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> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
In part one of this review, we considered several themes that Roger Thurow raised in the book The Last Hunger Season: A Year in an African Farm Community on the Brink of Change that might influence how we conduct research and design evaluations to measure changes in poverty. The book follows four Kenyan smallholder families for a year, chronicling how their lives were changing as a result of participating in One Acre Fund’s agriculture training and loan program.
Understanding the decisions these families made about how and where to allocate their very limited resources helps us as financial service practitioners and researchers to understand and appreciate certain realities.
Financial service providers can feel both disappointed and encouraged by this book. We find ourselves uncomfortable reading about Leonida, the Kenyan mother and smallholder farmer who makes a credit payment instead of feeding her family. But we also see opportunity. It’s a difficult trade-off for Leonida, but she sees her credit payment as her ticket to new investment in crops, which have already shown promise after a year of participating in One Acre Fund’s program.
In our earlier discussion, we looked at how we might think differently about evaluating programs. Let’s switch gears to what Thurow encourages us to think about in terms of program design. He highlights two key opportunities that stem from a more client-centered approach to program design.
Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Associate, CFI
Last week the Microcredit Summit Campaign released their 2014 State of the Campaign report, sharing insights and exemplary initiatives that support the global goal of resilience for all. Resilience outlines where the microfinance industry stands in its mission to end poverty, and how synergies with other services and sectors, like healthcare, mobile phones, and social relief payments, are key to achieving even greater impact.
Worldwide, 1.2 billion people live in extreme poverty. One in eight people go to bed hungry and one in six children under the age of five are underweight. Every few years between 10 and 30 percent of the poorest households around the world work their way out of poverty, while roughly the same number fall below the poverty line. Several of these statistics, all highlighted in Resilience, come from the 2013 Millennium Development Goals report. In that report, it’s noted that in terms of the MDG to eliminate poverty, the world is about five years ahead of schedule, though of course progress around the world hasn’t been uniform. In one of the regions that has lagged, Sub-Saharan Africa, so too does financial inclusion. About 85 percent of those in the region don’t have a formal savings account, compared to 77 percent of the world’s poor globally. Even fewer individuals have access to formal credit or insurance products.
Nevertheless, the growth numbers of the microfinance industry for the past decade and a half are encouraging. In 1997, global client outreach totaled 13 million. By 2010, it grew to 205 million. After a dip in 2011 resulting from a loss of 15.4 million clients in India, industry outreach rebounded in 2012.
Resilience breaks down these numbers by income level, revealing an important trend. According to the statistics, during the past decade, for the first time the gap between total client outreach and the total number of clients who are among their country’s lowest income group has widened. At first glance, the numbers may be interpreted as suggesting that MFIs have become more interested in serving wealthier clients. The reality, however, is that more MFIs are adopting accurate benchmarking tools for assessing poverty, such as the Progress out of Poverty Index. It turns out, many MFIs’ previous estimates of their outreach to the very poor have been inaccurate – overestimating how effectively they are serving this client segment.
> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
In 2009, Portfolios of the Poor illustrated a rich array of formal and informal financial services and money management practices used by the poor. For this reason, it has become a foundational text for development professionals seeking to address poverty through financial inclusion.
The Last Hunger Season: A Year in an African Farm Community on the Brink of Change, by journalist and author Roger Thurow, chronicles the lives of four smallholder farmers in Kenya over a year’s time. His conclusions further enrich our understanding of household financial decision-making processes and tradeoffs made by the poor on a daily basis.
Along the way Thurow describes the critical role that the Kenya-based One Acre Fund plays in improving agricultural knowledge and practices by providing training and credit for agricultural inputs such as seed and fertilizer to families that have one acre of land or less. All four families followed in the book are One Acre Fund program participants.
The Last Hunger Season provides some important lessons for us as financial service practitioners. It helps us re-frame how we view client impact and design impact assessments. Let’s look at a few themes.
Think of “impact” or “change” in poverty in a more comprehensive way. Thurow shares the story of Leonida, a 42-year-old Kenyan mother of seven children. Several times each year, she must choose between feeding her children and paying school fees to keep her oldest son in a boarding school. Hunger is the tradeoff that Leonida accepts because she sees education as the ticket to a better future for her children and her family.
