Does anti-poverty work actually … work?

Photo credit: Giorgia Bonaga & Shamimur Rahman

Photo credit: Giorgia Bonaga & Shamimur Rahman

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The following blog post is re-posted with permission. Read the original article on Next Billion, “NexThought Monday – Does Anti-Poverty Work Actually … Work?: Three questions every ‘pro-poor’ group needs to ask themselves.”


>>Authored by Chris Dunford and Carmen Velasco

This month, the United Nations will celebrate achievement of Millennium Development Goal No. 1. The number of people living in extreme poverty has fallen by more than half, from 1.9 billion in 1990 to 836 million in 2015. How did this happen? Is it because of targeted anti-poverty programs, or is it due to broad-based economic growth, especially in China and India? If economic growth is the main cause, as it seems to be, further progress may be doubtful. Economic growth alone is unlikely to reach the residual hundreds of millions still living in extreme poverty.

Nor is it likely that anti-poverty programs, whether public or private, will lift this “bottom billion” from extreme poverty. For example, the U.S. poverty rate hovers around 15 percent of the population, nearly unchanged for decades, despite the hundreds of billions of dollars spent on U.S. anti-poverty programs. For another example, in poorer countries, microfinance was billed as a self-financing solution to deep poverty and became a darling of international development donors in the 1990s and “social investors” in the 2000s. Then smart social scientists tested the claims with sound field research and found little to no impact on poverty.

Is it reasonable, however, to expect anti-poverty programs, by themselves, to lift large numbers of people above an arbitrary poverty line? Given that the poor must overcome many burdens before they can seize whatever economic opportunities are available, perhaps we should ask a different question:

Do anti-poverty programs ease the burdens of poverty?

While the recent research into microfinance shows little to no increase of annual household income, on average, the same studies very often show that the burden of poverty is alleviated by giving microfinance participants access to money when they really need it during the year. Economists call this impact “consumption smoothing.” In plain terms, it means people get enough to eat throughout the year instead of going without adequate food for a day, a week, or even months at a time. If so, this is an impact worth celebrating, is it not?

Even with this more modest and realistic expectation, some anti-poverty programs are effective and some are not. We know this from our collective experience in anti-poverty work, with more than 70 years between us. We know the challenge is to distinguish what works from what does not. It is better to seek out “pro-poor” rather than “effective” anti-poverty work, because there are gradations of effectiveness. All programs have room to improve. “Pro-poor” programs actually strive to improve toward greater effectiveness. Transparency and accountability are not just about separating wheat from chaff; they are about improving.

How can we fully distinguish pro-poor programs from those that are not?

In a volunteer initiative called Truelift, leading thinkers of the “social performance” movement in microfinance (seeking social as well as financial return on investment) have hit upon a truth that applies to all anti-poverty work: Truly pro-poor programs provide the right answer to each of three straightforward questions.

First: Does the program work with people living in poverty?

Straightforward indeed! But how do you know a person living in poverty when you see one? More important: How does a program know them, recruit them, include them and keep others who are not poor from co-opting what the program offers?

Too many anti-poverty programs cannot answer this question. Regardless of legitimate reasons, these programs are flying blind in their poverty outreach and, therefore, their potential to impact poverty. “Blind” programs may be “wasting” precious resources on the “wrong” people — even though much good may be done. Such programs are not entitled to the “pro-poor” label — they need a different justification. Or, they can get serious about knowing the poverty status of the people they work with.

Second: Does the program design and adapt its services specifically for people living in poverty?

The staff of a pro-poor program changes and adapts the services and products they offer — intentionally and systematically, always listening carefully to people living in poverty and being clear about the benefits the program seeks to provide them. It is basic good business practice — know your customers, listen to them, design for them, satisfy them.

The Réseau des Caisses Populaires in Burkina Faso (RCPB) discovered while providing savings and credit services to groups of rural women that they wanted information about how to prevent and treat malaria, a disease that kills children and robs adults of far too many productive work days. At left, an RCPB animatrice (field agent) shows a women’s group how to understand the symbols on a take-home card that shows illiterate people how malaria is prevented and treated. (Image credit: Karl Grobl for Freedom from Hunger)

Third: Does the program track the progress of the people using its services?

It is not enough to reach out to people living in poverty and to design and adapt services to suit their needs and constraints. We must have some evidence that our work is helping them move in the right direction, even if not all the way to the intended destination. This is not just to show that our work is worthy of the money spent, but also to know how to improve our work. We need “real time” information about change in clients’ lives.

We operate programs in a world where sophisticated research into cause and effect is rare and likely to remain so. Logic, experience and some evidence indicates that programs providing the “right” answer to each of the three Truelift questions are likely to show positive impacts on people living in poverty, if and when sophisticated impact research is done.

It is not too difficult for managers, donors, investors, regulators and business leaders to ask these three questions and know when they get good answers. We can know a pro-poor program when we see one — and act to support it.

Truelift_RGBChris Dunford and Carmen Velasco are co-chairs of the Truelift Steering Committee.


Read the full article on Next Billion.

Learn more about Truelift.

The Business of Doing Good: A Chat with Anton Simanowitz

BizofDoingGoodCover

The Business of Doing Good by Anton Simanowitz and Katherine Knotts

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Larry Reed, director of the Microcredit Summit Campaign, recently sat down with Susy Cheston, senior advisor to FI2020, and Anton Simanowitz, co-author of the new book The Business of Doing Good, to discuss how organizations can do good work and turn a profit, particularly in the microfinance sector.

In exploring this question, Simanowitz draws on key insights from the new book, in which he and co-author Katherine Knotts studied the success of AMK, a social enterprise which has touched the lives of millions of people living in poverty in rural Cambodia. This study revealed six powerful strategies to improve business to do good:

  1. Don’t just offer products; respond to client needs
  2. Ask good questions and have good conversations
  3. Do what it says on the tin
  4. Motivate staff to do difficult work in an excellent way
  5. Own the dirt road
  6. Adapt to the changing landscape

Find out more about the thinking behind these insights.

In the latter half of the book, the authors explore the disconnect between theory and practice and the resulting implications for client value. AMK’s success is largely attributed to its recognition of the distinction between client wants and client needs, which are rooted in the meaningful conversations the organization has with its clients. The authors observe, through their exploration of AMK, that vision is ensured only when it follows intent, instead being constrained by conventional wisdom.

