New models for Kiva?
9 May 2010 at 00:01 James Allman-Gulino 19 comments
By James Allman-Gulino, KF11 Uganda
It’s now a little more than a week into my Kiva fellowship, and I’ve settled into my work at BRAC Uganda and gotten well-acquainted with Kampala. The city is a great place – it’s bustling and full of energy, and the populace is very welcoming and outgoing. Kampala and Uganda in general also enjoys a fantastic climate, and offers a huge variety of great produce – bananas, avocados, cassava, you name it.
But an area that Kampala doesn’t do so well in is public infrastructure. Electricity and internet connectivity are both spotty, but the condition of Kampala’s roads definitely sets the low bar. Even major thoroughfares are poorly maintained, and since paving is inconsistent, frequent thunderstorms create enormous potholes throughout the city. Sometimes portions of already-paved roads are torn up for no reason and then never repaired, as recently happened to a street near where I stay (shown below). An ex-Ugandan civil engineer who I rode with from Entebbe to Kampala complained that there are plenty of resources for improving Kampala’s roads, but that they never get fixed because money is siphoned off for other interests and projects are mismanaged. He also thought that low quality roads were the single biggest impediment to commerce in Uganda.
This street was perfectly fine two days ago.
This discussion got me thinking – if roads are this bad in Uganda’s capital, what are they like in the interior of the country? And how does this affect the rural business owners that make up the bulk of Ugandan borrowers on Kiva? I believe strongly in the ability of microfinance to empower the world’s poor and support their productive enterprises; but what happens when these entrepreneurs can’t even get their products to market because of poor road conditions? Is microfinance just a tease when the things really keeping people poor are big-picture collective action problems like maintaining roads, effectively using natural resources, and addressing public health issues?
That line of thought also got me thinking about possible roles for Kiva to tackle such problems. Could Kiva also serve as a place to post large-scale projects – like a village soliciting funds to build a road or medical clinic – that lenders could choose to fund? Such capital-intensive projects would benefit greatly from Kiva’s zero-interest funds, and the ability of many lenders to contribute would help disperse the risk of big projects. But conversely, would such a change take Kiva too far away from the peer-to-peer connections that are at the core of our model? And would it stray into unfairly usurping the work of public institutions, even if they are ineffective? I’d be curious to hear people’s ideas about other ways Kiva could try to address the challenges of global poverty, or whether such changes would lead the organization too far away from its core model of microfinance. A very happy Mother’s Day to all the moms reading!
Entry filed under: Africa, BRAC Uganda, KF11 (Kiva Fellows 11th Class), Uganda. Tags: blogsherpa, Field Partners, infrastructure, James Allman-Gulino, Kampala, roads, Uganda.
1. Infrastructure War: How Trying to Fix it can Sometimes Become a Fight « Kiva Stories from the Field | 21 October 2010 at 03:05
[...] main parts of Tajikistan. You’ve read blogs about poor roads before. Two of my favorites are James A-G and Meg Grey’s. But this isn’t just about poor roads, this is about rising tensions, [...]
2. Infrastructure War: How Trying to Fix can Sometimes Become a Fight « Kiva Stories from the Field | 20 October 2010 at 22:38
[...] main parts of Tajikistan. You’ve read blogs about poor roads before. Two of my favorites are James A-G and Meg Grey’s. But this isn’t just about poor roads, this is about rising tensions, [...]
3. Reflections on my fellowship « Kiva Stories from the Field | 21 September 2010 at 00:03
[...] and I distinctly saw problems in Uganda through a public management lens. As I commented in an earlier post, even after a borrower gets loan capital, they still need decent roads to bring their products to [...]
4. Top 10 things to know about microfinance « Kiva Stories from the Field | 19 August 2010 at 00:01
[...] However, microfinance is not a be-all, end-all “poverty solution.” As I alluded to in an earlier blog post, entrepreneurs in developing countries still have to deal with a multitude of problems that [...]
