Archive for February, 2009
When The Collections Call Rings, How Do You Answer?
* image used for illustration purposes only; it is not an actual sign used by our MFI *
The end of the month is always a hectic period at my micro-finance institution. It’s considered to be a critical time to collect the late loan repayments, in order to reduce the amount of risk in the portfolio when the new month rolls around.
There are a number of meetings that take place among the loan officers and the management where the problem clients and groups – those that have not submitted their repayments on time – are discussed in detail. The mood is solemn at these meetings, as the situation is worrisome. Due to the economy affected by the worldwide crisis, more and more clients are becoming delinquent and are having trouble paying back their obligations.
The Collections Process
Typically, when a client is late, the loan officer personally delivers several written warnings to him or her to let them know about the late fees, which are relatively steep, and the consequences that may follow if the payment is not submitted promptly, such as the possibility of a lawsuit. Most of the clients react to these warnings and settle their debt, but not everybody. Thus, at the end of the month, there is an extra emphasis placed on collecting the repayments from these remaining “problem” clients.
Over the last few days, the loan officers have been paying daily visits to the delinquent borrowers. In fact, they even bring in an additional loan officer for reinforcement and effect. Oftentimes clients simply get used to their credit officer “pestering” them about the missed payment and not take it seriously any longer, so the extra support is meant to show how serious the situation really is.
Although today is Saturday, most of the staff has been working and making their rounds. The office stayed open as well, as the clients have been given a deadline to come in and submit their repayments by the end of the business day. As the day rolls to an end, many of the “delinquencies” have been resolved, so the staff starts to breathe easier.
It’s not the easiest part of the job for the loan officers, as that’s when they have to be a “bad guy” to a large degree. Many of their clients – even long-time reliable ones – are struggling to pay back their debts. For some, business has slowed due to the worldwide economic crisis. Others have relied on remittances coming in from Russia which has dried up recently. Although the MFI staff may sympathize, everybody has their job to do and the money needs to be paid back.
Conclusion
When you first learn about micro-finance, you learn about the impact that the loans have on the borrowers. You learn about the social value that the micro-finance organizations provide to their clients. And it’s all true – impact and social value are certainly there.
But because this is still a business and not a charity, things don’t always go so smoothly. As a micro-finance institution, you are caught between a rock and a hard place. Many MFIs, including the one that I’m working for, has a social mission to help the poor population and conducts its operations accordingly.
However, when the clients are struggling to pay back their loans, what should the MFI do? Do they attempt to accommodate the client, since – after all – their mission is to help the struggling population and not take their last money at the time of need? Or do they need to do whatever needs to be done in order to collect – as otherwise they can significantly jeapordaize their operations and the ability to serve more customers in the future?
What do you think?
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* This post has been written by Boris Mordkovich, a Kiva Fellow working for 10 weeks in Tajikistan for MLF Humo and Partners. Check out currently fundraising loans by Humo and join Kiva Lending Team – Supporters of Tajikistan *
A Phnom Penh Afternoon
Jeff Zira, the new Kiva fellow at CREDIT MFI in Phnom Penh, Cambodia has arrived and is loving everything about his placement
Continue Reading 26 February 2009 at 15:43 jeffzira 2 comments
Carnaval Crazies and Office Calm
I arrived in Bolivia on Sunday to the happy sounds and bright colors of Carnaval. The whole country was busy with their week long celebrations before lent. This Christian country incorporates many indigenous beliefs. Nearly all the entradas, or parades, that made getting from the airport to my apartment really difficult, are to honor some deity related to the earth, the sky, hell or food. Many offerings are made throughout the drunken mayhem. Water balloons and super soaker 5000s arm every child on every corner. The streets were filled for days with the sounds of fire crackers, screaming children and traditional music. Every person’s eyes were glazed with the happy film of Paceña, the local beer in La Paz. Though adjusting to the crazy altitude where fires don’t light and pasta doesn’t cook since water boils at such a low temperature, I partook as best I could.
Women wear over 30 skirts to show off their textile skills
This kind of break is clearly needed. The Bolivian staff at Kiva’s partner MFI, Emprender, work long, hard hours. Bolivians are known for their clear, slow Spanish (lucky for me), and their serious affect. I find this to be very true in this office of solemn faced workers. At first I was intimidated, but not more than 5 minutes had passed when they started to make straight faced jokes, that I’m proud to say I understood. I am so welcomed and comfortable in their office. Though serious and solemn, the Emprender staff feel an intense connection to the social aspect of their work. Christian, the young doctor who manages Kiva in Emprender is happy to pass along his responsibilities to a new Kiva Coordinator and focus full time on his health program. Starting shortly, Emprender clients can opt into a health insurance plan, pay slightly more at every loan repayment, and receive health services. I look forward to attending the opening. Around every corner I find a new plan for improving the lives of Emprender’s clients. They have an integrated approach to microfinace that is refreshing and inspiring.
Christian working in Emprender's Main Office
Our time together has been thoroughly planned, and I look forward to recounting the successes Emprender has here, the struggles I might encounter, and the face of microfinance in Bolivia. I can’t wait to meet the clients. I expect solemn faces barely hiding the color and excitement just below the surface that greeted me on my arrival.
Micro finance in Haiti!
Micro finance in Haiti -seeing is believing!
Continue Reading 26 February 2009 at 06:38 ashleyolivia 10 comments
After a little snag, safe in Kampala!
After years of international travel riddled with complications, I think that I have just experienced my most dramatic journey yet. About two weeks ago, I left Boston to travel to work with Pearl Microfinance in Kampala, Uganda. I had planned to land in Nairobi on Tuesday and then spend three days in Nairobi before traveling to Kampala Friday evening.
All went as planned. As I have lived in Nairobi before, my time there was spent visiting old friends and meeting all the new babies! Despite my happy time in Nairobi, as I headed to the airport Friday evening I was thrilled to finally be on my way to Kampala. I boarded the plane and sat down next to one of the heroes working on AIDS in Africa; listening to his story made the plane ride go by very quickly.
About 10 minutes before landing, I began to pour sweat and a sharp pain in my stomach began that scared me, despite all my years of stomach ailments from travel. After landing, and some chaos on the jet way, I met my waiting, and now very worried host family, who rushed me to the hospital.
Thus began a long night in a hospital with cockroaches in the bathrooms, ants under the beds, and staff who seemed unconcerned about me, and my insect company. Somehow, despite my lack of local currency and a phone that let me make international calls, I spent the night wide-awake on the phone with Kiva, our wonderful medical insurance program MEDEX (who had a doctor from the US consulting with my doctor within an hour), and my increasingly worried family.
The following morning, I was medically evacuated to a hospital in Nairobi where a series of tests revealed that I had had a cyst on my ovary that had twisted causing the severe on set of pain. However, it seemed to have untwisted, and I was feeling better – the pain had subsided over the day and my spirits has been revived by the awesome experience of being medically evacuated. (First, I rode in an ambulance with no lights and no sirens, which they compensated for by continually beeping – and then, I was put in a little tiny airplane where I was tied down to a stretcher, my IV bag was clipped to the light socket, and I had so many machines attached to me I felt like Dr. Octopus from the Spiderman.)
After determining that I would not need emergency surgery, the doctors sent me home with a friend of mine who is currently living in Nairobi. I rested for a week, went back to the doctor a few times for various tests which eventually showed that the cyst had dissolved, and after being given the go ahead – planned my trip to Kampala for a second time.
This time during the landing, my only stress was that the location of the airport in Uganda is such that you are quite sure you are going to land in Lake Victoria! You lean forward in your seat hoping that your forward momentum will encourage the plane to stretch a little further.
So far, Kampala has been wonderful – it is a bustling, hot, friendly place, that is clearly filled with adventures waiting to be had! I have only been at Pearl for about a day and a half, and so far, my days are filled with meetings with very impressive people, reading amazingly organized manuals, and other tasks that go along with the first days at a great new job. I head to the field tomorrow to meet with some borrower groups. I hope to have more news of microfinance soon!
During all my chaos – Grace, the Kiva coordinator here, was working tirelessly to prepare borrower profiles! Watch in the upcoming week for new loans from Pearl Microfinance!
Kiva in Senegal
My name is Liz O’Donnell and I’m one of the new Kiva Fellows. I’m currently working with Caurie Microfinance based in Thiès, Senegal, about an hour and a half east of Dakar (which unlike Bamenda, Cameroon, is really easy to get to from the US – a seven hour nonstop flight from your choice of New York, DC, or Atlanta).
I arrived in Senegal recently and while I have yet to go out into the field to meet Caurie clients, I wanted to share with you a video that I found helpful while trying to understand microfinance in Senegal, and the daily life of the borrowers here. The video was made by a Kiva partner here in Senegal, SEM: Senegal Ecovillage Microfinance Fund. Now that I’m here, I can say that it gives a good picture of village life, not to mention a taste of Senegal’s wonderful music:
SEM is one of three microfinance partners here in Senegal, and each partner operates under a different model (read more about SEM from a 2008 Kiva Fellow).
While SEM relies on the ecovillage concept, Caurie works exclusively with village banks – groups of 30-70 women – who join together to take out a group loan. There’s also UIMCEC, where another fellow just landed (literally – within hours of this post being published), so you’re sure to hear more from Dakar soon.
One thing I do want to highlight about Caurie is its status as MIX Market “5 diamond profile of the month” for February 2009 on mixmarket.org, a web-based microfinance information platform that provides data on hundreds of MFIs (microfinance institutions), microfinance investors (including Kiva), and other partners. The 5 diamond rating indicates that the institution has displayed the highest level of disclosure in terms of data relating to impact and finances. Caurie’s MIX Market profile is located here.
There are currently 333 5 diamond profiles so Caurie is rightfully proud to be selected for the MIX Market’s homepage this month. If you’re interested in the nitty-gritty financial details of certain organizations or countries as it relates to both microfinance and macroeconomics, I highly recommend taking a look at MIX Market. Note that the MIX Market profile for each Kiva partner can be accessed from the individual partner pages found on Kiva.org.
