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> Posted by Josh Goldstein, aka Mr. Provocative
The proliferation of smart and cell phones in Haiti is nothing short of remarkable. Even people who seem to be among the poorest of the poor have them. When people at the so-called bottom of the pyramid truly desire a new technology and the price is not outlandish, they find a way to purchase it. Marchands (market women) peddle their wares on Port-au-Prince’s teeming streets under ubiquitous sun umbrellas that Digicel, the largest cell phone provider, has handed out by the tens of thousands.
And Haitians, as I recently learned, often use these phones to text, email, or call relatives in the diaspora to ask them to remit money. Remittance transfers from relatives in the US, Canada, and elsewhere is the one source of reliable income for many of Haiti’s poor. When I visited Fonkoze’s bank in Port-au-Prince, every person in the waiting area was there to collect a remittance — not to save or borrow.
Visitors to the island with any kind of conscience struggle with the enormity of the suffering they encounter. Many provide cash gifts to Haitians they get to know, just to “do something,” hoping to make a small difference in a life or two. There is nothing new about this kind of direct philanthropy in the poorest country of the Western Hemisphere. But today, thanks to the communications revolution, that sense of responsibility for acquaintances (who are not relatives) can persist, and vividly so, after visitors leave the island.
Before departing from Boston for Haiti this spring, I hired a driver, based in Port-au-Prince, whom I will call Hector, to drive my daughter and me around the island. We had “met” through email, connected by a friend who had used his services in the past. Hector and I exchanged a few courteous emails and telephone calls to take care of logistics (I assumed he was a man of some means because the Haiti I knew in the 1990s was a place where only the wealthy had phones.) Hector wrote me exactly as follows:
my dear friend Johs, the pleasure is mine to get ur massage today, i think whenever you wanna come in haiti u will be welcome, and i will be glad to spend you my time.i will be happy to receive u may 18th,11 cause it’s haitian’s flag party,my phone number is:xxxxxxxxxxx available anytime
The Hector who met us at the airport was a very nice 28-year-old man, brimming with life and contagious bonhomie. He was available to chauffeur because he was unable to find any steady work — in spite of having some college education.
There are, of course, millions of poor Haitians like Hector, but they usually remain a bloodless, undifferentiated abstraction, and it is hard for most of us to stay emotionally connected to an abstraction for long. It was Hector I got to know as person, who took good care of me and my daughter. I learned about his evangelical minister father, his little brother (a part-time dispatcher for Handicap International), and his fiancée (a nursing student in New Orleans). I met a sister-in-law. Solidly lower-middle class, I suppose, but by Haitian standards. He did not shout his desperation — he had too much dignity for that. He had many dreams, but his frustrated ambition to do something with his life in Haiti was heartbreaking. Read the rest of this entry »
> Posted by Josh Goldstein, aka Mr. Provocative
What international development interventions truly work? I say, with absolute conviction, mine does. You say, with absolute conviction, yours does. Who to believe? Where does the truth “lie”?
The Center’s recently published report “Opportunities and Obstacles to Financial Inclusion” is highly illustrative of how hard it is for varied stakeholders to agree on what is actually true—in the case of this study, the top obstacles and opportunities to the expansion of financial services to all who need them. As Gardeva and Rhyne write, “Segmenting the survey responses by stakeholder group [providers, investors, support organizations and regulators] shows how each group’s priorities in financial inclusion align with its main interests as well as its day-to-day realities.”
This tendency to self-serving perception is hardly limited to the microfinance or even the development arena. What diet really sheds the pounds once and for all? What educational reform really improves the performance of school children? Every approach has its fervent champions. Thus, many contradictory, competing claims over efficacy and impact. Most advocates for their respective causes are not scoundrels or sociopaths but well meaning “everymen” convinced of what they say, wedded to their viewpoints, because their professional survival depends on it.
Someone must be wrong. Everyone can’t have “God on their side.”
Competing institutional priorities and agendas between organizations or, indeed, within different divisions of the same organization, almost ineluctably lead Team X and Team Y to different versions of reality (competing belief systems). Recently, a new biography of one of the pre-eminent physicists of the twentieth century, Richard Feynman, crystallized in my mind this stubborn and vexing feature of human affairs that slows down communal progress in countless ways.
Illustrative of Feynman’s relentless pursuit of the facts is the role he played in investigating the Challenger Space Shuttle disaster of 1986, which resulted in the death of all the astronauts on board. As Freeman Dyson writes in the July 14th issue of the New York Review of Books, Feynman was told radically different narratives about the accident by the key teams working on Challenger: “the engineers and the managers, who lived in separate worlds and did not communicate with each other. The engineers lived in the world of technical facts; the managers lived in the world of political dogmas.” One example: the engineers estimated the risk of catastrophe at 1 in 100 missions; the managers at 1 in 100,000, a shocking disparity. The engineers, Feynman reported later to the public had it right. Read the rest of this entry »
> Posted by Josh Goldstein, aka Mr. Provocative
In the wake of BP’s drilling catastrophe in the Gulf of Mexico, oil companies are facing a possible revolt by profit-conscious shareholders who fear that these firms aren’t moving aggressively enough to operate safely, according to Ed Crooks, a reporter for the Financial Times. At the same time, the repercussions from the disaster in Andhra Pradesh continue to send shock waves across the microfinance industry. What are the parallels here?