5. Schafer | 20 May 2010 at 12:15
Some light reading….http://econ-www.mit.edu/files/5415
From Esther Duflo, an economist from MIT.
6. Burt Allman | 14 May 2010 at 03:12
Kiva got a great mention last night on “Jeopardy”. One of the previous champions returned to appear on the Tournament of Champions and she answered Alex’s question about what she was doing with her winnings by mentioning her involvement with another previous winner and their cntributions to Kiva thriugh the “Bank of Bob”
She went on to give a breif description of Kiva and their mission.
Great PR
7. Fehmeen | 11 May 2010 at 09:59
A small village in Germany had a road that was severely damaged by the cold weather during winter. The govt didn’t repair it because of a shortage of funds so the city council decided to ‘sell’ the each pothole’s repair to individuals/businesses, i.e. each pothole was sponsored. This attracted plenty of attention since businesses could promote their products or showcase their CSR policies, and individuals could spare a few Euros as well.
Kiva can be the medium that shares activities like these with the world.
8. Jeremy Farkas | 9 May 2010 at 10:33
I’m not sure what happened to my last comment so I’ll try again.
Steve,
I agree completely with everything you wrote, and I’m looking forward to checking out that book when I return home. The big (and frustrating) question is how to resolve the Big 5 issues when a country’s own government won’t step up to adequately lead the effort. Relying largely on foreign aid does not seem like an efficient and effective solution. In the meantime, international development non-profits will continue to improve the quality of lives, but I agree the impact will be limited until the larger problems are addressed. I’m curious if Sachs recommends a solution for this problem.
-Jeremy
9. Jeremy Farkas | 9 May 2010 at 10:20
Steve,
I agree with you completely and will check out that book when I return home. While I don’t think that non-profits and NGOs should put their projects on indefinite hold until the Big 5 issues are resolved, I agree that our impact will be somewhat limited until they are. The frustrating part is the lack of control over the Big 5 issues. If a country’s own government won’t step in to adequately handle these issues, they force their citizens to sit and wait for foreign aid to do it, and that’s certainly not going to be as effective or efficient. In the meantime, I’ll continue on with my work so as not to punish the people that are already at a major disadvantage. I’m curious how Sachs recommends fixing this critical problem.
-Jeremy Farkas
http://www.CleanWaterForAll.net
10. Rilla Hamilton | 9 May 2010 at 06:53
That’s an amazing photo, given that the road was fine 2 days before!
Can private funds be used for public infrastructure needs, such as management of the roads? I would think yes for internet connectivity issues, but roads? If they’re managed publicly, and without solving the problem of mismanagement of funds, any new funding for these projects would be moot without a shift in public management principles, I’d think.
11. Schafer | 10 May 2010 at 12:42
I think private funds can make roads–think diamond or oil companies that build roads to ship their items out of the country…
12. David K | 9 May 2010 at 06:23
Who would repay Kiva? If it involves tax revenue streams, forget it. Infrastructure should be provided by local governments via taxation. Kiva should remain ground-up, with the benefits of thriving small businesses trickling up to infrastructure projects.
I do see that fixing the roads would catalyze some small businesses, but I still think it’s beyond the scope of Kiva.
13. James A-G | 10 May 2010 at 23:55
David,
I agree, repayments would be the principal challenge. You would have to create a large village group where everyone agrees to pay, plus with some higher level of contribution from businesses that are likely to get the most use. Whether this strays into being a tax stream or not is up for debate.
The fact that I think makes it potentially viable though is that it fills a gap where local governments simply aren’t functioning. If taxation and effective use of public funds isn’t happening, and a village’s populace is willing to enter into this essentially private arrangement, shouldn’t they have the chance to? Plus the investment in a (somewhat) public resource would then amplify the benefit that financing could yield for businesses, which could now deliver their products more effectively.
