Posts filed under 'ADEPHCA'
Adios ADEPHCA, Hola EDESA
I’ve just arrived at my fourth and final placement as a Kiva Fellow. Less than two weeks ago I was wrapping up work with ADEPHCA in Nicaragua and, following a week of whirlwind travel through southwestern Nicaragua, I arrived to start my first week with EDESA in Costa Rica. Based on initial impressions, ADEPHCA and EDESA have very little in common other than the fact they are both identified by somewhat confusing acronyms and are both quite small organizations in the world of microfinance. But that is where the similarities end. ADEPHCA is based out of Bluefields, Nicaragua: a town of less than 50,000 where the tallest building in town is the 3-story discotheque and many people haven’t even heard of Diet Coke. EDESA is based out of San Jose, Costa Rica, a bustling metropolis of over 1.5 million people that feels more like the United States than any other place I’ve ever been in Latin America. ADEPHCA’s clients live in tin and clapboard houses that may or may not have a real floor. The EDESA clients I’ve seen so far live in cement houses and may even have tile covering the concrete floors.
The working poor in Bluefields have very few options in terms of starting up microenterprises. Accordingly, nearly all of ADEPHCA’s loans are invested in daily consumption items such as rice, beans, and soap for little stores or in the purchase of clothing for resale. That’s it. The kinds of businesses EDESA’s clients are investing in run the gamut from agriculture and livestock, to fishing and restaurants, to sewing, bakeries, traditional handicrafts and more. One community they work with used to be dominated by coffee cultivation. Several years back coffee prices dropped dramatically, and many in the community used microloans to invest in other agricultural endeavors, a bakery, a tailor shop, etc.
While I’ve only been in Costa Rica for a week, my initial visits into the field (the rural areas where microfinance is most utilized) have shown that the levels of poverty and challenges to development are markedly less severe than in Nicaragua. To some extent, this is to be expected. Nicaragua is the second poorest country in the western hemisphere, while Costa Rica is among the most developed countries in all of Latin America. Costa Ricans take great pride in the fact that their country has not been torn apart by civil war and government corruption like much of the rest of Central America. While other countries were embroiled in internal conflict, Costa Rica was able to focus on things like infrastructure and education. In addition to investments such as this, Costa Rica is blessed with fertile lands conducive to agricultural production of all kinds and incredible biodiversity that attracts tourists from all over the world. They are so far ahead of Nicaragua in almost every way that it’s hard to believe that these tiny Central American countries share a border.
As a longer-term Kiva Fellow, it has been extremely valuable to see microfinance in action in a variety of regions and contexts. The thing I am most excited about regarding my time in Costa Rica is getting a feel for how levels of poverty here really compare with elsewhere I’ve been in Latin America. Are the poorest of the poor in Costa Rica still way ahead of Nicaragua’s poor? Or is there still extreme poverty in some parts of the country? Because Nicaragua and Costa Rica share a border, and because Costa Rica has so many more work opportunities than Nicaragua, nearly one million Nicaraguans have immigrated to Costa Rica. One million Nicaraguans in a country with just over four million Costa Ricans. It’s my understanding that Nicaraguans actually comprise much of the poorest of the poor in Costa Rica. But is their quality of life in Costa Rica still better than their life in Nicaragua? I look forward to seeing just how well Costa Rica has done in terms of development and poverty alleviation. In such a small country, have all corners benefited from the growth and prosperity I see in San Jose and nearby rural communities? Or have some still been left way behind? Hopefully I’ll be able to provide some answers in the coming months.
An EDESA borrower's chive fields in beautiful Costa Rica
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Megan Tatman Montgomery is in her fourth and final placement as a Kiva Fellow. Prior to EDESA, she served at Friendship Bridge and FAPE in Guatemala and ADEPHCA in Nicaragua. Please feel free to contact her at megan.montgomery@fellows.kiva.org with any questions, comments, or requests for future blog posts.
Add comment 1 May 2009
Does Business Diversification Reduce Risk or Increase It?
Perhaps it depends on the context.