First, to the BP debacle. Costly as it will be to the bottom line in the short run, good environmental stewardship of the environment will maximize shareholder value — in the long term. In fact, pursuing the maximization of short-term shareholder value arguably led to unsafe practices, and ultimately, disaster. So shouldn’t profit-driven investors be most alarmed that one more major accident might conceivably drive BP into bankruptcy and render its shares worthless?
What’s also clear is that other companies in the same business share the same risks as BP. As Ceres, the investor network, emphasized to Crooks, “the whole oil industry has an interest in raising the standards of the weakest [industry players] because the consequences of an accident can damage companies that have not made any mistakes.”
In that context, let’s now turn to microfinance and its muddied reputation in the wake of Andhra Pradesh. Just substitute the word “poor” for the “environment” and the scenarios facing this industry and its shareholders are strikingly parallel. The shortcomings of microlenders (over-indebting clients in a headlong rush for growth) fueled an explosion of bad press and political opportunism that ultimately put all Indian microfinance at risk. The resolution of this crisis in India remains uncertain. More broadly, the global fallout from the crisis in Andhra Pradesh is damaging the reputation of the whole microfinance sector. Read the rest of this entry »
> Posted by Josh Goldstein, aka Mr. Provocative
With up to one million state workers moving off the government payroll in the next year, President Raúl Castro and the Cuban leadership seem committed to strengthening the microenterprise and small business sector—with self-employment now the certain future of so many Cuban workers. Could remittances from the United States play a key role in providing finance to these new start-up enterprises, in the absence of private or public banks in a position to lend?
On January 19th, the Center for Financial Inclusion, in conjunction with the Cuba Study Group sponsored the “Cuba Small Business Summit,” which was hosted by the Council of the Americas, at its headquarters in New York. The summit focused on the outlook for profound change in the employment picture in Cuba in the wake of a new commitment to economic reform announced in September 2010 by the Cuban government. One question was on everyone’s mind. Were the newly enacted economic reforms beginning to make a difference in the lives of ordinary Cubans? Read the rest of this entry »
> Posted by Josh Goldstein, aka Mr. Provocative
My first job out of college in the seventies was selling Encyclopedia Britannica in Connecticut. After a week’s office based training where I learned from oracles on the sales force how to “build the four walls around the customer so they {the customer} can’t get out,” I gamely popped a mint in my mouth and began to ring door bells of my prospective quarry. (None of these were the dreaded “cold calls”: interest had been signaled via phone solicitation or by the filling out of a newspaper insert.)
It quickly became apparent that I had no talent for convincing my would be customers in middle class neighborhoods to buy the premium set with luxury binding which would earn me a healthy commission as opposed to the economy edition in faux leather, which would earn me peanuts. In fact, I was lucky to get my foot in the door, let alone erect even one of the four walls on the road to commission heaven. Indeed, it became increasingly apparent that the middle class were reluctant to buy from a door to door salesman—when they wanted a product, they went out and shopped around for it on their own terms. It was reassuring to find out that it wasn’t only a novice salesman like me who suffered at the hands of the middle class. Even the legends of the sales force encountered resistance from these quarters.
So where did the commissions come from that kept the Britannica sales force in clover? Read the rest of this entry »
> Posted by Mr. Provocative
Even in the U.S. there is no set standard for calculating credit scores
Joe Nocera, a business columnist for the New York Times, recently published a piece about the frequency of unreliable credit scores. His experience should give the microfinance industry pause as it rushes to embrace the creation of credit bureaus.
Some microfinance practitioners want to move away from the traditional, high-touch (very imperfect) loan-officer evaluation of client creditworthiness to the use of information gleaned from credit bureaus as a key to managing portfolio risk. And ultimately it is hoped that more complete credit reports will create greater operational efficiency, allowing interest rates to drop. Furthermore credit bureaus will help protect against the growing plague of undetected multiple borrowings that hurt an MFI’s bottom line and allow clients to fall into over-indebtedness.
As David Roodman of the Center for Global Development argues in a June 1, 2010 interview on NextBillion.net, “Where credit bureaus are practical, they are definitely good things to create. It makes perfect sense that lenders need complete information about how much borrowers really owe.”