But beyond several great Senegalese partners, Kiva’s also lucky to have a full-time employee based in Dakar, Anne-Laure Behaghel, who is Kiva’s Partnership Development Specialist (PDS) responsible for West Africa. So we’ve got 3 microfinance partners, 2 Kiva Fellows, 1 PDS … and maybe a partridge in a pear tree? (Actually, partridges can indeed be found Senegal, but pear trees, not so much.) As the microfinance sector in Senegal is quite large – according to 2003 data from the Dakar-based Central Bank of West African states (BCEAO), nearly 40% of Senegal’s population (which is currently estimated to be 13 million people in total) has borrowed money from microfinance providers — there is certainly room for the organization to grow here. But Kiva is definitely starting from a strong base.
I’ll be writing about Caurie specifically much more in the coming weeks (you can also read earlier Caurie-related blog entries from a previous fellow). In the meantime, visit the Kiva website to find currently fundraising loans from Caurie, SEM, or UIMCEC.
Or you can take the opportunity during this Valentine’s month to share the Kiva love by purchasing a Kiva gift certificate. I just gave one to my niece and nephew so they could understand exactly what I’m doing here in Senegal. They have yet to choose an entrepreneur, but when they do, I’ve got my thoughts on where they should place their first loan …
- Liz O’Donnell, KF7
A Long Layover for Thought
A warm welcome to the Kiva Fellows Blog! I would like to introduce myself to you, my name is Ashley King-Bischof. As one of the last KF7 Fellows to arrive in the field, I make my way to Bamenda, Cameroon with much anticipation and excitement. My travels to Cameroon started in the San Francisco Bay Area and will last more than a couple of days before arriving to my final destination. The first part of my trek was across North America to New York City, where I am now. From there I have a longer red-eye to London, a quick jet over to Zurich and then another flight to Douala, Cameroon. As a last, and probably the most crowded trip, I have a red-eye bus ride to Bamenda. A lot, right?!
There is a reason for that; there are no direct flights from the United States to Cameroon. I had no choice but to layover in a third-party country. Ironically though, a loan to an entrepreneur in Cameroon can be fundraised faster than the time it takes me to get there by plane. Kiva’s online platform bypasses the need for a lender to meet face to face with its borrower in order to give them credit. Instead, with a click of a mouse, their loan can have the same, positive effect through the internet. It blows my mind to think of how Kiva will affect the lives of people over time with this method; the possibilities are endless. That said, my opportunity as a Kiva Fellow still requires me to layover in Europe, and although it will take some time to get to Cameroon, the wait sure does make me appreciate Kiva’s online immediacy.
With a flight or two to go, I look forward to being a Kiva Fellow in Cameroon!
You can check out the MFI I will be working with, GHAPE. They have been working with Kiva for 2 years now.
Poncho, then Expectations, slashed on a trip to the country
The morning commute to the DINARI office on my motorbike no longer takes 30 minutes since I found all the shortcuts (by getting thoroughly lost) so I hesitantly say that I’ve “hit my stride” here in Bali. Nothing wakes you up like an exhilarating bike ride at 7:30 am, dodging erratic drivers, enormous potholes, stray dogs, pedestrians in the middle of the road, and excessively crowded streets.
Last Sunday I loaded up my bike, said farewell to my two roommates from Jakarta and started the 2-3 hour drive, solo, to the DINARI office in Melaya, a small city in west Bali, where I’d be spending the week. Somehow it didn’t occur to me that leaving at 4 pm was a bad idea, especially given this is rainy season in Bali. By 5:30 the sky had turned completely black, the clouds felt like they were right above me, and I knew I was about to get very wet. I stopped to throw on the $2 poncho I’d purchased just before leaving and covered my backpack just before the skies opened up.
It was the worst storm I’ve ever been in. There I was, a relative novice on my bike, trying to find a city I’ve never been to in the pouring rain and impending nightfall. Thankfully there weren’t many roads where I was going (and mine stayed free of flooding) so I took it slow, kept heading west, and eventually arrived in Melaya sopping wet and my poncho in tatters, but with little additional fanfare. But let’s be honest here, that was fortunately the low point of Bali experience thus far and I learned a valuable lesson in preparedness and respect for the term “rainy season.”
The next morning, with my “I-think-I-can-journey” over, I arrived at the office rested and dry and was greeted by an exceptionally friendly staff. They proceeded to serve me mounds of traditional Indonesian breakfast goodies and coffee until I was uncomfortably full and hopped up on caffeine. The DINARI office in Melaya is a fraction of the size of the HQ office I’d come from. I welcomed the relaxed atmosphere and quieter streets – the “country” pace of things. It felt like I’d gone from Manhattan to Montauk and I loved it. Although, being the only guest at the only hotel in town was a tad strange and I’d be lying if scenes from The Shining didn’t cross my mind as I walked to my room at night.
DINARI was founded in 1992 in Denpasar, the sprawling and densely populated capital city of Bali. DINARI’s roots lie in the rural, largely agricultural communities of west Bali. The Christian community of Blimbingsari (blimbing is star fruit; sari is the essence of something) was established in the outskirts of Melaya in the 1930′s and is where a number of the DINARI staff grew up, including the founder and CEO Pak Alit. (The previous Kiva Fellow working with DINARI gave an excellent description of the history of the Christian community in Melaya, which can be found here.)
The Protestant church at Blimbingsari
The majority of borrowers the Melaya branch works with are engaged in agricultural activities of some kind – a great many are pig breeders and farmers. Despite it being smaller in size, the Melaya office’s borrower portfolio is larger than the headquarters in Denpasar. It struck me that DINARI’s mission – to “raise society’s awareness of environmental issues and to provide opportunities for people in chronic poverty to improve their lives” – may be better fulfilled at the Melaya branch, at least in terms of the environmental aspect of the mission. So many of the clients in Melaya literally live off the land.
For a city of boasting 10,000 residents at most, Melaya is incredibly diverse. During the 10 minute ride between my guest house and the office I passed Muslim girls heading off to school with brightly colored scarves covering their heads and Hindu families leaving morning offerings at their family purah (temple). I was awed by how well these communities coexist together in this small corner of the world. It reminded me of a term I’d learned when I was studying in Barcelona that the Spanish had used to refer to the peaceful coexistence of Christian, Muslims, and Jews during the Middle Ages: convivencia (“the coexistence.”)
DINARI coworkers
In addition to really appreciating the slower pace of things this trip to Melaya offered, I particularly liked the work I was getting to do. Zeruya, the Kiva Coordinator at the Melaya office, had created an ambitious schedule of client visits for my week (the first of 3 I’d be spending in Melaya.) The itinerary called for us being on the road a significant portion of the day, which was just fine by me.
The Melaya office’s operations cover an enormous area, so each day we’d have a 30-45 minute drive on the coastal highway just to get to the junction where we’d begin our ascent inland. Compared to the suburbs of Denpasar, the terrain in west Bali is mountainous and the climate much cooler. But the scenery is spectacular. Think beautiful lush green rice paddies stretching until they collide with the deep blue of the Indian Ocean, monkeys in the trees by the side of the road, and the clearest sky I’ve ever seen – punctuated by a vicious daily afternoon torrential downpour.
One of the most surprising – yet uplifting and reassuring – lessons the Kiva Fellowship has taught me is something I’d loosely deem “the commonality of the human spirit.” The endless preparation this Fellowship required left me constantly wondering what it would all be like. What would I feel when I met my first client? Would they want to talk to me? Would I be able to connect with them and then, perched over my laptop hours later, could I possibly justify their life story with a 200 word journal entry?
You tell yourself “Expectations” (yes, capital “E”) are a waste of time – and they probably are – but they are unavoidable and natural. I applaud anyone who can avoid making assumptions before doing something new. Coming to Bali I knew that most of the borrowers I would meet lived on less than a couple dollars per day. To be honest, I assumed some of the clients I would meet would be despondent, reluctant to talk about their lives, desperate, even suffering – out of pride.
Even before I got to Indonesia I knew these feelings were my “western expectations” but I feel particularly foolish now that I’ve experienced the reality. These borrowers I meet are perfectly happy and content. Furthermore, I see that they greet each day the same as everyone else in the world, wealthy or impoverished: they wake up in the morning, face the day, and go to work. Of course they are thankful for the loans they receive – which truly can and do change their lives – but there is no tinge of the “anguish” I admittedly prepared myself for.
typical pig sty
Many times the pig breeders I meet (you really never forget the smell of your first visit to a pig sty) live in the same community and very often are related or are close friends. To make the whole interview process most efficient for the field officers a number of the borrowers will congregate at a pre-determined home. Every pig breeder I’ve met so far has been a woman and the vast majority took a loan because they decided they wanted to help supplement their husbands’ income.
As the woman wait patiently, the children playing in the background, they gossip and laugh just as the same group of women thousands of miles might do at a the post office or local beauty salon. This is what I mean by the commonality of humans. People are people, no matter where you are or where you come from. They deal with same everyday struggles: making sure there is food on the table, ensuring suitable education for their children, putting some money away for savings (although often for the first time in their lives), even getting the gossip on the neighbors. Perhaps these everyday concerns vary in scale throughout the developed and developing world but I believe the core issues are the same.
Balinese family compound
Not only that but the borrowers I met were engaging and for the most part delighted that someone drive out to visit them and ask about their lives. With the interview over and Zeruya politely winds down the conversation, I will ask the borrowers if they would mind if I took a photo. Most happily consent and several have taken me by the hand to lead me out to their pig sty. Embarrassed and slightly incredulous, I’ll anxiously look around for the husband who usually hangs around the periphery during the interviews, and with his tacit nod of approval I’ll let myself be led by these women wherever they were taking me.
