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.
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.
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…
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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.
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.
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 (in its most recent formulation):
Financial inclusion means that everyone who can use them has access to a range of quality financial services at affordable prices with convenience, respect, and dignity, delivered by a range of providers in a stable, competitive market to financially capable clients. Quality and access are the double heart of CFI’s vision.
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.