Simanowitz was here in D.C. yesterday to discuss his book with Larry Reed and Susy Cheston on-site at the Center for Financial Inclusion. He spoke about the importance of conversation in the social sector, both with customers and within the organization itself. From his exploration of AMK, Simanowitz noted that client-centricity extends far beyond identifying the needs of the clients and becomes a feedback loop built on what he called conversational interplay.

An organization that successfully addresses the reality gap between theory and practice, he argues, embraces reality. It understands that following its social vision is everyone’s responsibility and so is built into the business model. Anton noted that we all have something to learn from this exploration of AMK, an organization that “has the client in their DNA” and “reinforces the truism that focus on the customer is good for business.”

Listen to the conversation


If you prefer, you can stream the podcast from SoundCloud, or you can download the audio file.

Voice your opinion in our comments section. How can organizations best do good and do well?

Following the conversation, we asked Larry and Anton to write up a few closing thoughts.

Larry said, “What struck me from our conversation today was how much the lessons we learn from AMK apply to any social enterprise that seeks to expand the positive results achieved by its clients while also earning enough income to sustain itself and grow. Social enterprises need to align all their people and systems around their mission, and they do this with good data, engaging and open conversations, lots of iterations and improvements, incentives that reward behavior that promotes the mission, and a governance structure that reviews performance according to mission at every meeting. The result is an enterprise whose corporate culture can consistently generate creative responses to changing client needs.”

Anton said, “Countless organizations of every shape, size, and orientation — not just in the realm of microfinance — are in the business of doing good and working with poor and vulnerable communities around the world to deliver potentially life-changing services to address a range of pressing social needs. Some are doing excellent work, and this book examines what it is that they do that makes the difference. But at the same time, a common theme has emerged in our work over the past 20 years: we see organisations missing opportunities to do things better and organisations getting things wrong, again and again. When surveying the landscape of missed opportunities, there is temptation to become blindsided by the success stories, but we must deliver on the ethical imperative to make good on our good intentions. This book explores the inevitable shortcomings of every success story and how we can learn from those who are ‘doing good’ well.”

The authors of The Business of Doing Good argue that social enterprises and organizations must understand the importance of response, be it to environment, best practices, or client needs and capacities. The Business of Doing Good challenges microfinance practitioners, social entrepreneurs, philanthropists, businessmen, and students of all kinds to reevaluate their respective journeys to deliver on their good intentions throughout their work and beyond.


Anton Simanowitz (@antowitz) has worked for the past 20 years to support social enterprises to be more effective in delivering impact, and for those who support and invest in them to make better investment, capacity building and policy decisions. For support on building organizations to deliver impact, contact him here. To receive current updates about The Business of Doing Good, follow the book on Twitter.

Larry Reed is the director of the Microcredit Summit Campaign (@MicroCredSummit). He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa regional director and eight years as the first CEO of the Opportunity International Network

Susy Cheston is senior advisor for the Center for Financial Inclusion (CFI) at Accion (@CFI_ACCION) and leads the Financial Inclusion 2020 Campaign. Cheston has a long history of work in economic development, including leading roles at World Vision and Opportunity International, as well as being active in the leadership of the Microenterprise Coalition.


Related reading

Can tablets and apps fight poverty?

Kids learning_LISTA_599x450

Kids use the financial literacy app developed by Fundacíon Capital called LISTA
Photo credit: Fundacíon Capital

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>>Authored by Julieta Bossi, Communications Officer, Fundación Capital

MoMF

April is the Month of Microfinance

We can talk about innovation and we can talk about technology, but when we work on poverty reduction, the most important thing we need to talk about is community.

It is only when we understand what capabilities and tools already exist and are being used within a community that we can develop and explore new technologies and solutions for that community. And it is only by working together with the social innovation community that we can ensure that these new tools can reach millions and have a lasting impact.

At Fundación Capital we work to eliminate poverty by fostering economic, financial, and social inclusion. Without economic opportunities and financial abilities, one cannot obtain full citizenship, including all of the rights and responsibilities that it entails. Therefore, our main goal is to promote financial inclusion and create economic citizenship. We do this by strengthening the productive, financial, human, and social assets of people living in conditions of poverty and extreme poverty, empowering them to find their own way out of poverty. Throughout this process, we rely on innovation and technology that we created in partnership with the community to provide sustainable and effective solutions.

Fundación Capital works with public and private institutions, helping government entities to create more innovative and efficient public policies and helping the private sector to develop products and services that fulfill needs at the base of the pyramid.

Working with communities, we identify needs and preferences that guide the design of new solutions we dream up and develop. Existing knowledge, capabilities, and social capital become the springboard for innovation and represent valuable tools that can be combined with digital solutions to generate real and effective change with the potential to reach millions, including those living in the most remote and rural regions.

A client of Fundacíon Capital wiht her daughter Photo credit: Fundacíon Capital

A client of Fundacíon Capital wiht her daughter

Photo credit: Fundacíon Capital

Through this process of innovation and co-creation, we have developed a number of digital solutions. One of them is LISTA, an initiative that was born out of the need to provide financial education to millions of conditional cash transfer recipients in a cost-effective way. LISTA offers interactive and relevant content delivered via a tablet computer provided to the families. The app called “Produciendo por mi futuro” provides tips for financial planning, familiarizes users with ATMs and mobile money through simulators, and seeks to break barriers between low-income communities and the formal financial system. This tool is brought into families’ homes, providing users with the opportunity to study on their own time, concentrate on topics most relevant to their needs, and include all family members in the learning process.

Another way we transfer knowledge to less advantaged communities living in remote areas is through government, this app teaches them how to run a business, manage and invest the capital into productive activities. It ensures that these injections of capital will be invested and provide a foundation to build on and eventually graduate out of poverty. Once they’ve built up their businesses, communities can access additional funding through LittleBigMoney, Latin America’s first crowdfunding platform for projects or businesses led by bottom of the pyramid entrepreneurs or whose impact benefits vulnerable communities.

Another challenge encountered in poverty alleviation programs is training field workers and ensuring the quality of the financial education they deliver. Since they engage with the community on a daily basis, it is important that they are properly trained, so we have created an e-learning course for fieldworkers working with our graduation program.

We also provide fieldworkers with the “Produciendo por mi futuro” app  to increase their productivity. The fieldworkers leave the tablets with participating families, who study the material over the course of the week, so that when they meet with their fieldworker “coach”, they can have more productive and personalized conversations with real outcomes. The app empowers families living in extreme poverty, by offering them financial education and business training.