It’s been a welcome dose of reality, perhaps even an affirmative slap in the face, for me to see and realize this. My first experiences in Melaya have shown me that the incredibly unjust realities and maddening inconsistencies of poverty do not always negatively affect a person’s outlook on the world. Although I feel in no place to make such sweeping comments, all I can offer is my perspective on what I’ve seen in this one part of the world. I feel a sense of relief in what I’ve witnessed so far and I can say that microfinance does work and truly changes lives. I am embarrassed to admit these were my Expectations – but if I can’t be honest about what I prepared myself for, how can I accurately and objectively evaluate and comment on how very wrong I was?
It’s the reasonable repayment plan-stupid!
Many of my friends and family have been shocked, when I explained to them that microcredit loans often carry (what we would consider) usurious/oppressive interest rates. Many of them have asked me how ANYONE could justify interest rates of 30 or 50 or even 100%?
I have tried to explain all the factors that go into how a microfinance bank determines just how much interest it must charge in order to remain a viable business.
I go through the litany of factors contributing to the “high” interest rates—-the fact that it costs as much (or more) to make a $300 loan as it does to make a $10,000 loan; that in order to reach the poorest of the poor, the loan officers must often travel long distances on back roads in order to serve this population(because these borrowers do not usually have transportation to get to the banks); how a microfinance bank must cover its costs if it is to stay in business and continue to provide credit to the poor, that inflation rates must be accounted for in order for the banks to even recoup the original value of the loan. Usually, their eyes glaze over, they remain unconvinced and they find it difficult to get beyond their shock at the absolute level of the interest rates.
So, yesterday, I listened to a loan officer with ASDIR (Kiva’s field partner in Totonicapan, Guatemala) explain to a couple how they would have to repay their 30% interest loan in 12 monthly installments and (this is the key) that with each payment the total amount due on their loan would get lower and lower, until it was paid off.
That is when the differences between credit card debt which most U.S. consumers use to finance purchases and the microcredit consumer loans became crystal clear! It’s not about the absolute interest rates; it is about having reasonable repayment terms, which pay off the loan!
Let’s compare two loans of, say, $1000 —-one done the microfinance way and the other the American credit card way. The microcredit loan is made at the apparently outrageous rate of 50%, while the credit card loan is at a far more “reasonable” 20%.
___________ Microcredit American credit card
Loan Amount 1000 1000
Interest Rate 50% 20%
Minimum monthly payment ($107.59) ($16.67)
Total Payments in one year ($1,291.02) ($200.00)
Amount owed after 12 months 0 $1,000.00
Total amount paid in 5 years ($1,291.02) ($1,000.00)
Amount owing in 5 years 0 $1,000.00
Interest Payments to Bank $291.02 $1,000.00
With a microcredit loan, a loan officer evaluates the financial position of the borrower and develops a payment plan that is reasonable. It is a plan that gets them out of debt in a relatively short amount of time. In contrast, in recent years, the credit card way has been to provide people with a credit line, encourage them to make purchases on their card (up to their limit) AND then encourage/allow them to make only the minimum monthly payment. Paying off the card/the loan is NOT encouraged. Better for the banks to keep them paying interest only.
After one year, the borrower with a microcredit loan has paid off her loan and has paid a total of $291.02 in interest. After one year, the American credit card borrower has paid $200 in interest and still owes $1000 on the loan. After 5 years, the American credit card borrower has paid $1000 in interest and still owes the entire $1000. Meanwhile, the microcredit borrower may have taken out and repaid another loan or two, while the credit card borrower is still paying on the original loan!
Ends up the lower rates, but totally open-ended repayment terms are far more onerous for the borrower (and beneficial to the bank in the short term) than a significantly higher interest rate with clear and closed-ended repayment terms.
I don’t know if this will change the minds of some of my doubting friends and family, but, I think it illustrates how banks can charge interest rates high enough to cover their costs and risks, while still benefiting the borrowers who must pay the interest. It is truly a win-win, even if it may not seem like it at first glance.
For more information on microcredit interest rates: http://www.cgap.org/p/site/c/template.rc/1.26.2617
Bonjour, Bamako: Soro Yiriwaso’s Monument to Sustainability
By Jessica Chervin, KF7 Mali
Save for the high beams of the Land Cruiser and a few fluorescent lamps, I couldn’t see much as we drove off the paved road and onto a bumpy street, nestled deep within the quartier Cité UNICEF, a relatively poor neighborhood of Bamako (the capital of Mali) and my home base for the next few months. Then, from the darkness and dust, it rose: a glistening yellow building that, against the local backdrop, appeared rather like Oz…
I am Jessica Chervin, age 24, from New York, New York, and a proud member of the seventh class of Kiva Fellows. I have had the tremendous fortune to be placed with Soro Yiriwaso (which means “fructify the revenues of the home” in Bambara), Kiva’s first and only field partner MFI in Mali. As the first Kiva Fellow ever to work with Soro, I am charged with getting to know their organization deeply in the spirit of strengthening its partnership with Kiva. So, what of this “Oz”?
Soro Yiriwaso's new facility in the Cité UNICEF neighborhood of Bamako
Soro, which is currently headquartered in small town called Bougouni, has just constructed its first facility in Bamako. On my third day there, Soro’s director invited me to attend their direction’s official walk-through and reception, at which the architect and several members of the board were also present. The mood in the conference room was solemn. This building, for them, is a dream realized. Soro’s arrival in the capital heralds the organization’s coming of age. But as I listened to each of them reflect on the project, a deeper and greater symbolic power of the building emerged.
I thought of Soro’s mission, “To increase economic opportunities of disadvantaged Malian entrepreneurs, particularly women, in offering them enduring access to financial services”. And of Soro’s vision for itself: “A solid, autonomous, and perennial microfinance institution”. In every way, this building is the physical embodiment of each of Soro’s values. The idea of accessibility, for example, cannot be overstated. Soro’s choice to erect its magnificent headquarters in a poor neighborhood of the capital sends a bold message to its target population: we are HERE, for YOU, and we are not going anywhere. It beckons. It inspires.
A placard, detailing Soro Yiriwaso's mission and values, that hangs in the conference room of its Bougouni office
We members of the Kiva community, Kiva Fellows and lenders alike, see everyday that the basic and empowering principles of microlending work. But the consistent and enduring provision of financial services by microfinance institutions, the superstructure over a world of people ready to put their dreams into motion, is what makes the system run. Soro’s monument to sustainability is bona fide proof that, at the institutional level, microfinance can, does, and will work. And, as Kiva lenders, each of us has the special privilege of partnering in this industry-building effort.
I look forward to sharing stories of Soro in action with you in the months to come!
Click here to lend to Malian entrepreneurs through Soro Yiriwaso (check back soon if your friends have beat you to them), and join Team Fructification, Soro’s new lending team!
How Risky Are MicroFinance Borrowers?
One of the reasons why so many people around the world are not eligible for traditional credit and financial services is because they don’t have any collateral to offer to the lender. However, ironically, collateral alone is often not enough anyway. If you look at traditional borrowers in the U.S., who take out mortgages while putting their house down as a collateral or other loans, the default rates are still quite high (even before the crisis).
So is physical collateral a necessity? Or can credit be given without it?
About 2 Percent
One of the big questions that people have when they first learn about microfinance is – what is the repayment rate? Oftentimes, people are sceptical that the poor actually repay their debt. In general, this can vary from organization to organization, but a 98% repayment rate or higher is typical. In other words, only 2% of the loans or less actually go into default.
So, how can it be that microfinance clients in Tajikistan seem to be more likely to repay their loans that typical borrowers in the U.S.? What measures do MFIs take to keep their portfolio-at-risk numbers low? What can be effective means of collateral when there is nothing physical a client can offer to the lender?
Solidarity Guarantee
One of the most common techniques used by many MFIs to secure their loans is to lend through groups, where every member of the group is responsible for the group’s repayments. In other words, if one borrower fails to repay, the others have to cover for him or her or the entire group suffers.
Why does that work? In part, because the groups do their own, internal analysis to determine who is trustworthy and who they will accept into the group. And secondly, when people have very little, the most important asset they hold is their reputation, so they have an additional interest in repaying their loan to maintain that.
Small, 3-person group. They can range from 3 to 10 people.
One of the credit officers told me a story about a client who was late on her payment. The loan officer went into her village a few times to tell the borrower about the consequences of a late payment. After a few visits, the borrower came into the office to pay up and asked him not to come to the village anymore because she was afraid of what people would think if they’d find out that she was late. Reputation matters.
One step at a time
Solidarity and reputation are important factors, but they are not the only motivators. Many new clients typically start off with small loans at first and need to prove their repayment ability before gaining access to larger amounts and better interest rates. At my MFI, it’s not uncommon to see clients on their 6th, 7th or even 9th loans – each one larger than the previous one.
One client that I’ve met (below), received her first loan for about 1,000 Somoni (300 USD), her 2nd one for 3,000 Somoni (900 USD) and was currently applying for her 5th loan for 5,500 Somoni. In a sense, this is a way for people to build a credit history in places where credit agencies, like Experian and TransUnion in the U.S., do not exist.
Lola Toshmatova, a bulk sunflower seeds saleswoman, is now on her 5th loan
Keeping your clients close
A very interesting risk-reducing technique that I observed at my MFI is the monitoring system that the credit officers have in place. For every new client that comes onboard, the loan officers visits them several times right after dispersing the loan to ensure that the loan was used correctly. But, moreover, they follow up with quarterly visits to evaluate the business and ensure that everything is going smoothly. This way, any problems are identified and dealt with early on.
I’d say that this level of attention is pretty unheard of in the United States. After all, when was the last time that the person at your bank visited you after you took out a mortgage or a student loan to see how you’re doing. Even though, the loan sizes here can be 100 smaller than in the West. Although this is a time intensive endeavor, this is one effective strategy to stay on top of your investment.
