Archive for October 10th, 2008
Why Ukraine Needs Microfinance
As a former Soviet state, home of the Orange Revolution, and under-journalized European backwater, Ukraine certainly has an image problem. It brings to mind images of inscrutable bureaucracy, frozen winters, and monotonous apartment blocks. Except to those of us who have visited the country or known citizens of Ukraine, it does not bring to mind the sorts of struggling poor that microfinance institutions typically serve.
Indeed, in the capital of Kyiv (aka Kiev), microfinance banks don’t operate. The cost of living is too high, and the living standards are those of a middle-income country. You can buy a pizza or condo or a Mercedes in Kyiv. But even here, life is harsher than it is in the West. Public transit, while ubiquitous and cheap, is slow, crowded, unmarked, and in poor repair. The bathroom in an apartment, often as not, is a post-remodel afterthought located in the kitchen. Tall buildings do not necessarily contain elevators. Internet access is in stunningly scarce supply, even in the capital.
Yet despite an average per-capita income of less than $20,000 a year in Kyiv, an apartment that nine years ago cost $4,000 now costs $100,000. Banks no longer give mortgages, partly in reaction to the 30% inflation rate, partly as a ripple effect of the US subprime mortgage crisis. The Producer Price Index is well over 40%. (Imagine that McDonalds’ beef suppliers raised the price of a pound of beef from $1 to $1.40. Quite reasonably, you might expect that last year’s $4 Big Mac is now this year’s $5.60 Big Mac. The beef price hike is Producer Price Index, and the Big Mac price hike is Consumer Price Index. Roughly.)
Outside the capital, life is closer to the edge. Per capita income is down into the $10,000 range (estimated; 2008 figures haven’t been released yet), and agricultural land is still impossible to legally purchase – a holdover from communist times. Corruption is ubiquitous. Unemployment is roughly 7%. With badly tended roads, few successful industries, and little communications infrastructure, there is essentially nothing to do and few prospects for prosperity. Never underestimate the economic power of abject boredom.
2003 figures estimate that poverty levels are 37.7%; it’s difficult to say what the intervening years and the weakened dollar (to which the hryvnia had been de facto pegged) have done to this number. As late as 2001, Ukrainians were still working without pay under a half-collapsed central planning system that left many of them unequipped to transition to a new market economy. Anyone over the age of 35 grew up without banks, credit, or business as part of their existence. Entrepreneurship was stamped out during the twentieth century, and the working poor, no longer secure in even an inefficient social safety net, have had to teach themselves new skills.
They make their living where they can, often in small shops reminiscent of those found throughout the developing world. While walking through a tumble-down market above a subway stop in Kyiv, the director of the HOPE Ukraine microfinance bank gestured to a woman selling cigarettes from a tiny glassed-in kiosk. “Microfinance client,” he said with an ironic tone. “Or she would be if we operated in Kyiv. All the market sellers would be.”
The picture is bleak, but into the infrastructure gap has emerged the Ukrainian microfinance industry. MixMarket lists three active microfinance institutions in the country, with a combined total of about 55,000 current borrowers. These small business loans average around $1,600, and can provide for several months’ worth of inventory, repair costs, or household expenses. Additionally, HOPE sponsors business education camps for the children of their borrowers, giving the next generation the tools they need to survive in the new Eastern Europe.
Learn more about Kiva’s field partner, HOPE Ukraine, here. And consider lending to these entrepreneurs for your next Kiva loan.
HOPE Ukraine serves clients like Tatyana all over the country
10 comments 10 October 2008
You Know You’re in Tanzania When…(Vol III)
A past fellow to Tanzania, Alec Lovett, posted two blogs on “You Know You’re in Tanzania When…” I’ve posted the links to his blogs and added volume III with my own observations. Enjoy!
http://fellowsblog.kiva.org/2008/03/21/you-know-you-are-in-tanzania-when…/
http://fellowsblog.kiva.org/2008/03/24/you-know-you-are-in-tanzania-when…-vol-ii/
Volume III
1. They say “Hakuna Matata,” which is actually Swahili but it’s still funny.
2. The water stops running in the middle of your shower. (This only applies if you are lucky enough to have running water).
3. You meet someone with a pet monkey.
4. You spend 10 minutes just with greetings.
5. The children point at you and yell “mzungu”.
6. Someone passes you his or her baby to hold in the dala-dala.
7. The dala-dala won’t leave until its full, which means the person on your lap has someone on his or her lap.
8. Half the channels play Bollywood films, which are actually addicting.
9. Women wear crazy colored kangas (traditional fabrics) that don’t match at all.
10. People order beer warm.
3 comments 10 October 2008
Get to Know Me
To introduce myself, I’d like to tell you how I got out of the basement. But first you need to know how I ended up there.