After years of working on designing, developing, and implementing these kinds of solutions, we have come to understand that the most important input for our work and innovation is the constant feedback we receive from communities. They are our inspiration and a great source of ideas for constant improvement and adjustment. While we can’t expect that any one of these digital solutions will provide a “magic bullet” tool for poverty alleviation, these tools support communities as they work to improve their lives and reach their goals.

A Fundacíon Capital family in their shop Photo credit: Fundacíon Capital

A Fundacíon Capital family in their shop
Photo credit: Fundacíon Capital

The only way to ensure that innovation and technology works is by both designing and testing it with the community and then learning from failures and making the necessary adaptations. For us, it is also important to learn from and share ideas with the social innovation community, so we look forward to working in partnership with other members of the community.

Fundación Capital made a Campaign Commitment to end extreme poverty, watch this video to know more about it:

 

Is it April Fools’ Day, or ‘Groundhog Day’?

Pathways: financial inclusion to end extreme poverty | Find out what we heard from the industry in this year’s Listening Tour

We’ll be bringing you articles throughout April that reflect the results of this year’s Listening Tour Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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>>Authored by Larry Reed, Director, Microcredit Summit Campaign

MoMF

April is the Month of Microfinance

We are capitalizing on the occasion of the Month of Microfinance to bring you articles throughout April on our 100 Million Ideas blog that reflect the results of this year’s Listening Tour. We received written feedback from 151 people and conducted 27 interviews with thought leaders like Beth Porter (UNCDF), Syed Hashemi (BRAC University), Essma Ben Hamida (enda inter arabe), and William Derban (Fidelity Bank). This feedback from the industry forms the basis of the Campaign’s theme for 2015 of financial inclusion to end extreme poverty and the six pathways that we think show promise in getting us there:

  • Mobile money linked with agent networks in low-income communities;
  • Agricultural value chains that reach to small scale producers;
  • Savings groups (aka village savings and loans associations);
  • Conditional cash transfers linked with mobile delivery and asset building;
  • Ultra-poor graduation programs; and
  • Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery.

These six pathways will be reflected in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments to be featured this year. From the start, the Microcredit Summit Campaign has advocated scaling up microcredit (and, by extension, “microfinance”) as just one part of a larger effort to end poverty. We have held up as paramount the continued innovation and client-focused development of financial tools, creative ideas for delivering these services to remote and hard-to-reach areas at affordable prices, and the promise that microfinance can help create positive and durable changes in the lives of those being served. These six pathways are a continuation of that promise.

Fazila Begum struggling Member of Grameen Bank Shakhaerchar branch

We met Fazila Begum in 2007. She was a struggling member of Grameen Bank, Shakhaerchar branch.

When will researchers catch up with microfinance leaders?

From the very first loan of $27 that Mohammad Yunus gave to 42 women in Bangladesh, the heart of microfinance has always been about getting to know the needs of people living in poverty and designing products and services that help them loose the bonds that keep them in poverty. The aim of Yunus and many other founders of the movement was not to build financial institutions, but to empower people women to create a better future for themselves and their children. To do this they had to get to know people living in poverty and their cash flows, needs and aspirations in order to develop combinations of helpful products and services.

So when our team listened to the presentations of academic researchers made at the World Bank covering six randomized control trials of microcredit programs, we came away more than a little underwhelmed. Their big conclusion, after spending several years and millions of dollars on research: “Understand clients.” (Watch a recording of the forum.)

Even more alarming was that many of the researchers and the audience seemed surprised by the news. We have been engaged with leading microfinance groups around the world and have seen how they have learned — on their own — the lessons that the researchers presented as well as how they adapted their programs to address them long ago.

Here are some examples of research findings presented at the World Bank gatherings and actions previously taken by leading MFIs:

“Credit alone, on average, has neither large positive or negative effects.”

Very few of the leading MFIs that have focused on reaching people in poverty and facilitating their movement out of poverty have ever offered only credit. Grameen, from the start, had group savings and the 16 Decisions. The Village Banks developed by FINCA offered group savings and a group insurance fund. Many also provide training in business, marketing, health, nutrition, and sanitation in their group meetings.

“When only credit is available, people may use it when what they really need is savings, or insurance or other financial products.”

Microfinance leader BRI in Indonesia has been offering individual voluntary savings accounts since the 1980s and now has over 35 million savings accounts and 8 million borrowers. While many of the group lending systems provided loans, savings, and insurance bundled into one package, many of the leading MFIs have begun unbundling those services in the last two decades.

Grameen II, instituted in 2001, provides a range of financial services to clients, including voluntary savings and micropensions, and it removed the group guarantee on loans. Opportunity International began providing microinsurance in 2002, expanding from life insurance to health, casualty, and crop insurance and then spinning off MicroEnsure as a subsidiary that now reaches over 10 million clients.

Nangolkot, Noakhali, Bangladesh

Villagers in Nangolkot, Noakhali, Bangladesh
Photo credit: ©Shamimur Rahman and Giorgia Bonaga

“For 5-10 percent of the clients, credit has a very large positive impact on business growth and income.”

Aris Alip, founder of the CARD network of mutually reinforcing development institutions, saw this happening in the villages where CARD provided group-based savings and lending services. He also saw that those 5-10 percent that grew benefited the community by providing stable employment to others. In 2008, CARD created an SME bank to work specifically with fast growing microbusinesses and to see if, by providing appropriate products and services to this group, they could increase the percentage of growing businesses to 15 or 20 percent.

“For the ultra-poor, a gift of an asset has significant positive impact.”

REST Client photo_427x569

A woman client of Relief Society of Tigray (REST) in Ethiopia harvests her mango tree.
Photo credit: REST

This learning came directly from the work of BRAC and its ultra-poor graduation program. BRAC found that those who live on less than $.50 per day face so much vulnerability in their lives that they do not want to take on more debt. They developed a system of regular stipends of food or cash, a gift of an asset like an animal or a sewing machine, business training, savings, and regular mentoring. This program has now been replicated in several countries, and studies of these programs show strong positive impact.

The Relief Society of Tigray (REST) has combined this programs with the government’s Productive Safety Net Program so that the government provides the stipends and the assets, REST provides training and mentoring, and Dedebit Bank provides savings and lending facilities.


We are glad that these studies have proven out the innovations implemented by many leading MFIs. But if researchers want to get ahead of the learning curve, they could start to engage with some of these leading institutions on the questions that they are asking now. Here are some suggestions we have for new areas of research:

Research question 1: Conditional cash transfers (CCTs) seem to play an important role in providing some regularity in lives that are filled with unpredictability and vulnerability. How can these be linked with other services, like savings and insurance, to help beneficiaries move from resilience to asset building?