Now having served as a Kiva Fellow at three of Kiva’s partner microfinance institutions (MFI) in three distinct locations, I have seen a wide variety in the types of businesses Kiva lenders are funding. I have also seen many, many situations where one client has several businesses. In a recent blog post, Stephanie Koczela, a Kiva Fellow in Uganda, very articulately explained how and why microfinance clients often have a variety of businesses. As she describes, not only is this the reality, it actually makes a lot of sense and helps these clients reduce their vulnerability to bad weather, fluctuations in supply and demand, price instability in certain products, etc.
Given that microfinance clients often operate several businesses concurrently, in my first two placements it was not uncommon for me to discover that clients had not bought what they originally said they would when they requested the loan. As a Kiva Fellow, part of my job is to verify that the clients do indeed exist, have received the amount of money they were supposed to, and that they are using the loan to invest in their business as they said they would. Accordingly, when I first heard of clients not using their loans as they said they would, it bothered me a bit.
However, in talking with the clients and with the MFI staff, I quickly learned that, of course, the clients know how best to manage their businesses. Circumstances often change. Perhaps when they first requested the loan, the upcoming planting season looked promising, so fertilizer and seeds seemed like the smartest investment. But by the time the paperwork was done, the loan funded on Kiva, and the client received the money, a tropical storm led to flooding and the soil needed time to recover. So rather than sit and wait, the client turns to other skills she has. She wisely purchases thread and, as she’s waiting for the fields to dry and to see just how rainy this rainy season will be, she is able to weave and embroider beautiful blouses that she can sell for a nice return.
All of this made sense…until I arrived at ADEPHCA in Bluefields, Nicaragua. As I’ve described in previous posts, Bluefields is a unique place and microfinance faces unique challenges here. Because there is so little industry, clients are generally quite limited in terms of kinds of businesses they can operate. I recently visited a prospective client with ADEPHCA’s loan officer, Guillermo, to see her business and talk about a loan for her. She has a very small store in the front of her home, with a very meager supply of basic daily consumption items such as rice, beans, and toilet paper. As soon as we arrived she launched into a very animated and enthusiastic explanation of her desire to start buying used clothing and selling it from her open front porch. Guillermo promptly explained that ADEPHCA only makes loans for clients to invest in established businesses that they have had for a minimum of one year.
ADEPHCA does not view having a variety of businesses as a positive thing. After seeing and understanding the value of having multiple businesses, I was initially confused and a little troubled by this position. But once again, I was reminded of how much I have to learn. Development is definitely not formulaic and Bluefields, Nicaragua has taught me firsthand how much specific geographic, cultural, political, and economic contexts can dramatically impact what can and cannot work. Rules of thumb that seem to apply elsewhere cannot be taken for granted here. Because nearly all industry in Bluefields is related to direct consumption (food, clothing, basic necessities such as toilet paper and soap, and maybe some basic construction materials), nearly all businesses will be affected similarly if there is a problem such as a natural disaster or an economic downturn. In other regions, having a variety of businesses might mean a small store, raising some animals, growing some crops, and selling clothing. In Bluefields, this kind of variety simply does not exist, so having multiple businesses does not necessarily lead to meaningful diversification and more reliable sources of income.
In general, I’m still a firm believer in diversification. Nevertheless, ADEPHCA certainly has some valid reasons for choosing to lend only to established businesses and encouraging clients to focus on growing the one business they have. That said, one thing that has troubled me since my arrival in Bluefields, is the big question of why there is so little industry here, and what would happen if someone made an educated, thorough, and well-funded effort to develop new industry. Would it be possible, with the right resources, to increase agricultural production in this sparsely populated region? Why don’t more people raise chickens in their backyards? Costeños pride themselves on their culture, so why aren’t there more local handicrafts? ADEPHCA is very small and simply does not have the resources to promote the development of new businesses. Nevertheless, I hope that someday, someone does invest in Bluefields a little more. I’d love to see what potential really exists here. In the meantime, I definitely have a newfound appreciation for how much context influences how microfinance works in a given place.
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Megan Tatman Montgomery is in her final week as a Kiva Fellow at ADEPHCA in Nicaragua. Prior to ADEPHCA, Megan served as a fellow at Friendship Bridge and FAPE in Guatemala, and will soon head to Costa Rica for a fourth and final placement with EDESA.
