Nicaragua and the Movimiento no Pago

There's been some interesting activity lately in Nicaragua, with the "Movimiento no Pago" (a non-payment movement among groups in the North of the country) protesting against microcredit loans. Things have got a lot harder in the country since the economic crisis. Kiva put out this statement:

"Recent information indicates that the situation may be improving as the President of Nicaragua has spoken out against this law and would not support its passage in its current form. The network of microfinance institutions in Nicaragua (ASOMIF) has been negotiating with the government in support of an alternative proposal. Kiva, along with 25 other funders from 9 countries, has signed onto a letter to the Nicaraguan government urging a resolution to this situation without enacting a moratorium on debt repayment. The potential passage of the debt moratorium increases the risk of lending in Nicaragua."

There's a copy of the anti-movement advert available on David Roodman's blog that gives a really good picture of exactly which microfinance organizations are operating on the ground there.

At the moment, I can't find much information on who's in Movimiento no Pago and what the extent of support for them is among ordinary people, but I'll keep looking.

Macro Evidence for Micro Finance?

One of the key problems in determining the effectiveness of microfinance is this: there are many studies which show it works on the individual case level, but few which do so in aggregate...

This economist article demonstrates the point well. In other words, we know that microfinance, done properly, can improve the lives of the working poor, but can it do more than that? Can it fight poverty in a sustained way?

Record lending to Kiva this month?

It looks likely. See the lending totals by month here.

Microfinance and the Recession

A story from the East African, reporting that many microfinance institutions are facing tougher economic conditions.

Field Report: Emprender in Bolivia

Kiva hires a number of fellows to report on progress with various lending projects. I received this report today from a Kiva fellow working with Emprender in Peru, one of the organizations that we have loaned through:

"I have been working as a Kiva Fellow in Emprender’s offices for the past 3 months, and have been greatly impressed with the high quality of their staff, their commitment to the people in their community, and unique services they offer their clients.

In particular, Christian Rivera should be recognized for his work. He is Emprender’s Kiva Coordinator. He posts profiles of Emprender clients on the website for Kiva lenders to fund, keeps in touch with both lenders and Kiva staff, and helps to make sure Emprender staff understands and participates in Kiva in the best, most effective way possible.

Christian has been wonderful in this position, but will soon be passing the responsibility to another Emprender staff member, Jose Luis.
Christian plans to focus his attention on a unique project that Emprender is starting. He is also a doctor, and has organized a medical program for Emprender clients.

Sadly, Bolivia has the worst health conditions in South America and is second only to Haiti in the hemisphere. In an effort to improve the health and well being of their society, Emprender, with the help of the Center for the Sustainable Development (CEDESS) and An Ber, will open free clinics for their clients and offer medical treatment at reduced costs for the members of client families. The clinics will be located within Emprender offices, making access convenient and efficient. They will even offer medical services for other community members in semi-urban and rural areas that are under-serviced by other medical facilities. These clinics will provide basic and preventative medicine, family planning, and other health education services. The first of the six clinics will open within the next three months, as soon as the final paperwork has been completed. Emprender hopes to reach 50% of their clients by the end of the first year, and 100% of their clients by the third year of the project. In addition to organizing the project, Christian will be the doctor at Emprender’s first clinic. I am constantly impressed by his ability to wear many hats and know he looks forward to this transition in his job.

It is everyone’s hope that by providing medical services, Emprender’s borrowers won’t face financial disaster caused by preventable illness. Ideally, these medical services will improve the lives of Emprender’s borrowers, increase their repayment capacity, and help inoculate the family from medical risk.

I saw first hand the ways that simple medical treatment could help an Emprender client. Alejandra and her husband Demecio purchase, raise, and then sell ducks in the small town of El Torno outside of Santa Cruz, Bolivia, where Emprender has a field office. Alejandra has been selling ducks for over 20 years, and often has more than 70 ducks in her yard at a time. With the income from her and Demecio’s business, they are raising their 8 children. Unfortunately, a few weeks before I met Alejandra, she stepped on a piece of glass that cut her foot. Perhaps from working so close to animals, or perhaps due to just bad luck, the cut got infected. The infection has grown and grown and Alejandra has had trouble walking, and now spends most of the day off her feet. Her business is suffering, because she can make fewer trips each week to the market to sell, and is reliant on people coming to her home to purchase ducks. Emprender hopes to be able to help its clients by providing basic medical care that can help them feel better and continue to succeed in their businesses.