Research question 2: Are there some financial services that consistently provide benefits and rarely cause harmful effects so that they should be recommended for all? It looks like savings could fit this category, provided the savings mechanism is safe and the account maintains its value over time.

Research question 3: How do we refine our understanding of the situations in which credit is most likely to be helpful? And, what role do other services, such as group meetings, access to health care, insurance, and savings, improve the likelihood that a person will benefit from credit?

Research question 4: Graduation programs that start with a donated asset, group meetings, mentoring, and community involvement and lead to other financial service like savings and credit have proven to have a positive impact. Can we start to determine under what circumstances a person will need all of these services — and which people might need only one or two — to start moving from extreme poverty?

Instead of taking more time and money to prove that we need to understand clients, we suggest that researchers work with microfinance institutions that already listen to their clients and develop with them research agendas based on that growing understanding.

The same family from the top of the article has gone through the Stoplight process and now their situation is much improved.

A Fundación Paraguaya family has gone through the Poverty Stoplight process and now their situation is much improved. Read our blog post about the Poverty Stoplight.
Photo credit: Fundación Paraguaya


Relevant Resources

2013 State of the Campaign Report:Know Your Client

Social protection: innovative programs deliver financial services at scale

How families are creating step-by-step plans for poverty elimination


 

A few key takeaways from the World Bank forum on microcredit (video)

The diagnosis of the six randomized evaluations that spanned six countries on four continents, in both urban and rural areas with different borrower, lender, and loan characteristics, was that they showed no significant impact on the poverty level or living standards of the clients.

In some studies, it was concluded that the top 5-10 percent of clients did have some significant impact on their income and assets. One study showed some positive impact on women’s empowerment while another showed that depression seemed to go down for clients who had taken a loan, but their stress levels went up. Basically, it was all rather inconclusive, yet it also opened a transformative dialogue about how we can learn from our mistakes and what we need to do better to meet the needs of our clients.

On learning from what we know does work

The results of the randomized evaluations suggest that microcredit alone doesn’t have a transformative effect on the poor. However, despite its shortcomings, it is recognized that microcredit enhances the range of choices available to the poor and allows them to manage their circumstances as they consider appropriate.

Furthermore, microcredit still serves, in many cases, an important role as a risk absorption tool, acting as an insurance product that allows the clients to react to shocks and emergencies. In these instances, credit provides stability and prevents the clients from falling deeper into poverty. It has long been recognized that credit is not suited for many people, so insurance products should not be built around a credit product. In fact, several panelists said that microinsurance may be more needed than microloans particularly in sub-Saharan Africa,

For his part, Alex Counts (Grameen Foundation) invited the audience to focus on the five percent of clients — equivalent to millions of families — who moved out of poverty with microcredit. We should do this because we should want to understand (isn’t it our job to understand?) what it was that helped them compared to those less successful (or unsuccessful).

More research is needed to stimulate this conversation around what is working and what is not and to promote models that can serve as examples for adaptation and replication.

On understanding your clients

The research presented at the World Bank forum showed us that we need further analysis on what poor people really want and in understanding the heterogeneity of needs. It is important to study the particular context of each country, region, and community. Different circumstances lead to heterogeneous needs, so we need to offer a variety of products and services that actually meet the specific needs of the clients.

In addition, we need much more work on tracking how the money is being used. Perhaps we should not only look at factors like change in profits, wages, or consumption to test the success of microcredit products. Clients sometimes use their loan for personal needs, like for health issues or for social obligations such as weddings and funerals, and in order to see the impact of microcredit on the overall quality of life for clients, we need to know where the money is going.

Knowing more about these two dimensions will enable better product design, promote innovation, and help microfinance evolve in a manner that is both sustainable and beneficial to the extreme poor. It comes back to what Dean Karlan said, “Understand your clients.”

On the implications of digital innovations

Innovations in financial technologies are increasing client outreach and reducing transaction costs (to nearly zero), but they are also creating new transparency challenges that could pose serious risks to the clients if they are not addressed.

The main concern is the lack of adequate regulation for digital financial services. Client protection measures need to be in place to raise awareness of the risks linked to loans and ensure that customers understand the terms and conditions of the loans they are taking out. This is particularly important when we consider the rapid pace of growth and expected outreach of the new digital services.

When looking at agent networks, serving 100,000 clients after five years was a big achievement; today, however, they are expected to reach 1,000,000 clients after only one year of implementing a digital service.

We need to carefully assess the risk of inflicting harm to a large number of people at the base of the pyramid to ensure that digital financial services are being provided in a responsible way that brings no harm to the clients. Keeping this in mind may inspire innovative ideas for consumer protection and improve the quality of existing products.

On their recommendations for further research

In the coming years, Abhijit Banerjee (J-PAL) stated that research should focus on answering the questions: Why is there a low demand for microcredit products? What do clients need? What are the right products to offer them and the right channels? Where does the money go if it doesn’t reduce poverty?

Esther Duflo talked specifically about the graduation pilot programs, which are targeting the ultra-poor and already show some positive results on poverty levels. The results of this research will buoy efforts to promote the adoption of graduation programs as a poverty alleviation tool and underscores the need to segment the poor for the purposes of understanding the impact of microcredit and designing adequate products.

Are we measuring the real story? Jaikishan Desai, one of the researchers of the RCTs, posed this question to the audience. This seemed to go beyond how do we interpret the data to what is the purpose of measuring the impact of microcredit? Is microcredit and microfinance supposed to be the cure of the world poor or should it be used as a tool to include ignored segments of the population and reduce risk to those most vulnerable? Are we looking for a change in poverty levels or should we be focusing on the impact credit has on maintaining stability?

Other questions that were not resolved included, was the length of the study a factor? Do we need more long-term or short-term assessments? What about the generational impact? Could it be that we won’t see the effects of microcredit on clients unless we track progress through the next generation?

What impact does an MFI’s staff incentives and governance have on its clients? Does this impact the type of loans they receive and the quality of the product?

Relevant resources


For those who are unfamiliar with the cultural references in the title

April Fools’ Day: April 1st is a day of pranks and practical jokes and has its roots in medieval Europe — or possibly even earlier — and is similar to (or may be related to) the Holi festival of India.

Groundhog Day: February 2nd is an American tradition brought over by our German ancestors and adopted by popular culture and the media; it consists of looking to a rodent (a groundhog) to find out if winter is over or not. However, our reference here refers to a fantastic movie of the same name where Bill Murray relives the same day over and over again to hilarious effect.