4 comments 17 April 2009
Literacy and Child Labor in Bluefields, Nicaragua
Having spent two months in Bluefields, Nicaragua now, I have been struck by the near absence of two characteristics common in impoverished areas: illiteracy and child labor. This statement is based purely on my own observation. Unfortunately very little statistical data exists for this region. Nevertheless, what I have seen here in terms of these two particular, yet intimately related, challenges to development is one of very few things that gives me hope and even a little optimism for future development here.
When interviewing recipients of Kiva loans, I often ask the client how many years of schooling they have had. If they have had very little, I follow up by asking if they can read and write. In my first placement as a Kiva Fellow in Guatemala, less than half of clients I interviewed were literate. It was not uncommon to see loan documents full of fingerprints instead of written signatures, as many clients could not even write their own names. Yet in Bluefields, far more isolated and with far fewer opportunities in many respects, only one client out of the dozens I have interviewed has been illiterate. And despite the fact that he cannot read or write, he worked diligently with his wife to make sure he would be able to sign his name on the loan documents.
As I realized more and more that ADEPHCA’s (Kiva’s field partner in Bluefields) clients are nearly all literate, I began pondering why that might be. ADEPHCA does not currently provide loans to start up new businesses, only lending to those that already have a business. So perhaps this requirement rules out the truly poorest of the poor, which are more likely to be illiterate. Nevertheless, I still got a general feeling that literacy is more common than one might expect in an area as underdeveloped as this. The Nicaraguan government has had several waves of literacy campaigns, starting in the early 1980s and off-and-on up to the present. These campaigns have been declared a great success, though some question the reliability of the related statistics that have been published. Hard data aside, I have observed two specific signs that reinforce my belief that literacy is surprisingly high here.
For one, there is virtually no child labor here. Nicaragua is now the fifth Latin American country I have lived in, and I have traveled in many other developing countries in Latin America and other parts of the world. In all of them, I have seen children working all hours of the day and night, selling local handicrafts, fruits and vegetables, washing windshields, juggling on street corners… Families often do not have the small amounts of money needed to pay school registration fees and buy uniforms and school supplies. Instead of going to school, children are needed to help contribute to the family expenses and spend their days in whatever income generating task they have access to. The cycle of illiteracy persists.
Yet when I ask ADEPHCA’s clients if their children are in school, I have been told “yes” every time. And as I walk the streets of Bluefields on weekdays, nearly all of the school-aged children I see are in neatly pressed uniforms and carrying backpacks.
My second source of optimism is very anecdotal, but interesting nevertheless. I currently live with a Nicaraguan family. I have a “little sister” here that is in her last year of high school. Before she can graduate, she is required to spend at least 30 hours tutoring an illiterate person in the community. I’m still not entirely clear on the details of how she is supposed to find this person or if she is given any sort of guidance as to how best teach literacy. Nevertheless, the fact that this is a requirement for all students before they can graduate from high school is a quite remarkable indication that Nicaragua cares about literacy and aims to do something about it.
So while I still don’t know if the fact that nearly all ADEPHCA clients are literate is a reflection of successful literacy campaigns and an understanding of the importance of literacy or if it’s because they are not currently lending to the poorest and illiterate portion of the population. What I do know, though, is that nearly all children that I have seen in the area are in school. Furthermore, these children are required to promote literacy among others as part of their school requirements. These two very basic facts give me hope that the region is making important strides in the right direction to combat poverty and improve quality of life. And as the general population becomes increasingly educated, microfinance can be increasingly instrumental in providing opportunities for the poor to channel their higher level of education into productive, income-generating businesses.
1 comment 3 April 2009
Microfinance Challenges in Bluefields, Nicaragua
Preface: I recently posted a blog describing some of the unique challenges people in Bluefields must deal with. I’d like to encourage those of you that haven’t already seen it, to first click here to get a bit of context before reading this post.
Microfinance faces some unique challenges in Nicaragua, and especially in the southern Atlantic Coastal region. This is my third placement as a Kiva Fellow (meaning the third partner microfinance institution I’ve worked with), and I have thought more deeply about poverty, development, and the role of microfinance in my first three weeks here in Bluefields, Nicaragua, than I did during my entire 3 months with field partners in Guatemala. Why is that, you ask? Because things were going relatively well in Guatemala. The MFIs were mostly self-sufficient, lots of loans were made, and nearly all were being paid back. Things are not going as well here in Nicaragua. Don’t get me wrong, there are certainly some success stories here; examples of people using Kiva loans to expand their businesses, increasing their income and successfully paying back the loan. But there are also many stories of people not paying back on time, if at all. Delinquency and default rates in Bluefields are substantially higher than what is standard in microfinance.