* This post has been written by Boris Mordkovich, a Kiva Fellow working for 10 weeks in Tajikistan for MLF Humo and Partners. Check out currently fundraising loans by Humo and join Kiva Lending Team – Supporters of Tajikistan *
What Do You Mean By “Profit”?
The word “profit” does not translate easily into foreign languages. I’ve now tried to convey the idea both in Swahili and in Kinyarwanda and I often come up with nothing more than blank stares or long pauses. The difficulty lies in what “profit” includes (or doesn’t). A client may answer my question as to what their monthly profit is with a confident declaration of “30,000 Francs”, but when I ask what she uses the profit for, she answers that she pays the rent and pays off her loan. If that is the case, then her profit is not in fact 30,000 Francs but rather is 30,000 Francs minus rent, loan repayment, and other expenses. Unfortunately language barriers consistently stop me from explaining this coherently.
I understand the confusion. It serves as a reminder that many of these business-owners do not have any formal training in accounting or personal finance. Afterall, for much of their lives there was probably no need for this knowledge. They began businesses with survival and advancement of their families in mind, not as a result of thorough market research or financial backgrounds. Yet despite confusion on what, precisely, I’m asking, after some quick calculations every client is able to give me some number. The only problem with the figure is that I really am not sure what it represents. I have often included these numbers in Business Profiles and Journal Updates that I post on Kiva, but I recently realized that they may be misleading so I am beginning to hold off unless I am sure that the question was properly understood.
This is not to say that clients are oblivious to their earnings. On the contrary, they are very much aware of how much is coming in and how much is going out. They price their goods extremely carefully and perfectly in line with market rate. This is particularly essential since many shops sell the same goods, and a shop that tries to sell for more than market rate will quickly lose its customers. My point is merely that a balance sheet is not something that many shop owners have learned to rely upon. Training at many microfinance institutions is improving upon this as they teach their clients basic bookkeeping before disbursing loans, but it’s not yet ubiquitous. This is why I was particularly surprised when I met Aimable, one of Vision Finance Company’s clients.
Upon first glance, Aimable’s ease with numbers was noticeably absent. There was a significant pause when I asked the size of his loan. This is particularly unusual, as this number tends to live on the tips of the tongues of microfinance clients. As Aimable produced a notebook with detailed accounts of all costs, purchases, and sales, I understood how he was able to allow these numbers to slip from the front of his mind. He kept them on paper instead. In the U.S., we might view such paper bookkeeping as archaic. What’s paper? But here, even microfinance institutions often lack computer technology and do most, if not all, of their paperwork by hand. Therefore Aimable’s meticulous calculations make him ahead of the curve, not behind.
Aimable's Balance Sheet--he meticulously tracks all expenses and income
Aimable in front of his shop, bursting into the street with his many goods for sale
As you can see from the photo, Aimable’s business is booming. In fact, he is bursting out of his small shop with his quantity of goods for sale. I can’t say that this is the result of his careful bookkeeping, but I don’t see it as a coincidence that he has both been very successful and keeps close track of his income and expenditures.
Across the board, microfinance clients are impressive in their ingenuity, drive, and ability to survive within the marketplace. With a little bit of training on bookkeeping, they could likely be even more successful. I am optimistic that in the future, such training will become the status quo. I look forward to the day when my excitement at Aimable’s papers fades as balance sheets crop up all over and eliminate the confusion over that pesky word: “profit”.
To see Vision Finance Company’s currently fundraising loans, click here. If there are none up now, please check back soon!
Julie Ross is currently serving as a Kiva Fellow at Vision Finance Company in Rwanda. She recently completed her first placement with BRAC Tanzania.
The Road to Success
For the alleviation of poverty in Uganda, Microfinance Institutions are in the pilot seat by providing micro loans to the poor. The areas of operation depend on an Institution’s Vision and Mission, and like at Pearl Microfinance, financial services are provided to the economically active population of Uganda sustainably.
MFIs’ operations can not go on without the recognition of credit officers, a position that requires a lot of dedication, hard work and trust. The credit staff should have good people skills for if not, institutions would lack who to lend the money to or worse still, the existing clients are bound to fly over since they have many Institutions to choose from. They manage many lending groups and it is their duty to monitor each group for timely disbursements, loan repayments and trainings in better business skills. However, they face hardships like heavy rains leading to slippery and muddy roads, dusty roads with the scotching sun that mercilessly burns their heads. And actually our obligations at Kiva largely depend on the credit staff since they organize, train and disburse loans to the various groups that are known to us all; after which they ensure that the groups make their repayments on time. Kiva is doing a very commendable job in funding clients through the website just like the clients ensure that whatever amount disbursed is repaid on time.
The same recognition also goes to the hard working and devoted client’s that are very much willing to put their trust in the mutual relationship we have with them.
Take the example of Namulindwa Suzan, a 10 year old client with Pearl Microfinance in Gakuweebwa munno women’s group in Lugazi. She has a business of selling new clothing to daily markets called “mubuulo” which she buys from Kampala. Such markets are a collection of many entrepreneurs with various merchandise with a hope to sell to the customers who constantly flock the shopping stalls in the demarcated market areas as some markets reoccur weekly or bi-monthly and amazingly, no one concerned ever forgets the day and date and will always look forward to their next shopping whose prices are considered lower than shop prices.
To reach these markets, entrepreneurs like Suzan come together and hire a truck to take them with their merchandise to the market and pick them up after the day’s sale. And since the daily markets are never booming in the morning hours, Suzan has ample time to prepare her children for school, prepare the day’s meal and serve her husband before she sets foot only to return home after 9pm.
The saying, “when good character and hard work find opportunity, wonderful things happen” comes to terms with Suzan since with the help of loans, she has been able to increase stock of the clothes she sells and this has enabled her to pay school fees for her 4 children plus 3 relatives in her care, she has bought herself another plot of land, she has two cows, one giving her milk and she has hopes of more developments.
Figure 1: A typical wednesday market in Njeru County in Jinja.
Very true, women are instrumental in the poverty eradication process; take the example of Babirye Eflance. She had never thought of joining any lending group not until a day she was sent packing by her husband. It all started when she gave birth to her 5th born Sarah. At the age of 3 months, Sarah developed some abnormalities like having a loose neck, rolling eyes with a generally very weak more like a borne less body. She took her to the various clinics and hospitals with no solution to her sickness and this prompted the husband to send her packing with the rest of her children. Having no where else to go, she headed back to her parents’ home who managed to set apart some little money for her as capital to start a small retail shop.
Figure 2: Babirye Eflance with Sarah, her daughter.
After a few months, and by word of mouth, she was introduced to Pearl Microfinance and since then, life has never been the same. She has been able to include the sale of charcoal, mukene, tomatoes, pineapples and many others hence increasing her savings each day. As a result of her persistence and hard work, she has been able to educate her children of which 2 are now secondary school teachers, 2 are managing their own businesses while Sarah is able to access her medication, her life’s dependency. Eflance has asked for another loan through her lending group with the hope to restock her retail shop with more products like sugar that will bring in more income. This is not a story of sympathy but to show how she has managed to pull herself out of sheer poverty. In every development, we are supported by others and it takes one with a big heart to sacrifice the little they have for some one else’s big achievements. Good Luck.
Posted on behalf of Grace Natoolo, Pearl Microfinance
The Ovarian Lottery
I’ve been in Uganda for a week and a half now, working for a local MFI here called PEARL microfinance. During this time I’ve seen more action than I would have seen in 3 months back home. I’ve gone on a death defying motorcycle ride during a thunderstorm deep in the jungle, skidding through mud in 45deg declines and inclines (literally). I’ve witnessed the breathtaking beauty of the countrysides of Uganda — scenery that takes the cake from any other that I’ve seen in my 25 years, including Yosemite. I’ve gone on exciting adventures in the city with dozens of expatriates here similarly affected with a chronic restlessness and need for adventure.
But through it all, there is just one thing that stands out at the end of the day; something that occupies my mind during those quiet, solitary times in the evening just before going to bed. Its not the breathtaking views, the adventures in the city, or even the near death experiences on my motorcycle. It’s the faces of the locals here. The friendly shop owner and Kiva borrower who I pass by and say hello to on my way to work everyday; the entrepreneurs I’ve met with and interviewed at their broken down homes; the extremely well spoken, energetic and confident credit officer who made a lasting impression on me during one of our borrower meetings.
Any one of these people could be tremendously successful in America (economically speaking). Maybe a CEO of a prominent company, or a hotshot lawyer who wears a two-thousand-dollar suit to work everyday. But they arent. And the only reason for that is because of where they were born.
I think about it this way: suppose there is a barrel with 6 billion tickets, and before you’re born, you pick one at random. The ticket identifies what you will be when you enter this world, for example, rich or poor, black or white, retarded or bright, male or female. The title of this game is “the ovarian lottery”*. It’s a game we all played when we entered this world.
I won the ovarian lottery. I am a US citizen; got a good education; enjoy great health; and came equipped with a “engineer” gene that allows me to prosper in a manner disproportionate to other people who contribute as much or more to society. I’m in the top 1% of the entire population of the world.
Kiva, to me, is simply a way for those of us who drew the best tickets in the ovarian lottery to help those who drew less fortunate ones.
*The “ovarian lottery” concept was taken from a speech by Warren Buffett, the world’s richest person who recently committed a staggering $31B to philanthropy
Don’t Judge A Book By Its Cover
My name is Nathan and I would like to introduce myself to the Kiva community as one of the members of KF7. I am stationed in Hanoi, Vietnam with the local MFI SEDA. I am extremely grateful for this amazing opportunity and strongly urge anyone who is considering applying as a Kiva Fellow to do so immediately!
A typical Hanoian street scene.
The well-known idiom ‘don’t judge a book by its cover’ perfectly explains my first several days in Vietnam. While I had many fears prior to arriving in Vietnam including safely crossing the hectic and mob-like streets of Hanoi (I even was hit by a passing motorbike on the sidewalk one day and the previous day I saw a city bus T-bone another motorbike!), I am no longer afraid that there are no deserving recipients of microfinance here in Hanoi.
