Posts filed under 'ACCION USA'

The Nature of Poverty

I’ve seen the effects of poverty in many parts of the world. A year spent in Latin America couldn’t have prepared me for the crushing poverty that I saw in India. In Jaipur- the lonesome eight year old girl with a baby strapped to her back collecting garbage along the train tracks. In Mumbai- the endless lines of street dwellers sleeping alongside the highway and the horrified starved looks on their faces. The man that used one arm to pull the small remaining portion of his body across the harsh cobblestone paths of Varanasi- I could never erase that image from my memory.

Nor can I erase the feelings from my heart after what I saw in New Orleans post- hurricane Katrina. The community was abandoned and left in shambles and the residents, after years of neglect were nearly helpless. I’m often heartbroken by the exposed and vulnerable I see on the streets of New York City- old, young, pregnant, war veterans and others just lost. When I visited my home last week, it was hard to miss the bulging crowd outside of the Denver Rescue Mission- or maybe it just looks smaller when the crowd huddles together to escape the freezing winters.

Trying to compare the destitute in San Francisco or New York City to the desolate in Katmandu or Lima would do an incredible injustice to truth of these individual situations. The nature of poverty in the United States often manifests in ways that we don’t commonly label as “poverty”, especially once compared to the destitution we see in developing countries.  I can’t pinpoint it but, the look of boredom I saw yesterday on the face of a four year old girl in New York City, elicits a similar feeling from me as seeing the languish on the face of a child in India.

You cannot compare the empty stomach of a child in New Delhi to the bulging belly of a boy in Brooklyn; however the look of malaise on both of their faces can be a symptom of some form of poverty. Poverty can be due to the lack of dignity involved in the process of consumption. Over abundance and extreme lack have both been known to create hopelessness, violence, and severe health problems. The types of poverty that I distinguish have manifested themselves differently and each deserves a compassionate call to response.

How does this relate to Kiva…

The United States has been suffering from a community disconnection that has been growing for decades, and the affect has had implications across the globe. The movement to bring back our sense of community has taken many forms. Some buy locally grown foods or volunteer at local school programs. Now, you can choose to lend locally on Kiva and support small businesses that foster strong and dignified communities. I’m a firm believer in the interconnectedness of humanity, and that even the smallest of actions can have profound and long lasting impacts. By supporting a microenterprise on Kiva you are supporting the rights of an individual to a dignified way of earning a living and supporting their family- dignity is a strong word.

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Erica Dorn has recently completed her Kiva Fellowship at ACCION USA in New York City.  She will be continuing a career in US Microfinance and can be reached at ericadorn@gmail.com.  You can also follow her blogs related to US Microfinance at  ACCIONUSA.org/blog

9 comments 21 July 2009

The Cost of Doing Good

By Nancy Tuller, KF8, Ghana, Africa

I have a professor and mentor from my undergraduate days whose advice and thoughts I value and respect so much.  I still communicate with him regularly, and over the years, the topic of interest rates in microfinance has come up repeatedly in our conversations.  This is the man from whom I first learned about community currency, an alternative exchange system used alongside national currencies.  He is knowledgeable about micro and macroeconomics, as well as finance.  However, our conversations about interest rates for microloans always end the same way:  with me, for the most part, defending the rates charged for microloans, and with him maintaining that the rates are most often too high.  I think I finally have the words to support my position, and I offer them up to you all.

It seems I’ve always intuitively known that if you want to be in the business of giving very small loans to the poor, your expenses are going to be higher than if you are a financial institution that works with middle to high income clientele.  If you want to continue providing basic financial services to the poor you must have a sustainable operation, with an ability to cover all your expenses and generate funds to lend as well.  Many microfinance institutions (MFIs) rely on donor funds to stay sustainable, and I would even venture to say, without the statistics at my fingertips, that the majority of MFIs begin operations this way.  Many are not able to wean themselves from donor funds.  But relying on donor funds has its own cost, in terms of meeting donor needs, reporting back to donors, and the very real threat of MFIs losing sight of their own missions by putting their financial viability (and sometimes donor missions) at the top of their priority list.  The more recent trend in microfinance is to move away from donor funds and seek financial sustainability as quickly as possible.  Scaling up the business by adding more borrowers is a step in this direction, and there are certainly MFIs, who once they have reached a financial comfort level, have lowered their interest rates.  However, that comes with time and sustainability.  The first goal, before lowering interest rates, is financial self-sufficiency.

One thing that is really important to acknowledge is that different country contexts present different challenges to meeting financial sustainability for MFIs.  For example, Kiva recently launched its first loans to borrowers in the United States.  One of the MFIs offering these loans, ACCION, charges an interest rate of 12% APR.  That may seem on the reasonable end to many from the US.  However, (more…)

4 comments 18 June 2009


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