In talking with staff at my MFI and others in the area, I’ve heard a few theories as to why that is. Here’s a summary of the arguments, as they’ve been presented to me:
1. It’s a cultural thing. Some people here just don’t care about the commitment to pay back. Some people just aren’t responsible. A lot of people lie about what they are going to use their money for, when they’re going to pay, why they can or can’t pay, etc. There are definitely a lot of trust issues. Furthermore, things like solidarity groups to share the responsibility of repayment among many clients are reportedly not realistic here, as people are simply not willing to back their friends and neighbors financially.
2. Donations. This area is among the poorest in a country that is the second poorest nation in the western hemisphere. Over the years, few organizations have really invested in development here. Instead, the Nicaraguan government and well-intentioned NGOs have donated a lot of money. So the ultra poor have gotten handouts when they need it most, and sometimes otherwise. Accordingly, there is now an expectation, among some, that if things get bad enough, someone will come along with handouts for them. Evidently many prefer to wait for those handouts, rather than get in a situation where they have to pay back a loan. Furthermore, those that do take out loans, may have a somewhat clouded understanding of what a loan is, since they have grown up accustomed to charity, which obviously involves no repayment.
3. Lack of education and training. Many microentrepreneurs do not have much knowledge of basic business administration and money management, so they don’t have a good grasp on managing pricing, savings, etc. to be able to pay back successfully.
These are the most common explanations I’ve heard in talking with people that have been working in microfinance here for awhile. The first two theories are tough – in terms of measuring and defining and in terms of overcoming. The third one, however, holds a lot of potential, as this is certainly something that can be measured and largely overcome with the right training. Of course such training requires time and money, neither of which seem to be readily available in Bluefields.
While there is clearly no simple answer to the question of why some people repay their loans while others do not, I do believe that witnessing the challenges here is giving me greater insight into both the potential of microfinance as well as its limitations. The thing that I currently struggle with the most is how damaging delinquent and defaulting loans can be for individuals, communities, and the microfinance industry in the region. Taking out a loan, building a business, and paying off that loan is an incredibly empowering thing for anyone, and especially for the poor who have had so few opportunities. So I can’t help but think about how, on the flip side of that, failing to pay off a loan is the opposite of empowering. It seems like failure to fulfill loan obligations could cause a person to lose faith in their abilities, can damage their sense of responsibility, and certainly limits future opportunities. So the big question is: what can microfinance institutions do to ensure that the clients they are lending to are set up for success? What can and should be done when evaluating a new client for a loan to select clients that will be empowered by their loan? How do you know which prospective clients are trustworthy and responsible and entrepreneurial enough to be a good candidate for a microloan? And what can be done throughout the life of the loan and beyond in order to increase a client’s success in their business and repayment of the loan?
These are tough questions, with no easy, formulaic answers. What I find most disturbing though, is the argument that the success of microfinance is predetermined, to some extent, by the cultural conditions of an area. I really don’t want to believe that there are simply some areas where microfinance will never work because the people are not responsible or trustworthy. I hope to gain greater insight into this theory and other limitations of microfinance in the coming months.
5 comments 13 March 2009
Bluefields, Nicaragua
I sat down to write this post at least five times. I want to tell people a little about Bluefields, Nicaragua and the challenges that exist here, but that’s not easy to do. Bluefields is unlike any place I’ve ever been, and I’ve travelled and lived abroad quite a bit. At one point, I thought I’d try to find some statistics to paint a picture of the poverty here. At another point, I just started rambling about specific things that I’ve seen and experienced. Then I thought, maybe pictures are the way to go. None of these approaches even begin to explain this place that I currently call home. For the moment, I offer a couple of anecdotes.
Do Bluefieldeños Need a Passport/Visa to go to School in Managua?