Before arriving in Vietnam, several previous fellows told me that in terms of Kiva placements, Hanoi is a 5-star rated fellowship. The city looks and feels like a modern city in all aspects including hotels that are budget to posh, an extensive public transportation system, large businesses and high-rise buildings on many blocks, and young, trendy, and fashionable people everywhere. The house that I live in even has high-speed wireless Internet, a luxury the vast majority of Kiva Fellows will not even come close to having at home let alone in Internet cafes.
This so-called 5-star rating made me question whether microfinance was actually all that necessary in Hanoi and the surrounding communities. After my first day in Hanoi I still felt this way after looking to purchase a mobile phone. After being pointed in a direction to find a phone by a long-time expat from Australia (maybe this was my first mistake!), I went into a very fancy looking store with an all-glass front with automatic sliding doors. Inside, the clientele was 100% Vietnamese with many of the people wearing what appeared to be designer clothing and sporting cool and trendy-looking haircuts. The cheapest phone that I found in the store was around $40, with prices ranging all the way up to $600+ for iPhones and various Blackberry phones.
My initial fear about microfinance in Hanoi however has turned out to be unfounded. Without even having a chance to settle down and get over my jet lag I went right to work as a Kiva Fellow my second day. After taking a hired taxi to SEDA’s branch offices on the outskirts of Hanoi and beyond I realized that there are in fact many deserving recipients of microloans here in the Hanoi surrounds.
Bac Ninh: The location of a SEDA branch office.
In one village that I visited near SEDA’s Bac Ninh branch office, I met my first group borrowing team. The village was small and had open raw-sewage drains along the tiny road in front of the small retail shop of one of the women. Nearby several small children were playing next to dogs that were foraging in piles of litter. The five women that I met live very different lives than many of the residents of Hanoi-proper, and in my humble opinion are using their microloans to attempt to better their opportunities. In fact, when asked what their hopes were for their futures they all said the same thing: get larger future loans so that they can improve their businesses even more so that hopefully they can send their children to university to provide the children better job opportunities than they have. Very inspiring if you ask me!
Lesson #1 learned in Hanoi: you can’t judge a book by its cover!
To learn more about SEDA, please click HERE. If you would like to lend to woman like this group near Bac Ninh, Vietnam, please check out SEDA’s currently fundraising borrowing groups by clicking HERE.
From boardrooms to street kitchens
You will not find much about it in the Lonely Planet but Thanh Hóa, Vietnam, is where I will be spending the next few months as a Kiva Fellow. Its dirt roads, paper-based systems and road-side street kitchens are a far cry from the corporate culture that I am familiar with, but I am excited to see what the next few months will hold.
Thanh Hóa is the fourth largest (by area) and second poorest province in Vietnam, with over 30% of the households considered poor. Kiva’s field partner here, the Fund for Thanh Hóa Poor Women, has been in operation for over 10 years and continues to grow in size and influence, opening a new branch just this past November in the Hậu Lộc district.
Although I have only been here for a few (linguistically challenged) days, we have hit the ground running and I am trying to ramp up as quickly as I can. (Easier said than done when there isn’t a wikipedia page on hand.) What I have found so far is a great passion for change and a general consensus that with the strong work ethic ingrained in its people, Vietnam’s economy will grow. The only question is how quickly and at what cost.
I will keep you posted on what I find, but in the meantime… Tôi cần thực hành tiếng Việt!
Note: In a future blog, Nathan, Kiva Fellow based in Hanoi, and I will be delving into the differences between microfinance in Hanoi and Thanh Hóa. Please leave us any specific questions you would like us to look into (e.g. how does the cost of living differ?) by leaving us comments. Cám ơn!
Join the ‘Vietnam Critical Mass’ lending team!
Coming to you from 37,000 ft.
After months of preparations and planning I am finally on my way. As I write this the map on the TV screen tells me I am currently over Pueblo, Colorado on the first leg of a three part trip from New York, USA to Phnom Penh, Cambodia. I will be in Phnom Penh for five months as a Kiva Fellow and will be working with Kiva’s partner agency HKL.
While I am very excited to listen and learn from both the staff members at my host MFI, HKL and the borrowers they serve I have a certain amount of trepidation concerning the affect the global recession will have on the local economy. During our Kiva Fellows training a few weeks ago the subject of how microcredit repayment rates would fair in the coming months and years was brought up. Since then, I have been thinking about what this in the context of how it will affect Kiva Borrowers in Cambodia. The first question I had was how are the lives of people selling fish, firewood or growing food connected to bankers in New York and London? While at first this boggled my mind, after thinking about it for a little while, the connection became very clear and very scary.
My train of thought went something like this: a bank in New York lays off a worker … that worker then buys fewer things, (clothes included)…the clothes store that particular banker used to buy from now has less business and has to close a few stores and orders fewer products from its suppliers … its suppliers in Cambodia are getting fewer orders in so they also have to lay off a person … that person’s spouse, who had previously used their small loan to sell fish as a second income is now the sole provider for the family … they can’t afford to payback the loan that they had previously had no problem repaying. Four quick steps and we go from skyscrapers to people like the borrows on Kiva’s website. This interconnectivity, both positive and negative, that our global economy has given each and every person in every country constantly amazes me.
While I am by no means a microcredit expert, I do know that one of the reasons that repayment rates are so high is that many of the loans are a once in a lifetime opportunity for people to lift themselves and their families to a better life. This means that if repayment rates start to slip in the microcredit industry it is not because people are out buying things they shouldn’t, it most likely means that their financial situation has become really bad and that they have no other choice. I think most of us have been in situations where we hit a time of financial trouble, weren’t able to pay all of our obligations on time and needed just a little help until we could make the needed adjustment and get to the light at the end of the tunnel. For many, this help could come in the form of a bank, family, or a second mortgage. Unfortunately, for those who have been borrows at microcredit agencies, this type of help usually is not an option. So in times like these, I want to keep lending on Kiva because the positive effects of $25 loan from New York can be just as easily felt in Cambodia and across the world as the negative effects of a bank in New York.
I look forward to sharing my experiences and all that I learn in the the coming five months!!!
Join HKL’s lender team here and show your love for my host MFI!!!
The Alpha and the Omega
It’s all Greek to me. But wait, I’m in Latin America.
I don’t know why the Greek alphabet comes to mind on my first night in Nicaragua. Perhaps its ambiguity is the result of hours upon hours of contemplation and preparation leading up to this fateful journey. Or better yet, maybe it’s my subconscious reminding me that I will soon be conversing entirely in a foreign language. To be sure, these Greek letters stand as literary symbols of beginning (Alpha) and end (Omega). The two so often complement one another in a seamless way. At present, the beginning of my time as a Kiva Fellow dually reflects the end of a more comfortable/less challenging routine in the United States. Peered through a larger lens, the end of my day of travel brings me one day closer to the beginning of my Kiva Fellowship with Fundacion Leon. And to that end, I couldn’t be more excited.
I come to Nicaragua feeling shreds of gratefulness, pride and wanderlust. Gratefulness to be able to serve those less advantaged in such an honest and practical way. Pride to be included in such a distinguished Kiva Fellows class. And wanderlust, well, because I believe that’s what flung me away from the confines of the cubicle and into the freedom of the field. I have to imagine all fellows share a similar sentiment.
Before closing for the night, I have a confession to make. I am currently sitting in a cozy hotel room in Managua’s business district. I know, I know (sigh). The “privileged” American arrives late to a foreign city and seeks comfort, safety, and a satisfaction in the belief that one can easily steer expectations. Well, now for a call to action: here’s to stepping outside comfort zones, becoming immersed in this new culture, and engaging in change as the weeks wax and thought of the ‘West’ wanes. Here’s to embracing entrepreneurial empowerment as a means by which we can all help alleviate the oppressive grips of poverty. And lastly, here’s to possibly returning to this very hotel room at the end of my fellowship and feeling a gleefully foreign sensation inside its once heartening walls.
Until that end, I hope you all enjoy my ride out here in Gallo Pinto land. In the mean time, please explore the borrowers within the Fundacion Leon network. While I have yet to meet them, I can only imagine they have incredible stories waiting to grace these pages.
Hola from Guatemala City!
Well, what the guidebooks say is true: Guatemala City is no walk in the park. Yet, the largest city in Central America certainly has much to offer and I look forward to sharing my experiences over the next few months with you.
I hope you enjoy the video below that I created to introduce you to FAPE – the microfinance foundation I’ll be working with here in Guatemala City. A previous Kiva Fellow (Megan Montgomery) and the Kiva staff have built a strong partnership with FAPE and I’ve been received with open arms and a lot of food.
Here are a few facts about Guatemala:
- Estimated 2008 Population: 13.6 million
- Population living below poverty line: 59%
- Indigenous population: 41%
- Languages: Spanish + 24 recognized indigenous languages
- GDP: $33.7 billion (About that of the state of Montana)
Hasta pronto!
Andrea
Help support FAPE and Guatemalan entrepreneurs by joining the
“Viva Guatemala” lending team!
The Hundred Thousand Peso House
Meet Paglaum Multipurpose Cooperative (PMPC), Kiva’s new partner in Plaridel, Misamis Occidental, Philippines.
PMPC Board of Directors & Evie, Kiva Fellow
As a co-op, its clients are members. They contribute savings, take loans, and earn profits as the institution increases its reach and profitability. Since 1982 PMPC has been working in a whole range activities, including microcredit; microinsurance; off-grid solar power; rice harvesting services such as processing, storage, marketing, and trucking; and sponsored preschool through college education for the children of indigent families. The co-op also sponsors a children’s savings plan, to which their parents contribute.
Paglaum Foundation School
The co-op members gather weekly for meetings. A PMPC loan officer goes over news and announcements. The members pledge to honesty and integrity, and the PMPC employees pledge the same in return. Every chapter then breaks into small clusters of half a dozen members, with a cluster leader taking the week’s repayments and counting them aloud so the entire group can hear the member’s name, loan terms, and repayment amount.