> Posted by Anne Hastings, Manager, Microfinance CEO Working Group
The CEOs of eight leading global microfinance networks – Accion, FINCA, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer, VisionFund International, and Women’s World Banking – made six significant commitments at the Microcredit Summit Campaign’s Partnerships Against Poverty Summit last week in Manila. These eight CEOs make up the Microfinance CEO Working Group. Together they represent more than 250 retail microfinance institutions in 70 countries globally and provide financial and often non-financial services to more than 40 million families.
Here are the commitments:
1. Client Protection: Encourage all affiliates to progress toward Smart Campaign certification and be on a pathway toward certification by the end of 2014.
2. Pricing Transparency: Motivate our affiliates to commit to pricing transparency and integrity by agreeing to publish their pricing data using standard methodologies, such as those developed by MicroFinance Transparency, in order to allow investors and clients to make informed decisions.
3. Social Performance: Promote the Social Performance Task Force’s Universal Standards for Social Performance Management among our affiliates and commit to supporting their compliance.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
A community health worker in Kenya trained by Pathfinder International, using a mobile phone to collect client data. Photo by Sala Lewis.
Each year billions of dollars in cash payments are distributed by development organizations to individuals in need. Across sectors including agriculture, health, and emergency relief, cash payments are dispersed with the intent of imparting a lasting impact on their recipients. As we’ve discussed in this space previously, dealing with cash instead of electronic payments brings risks and inefficiencies to the parties involved, both development organizations and their payments recipients, too, who are likely to have a lot at stake.
Visa, in partnership with NetHope, a consortium of more than 40 humanitarian organizations, is addressing this opportunity to improve development organizations’ payments systems through the Visa Innovation Grants Program, a new initiative providing funding to development organizations for the modernizing of their payments systems. A few weeks ago the program selected the five winning organizations, who will each receive $US 100,000 for their projects. Representing a breadth of sectors, the five organizations are Agribusiness Systems International (ASI), Freedom from Hunger, International Federation of Red Cross and Red Crescent Societies (IFRC), Mercy Corps, and Pathfinder International.
The payments system projects of ASI and Mercy Corps focus on developing mobile money services for farmers and other actors in agriculture value chains. ASI is working with rice farmers in Ghana, and Mercy Corps with smallholder farmers in Indonesia. The payments systems allow farmers to receive timely and secure payments from agricultural cooperatives electronically, rather than by traveling to pick up cash, which requires expending resources, including time that could otherwise be spent tending the farm.
> Posted by Lisa Kuhn Fraioli, Independent Consultant
When Meri was first interviewed by Freedom from Hunger for its impact stories research in 2008, she was a classic microfinance success story. This hard-working mother of five from Huancayo, Peru had a successful business buying grains in the local market, milling them, and processing them into a type of custard that she then sold in Lima at a good price. The loans that Meri received from her local microfinance organization allowed her to buy more grain, invest in new products, and transport them for sale in Lima. The loans had helped Meri grow her business beyond the subsistence level for the first time. She now had a profit that she invested in food, healthcare, and education for her children.
When interviewers returned to Meri in 2011, the story had turned into a tale of desperation and distress. Now, Meri says, “I try to sell underwear and socks, but it almost never goes well. We are hungry. Sometimes there isn’t enough food. It’s very rare that we buy meat, and what I prepare, I give to my daughters and hope that my husband brings something to eat.” She is no longer able to send all her children to school. What happened to Meri?
After the birth of her fifth child, Meri suffered an internal hemorrhage and was hospitalized. The doctor warned her that her condition was very delicate and that she could no longer make the eight-hour trip to Lima to sell her products. Unable to travel, she reluctantly shut her business down. Meri’s family’s sole source of income was now the few soles that her husband brought in as a shoeshine. Meri owes the hospital for her emergency treatment and used money from her business loan to help pay for it. Then she borrowed from a bank, the municipality, and two more microfinance organizations. Meri can’t find any new business that gives her stable income. Meanwhile, her debts weigh upon her heavily. She is still in pain, but she can’t afford the 15 dollars it would cost for an ultrasound. She says, “It seems that the stress is accumulating in my stomach. Every day it hurts me as if the anxiety were taking away my potential.” Meri, overdebted with no means to repay her loans, is now effectively excluded from the financial system as a poor credit risk. She is still struggling to get back to the economic position she was in 10 years ago. She needs to develop a new business, one less dependent on traveling, but she will have to do so without any help from microfinance.
> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
Listening to the poor without preconceptions has generated remarkable insights about their desires, challenges, and capabilities, with significant implications for designing programs that more effectively meet their needs. What about listening to those who talk to clients every day – the front line staff of microfinance institutions?
To complement direct client surveys, Freedom from Hunger undertook a study called Voices from the Frontlines: A Research Project Focused on Listening to Microfinance Credit Officers in order to listen to the frontline workers of financial service providers who use the village-banking model to provide financial and non-financial services to groups of poor women. Freedom from Hunger worked with five microfinance institutions to conduct this research: CRECER in Bolivia; Confianza, PRISMA, and Finca in Peru; and Alsol in Mexico. Almost 200 interviews and focus-group discussions were conducted with credit officers, clients, and supervisors. We wanted to answer five questions:
- What motivates credit officers?
- What is the state of the relationship between the credit officer and the client?
- What can we learn from credit officers about the people they serve?
- How can we better support credit officers?
- How faithfully are programs, policies, and procedures carried out by credit officers?
We found credit officers of these five institutions to be primarily socially motivated; they work for these organizations “to help people.” Their relationships with clients are crucial for client as well as organizational success. For example, the relationship creates both mutual satisfaction of clients and credit officers; on the other hand, the relationship can create huge risks of dissatisfaction and drop-out when the relationship is weak or falters for any reason. Therefore, these relationships can make or break client recruitment and retention. Product attributes and relationships with credit officers are intertwined. For example, a strong relationship between the client and the credit officer can overshadow poorly designed or less competitive products and services; however, poorly designed products and services also strain the relationship between the client and the credit officer. Products and services that respond to the clients’ needs better are an aid to building a stronger relationship between the client and the credit officer. The client’s relationship with the credit officer therefore deserves more attention than it normally receives when evaluating client satisfaction and outcomes.
> Posted by Mary Ellen Iskenderian and Rupert Scofield, Co-Chairs of the Microfinance CEO Working Group
As co-chairs of the Microfinance CEO Working Group, we are pleased to share with you a joint statement from the Working Group in support of the recently announced Smart Campaign Client Protection Certification Program. Certification will offer public recognition for institutions that meet adequate standards of care in appropriately protecting microfinance clients, as verified by an independent evaluation. It marks a clear step forward in ensuring the microfinance industry puts the treatment of its clients first.
Since we began meeting in early 2011, many of the Working Group’s discussions have focused on the fundamental question of what the microfinance industry requires to flourish in the future. We believe that client protection is central to the answer. It is common sense – and good business practice – that a fair and respectful relationship with clients is required to develop trust, reduce risk, and serve them appropriately. As leaders of FINCA and Women’s World Banking, we are especially concerned with the fair treatment of women clients, the traditional backbone of the microfinance industry, who are often more vulnerable to exploitation.
> Posted by Chris Dunford, Senior Research Fellow, Freedom From Hunger
Bridging the Gap is a most welcome and ambitious review of the state of financial education. Its authors, Anamitra Deb and Mike Kubzansky of the Monitor Group, were commissioned and funded by the Citi Foundation.
There is much real value to this work, and I will point out the important contributions the report makes. I will also point out serious concerns about some of the points made and how they may distort the experience to date and the promise of financial education. Please read it for yourself rather than depend on me to summarize it for you here. This review is meant to help you read the report carefully.
Bringing conceptual clarity to an often muddled narrative
A valuable distinction is made by Bridging the Gap: financial education is but one component of the huge effort required to build financial capability. Financial capability is defined as “the ability to make informed judgments and effective decisions about the use and management of one’s money.” This must accompany access to financial services in order to bring about true financial inclusion. By these assertions alone, the authors earn our gratitude for bringing conceptual clarity to an often muddled narrative. Read the rest of this entry »
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