How families are creating step-by-step plans for poverty elimination

This family has used the Poverty Stoplight to self-assess their situation and needs. They will now work with Fundación Paraguaya to develop a plan to lift themselves out of poverty.

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Fundación Paraguaya declared its support for the goal of helping 100 million families lift themselves out of extreme poverty by making a Campaign Commitment at the 17th Microcredit Summit in Merida, Mexico. The Microcredit Summit Campaign recently caught up with Fundación Paraguaya to learn about the ways they are working towards the end of extreme poverty.

Luis Fernando Sanabria: what drives their Commitment to end extreme poverty


>> By Luis Fernando Sanabria, Gerente General, Fundación Paraguaya

logo_fundacionparaguaya

This year, Fundación Paraguaya celebrates its 30-year anniversary working in microfinance and entrepreneurial education. During this time, we have seen the following economic progress of many of our clients and their families: increased income (116 percent on average), better business management practices, and increased loan amounts.

In spite of these inspiring achievements, we know that many of our clients and their families have remained poor even when they earn more money. While many clients have significantly increased their income, others hover near the official poverty line or have unstable income and lack family savings. Moreover, many of the families we work with lack modern bathrooms, live in overcrowded and unsafe housing, cook on the ground, have no access to clean water, do not vaccinate their children nor send them to school, and live in contaminated environments. Additionally, many suffer from low self-esteem, do not have entrepreneurial spirit, and are victims of domestic violence.

The above description shows us that families can be poor in many ways. Poverty, as we have come to understand, can be seen as a “grey cloud” that hinders poor families because it can so complex and overwhelming that they do not know where to start. Fundación Paraguaya has developed the Poverty Stoplight to simplify and operationalize this concept by dividing the problem of poverty into smaller pieces so that families can overcome their deprivations step-by-step. The Poverty Stoplight methodology is based on the following principles:

  1. Poverty is multidimensional.
  2. Poverty can be eliminated.
  3. Poverty affects different families in different ways.
  4. Poor people should take a participatory role in overcoming their own poverty condition instead of being simply program beneficiaries.
  5. Given that poverty is multidimensional, the involvement of multiples role players from the public and private sector as well as the civil society is needed in order to eliminate it.
Don Aníbal Borja is a client from Fundacion Paraguya

Don Aníbal Borja is a client from Fundacion Paraguya, watch his interview HERE

We have deconstructed the concept of poverty into 6 dimensions that are operationalized in 50 indicators. These dimensions are: Income and Employment, Health and Environment, Housing and Infrastructure, Education and Culture, Organization and Participation, Interiority and Motivation. In the Poverty Stoplight, all indicators have the same weight. That is, it is not an index but a dashboard, a list of items that define how poverty affects a particular family.

Families are “owners” of their poverty and therefore must accountability and an active role to overcome it. Fundación Paraguaya’s role in this process is to offer each family a “Menu of Solutions” to the different poverty indicators (goods and services), and at the same time, develop a plan based on the Influencer theory[1] to train and motivate families to solve the issues of poverty that affect them. This “Menu” defines solutions that (a) are directly provided by our organization, (b) are made available through strategic partnerships (with NGOs, government, and the private sector), and (c) originate from the social activism of each individual family.

The Poverty Stoplight methodology starts with a family self-assessment. For this, families with support from an advisor take a visual survey using software developed in partnership with Hewlett Packard. The visual survey uses pictures to illustrate different situations of poverty for each of the 50 indicators. Each family evaluates their situation and for each indicator they select the picture that better depicts their family condition. Indicators have three possible definitions (defined by 3 pictures) and define situations of extreme poverty (red), poverty (yellow) and non-poverty (green).  In addition, the software allows us to geo-tag Poverty Stoplight data, which results in a “Poverty Map” displaying how each indicators affect different families.

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Upon complementing the 50 indicators self-assessment, families have a better understanding of how poverty affects them: they can see how many “reds” and “yellows” they have. At the same time, they can see that family already has “blessings” or aspects in which the family is no longer poor. This is visualized by all the “greens” displayed in their Poverty Stoplight. With support from a village bank advisor, families then create a “Life Map”; that is, they identify the indicators they want to solve, and establish family’s short and long-term goals aimed at overcoming poverty (turning all indicators from red and yellow into green).

The Poverty Stoplight approach has been applied in different settings. In addition to its microfinance clients, Fundación Paraguaya has applied this methodology with its 400 employees during the past three years. As a result, 35 businesses and private industries in Paraguay are using the Poverty Stoplight in order to better understand their employees’ situation and help their families overcome poverty. Moreover, the Government of Paraguay’s Central Department[2] has started a pilot project at a marginalized neighborhood, which is being followed by the Government of Villa Hayes Department.[3] At an international level, organizations from 18 different countries have launched pilot projects using the Poverty Stoplight methodology in Tanzania, India, South Africa, Uganda, Nigeria, Dominican Republic, Colombia, Guatemala, and others.

Our institution aims at achieving financial inclusion of poor families with the soul purpose that they overcome poverty. Using the Poverty Stoplight methodology, 20,000 families have overcome income poverty, and 2,000 families have overcome multidimensional poverty as measured by the 50 indicators over the past 3 years.

With the Microcredit Summit Campaign, we are committed to reach 125,000 families in the next three years, contributing to a total of 30,000 families that overcome income poverty and a total of 9,000 families that overcome multidimensional poverty in all 50 indicators in Paraguay.

Every family has all of the accumulated potential needed to overcome poverty. Our role as a microfinance institution is to develop appropriate methodologies to unleash that potential. The Poverty Stoplight is our way of “rubbing the magic lamp” to liberate the energy trapped within each family to overcome poverty.

The same family from the top of the article has gone through the Stoplight process and now their situation is much improved.

The same family from the top of the article has gone through the Stoplight process and now their situation is much improved.

[1] Influencer Theory, developed by https://www.vitalsmarts.com

[2] Regional Government, Paraguay

[3] Regional Government, Paraguay

To learn more about Fundacion Paraguaya, click here.


Join Fundación Paraguaya in stating YOUR Campaign Commitment!


Más que inclusión financiera, eliminación de pobreza

Este año Fundación Paraguaya cumple 30 años trabajando en programas de emprendedurismo y microfinanzas. Durante este tiempo, hemos visto el progreso económico de muchos de nuestros clientes; como aumentaban sus ingresos (en promedio, 116%!), administraban mejor sus negocios e incrementaban los montos de préstamos solicitados.