Yes, in a world where human beings can be counted on to input accurate, complete and up to date data. But what are the consequences for clients if this is unrealistic, even Pollyannaish thinking? Read the rest of this entry »
> Posted by Joshua Goldstein
What role can microfinance organizations play in helping to bring access to financial services to people with disabilities? The UN Convention on the Rights of Persons with Disabilities emphasizes that people with disabilities should not be treated as “objects” of charity but as “subjects” with rights, who are capable of living productive lives and contributing to society.
This shift in perspective sounds remarkably similar to the way that the perspective about the poor transformed in the seventies when the microfinance revolution took off. The poor, long viewed as objects of charity, became “subjects” determining their own destiny, fueled by loans to lift themselves out of poverty, rather than as lifetime wards of first world philanthropists.
Today, the WHO estimates that roughly 10 percent of the world’s population (650 million people) lives with some kind of disability, 80 per cent in low-income countries. There is a clear association between poverty and disability. Yet, the Millennium Development Goals where it is never even mention disabilities. Activists in the disability community are lobbying to rectify this situation. Read the rest of this entry »
> Posted by Mr. Provocative
Looking through the mail yesterday, I came across a credit card application addressed to my teenage stepdaughter, who recently turned 18. It was one of the first in an avalanche of such offerings for financial services she will receive this year, indeed for the rest of her life. The seductive promise of the first credit card is a rite of passage into young adulthood and one fraught with untold risk for this generation of Americans – notwithstanding the fact that banks, and the financial services they provide, have led to phenomenal wealth creation and the most successful property-owning democracy in history.
This got me to pondering the extent of my stepdaughter’s financial literacy and her readiness to make a thoughtful evaluation of this and other such offerings. She certainly hasn’t received it from me. (In the spirit of full disclosure, I have never learned how to balance a checkbook or read and comprehended the boilerplate on my credit card statements.)
Sadly, my ignorance of the financial basics is hardly aberrant and may even be closer to the norm, as a little research quickly indicated. According to Niall Ferguson, author of the new book, The Ascent of Money Read the rest of this entry »
> Posted by Mr. Provocative
Joshua Goldstein is a director at the Center and our very own “Mr. Provocative.” In addition to his work with the Center, Josh is a writer and teaches a playwriting class in Boston University’s Creative Writing Department. He’s published several of his plays, poetry, and prose. Josh will post here on topics of interest and debate. Feel free to add your comments by emailing .
The explosion of remittance transfers from people who have migrated to developed countries to their poor relatives back home has led to new wealth creation and a better standard of living for many. And this is, on the face of it, very positive.
But I believe that there is a particular sorrow behind a considerable percentage of remittances that demands greater scrutiny and perhaps some kind of remedial action. The transfer of money is often made by families living under the great stress of separation—such as an absent mother supporting the small children she has left behind—an abandonment from which some never recover.
Enrique’s Journey, (2006) by Pulitzer Prize winning journalist Sonia Mazarin, is the harrowing story of a teenage Honduran boy who embarks on a dangerous journey, riding the tops of freight trains, to reach the United States in search of his mother Lourdes, whom he has not seen since he was five years old. He is, says Mazarin, one of an estimated 35,000 migrant children each year who sneak into the United States (many others are turned away at the boarder) with the dream of reuniting with a mother they hardly remember.
Like countless other impoverished, single mothers, Lourdes left Honduras for the United States with the best interests of Enrique in mind. Hers is an agonizing decision, driven by economic necessity and the dream of a better future. Lourdes does find work, remits money regularly, and within a year or two plans to return to Honduras. But that last, critical piece of her plan is not possible.
As a five-year-old, all Enrique understood was that his mother had abandoned him. His loss ultimately drives him to risk everything and head north to find her. But, after years of separation, the kind of perfect bonding he longs for with his mother is not achievable, leaving him bitter and confused.
When impact studies are done about the value of remittances, it is inevitable that proxies for success like school attendance and increased consumption are used. And that makes sense. But poor people are as psychologically complex as the rest of us, and increased material well being afforded by remittances may be counteracted by the profound social dislocation and loss that children like Enrique suffer. (And what good is school attendance if a child cannot concentrate anyway?) As a first step, a public health campaign to educate migrant mothers about how best to communicate with the children they have left behind, in order to minimize the psychological damage, would be well advised.
Transfers of money are no substitute for the daily reassurance of parental love that allows children to flourish, and that means doing more to keep families together. Microfinance institutions focus on serving people where they are. Made explicit in the mission statements of microfinance institutions might be something like the following: Working capital loans to the self employed poor sector make it possible for mothers and fathers to stay with their children. This is a very impressive achievement of the microfinance revolution that, in my opinion, should be highlighted more and is surely an impact that we should design studies to measure. It certainly is another powerful argument for exponentially expanding the reach of microfinance.
Reading recommendation: Readers of this blog might also be interested in Edwige Danticat’s new memoir, Brother I’m Dying, which is filled with poignant passages about separation, loss, and the role of remittances in the lives of the Haitian poor.
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