PMPC Chapter Meeting
Then the Chapter Leader, along with a group-appointed Treasurer and Auditor, record all this information in a log book and again state it aloud for all the members to hear. Finally the PMPC loan officer performs a verification of the group’s accounting.
Nita Morequio counting repayments
This Chapter Leader, Nita Morequio, is a ten-year member of the co-operative and an overwhelming success story. I asked her whether or not being a member of PMPC had changed her life. She said:
“Before I was a member, I made 50 pesos [$1] a day. My husband caught fish and I sold them. Then I got a loan for a pump-boat. Now I have three pump-boats. I got a motorbike for my husband and have paid off the loan. Now I make enough money every day that I can afford to make my payments on the 100,000 peso loan I got to build my new house. And now I have two kids, and I can send them both to college.”
The Hundred Thousand Peso House
Mr. Morequio and his motorbike
To see all of PMPC’s fundraising loans, click here.
Plaridel, Misamis Occidental, Philippines
Leaving Honduras
Yesterday all the loan officers and agency coordinators from all over Honduras gathered in the small conference room in Prisma’s main office summarize, discuss and clarify the way Kiva would be implemented in the coming year. This was the final day and our final hurrah. I was so honored that they considered my assistance and their partnership with Kiva worth the administrative cost of bringing everyone together for a day- effectively halting all normal activity. The loan officers from San Lorenzo and Choluteca were up at 3 in the morning to catch the bus to the capital and surely didn’t arrive back in their homes until nearly midnight.
Sierra and most of Kiva's Staff
I entered the office before anyone to go over the copies one more time, to wipe down the table, to center myself. The worries. “What if it turns out to be a big waste?”, “What if it becomes obvious that still, no one really understands Kiva?”, “I am hoping for a big discussion, but what if my questions fall flat and they respond with deafening silence” By the time I get the projector hooked up and water laid out on the table I’m starting to sweat. And by the time everyone trickles in, and begins reviewing their carefully prepared folders including the day’s agenda, a pencil for everyone, places for notes, and summaries, I’m starting to shake. And by the time Prisma’s director, operations manager and credit manager adjust their glasses in the back I’ve nearly forgotten all my Spanish.
We start and to my surprise the somewhat distant faces open up into big smiles and everyone takes part. People emphatically describe the kinds of journals they want to write and want to make sure that they have the right idea. Orbelina, Prisma’s Director, emphasizes her confidence in her employees, encouraging them to be creative. She reminds them how important Kiva is to their goals as an organization. After nearly 4 hours of pounding out the process, reading examples of profiles and journals and discussing the operational difficulties facing every office we were all relieved to enjoy a big lunch.
Manual and Octavio Enjoying Lunch
In typical Honduran style, the Thank Yous began. Each person took the time to express their gratitude and friendship to me. We spent about 20 minutes reminiscing about the occasional disastrous moto ride. Side trips to visit the grandparents of the loan officers who lived “just beyond that little hill”. Adventurous lunches in the local markets. Funny language mix ups. Memorable clients.
Sierra and Elia
I realized that though I know that Honduras is an environmentally rich country, filled with incredible species of birds, rainforest and arid highlands. I hardly made my way out to these places. Instead, my experience has been colored with the rich culture and individual connection I’ve had with so many people. The family I live with is a true blessing. I’ve witnessed a marital fight. 3 birthday parties. A huge baptism. The daily ins and outs of raising grandchildren, making ends meet. I have been so welcomed into their home and comfortably pass the time with both Doña Elia and Don Carlos. Carlos listens to the radio. A big clunker he carries around the house all day. He watches TV and recounts the plot to me almost as if it were non-fiction. “Then the shark attacked the scuba divers and they thought that it was safe to swim but it wasn’t. He ate all but one. She made it to the island and became a savage. She didn’t even believe in God”. Elia is in a constant state of preparing food for the endless stream of neighbors, God children, sisters, grandchildren, children and strangers that pass through her dining room daily. She turned 60 last night and joking put only 6 candles on the cake. “I’m still a child at heart,” she said. The salsa dancing began a few minutes later.
Salsa Feet
Prisma’s clients have contrasted this incredible affluence. They are honorable and interesting people. Each person has their own incredibly varied background, but their dreams for the future are almost always the same. They want a well-constructed house, healthy nutritious food, and the ability someday to stop worrying. I love the way that Kiva funded clients pat my arm on the way out of their homes saying “Nos vemos”, or loosely, “see you soon”. I feel that I really could come back any time and visit with them, or see them on the street and stop for a quick chat.
The country is a mix. Many feel incredible shame and anger at the corrupt system everyone agrees is the problem and which no one knows how to change. They have a curious love-hate relationship with the US. Everyone wants to go there, anything in English is way cooler, and clothes or lotions or food or machinery from the US is assumed to be higher quality. Still, people seem to be searching for the reasons they can be proud to be Honduran. Many have found it, some still yearn to leave. I’ve been asked for help getting a visa so many times I have lost count. Still, each person loves to brag about the parts of their country they love most. Nothing makes them happier than to hear how much I like the food, how beautiful their beaches are, how incredibly open their homes are, how I love the dancing and the visiting and the coffee and the weather and the clean air. “I’m happy you are comfortable”, everyone says.
Honduras is a country that often suffers. Mitch nearly destroyed it in 1998, and they’re constantly battered by rains, draught, disease. They’ve been undermined by economic exploitation by other counties for the past 400 years. Now they have a president that recently raised the minimum wage, in an appeal to the large population living below or near the poverty line. Unfortunately, the majority of small business simply couldn’t pay and the larger ones often refused resulting in a massive lay-off that combined with the drastically reduced remittances from the US has crushed the economy. Worried faces. Small businesses fighting yet another battle. Another complication Prisma has to navigate. But they have a wealth of potential. Honduras has incredible natural resources, a fighting spirit and a country filled with incredible kindness.
Waiting for Change
I’m not sure exactly how microfinance fits into the picture here, but it could not be clearer that Prisma is passing hope to its clients, who pass it to their neighbors, who enact it in their churches and local governments and schools, who continue to struggle to make this a better place. It has been an honor.
Calling for all T-shirts
So I’ve spent the last three months in San Francisco, anticipating my Kiva adventure in Nicaragua and familiarizing myself with the various players in the surprisingly small microfinance network. Now, I’m just four short days away from embarking.
Excited? Yes. Nervous? Definitely. Ready? Well, I don’t think it really matters at this point. The best way to learn, it can be said, is to throw yourself right into it.
Speaking of getting ready, I had a really great idea (or so it seemed at the time) on how to assemble an ideal wardrobe for my work in Nicaragua. T-shirts. I figured, since I’m going to be spending my days in the field, on the backs of buses and motorcycles, in the heart of Central American rurality, what better accessory to have than innumerable T-shirts. So, I started up this whole armamentarium, collecting unused, oftentimes old and unwanted, yet still charitable, donations from my friends. One of my friends in the Bay Area startup world had an even greater idea: let’s hop in the car, drive around to various startups, and ask for t-shirt donations. While it never happened, by the end of this venture, I had amassed far more t-shirts than a girl can hope to possess.
But wait, the punch. I emailed the Director of Finance of my MFI (ADIM) a few days ago, inquiring as to what the dress code is. His words: “Como gustes, no tan informal que contraríe la presentación normal de una oficinista,” or, “Whatever you prefer, but not so informal as to contradict the presentation of an office worker.” Well…that pretty much rules out t-shirts. Sigh. I guess I’ll have to give myself an A for effort. And now I have a lot more t-shirts.
While the above story marks a humorous beginning to my upcoming journey, what it comes down to is this: I am at a stage in my life where I am ready to make a tangible impact. I want to throw caution to the wind, let go of the comforts to which I am accustomed, and experiment with the road less traveled to get to my final destination…helping the world get that much closer to eradicating poverty.
More to come soon from Managua, Nicaragua!
iPhone Water Pump
Kiva is a “sexy”, high-tech cog in the economic development machine, conceived in where else but the dot-com capital of the world: Silcon Valley, California, USA, North America. At the very least I’m jealous at how Kiva seems to be a citizen of both the new “read the New York Times on your laptop in starbucks” and the traditional “Financial calculator at US AID” development worlds. Also, as a product of the AOL instant messenger generation, I would be the first to admit that I am incredibly energized by the emer
gence of social business, high-tech hybrids. Slick web pages, the same nifty gadgets I use to check local movie times at Fandango.com, and even some really cool hardware to make a difference in the world; right now, right where I am, with the tools and skills I already have (Kiva on your iPhone anyone?). I’m recalling a trip I took last fall to Northen Ghana in which I stumbled into a rural village library and to a tech-enthusiasts dream: several young Ghanaian students huddled around the monitor glow of a One Laptop per Child machine trying to get the operating system to open an excel file. Here was my specialty: a way to express my love for micro processors and working with others ; a process I had been working on since age 5 when I spoke my first words: “C:\dir /p” Even back on the Kiva homepage front, I’ve fallen victim to the seductions of .orgs where I can create a micro endowment at Star Bucks or a virtual parent-teacher association during a long layover in Bogotá. Seriously cool.