That’s like asking someone from California if they need a passport and visa to go to school in Washington, DC. But that’s what a friend from Bluefields was asked when he arrived in the capital city of Managua to start college. Bluefields is the largest town on Nicaragua’s Caribbean coast, with over 40,000 people. It is the seat of government for the Southern Atlantic Autonomous Region (RAAS), which consists of a large percentage of the land mass of Nicaragua, but a very small percentage of the population and even smaller percentage of the nation’s wealth. It is entirely isolated from the rest of the country; geographically, politically, culturally and otherwise. Even university students, whom are obviously among the more educated in Nicaragua, don’t know anything about it, and even think of it as another country.
There are no roads connecting Bluefields with the rest of Nicaragua, so you must either fly in on a tiny, expensive prop plane, or you can take a small, crowded motorboat for a couple of hours, followed by a 5++ hour bus ride to get into the capital. Even this arduous, cheaper route costs about US$35 roundtrip, which is a whole lot of money in Nicaragua.
Industry in Bluefields: a pound of shrimp and a papaya
There is very little industry in this part of Nicaragua, and not a lot of potential to build it up. There is natural beauty, so why not promote tourism? Great, except that the infrastructure to get tourists out here is so poor, it would take a tremendous amount of investment to get that going. There is a lot of fishing, but that generally translates into super cheap seafood here, yet because of the very high costs of transport to get it to the rest of the country, the small-scale fisherman are forced to sell at the low local prices, while a lucky few are able to earn the big profits involved in larger-scale transport. How about agriculture if the population density is so sparse? Evidently the soil out here is not good for growing much, especially nutritious vegetables. This is a double-edged sword. Not only are people unable to grow their own food or build a business in agricultural production, but nearly all produce is imported from the western side of the country, making it very expensive.
In Bluefields, I can buy a pound of beautiful, succulent shrimp fresh out of the water for US$1.50. A papaya, however, will set me back US$4.00, and is probably a little beat up. The local fisherman that I buy the shrimp from has gotten up before dawn, boarded his tiny boat, and spent the morning catching shrimp. He walks through the streets, calling out “chacalín, chacalín, chacalín” to announce to what he has to offer, and continues doing so until his catch for the day is gone. The papaya was grown in the western part of the country, harvested, and most likely sold from a farmer to a larger transport company, who takes it on the long journey to Bluefields and sells it to someone in the local market. In both of these scenarios, the local person selling the product is receiving very little income. The shrimper, because the local price of shrimp is so low. The fruit salesperson, because of the incredibly high overhead in getting that one papaya all the way out here.
I recently traveled by boat and bus from Bluefields to Managua with the family I’m living with here. My host mother tried to beat the system, both going and coming. She planned to bring her daughter in Managua several pounds of shrimp and oysters, as these items cost over three times as much in Managua. The port authorities and the municipal dock, however, would not allow her to take them on the boat. Then, as we returned to Bluefields from Managua, we brought back several heavy bags of produce, trying to take advantage of the cheaper prices for produce in Managua. Sadly, as we unloaded our goodies, that big, beautiful papaya we had bought for half the price, was nothing but a soggy, squished mess. Even on an individual level, transporting basic products to and from Bluefields is extremely difficult.
So where does microfinance fit in?
That’s a tough question that organizations such as ADEPHCA, Kiva’s field partner in Bluefields, struggle with. Poverty here is extreme and pervasive. There are many challenges to economic development in Bluefields that go well beyond the isolation and lack of industry. Look for my next blog post, which will outline some basic theories as to why repayment rates in Bluefields are significantly lower than what is standard in microfinance. For the meantime, we should all have a special appreciation for an organization like ADEPHCA that, despite all the challenges, continues to do what it can to try to help those who need it most.
Click here to see any currently fundraising loans for ADEPHCA and start lending!
19 comments 6 March 2009
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!
3 comments 6 February 2009
Getting to know our field partners: ADEPHCA
Here’s an update from Kiva Partner Development Specialist, Daniel Kahn, about his visit to Nicaraguan field partner Asociación de Desarrollo y Promoción Humana de la Costa Atlántica (ADEPHCA)
http://kivanews.blogspot.com/2008/07/getting-to-know-our-field-partners_08.html
To see loans currently fundraising from ADEPHCA on Kiva.org, please click here.
Add comment 9 July 2008
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