It has been a pleasure for me to get to know Emprender’s staff across the country and to learn about the many ways in which this socially focused organization provides for its clients — Kiva borrowers.

Thank you again for lending to Emprender’s clients and for believing in the power you have to make a difference. Gracias!

Sincerely,

Sierra Visher

Kiva Fellow"

The Reith Lectures 2009: Markets and Morals

The Reith Lectures are an annual series of public lectures hosted by the BBC.

The first lecture from this year's series is particularly relevant for microfinance - titled "Markets and Morals", given by Michael Sandel, Professor of Government at Harvard. You can listen to the lecture here.

Sachs-Poyo-Easterly: Who will win the aid debate?

There appear to be some heated arguments flying around (as reported by Kristi York Wooten at the Huffington Post) over the future of aid policy between some of the big guns: Jeff Sachs (economist at Columbia), William Easterly (at NYU) and relative newcomer, Dambisa Moyo (author of the book Dead Aid). Easterly sums up the debate here on his blog.

Moyo's book makes some strong accusations of the aid 'establishment': namely, that aid to Africa has created dependency on the West. The book has made a big splash in the media world - enough for Time magazine to name her as 'one of the most influential 100 people in the world'...

Jaime Pozuelo-Monfort on Microfinance

Jaime Pozuelo-Monfort: Words Apart
from Breaking News and Opinion on The Huffington Post by Jaime Pozuelo-Monfort

"On Sunday night I had dinner with World Bank economist Branko Milanovic, one of the leading experts in income inequality. Branko authored a book in 2005 called Worlds Apart. It is after Branko's inspiring book that this article is entitled. Branko's book describes the immense income gap between Hemispheres. This article describes the immense opinion gap when it comes to approaching the eradication of extreme poverty.

This morning I met with Elizabeth Littlefield, the Chief Executive Officer of the Consultative Group to Assist the Poor (CGAP). This afternoon I am meeting with the Malagasy Ambassador to the United States Jocelyn Radifera. Overall I have conducted 210 phone interviews and 270 face to face interviews in preparation for the writing of my forthcoming book. I have discussed the future of microfinance with some of the experts in the field that include Maria Otero (Accion), Michael Chu (Harvard Business School), Chuck Waterfield (Microfin), Hugh Allen (VSL Associates), Kim Wilson (Tufts), Dean Karlan (Yale), Jonathan Zinman (Dartmouth), Jonathan Morduch (NYU), Chris Dunford (Freedom from Hunger), Alex Counts (Grameen Foundation), Carlos Danel (Compartamos), Maria Nowak (Adie), Shabbir A. Chowdhury, Aminul Alam and Imran Martin (BRAC), Lamiya Morshed and Nurjahan Begum (Grameen), Premal Shah (Kiva), Sam Daley-Harris and Bob Sample (Results), Adrian Gonzalez (Microfinance Exchange Network), Ann Rutledge (R&R Consulting), Michael McCord (Microinsurance Centre), In Channy (ACLEDA Bank), Lynne Patterson and Irina Aliaga (Promujer), Niki Armacost (Women's World Banking), Martha Chen (Harvard) and Matt Bannick (Omydiar Network).

I approached the microfinance industry in the same manner that I have approached other areas such as agriculture, trade and labour rights, financial architecture, immigration, small arms trade and military spending or the mining industries. I sampled the industry and tried to reach out the most relevant experts. I have seen words apart. A majority of the experts on the microfinance industry are not on the same page. Some of the following questions may be familiar to the reader: how can microcredit penetration be expanded among the bottom billion? Is Compartamos the right approach to banking for the poor? Has microcredit being emphasized over microsavings? What role do innovators such as Kiva.org play in the field? Should microfinance institutions receive subsidies from national agencies and foundations? What are the Omydiar Network and the Gates Foundation doing to enhance basic financial services for the poor? What is the impact of the World Bank and the United Nations' involvement in microfinance?