But then, yesterday on a visit to an organic farming coop in the mountains outside of San Salvador, El Salvador I had an out of cell phone service experience: I was reminded about the nitty grity work of community growing from the ground up, but more importantly how exciting and rewarding it can be. Donning her sweat-stained Che Guevara hat, Mercedes the local community organizer in the Salvadoran pueblito, enthusiastically shuttled us from one “shared work” project to another. With a $1k microloan in cash directly group of university students, the community had developed a good old-fashioned, plastic piping, brick tank, and muddy ditches water system to supply their organic crops of c
orn, tomatoes, onions, squash, oranges, cilantro, carrots, tilapia fish and countless other plants I wish I could understand in Spanish. Her crowning achievement since increasing total food production by three fold from last year are her Cuban designed, homemade water pumps (She pointed out several times that they were designed in Cuba). These two pumps, which each cost about $50 in parts, are made from used metal piping and a fire extinguisher tank, use no electricity or gasoline, and are able to pump river water about 50 vertical meters up the side of a mountain to supply acres of farm land with necessary irrigation. Can your iPhone do that? Needless to say, I was quite impressed by the ingenuity and persistence of the organic farming cooperative that has worked patiently for years on this agricultural project and are now hoping to reinvest their microcredit fund into personal vegetable gardens in each family’s home. With little more than sweat and some used parts from a hardware store the community has been able to drastically improve the economic and emotional quality of life in their community. Next time I visit I’ve planned to propose my new partnership with the organic farming cooperative: cubanwaterpumps.com
Impact of the Economic Crisis in Tajikistan
The consequences and impact of the international economic crisis has spread into all corners of the world – and Tajikistan is no exception.
In some ways, the impact of the crisis has not been as felt here as in the West. Most of the people here did not have their life savings in the stock market nor were they taking out 50-year, 0% down, adjustable rate mortgages (in fact, 30 year mortgages are unheard of here).
However, the crisis is here too and the true aftermath may simply be delayed.
How does Tajikistan play a role in the world’s economy?
One of Tajikistan’s biggest exports is its low-cost labor. Although the numbers vary, it’s reported that almost 2 million Tajiks (in a country with a population of 7 million) currently work beyond the country’s borders – primarily in Russia, in the construction field. Most families out here have a brother or a husband or a father that went outside the country to seek employment, as opportunities here are scarce.
Last year, the official numbers showed over $2 billion was sent back to Tajikistan in remittances by migrant workers. That’s just the money transferred through official means – much more was passed through informally.
Thus, when Russia sneezes, Tajikistan catches a cold. As the crisis is beginning to severely impact Russia’s economy which subsequently results in a slowdown of construction projects, massive numbers of Tajik workers risk not being able to find work in the future. The true impact is not entirely clear right now, as workers typically head back home for the Winter anyway. But the question on everybody’s minds is – will they be able to find work again when the Spring rolls around? With the poor economy and Russia instituting lowering quotas on the number of foreign workers, this is questionable.
Strong Dollar & Micro-Finance
The other major issue that’s affecting the people is the currency fluctuation – particularly involving the strengthening dollar. On January 15th, 1 USD cost 3.4 Somoni. Today, on February 11th, you’ll have to pay 3.7 Somoni for the same Dollar – almost 10% more.
You'll find these currency exchanges on every block - sometimes, inside grocery or cell phone stores
Although the national currency is Somoni, most of the business dealings here are tied to the dollar in some way, shape or form. Many of the remittances are sent back in dollars. Whether you’re refilling your cell phone balance or taking out a loan from a bank, even if you’re paying in Somoni, the real price is in dollars. As the dollar has been costing more and more over the last few months, people ultimately have less money to spend.
As a result, this is spilling over into the micro-finance sector, as well. Particularly, there are several ways in how this manifests itself.
First of all, borrowers are now more hesitant about taking out loans. When they take out the money in Somoni, their debt is tied to the dollar. So, when the future exchange rate is uncertain, borrowers risk owing a lot more than they originally took out. Instead, they choose to wait it out and forego the loan for the time being.
Secondly, business is slower. It’s a fact that’s not exclusive to the micro-finance sector or Tajikistan, but even this small economy is feeling the impact. As a result, there is an increase in consumer loans, but a decrease in business-related ones. People need money to meet their needs, but are uncertain about investing into their businesses. It’s interesting to see how this will impact the activity on Kiva, as many lenders seem to prefer to fund business-related loans, rather than sponsor a wedding or home repairs.
Thirdly, on a larger scale, many MFIs, including the one that I work for, get the majority of their funding from the U.S. based sources, so they are also subject to the risk. They try to deal with it by passing on the risk to the clients or charging a slightly higher interest rate, but this results in a drop of clients. With fewer clients, the risk within their own portfolio increases.
The next few months will show just how bad the situation is and whether things will get worse.
* This post has been written by Boris Mordkovich, a Kiva Fellow working for 10 weeks in Tajikistan for MLF Humo and Partners. Check out currently fundraising loans by Humo and join Kiva Lending Team – Supporters of Tajikistan *
Kesho, Nitaenda! (tomorrow, I will go!)
Hello Kiva Supporters! My name is Stephanie Koczela, and I am ecstatic to be headed to Uganda to spend three months with an MFI called Pearl Microfinance Limited. I am writing to you today from a bus traveling from New York to Boston. I am amused to be writing to you from this bus as it is running on a smooth road, has plugs for computer cords in each seat, and even has high speed wireless internet – it seems a far reach from the conditions I imagine I will be living in the upcoming months…
I am traveling back to Boston, where I currently live, to finish up a few last packing chores. I take off Monday to head to Nairobi, Kenya connecting through London. I will spend a few days in Nairobi and then travel to Entebbe, Uganda where I will be greeted and taken to Kampala by a wonderful family that has agreed to host me during my stay.
Despite the looming unknowns, I find myself very ready for this adventure I am setting off on. I think credit for the ready feeling must be given to the wonderful training that the Kiva Fellows are given in preparation for our department. Before taking off, I wanted to share with you my reasons for being delighted with this opportunity.
Two years ago, with a group of women from Mathare Slums in Nairobi, a friend of mine from Chicago, and two community organizers, I started a small fair trade bag company called Witethye. This business was possible because of a $40 loan that my grandmother sent to us. When the group began the women could barely ensure access to meals each day for their families – now, two years later, they are able to send their kids to school and some have moved out of the more standard slum housing (iron sheet roofs on top of walls make from mud and sticks) into apartment buildings made from cement. This business has shown me the power of a little bit of money when put in the hands of entrepreneurs in the developing world.
Naturally, my experience with this business led to an intense fascination with the idea of alleviating poverty by investing in small businesses in developing countries — thus the discovery and love affair with Kiva. Working with Pearl Microfinance Limited will be different than my own small company, because I will get to meet and interact face to face with dozens of business men and women all over Uganda. Not only will I get to meet them and hear their stories, but I will get to increase the connections that you all have with entrepreneurs in the developing world.
I can’t wait.
Join Pearl Microfinance Limited’s lending group on the Kiva website to connect with others who are excited about the entrepreneurs in Uganda!
Reaching out to the (almost) unreachable
I really struggled for a catchy title on this post but failed miserably. Hang in there – I promise it gets better.
One of the nagging questions I’ve always had about microfinance is – how does it scale? It’s particularly relevant here in the Philippines where Community Economic Venture’s (CEV) maximum loan is $450. A typical loan officer has about 350 clients who are often scattered across the countryside down dirt roads in distant communities. On a recent trip to Mindanao I had an opportunity to find out the nuts and bolts of how your dollars reach halfway around the world to the most remote borrowers.
After a day’s worth of plane flights, ferries, buses and motorbike rides I found my way to one of CEV’s community-run “cluster” houses outside of Trento in Agusan del Sur. The clusters consist of up to 30 local clients who take on the responsibility of managing the respective members’ loans. It’s governed by elected board members and by-laws and the group generally meets weekly to not only collect repayments but to discuss matters of importance to the community.
Inside the San Jose cluster house
This gesture of community empowerment is one of the ways in which CEV scales its operations. Loan officers often consult with the cluster chairman to determine creditworthiness or loan amounts for individual members. The group is accountable for one lump repayment representing the entire cluster and has some discretion in managing any deliquencies. It also serves as a forum for credit training and education which is one of the key distinctions between CEV and its competitors.
I had the opportunity to sit in on a meeting of the San Jose cluster and talk a bit about Kiva and what we do. The members were fascinated by the idea of distant lenders providing funding for their loans. But in the spirit of geniune hospitality the atmosphere was less about business and more about getting to know one another. I was asked pressing questions such as, “do you like chicken and rice?” and “when will you be coming back?”
Most of the San Jose cluster is engaged in rice or hog farming and the village sits on the edge of a massive rice field. Mindanao is often called the “Land of Promise” due to its rich soil and vast resources. Trento is well-known for its foray into organic farming and the mayor’s book on the topic was featured prominently in my pension house. Irenea Hitgano took on a bold challenge in pioneering organic methods in her community, even offering to pay for any losses incurred by farmers if the new practice failed.
I put together an admittedly shoddy video to chronicle a visit to a cluster house. It was shot with a cell phone and won’t win any cinematography awards, but the essence is there. Enjoy:
See You In Asuncion!
Kiva training is done. My bags are packed. I’m about as ready as I can be to make it from San Diego, to LAX, to Houston, to Buenos Aires, and then on to Asuncion, Paraguay. So, here I am, ready to depart for another meet and greet with customs officials, and it seems appropriate to spend a little time thinking and sharing about why, exactly, I’ve decided to hit the road again. On Kiva’s website, each lender creates a profile by providing his or her name, location, picture, and answer to the prompt “I loan because…” My lender page says that I loan because I believe in the power of empowerment. This idea, more than anything else, describes why I’m going to work for Kiva and why I wanted to learn more about microfinance.
Last year, when I was in Rwanda working for Orphans of Rwanda (ORI), it became very clear to me how microcredit could fill a critical niche in a developing economy. While ORI focuses on using university education to empower a small number of talented students to become competitive members of the country’s educated workforce (very important work in itself), I knew that thousands of young Rwandans would never have access to the type of support that ORI provides. Instead, those who cannot afford secondary or tertiary education struggle to find a foothold in their local economy–some will succeed and others will not. The women who sold fruit and vegetables on my street, the drivers of the local motorcycle taxis, and the owners of the small specialty shops that line Kigali’s downtown are all examples of people who have found a way to involve themselves in the local economy. But without access to credit, even the most entreprenurial-minded folks may not be able to endure setbacks such as a missed product delivery, a broken engine, or the appearance of new competition. A small loan can help those people stay afloat and out of poverty. When times are good it can help those entreprenuers grow their business, better support their families, and give themseleves the cushion they need to weather hard times. The concept is incredibly compelling, and the fact that Kiva lets individuals from all over the world empower one another by directly offering a loan to another person piqued my interest even more.