Sin embargo, muchos de ellos siguen siendo pobres! Aunque aumentaron sus ingresos significativamente, muchos no superan la línea de pobreza nacional, o sus ingresos son inestables o no tienen ahorros. Muchos siguen careciendo de baño moderno, viven hacinados y en viviendas inseguras, cocinan en el suelo, no tienen acceso a agua potable, no vacunan a sus hijos, no los educan y viven en un medio ambiente inapropiado. Muchos sufren de baja autoestima, no tienen espíritu emprendedor, y sufren de violencia doméstica.

Muchas maneras de ser pobre. La pobreza es como una “nube gris” que aplasta a las familias pobres, pues es tan compleja que las mismas no saben por donde empezar!. Fundación Paraguaya ha desarrollado el Semáforo de Eliminación de Pobreza para simplificar y operativizar el concepto y dividirlo en “pedacitos” de manera que las familias puedan resolver sus carencias paso a paso.

La metodología, se basa en las siguientes premisas: 1) la pobreza es multidimensional, 2) la pobreza puede ser eliminada, 3) la pobreza afecta de manera distinta a cada familia, 4) la familia debe ser protagonista en su salida de pobreza, 5) se debe involucrar a la mayor cantidad posible de actores para que contribuyan a eliminar la pobreza: familias, ONGs, gobiernos, empresa privada.

Hemos dividido el concepto de pobreza en 6 dimensiones, operativizadas por 50 indicadores. Las dimensiones son Ingresos y Empleo, Educación y Cultura, Vivienda e Infraestructura, Salud y Medio Ambiente, Organización y Participación e Interioridad y Motivación. Todos los indicadores tienen el mismo peso: no se trata de un índice sino mas bien de un listado de ítems que definen la pobreza.

Las familias son las “dueñas de su pobreza” y quienes deben superarla. El rol de la Fundación es poner a disposición de las mismas un “Menú” de soluciones a los indicadores de pobreza (bienes y servicios) y desarrollar un Plan de Influencia Positiva[4] para capacitar y motivar a las familias. Este “menú” contiene soluciones (a) proveídas directamente por la institución, (b) a través de alianzas (gobiernos, ONGs., empresas privadas), o (c) mediante el activismo social de las mismas familias.

El programa se inicia con una autoevaluación de las familias para lo cual utilizan un software (desarrollado con HP) que emplea fotografías para ilustrar los 50 indicadores de pobreza. Cada familia se autoevalúa (en cada indicador) como pobre extremo (Rojo), pobre no extremo (Amarillo) o no pobre (verde). El software permite georeferenciar la información, lo que nos proporciona un mapa de la pobreza, indicador por indicador, familia por familia.

Una vez que se ha autoevaluado en los 50 indicadores, cada familia sabe en que consiste su pobreza: cuantos y cuales rojos y amarillo tiene. Pero también sabe cuales son sus bendiciones: cuantos y cuales verde tiene. Con la ayuda de su asesora de crédito, la familia construye su Mapa de Vida; es decir establece sus metas para el año y para los subsiguientes y las acciones que tomará para transformar sus amarillos y rojos en verdes.

El Semáforo de Eliminación de Pobreza ya esta siendo utilizado en otros ámbitos. La Fundación lleva tres años implementándolo con sus propios colaboradores (400), pero además otras 35 empresas e industrias privadas en Paraguay están utilizando la metodología para lograr que sus empleados superen la pobreza. Además, la Gobernación del Departamento Central[5] ha iniciado un piloto en un barrio marginal y la Gobernación de Presidente Hayes[6] está próxima a hacerlo. Finalmente, organizaciones de 18 países han iniciado proyectos piloto de implementación de la metodología (Tanzania, India, Sudáfrica, Uganda, Nigeria, Rca. Dominicana, Colombia, Guatemala, entre otros).

Nuestra institución apunta a lograr la inclusión financiera de familias pobres con el único objetivo de que esta estas superen la pobreza. Mediante la metodología del Semáforo de Eliminación de Pobreza en los últimos 3 años hemos logrado que 20.000 familias superen la pobreza de ingresos y que 2.000 superen la pobreza multidimensional.

Nuestro compromiso con la Cumbre del Microcrédito es alcanzar 125.000 familias en los próximos 3 años y lograr que 30.000 superen la pobreza de ingresos y 9.000 superen la pobreza multidimensional.

Todas las familias tienen el potencial que se necesita para superar su propia pobreza. Nuestro rol como organizaciones de Microfinanzas es desarrollar la metodología apropiada para liberar este potencial. El Semáforo de Eliminación de Pobreza es nuestra manera de “frotar la lámpara mágica” para liberar la energía que cada familia tiene atrapada.

[4] Teoría de Influencia Positiva, desarrollada por https://www.vitalsmarts.com
[5] Gobierno Regional, Paraguay
[6] Gobierno Regional, Paraguay

Join us for an E-Workshop on Open Source Technology and Financial Inclusion

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The Mifos Initiative is co-hosting with the Microcredit Summit Campaign the next E-Workshop on February 19th, sharing insights on “open” technology platforms. The Mifos Initiative announced a Campaign Commitment in 2015 to promote poverty measurement tools through integrating them into their cloud-based core banking system.

The E-Workshop will include a demo of the Progress out of Poverty Index (PPI) in the Mifox X platform. REGISTER TODAY!

As organizations around the world embrace digital financial services for the poor, the entire sector must embrace open platforms, open standards, and interoperability in order to reach the 2.5 billion people who remain unbanked. “Open” is the key for organizations to be able to customize a common software platform.

Leaders of the Mifos Initiative will introduce the world’s first fully “open” technology platform for financial services providers (Mifos X Platform). Learn how using open systems and standards as a common foundation can lead to reaching more of the world’s poorest.

Join us on Thursday, February 19th at 11:00 AM (GMT-5) for an E-Workshop webinar titled “Using Open Source Technology to Expand Financial Inclusion”

SPEAKERS
Craig Chelius
Executive Director (Moderator)
Cameron Goldie-Scot
CEO
Markus Geiss
Software Developer

Join us for this exciting discussion to gain a deeper understanding of the Mifos X Platform and hear from partners who are using it about their challenges, gains, and the practical applications!

This webinar will be conducted in English. For our Spanish-speaking colleagues, the Portal de Microfinanzas (@Portal_MF) will be live-tweeting in Spanish the key points addressed by the speakers.


Follow this e-workshop and the Campaign’s 100 Million Project:

Learn about the 100 Million Project Project and Campaign Commitments.