Not everyone is on the same page. Is there a same page? Do you agree with Muhammad Yunus and Hernando de Soto? The overlap of opinions is manifest. There is an intellectual debate which could be healthy, but it oftentimes ends up in intellectual wars that forsake the ultimate goal: the alleviation of extreme poverty. If poverty is not eradicated it is not only because of a lack of political will or interest among developed nations and the elites of the developing world. Poverty is not eradicated because there is a lack of consensus as to how to mitigate it. The intellectual wars of left-wing and right-wing economists and practitioners do not help. The debate between what approach is more appropriate (for instance between USAID and the Millenium Challenge Corporation) perpetuates the problem. It is difficult to get everyone on the same page. What is that same page? There are many possibilities, but only one will materialize if a global effort is to be undertaken to create a new architecture for the extreme poor that sets once and for all the basis for the eradication of extreme poverty.

We have been born in a world that adores criticism in an area where the lack of innovation is second to none. We are all sports journalists broadcasting a football game that has been going on for decades. There is an abundance of commentators and a scarcity of implementators.

For decades social scientists have been elaborating theories that had no direct application. Humans built a first architecture in the aftermath of World War II, it is called the Bretton Woods architecture. For decades we as a society were reluctant to build a second architecture. We have not looked at the best ideas in the development arena from intellectual giants such as Jeffrey Sachs, Dani Rodrik, William Easterly, Paul Collier or Hernando de Soto. The de facto approach has been to channel funds through the existing schemes. There are recent pilots that are promising such as the Millenium Challenge Corporation.

What is the next big idea in the development space? Sampling the universe of opinions in the microfinance industry can only be helpful. The experts mentioned beforehand may or may not agree on how to tackle extreme poverty through microcredit, microsavings and microinsurance. There is one fact. Only when the experts become expert dreamers, only when the experts become men and women of stature will we be eyewitnesses of the birth of a new consensus, a new architecture that is designed to work for the extreme poor. It is perhaps time to propose a page one to start the Glorious Forty that will lead us to the world of cornucopia and eutopia. It is perhaps time to start a journey where only dreamers are welcome. It is perhaps time to start saying why not instead of why. We must dare, therefore we exist."

Papers from the Grameen Foundation

The Grameen Bank in Bangladesh is considered to be a pioneering microfinance institution:

"Started in 1976 by Professor Muhammad Yunus with a mere $27 from his own pocket, Grameen Bank today serves more than six million poor families with loans, savings, insurance and other services. The bank is fully owned by its clients and has been a model for microfinance institutions around the world."

The Grameen Foundation, a related organization, has a series of interesting papers on its web site that are worth a look.

Microfinance Best Practice Resources

A series of best practice papers from the Small Enterprise Education and Promotion (SEEP) Network, an organization in Washington DC which provides training and guidance for microfinance institutions.

Kiva on Frontline

The Frontline World site has a video examining Kiva's operations in Uganda, as well as some first hand accounts from lenders and interviews with the Kiva staff.

Why is microfinance weak in Africa?

In this story from Voice of America Mary Ellen Iskenderian of Women’s World Banking discusses her organization's recent diagnostic of microfinance in Africa.

The report finds that

"...the current market penetration to low-income households is
less than 15 percent for savers and even lower for borrowers..."

and highlights high costs caused by low population density and poor infrastructure and a lack of skilled managers as key constraints on the penetration of microfinance.

Microsavings? NYT Blog Post

This blog post from Nicholas Kristof argues that microlending should be supplemented by microsaving.

"many poor people must pay to save. That’s right — instead of receiving interest for depositing their savings with someone, they have to pay interest on their own money. One common scheme in West Africa, for example, charges an annual interest of 40 percent for accepting savings."