But does it always work the way it’s supposed to? Are there other benefits that we should pay more attention to? By serving as a Kiva Fellow in Paraguay, I hope to find out. Over the course of my four-month fellowship, I will meet over 100 borrowers. I’ll learn about Kiva’s partner in Asuncion, Fundacion Paraguaya. And, most importantly, I’ll do my best to share what I see, hear, and experience, with the rest of the Kiva community.
See you in Asuncion!
Nicaragua Bound!
My name is Megan Montgomery, and I am writing from Houston International Airport on my way out for five and a half months of adventures as a Kiva Fellow. I am in a unique position, as this is my second time to have the privilege of serving as a Kiva Fellow. I spent last summer working at Kiva Field partners Friendship Bridge and FAPE in Guatemala. I enjoyed the experience immensely, but felt there was still much to learn. Therefore, I head out once again to see microfinance in action, liaison between Kiva and partner MFIs, and hopefully help these MFIs learn more about Kiva and how best to maximize their partnerships.
This time I head to Nicaragua for two and a half months, followed by two and a half months in Costa Rica. In Nicaragua I will be working at a very, very small microfinance institution (MFI), ADEPHCA, located in the isolated Caribbean coastal city of Bluefields. Nicaragua is the second poorest country in the western hemisphere, second only to Haiti, and this part of the country is evidently as poor as it gets. Amidst the extreme poverty, there is cultural and ethnic diversity that contains rich and unique traditions, coupled with rampant discrimination and exclusion. I keep hearing that this part of the country is extremely different from the rest of Nicaragua, and Latin America in general, and I am very excited to learn more about the culture, the people, and ADEPHCA’s role there.
As I head out, I am somewhat overwhelmed by the anticipation of all the unknowns to come. I am most excited about getting to know the ins and outs of how ADEPHCA works. As I mentioned, this is a very small MFI, and my workplan from Kiva involves delving into everything from understanding the day-to-day operations, to discussing longer-term budgeting and strategic planning. It will be especially interesting to explore the role Kiva plays in such a small MFI and in a place where access to capital is so limited, yet so badly needed. ADEPHCA has limited resources and works in a part of the country that is quite remote and underserved. I look forward to seeing how Kiva loans are impacting the local communities.
Along with all the excitement, I must confess a few reservations. Quite frankly, I am most concerned about adjusting to the climate. It’s my understanding that Bluefields is hot and very sticky year-round, and I am somewhat dreading months of sweating. There are, of course, also the initial nerves related to catching all my flights, meeting up with my hosts, finding a place to live, etc, but that will naturally fall into place with a little persistence and a lot of patience. I suppose I’m also a little nervous, but also really excited, about the tasks before me. The Kiva Fellows Program is constantly evolving, and Kiva is increasingly utilizing fellows for new important and challenging tasks. This round of fellowships with entail projects such as operational cost analyses to help Kiva and MFIs better understand the real costs of partnering with Kiva, and a very exciting Flipvideo pilot project, among other initiatives. All fellows are being sent to the field with a handy Flipvideo in hand to collect video footage of interviews for journals, so lenders should look forward to getting an even better picture of the borrowers they are lending to.
I am thrilled to have this opportunity to learn more about microfinance, gain the additional perspective that comes from working with various field partners, and do what I can to promote Kiva’s mission. A big part of my job is to facilitate the connections that are so crucial to Kiva’s success. I am here to both represent and serve Kiva, ADEPHCA, the borrowers, and the lenders. I look forward to providing future updates on my work and welcome feedback from lenders regarding any specific topics of interest you would like to hear more about.
In the meantime, click here to see any currently fundraising loans for ADEPHCA and start lending!
Meet the fellows! Class 7
From San Francisco to Cambodia, Tajikistan and beyond. Kiva Fellows class 7 is off into the field… with cameras in hand.
Look out for more interesting videos from the fellows as we embark on this incredible Kiva journey. And please share your thoughts with us.
News Flash: Kiva Is Not Intuitive
Training microfinance institution (MFI) staff on Kiva never gets old no matter how many times I do it. The excitement lies in the great unknown of which questions they will ask once I’ve said my piece. Across the board, the staff I meet are professional and dedicated to their work. Most have been serving hundreds of clients for years before I dropped in to introduce Kiva, so it is not surprising that they are both slightly perplexed by this new element and also extremely invested in understanding it completely. Their questions illuminate for me how confusing Kiva is upon first (or even second or third) glance. My goal is to make Kiva as small a burden as possible so that the staff both collect the required information and do not have to take much extra time to do it. This is how the trainings tend to go:
Step 1: Introduce myself and make sure to mention Barack Obama in one way or another in order to get spirits high and interaction initiated.
Step 2: Explain Kiva and the MFI staff’s role within the Kiva framework. At Vision Finance Company in Rwanda, the previous fellow trained all staff on what Kiva is and my Kiva summary serves as a reminder of what she taught them several months ago. As such, I keep it brief. I emphasize how the credit officers are the most important piece of the Kiva puzzle. If they were to refuse to gather the information necessary to put loans on the website, Kiva could not exist. I also make sure they understand that information on Kiva-funded clients will be put on the internet. We want to make sure that they impart this to their clients and that their clients sign a waiver indicating that they do not object.
Step 3: Introduce business profile templates I created in order to ease the gathering of client information. Prior to the introduction of the form, they were writing up the stories by hand based on what they knew of their clients. Committed to their work, each would spend upwards of an hour trying to think of how to formulate their clients’ information into a story. This was both time-consuming and slightly confusing since some were not sure where the story went (answer: on to the Kiva website). We go over the form, written in English, with explanations in Kinyarwanda (the local language) of what each question is asking. The forms, much as you would expect, request basic personal information like age, marital status, and number of children. The staff are also to ask their clients business- and loan-specific information like what their business is, how long they have had the business, and what they will do with the loan and the profits that result from it. The form is simple because we don’t want the staff to be scared off from completing it. They already have so much work that the goal is not to create a large additional burden. Staff are visibly relieved at the sight of the form, knowing that this means they will no longer have to struggle with daunting blank sheets of paper as they think of what to say about their clients.
Step 4: Questions. One of the most amusing parts of question time, for me, is that the questions are all asked in Kinyarwanda and usually the Kiva Coordinator takes first stab at answering them. That means that for several minutes there may be heated debate, many players involved, volumes rising, and I will have no idea what is being said. When the Kiva Coordinator determines that I should be privy to the conversation, he’ll inform me of the source of confusion. There has been a great range of questions, all of them valid, since I conducted my first training with BRAC Tanzania until now, 23 trainings later. Some examples:
• How do we know when the loan has been funded on Kiva so that we may disburse the loan?
(Answer: you should disburse the loan according to your timetable at your MFI, not allowing Kiva to dictate the timing. If you disburse the loan before it has been funded by Kiva, the Kiva funds, when they arrive, will back-fill the MFI’s accounts.)
• What if Kiva wants to give the client a different amount than Vision Finance approved?
(Answer: Kiva has no role in determining the terms of the loan. Kiva is only a source of funding and will distribute only the amount approved by the MFI.)
• If it is a group loan, do we fill out one form for each member of the group?
(Answer: If it is a group loan, the group president should answer all of the questions and the rest of the group members should be included in the table where their name, loan amount, and type of business are requested. All group members must appear in the accompanying photograph.)
• By raising funds on Kiva, is Vision Finance exploiting its clients to get money for the MFI?
(Answer: By putting clients on Kiva, the MFI is not exploiting them but rather raising the funds necessary to distribute their loans. The money raised goes only towards that loan and not into the coffers of the MFI or into the pockets of MFI staff.)
• What if the client does not want to be put on the internet?
(Answer: If the client is uncomfortable having his or her information and picture on the internet, then choose a different client to be Kiva-funded. We do not want anyone to be uncomfortable or feel forced to appear on the internet. Just because that client is not Kiva-funded, however, does not mean that he or she will not get his/her loan. It means only that the funds will come from elsewhere, not Kiva. Disburse the loan if it has been approved by the MFI and do not let the client’s choice not to appear on Kiva affect whether or not he/she receives a loan.)
• If Kiva’s funds are at 0% interest, does that mean that our Kiva clients don’t have to pay interest?
(Answer: Clients are still to pay the MFI’s standard interest rates. The 0% rate from Kiva is for the MFI so that they may have more money available to disburse more loans and to help them cover the costs associated with serving their clients. If Kiva clients did not pay interest, all MFI clients would soon hear that certain clients are not paying interest and mayhem would ensue. It is more equitable to have everyone pay interest and for the MFI to use the interest to increase their impact on the community.)
• Why does it matter that the loan amount on the form matches the amount that Vision Finance has approved and will distribute?
(Answer: Kiva values honesty and transparency. As such, all loans raised on Kiva must match precisely the amount that is actually disbursed to the client. Ifs more money is raised on Kiva than is distributed to a client (for example, if the requested loan amount is listed instead of the actual loan amount, and the two differ), the MFI will be responsible for reimbursing the loan to the lenders.)
What the trainings remind me is that if we want quality business profiles and journal entries posted to the Kiva website, then it is important that we fully explain to MFI staff why they are filling out this form in the first place. Though some have never used a camera before and many spend little or no time on the internet, all want to understand the concept of Kiva and where they fit into it. For me, working with the dedicated credit officers at both BRAC Tanzania and Vision Finance Company has been just as rewarding and informative as meeting with their clients.
Julie Ross is currently serving as a Kiva Fellow at Vision Finance Company in Rwanda. She recently completed her first placement with BRAC Tanzania.