Join us for an E-Workshop on Gender Performance on Tuesday, Nov 11th

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Learn how the Gender Performance Indicators will help you track and improve gender performance. Continue reading

Solar loans for poor people in Tanzania and Uganda

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Social entrepreneurs in Tanzania and Uganda are innovating in the field of green energy. Read this blog post from Truelift to learn about Tujijenge Afrika, who spoke about their solar loan projects at the Convergences Global Forum last week. (And see this interview with Michaël Knaute, special advisor & board member of Convergences, that we posted last week).

2013Summit-banner_nologosAt the 2013 Partnerships against Poverty Summit that we’re co-hosting in just 2 weeks, we will be offering a workshop called “Microfinance Goes Green: Energy Inclusion to Help Alleviate Poverty.” Sebastian Groh (MicroEnergy International, MEI) is organizing this workshop, and it will include speakers Allan Sicat (MCPI), Francesca Randazzo (ADA), Wonjin Seol (ADB), Minh Cuong Le Quan (Prakti Design), and Camilla Hall (special advisor to Dr. Ashok Khosla).

Learn more about the “Going Green” workshop here: http://bit.ly/PaPGoingGreen

Register for the 2013 Summit today! http://bit.ly/Summitreg


Volunteer for a FREE registration to the Summit! We understand that the Summit fees can be costly. We hope to make the opportunity to attend as widely available as possible, so we are re-opening the volunteer application process. You can save as much as $650 on your registration fee by applying to be a volunteer at the Summit.

If you are interested in volunteering, please fill out this online form today!

Truelift

At this year’s Convergences Global Forum, Tujijenge Afrika executive director, Felistas Coutinho, discussed their solar loan projects in Tanzania and Uganda. Since 2006, Coutinho has been developing and refining the loan programs, with 1,577 clients served in the first year alone.

These projects demonstrate a successful model for product development that meets the needs of poor people through partnership and perseverance. Below are some of highlights, including challenges faced and lessons learned, as presented by Coutinho at the Global Forum.

The need:
Why are solar lanterns needed in Tanzania and Uganda? Especially in in rural areas, some benefits of solar lanterns for people living poverty are listed below:

  • Increased productivity due to availability of light in the evening
  • Children are able to study in the evenings
  • Solar lanterns offer clean, healthier light than other alternatives
  • Less expensive than other alternatives by at least 25%
  • Access to electricity fills the phone…

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Problems with scaling technological innovations

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With water filtration systems, filters have to be regularly replaced. Because filters are often expensive or difficult to find since they are model-specific, donated home filtration systems go to waste. Continue reading

Register today for the “Matching Products and Preferences” Webinar (June 21)

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Join Bankers without Borders for a panel discussion featuring Jesse Marsden from the Microcredit Summit Campaign, Guy Stuart from Microfinance Opportunities, and John D. Bergeron from Truelift as they discuss matching products to client preferences Continue reading

Seeing is Believing, Part 2: Potential for Integrated Health & Microfinance

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Marcia Metcalf from Freedom from Hunger and the Health and Microfinance Alliance, co-author of the recently released report titled Integrated Health and Microfinance in India: Harnessing the Strengths of Two Sectors to Improve Health and Alleviate Poverty—State of the Field of … Continue reading

Seeing is Believing, Part 1: Inspiring and Exciting Programs in India

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Marcia Metcalf from Freedom from Hunger and the Health and Microfinance Alliance, co-author of the recently released report titled Integrated Health and Microfinance in India: Harnessing the Strengths of Two Sectors to Improve Health and Alleviate Poverty—State of the Field … Continue reading

Providing a Safety Net for the Poor

Back in 2002, I found myself in rural Zambia sitting with a group of borrowers trying desperately to understand their lives; as it was my first encounter with microcredit, the ladies were getting increasingly frustrated with my ignorance. One of them took pity and shuffled off to her hut coming back with a “Chutes and Ladders” board (also known as “Snakes and Ladders”). She explained to me that she was trying to work her way out of poverty, which she likened to moving up the board. The loans she got were like the ladders, accelerating her progress.

As we went around the group, the ladies told me of the risks they faced and how disasters, medical bills, and funerals caused them to sell assets or spend hard won savings, returning them back into poverty much as the chutes (or snakes) cause you to slip down the board. They asked me if it was possible to put in place a safety net that would move up underneath them as they worked their way out of poverty so that when disaster strikes, they would not fall all the way back to the bottom.

That meeting changed the course of my life and led to the creation that year of what is now MicroEnsure, a leading provider of insurance to over 4 million low income people.

The first task in 2002 was simply to understand the supply and demand dynamics: which insurable risks did the poor face (and want to cover) and what products would insurers provide. The easiest way to do this was from within a microfinance network, and we were delighted to be housed within Opportunity International. After several years of developing products for Opportunity’s borrowers, it became clear that we were limiting our potential scale and the range of products that we could offer; we needed a way to pay for an organisation that would tackle the challenges of providing a wide range of products to a wide range of clients. The four challenges we set out to tackle were as follows:

  • Simple products with efficient processes.
  • An educated sales force and clients who understood the products.
  • Efficient back office capability and IT to collect, store, and report on key client data.
  • The ability to pay claims quickly as this has the biggest impact on demand.

MicroEnsure was established as an insurance broker because it was the fastest and cheapest regulated structure available and provided a revenue stream via commissions, but we soon realised that the local insurers we represented were not always able to offer the products we wanted or the claims turnaround times our clients demanded. Our response was to establish a reinsurance vehicle so that we could simplify the products and pay claims within days.

As we branched out into health insurance, we realised that many countries lacked the infrastructure to form networks of hospitals or to adjudicate complex health claims, so we created in-house capability called a “Third Party Administrator” (TPA) to do health claims. Finally, we realised that some products such as weather index require significant R&D pre-launch, and the only way to do this sustainably is as a consultant pre-launch and as a broker post-launch. So, today MicroEnsure is a broker, reinsurer, TPA, and consultant serving 4 million and growing in excess of 200,000 new clients every month.

Microinsurance is all about partnership, and perhaps the most important partnership is with the distributor of the products. Like most microinsurance providers, we initially only worked with microfinance lenders, packaging our basic life insurance products alongside the loans, but we soon started to work with a wider range of distributors including VSLAs, SACCOs, church groups, and other retailers. We discovered that in order to be a successful distributor you need a strong brand that is trusted by the poor, accessible points of sale, and the ability to transact cash to cover premiums and claims. So far, the most widespread distributors remain microfinance companies—although it’s great to see a wider range of products be embedded into not only the loan but also increasingly being used as an incentive to get savers to open accounts and increase balances. Mobile phone companies such as Tigo and MTN are also starting to be used to distribute insurance to the mass market.