In 2005, I was a year removed from an undistinguished college career and working at a small hedge fund in midtown Manhattan. And struggling. With the city, my health, a colorless half-cubicle and requisite data entry, and the slow realization that I was not happy. My boss got animated talking about potential acquisitions, EBIT (but not EBITDA), and reaching the one-million subscriber milestone. For a while, I felt a charge from that energy, but it never filled me.
My boss and I talked about finding your passion, and we both believed that you could only do your best work if you loved it. Something had clicked for him in elementary school when his history class covered the Roaring Twenties and the 1929 Crash. He intuitively understood the concept of leverage, and he went home and told his father that he wanted to buy stocks.
I really liked to travel but didn’t consider it a passion. Yes my Let’s Go Costa Rica had felt like a choose-your-own-adventure book with no bad endings, and my world was blissfully shrunken down to my backpack and the destination ahead. But traveling felt like an indulgence, not a vocation.
I got a little more direction when Warren Buffett decided to give his fortune to the Gates Foundation. It suddenly became a lot more hip to view charity as a social investment rather than a handout, and I latched onto the notion. It was the prospect of rigorous analysis that had piqued my interest in finance initially, and I thought applying it to social causes could engage both my soul along with my brain. I clipped articles about venture philanthropy and social entrepreneurship and learned a bit about microfinance.
I gave my boss notice that I would leave after my first year. I told him how I planned to meticulously research the non-profit sector to guide me in finding the right niche for my new career. My boss counseled me to get a job and figure things out along the way.
I left Manhattan and moved into my parents’ basement. A cushy cellar dwelling with cream-colored carpeting, dehumidified air and framed charcoal sketches, but still technically a basement
You have to squint to see the basement
And there I stayed. The better part of a year evaporated below ground, not in pursuit of finding a new job, but to tasks I had neglected during my time in New York; I reorganized my files, created a gorgeous Excel spreadsheet for my immunization records, revised my estate planning documents at the ripe age of 25, and generally puttered. Time seemed to spend itself. I thought I was getting my affairs in order, but I was really hibernating. My experience in New York had drained me physically and spiritually.
“You’re stuck,” a friend told me during a fresh afternoon in 2006. I was lamenting the fact that all my ducks were not lining up neatly and that I could not move on with my life until they were. He suggested that maybe I couldn’t complete my to-do list because I didn’t really want to. He talked straight to me for the better part of an hour, and when I left him, I paced the sidewalk, feeling a sudden need for excitement and joy and self-indulgence. I decided to travel.
I ventured to places that had piqued my interest, from friends’ experiences and gorgeous New York Times Travel section spreads. Places like Iceland and St. Petersburg, Morocco and Torres Del Paine. Sometimes the majesty of these places made me ache. It was a good pain, like my soul was finally getting a workout.
Erg Chigaga, Morocco. Hot toes!
At the end of 2007, I returned from South America with a commitment to finally land a non-profit job in the Bay Area. I had dismissed the thought of a career in international development due to health and safety concerns and all the unknowns of living in the developing world.
But then I received an e-mail about a Doctors Without Borders informational session, and I had a mini-crisis. I realized that if I moved to California, I’d in all likelihood land a desk job, stare at spreadsheets once again and daydream about two-week adventure vacations. I romanticized about helping people under fluffy white tents with backdrops of savannahs and equatorial sunsets. I needed to finally make travel my vocation.
I applied to the Kiva Fellows program this past summer, was accepted, and learned the organization needed a Kiva Fellow in Bali, Indonesia. I was smitten by the prospect of bumpy motorbike rides to interview pig farmers and find out what an $800 loan really means. I’m pretty sure they don’t have basements in Bali.
Just for fun: Tilt your head and do your best Lander voiceover. Want to find out where the video was shot? Tune in next time!
Thanks for reading my post. You can expect a new one every two weeks. I’m a beginner in this new world of blogging, so please tell me what works and doesn’t and help me create something you want to read. Too long? Want more pictures? Videos? I will be grateful for your suggestions. Lastly, check out the new loans for my microfinance institution (there may not be any currently): http://www.kiva.org/app.php?page=businesses&partner_id=82&status=fundRaising&sortBy=New+to+Old&_tpg=fb
12 comments 10 October 2008
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