David Gorgani | KF 17 | Dominican Republic
As readers of this blog, you’re all surely familiar with the controversy surrounding microlending. Of course, it’s easy to criticize the high-interest backdrop of loans that are designed to help the poor lift themselves out of poverty.
As you have probably read in this very blog, there are many explanations for this trend (see this post by Julie Kerr (KF16) for examples of why providing this capital is no cheap task, and this post by Kate Bennett (KF15) for an example of the alternatives for marginalized poor that need capital.) But I’m not writing this post to discuss interest rates, I’m writing this post to discuss the many other services that MFIs provide. Regardless of how you feel about microlending as such, it’s hard to deny the positive effects of the multitude of other services provided by MFIs worldwide.
What kinds of services, you ask? Well, the list is long, remarkably innovative, and best of all, tailored to the realities of the unique communities in which each MFI operates. In addition to the almost standard money management and business management training, take for example:
BRAC Liberia‘s health training for community leaders, to subsequently provide health assistance to their communities in the form of identification of illness, basic treatment, and referral to the appropriate clinics.
ASI‘s provision of income tax training to low-income populations in and around New Orleans.
Hluvuku-ADSEMA‘s leasing of agricultural machinery (specifically tractors) to micro agribusiness and subsistence farmers during the harvesting season in Mozambique, in an effort to reduce the cost of crops that are typically harvested by hand, with the ultimate goal of helping local produce compete with cheaper imported produce.
Esperanza International‘s provision of Spanish literacy courses targeted specifically to the Creole-speaking Hatian population in the Dominican Republic.
So I know what you’re thinking. Kiva is straight-up microcredit, right? Just loans, no additional services? Well, yes and no. Just like any institution, be it for-profit or not-for-profit, Microfinance Institutions have a bottom line. By supporting them with capital at 0% interest (i.e. through Kiva) you’re supporting their entire portfolio, and thus expanding their ability to provide these (mostly free) additional services.
It’s also important to note that Kiva is very picky in choosing its Field Partners. As the world’s most-visited microlending website, many MFIs want to join the ranks of Kiva’s Field Partners and the increasing number of field partner applications gives Kiva the luxury of choosing based in part on these factors:
Client Protection Principles. All of Kiva’s Field Partners are required to endorse the Smart Campaign’s Client Protection Principles, which are designed to remove the dark side of microfinance (e.g. overindebtedness, unfair pricing schemes, lack of transparency, etc) from the equation. Kiva has also begun a process of ensuring that field partners are complying with these principles, which many of us Fellows are currently implementing in a pilot phase.
Social Performance. Through Kiva’s Social Performance evaluations, lenders have the ability to tailor their loan portfolio based on which of the seven principles are most important to them.
The bottom line: local MFIs provide local solutions to local problems, both financial and otherwise, and by supporting socially-conscious local institutions with capital at 0% interest (i.e. through Kiva) you’re supporting their overall portfolio.
Just like any form of international development, microfinance has its flaws. However, if you choose where to lend wisely (which Kiva makes it easy to do) you’re not only supporting the clients receiving your loans, you’re also supporting institutions that strive to improve the quality of life of their clients with many services in addition to loans.
David Gorgani is a Kiva Fellow serving in the Dominican Republic, helping ASPIRE get started as a Kiva Field Partner, helping Esperanza International with borrower verifications, and attempting to learn salsa and merengue on the side.