of the arguments made in the book Scarcity for microfinance and more broadly for international development.  It includes a brief analysis of Fonkoze’s CLM (“Pathway to a Better Life”) program through the behavioral economics lens.

Full Financial Inclusion, Defined

January 13, 2014 1 comment

The Center for Financial Inclusion (on whose Advisory Council I proudly serve) has done a great service by defining a very important concept: “full financial inclusion.”  They have not, however, made it easy to find that definition online so I have taken it upon myself to create this blog post with the single purpose of reproducing their definition, which is:

Full financial inclusion is a state in which all people who can use them have access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients. Financial services are delivered by a range of providers, most of them private, and reach everyone who can use them, including disabled, poor, rural, and other excluded populations.

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Scarcity Blog (Part One) Posted

January 13, 2014 Leave a comment

As promised in my last blog, I have written a two-part blog on the behavioral economics-based analysis of scarcity in an important new book.  Part one has been posted today on the Grameen Foundation blog.  Part two will be published later this week.

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