14. John Hunter | 9 May 2010 at 03:57
I completely agree such projects would be a great addition to Kiva. I do think it is different enough to be a related but separate effort. It is different but much of it could ride on the same technology platform. And the lenders on Kiva would likely have a reasonably high likelihood to want to participate.
I believe in experiments. We could try various efforts and see how well they actually work.
15. Jennifer Lehman | 9 May 2010 at 03:29
James, way to spark curiosity and challenge one to think of a solution. I will summarize my comment to Jeremy’s posting, which similarly shares my thoughts on this issues. Effectiveness comes in numbers. “The more the merrier”…such a common phrase that should be applied here to forming stronger partnerships to compliment each other’s efforts. However, are these individual organizations/groups willing to share their funds, expertise, time and even the recognition of their “selfless” efforts to countries like Uganda? The answer: They should see this as an opportunity to gain/increase their own funds, expertise, time and even recognition for creating alliances/partnerships with others to achieve the common goal: alleviate poverty and suffering, improve living conditions and health, empower citizens of Uganda (enter any country of your choice here).
Food for thought: Could you describe to us what the food resources are like?
16. Jeremy Farkas | 9 May 2010 at 02:09
James, you make some very good points. I’m a volunteer in rural Kenya with an organization producing low-cost ceramic water filters, and have seen the same problems here that you have in Uganda. I have quite a few thoughts on the topic, so I wrote my own post in response rather than writing a novel here. I’m curious to hear your thoughts on how to attack some of these problems as you spend more time in Africa.
-Jeremy Farkas
http://www.CleanWaterForAll.net
17. Steve Grey | 9 May 2010 at 08:21
James and Jeremy,
After reading both your posts, I think you might enjoy reading Jeffrey Sach’s book “The End of Poverty”. Sachs focuses at the macro-economic level and describes the investments that need to be made on “The Big Five” to enable developing countries to step onto the first rung of the development ladder. If I remember correctly, The Big Five are essentially 1) Basic health care, 2) Free, basic education for children, 3) Increased agricultural yields, 4) Effective infrastructure (roads, ports, electricity, and telecom, and 5) Safe water and sanitation.
Sachs makes the case that developed countries should help developing countries with The Big Five so that we can wipe out extreme poverty by 2025. But whoever you think should fund it, my conclusion is that micro-economic solutions (like micro-finance, water filters, and mosquito nets) can only be truly effective if the macro-economic environment is conducive to growth. Without effective roads (health care, electricity, education, etc.), grass roots projects have a hard time taking hold. People are always at a distinct economic disadvantage in trying to move up (or even get on) the economic ladder.
My own opinion is that infrastructure projects like roads need to be funded by government and foreign aid budgets, since they benefit the collective society. It would be hard to find anyone to pay back the costs if it were structured as a loan.
However, for projects where usage levels can be measured, you could provide subsistence levels free (like a certain amount of safe, clean water or electricity) and charge for levels above that, so that medium to high income households and businesses share the cost.
18. James A-G | 10 May 2010 at 23:30
Steve and Jeremy,
Thanks so much for your replies, and Jeremy I agree with your post that tax collection and administration is a central problem. That’s one possible benefit of this arrangement – it would essentially create a new local structure for gathering funds for such projects and bypass government structures. It would have to be pre-arranged who was responsible for making repayments (i.e. local businesses, a certain amount from each village resident). The potential problems (and not that they aren’t significant) would be a possible perceived threat to the government’s interests, and also how to enforce repayments.
Also Steve, I agree that some of the focus of the post is the same as Sachs’, but a lot of people (Bill Easterly, Dambisa Moyo) have challenged how his ideas for “the big push” create a culture of aid dependency, which I think is accurate in a lot of ways. Some of my impetus is that these projects wouldn’t count on perpetual aid streams, but would instead need to be productive investments so the borrowers could make repayments.
19. The broader problem « Clean Water For All | 9 May 2010 at 02:08
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