In our experience, the most successful model is to introduce insurance as a loyalty program. The telephone company (“telco”) is willing to pay the premiums on behalf of its subscribers so long as doing so increases loyalty and the average amount of airtime that the subscribers purchase. It’s a true win-win. The subscriber gets free insurance and the telco increases its revenue. During 2011, more than 1 million people gained access to insurance for the first time through Tigo using this model. Having created a new market, the telco is then able to sell additional products to this market, and the take-up rate from consumers that have experienced the benefits of insurance are much higher than from a “cold sell”.

In 2011, Swiss Re estimated that perhaps as many as 4 billion people had no access to any insurance products. Over the last few months, however, it has started to emerge that, according to the ILO, perhaps as many as 500 million people now have access to insurance. Many of these have access only to basic credit life products—but it’s a great start. Providing the remaining 3.5 billion people with a safety net will be the work for many hands, but I feel confident it will happen in our lifetimes!

Over the last decade, I have often wondered how many emergencies that Zambian lady has had to face and overcome and whether the safety nets that we put in place meet with her approval. One day I hope to return to ask her and to share with her that the challenge she set me has been taken seriously and resulted in millions of people having access to protection from life’s storms.

—Richard Leftley, President and CEO, MicroEnsure, UK, http://www.microensure.com/

Additional resources:
• MicroEnsure blog: http://www.microensure.com/resources-blog.asp
• ILO, Protecting the poor: A microinsurance compendium, Volume II (April 10, 2012)
• “An interview with ILO’s Craig Churchill on the expansion of Microinsurance coverage

Beyond the Product: Creating Social Capital to Make the Most of Microfinance

Thank you to everyone who participated in the Virtual Conference on May 2, 3, and 4 called “Extending the Conversation on Reaching the Poorest: Another look at the 2011 Global Microcredit Summit.” A lot of great ideas were covered, and a great many thoughts and experiences shared which brought depth and clarity to the conversation. In an effort to help provide an accessible synopsis of the discussion topic for the third session, Megan Gash and Bill Maddocks marshaled their thoughts into the following review. A full transcript of the discussion is still available here. It’s a great way to familiarize yourselves with the topics covered on Day 3’s “Beyond the Product: Creating Social Capital to Make the Most of Microfinance.”For the past three decades many microfinance programs have used group based methodologies to serve “entry level” clients with the hope that these customers would “graduate” to individual loans as their financial security improved and they became more “trustworthy” borrowers.Once these clients have moved on to the individual borrowing path, the solidarity and guarantees provided by the group is substituted by a credit rating and a personal relationship between lender and borrower. The social capital built during this process can be jettisoned as an unnecessary by-product of the former group lending process. This is a generalization, of course, and many microfinance institutions retain the group lending process and integrate effective social development goals as “double bottom line” businesses. However few of these institutions wade into the waters of serving the very poor—and for good reason.Those microfinance institutions and development organizations which work to reach the poorest create social capital for purposes beyond debt collection. They often must move far beyond the frontiers of mainstream financial inclusion to nothing less than rebuilding the basic elements of civilization for those whom humanity has cast out. Community consultant Peter Block talks about creating social capital to restore whole communities. According to Block, “restoration begins when we think of community as a possibility, a declaration of the future that we choose to live into… The communal possibility rotates on the question ‘What can we create together?’ This emerges from the social space we create when we are together.”

The 10 pilots in the CGAP-Ford Foundation Graduation Program use social capital as a key element in the process of building a foundation of self-confidence and social bonds needed to move women from extreme poverty to small wins and beginning to enjoy meager levels of financial security. They are learning how powerful a force social interdependence can be in this restoration process. As Janet Heisey of Trickle Up commented during the Virtual Conference on May 4th (Session 3: Beyond the Product: Creating Social Capital to Make the Most of Microfinance), “…we are seeing that after 12-16 months, in many cases, the dynamic in the group really shifts, and group members take ownership, troubleshoot household and community issues on their own, operate independently of the partner agency, and advocate with local government institutions.” While social capital may be viewed as a by-product of the graduation process, its presence is an accurate indicator of the level of transformation and determination to which members individually and collectively are willing to commit.

The SEEP Network’s STEP UP initiative (Strengthening The Economic Potential of the Ultra Poor) views building social capital as an important “Push” strategy along with confidence-building, savings, conditional cash transfers, asset transfers, and food stipends. A continuum of “Protecting, Promoting, and Providing” can move the destitute poor to be ready and able to make positive changes in their lives.

In order to reach some fraction of the massive number of poor not currently served by microfinance, especially the 1.29 billion that live on $1.25 a day or less, we will need strategies like STEP UP that work to break down the silos of practice (and link to other initiatives), play a central role of facilitation and coordination, and provide advocacy. We need such initiatives to assess the real poverty of those participating in microfinance interventions and to build integrated, systemic approaches utilizing assessment, design, implementation, evaluation, and learning. Contact STEP UP facilitators, Jan Maes and Margaret Richards, for more on this approach.

Savings groups is another methodology that uses social capital as a key element to build strength in its success. As self-selecting groups of 20-25 women come together to save, loan, and manage their money together, they build strong bonds of trust and mutual support. They democratically elect a management committee, which they can change over time, and make decisions together. They often feel group decision-making is a fair and peaceful process which creates an environment where they can trust and rely on one another. They learn from each other by exchanging ideas, such as sharing tips for improving businesses. In times of need, they feel that they can go to their group for both financial support (through emergency loans) and emotional support. They feel it is a place where they can go and talk about their problems openly; they can relax, have fun and enjoy themselves. It is a place of their own.

In the case of savings groups, it can be argued that social capital is not just a by-product of the program, but a main objective. If members do not trust and rely on each other, then the group will fall apart. This methodology works well for many and often creates a platform for the group to engage in other community activities and take on other leadership roles. For more information about savings groups and their impact, watch for the book Savings Groups at the Frontier, which should be published in summer 2012. First drafts of the chapters are available here.

Creating products and services which serve both individual needs and also capitalize on the power of social capital can be challenging to create and to maintain over time. It may seem easier to focus program design on serving individual needs first and then capitalize on a social aspect if a positive dynamic amongst participants already exists. However, this can limit the potential of social programs. As Peter Block said, “restoration begins when we think of community as a possibility … What can we create together?”

—Megan Gash, Research and Evaluation Specialist, Freedom from Hunger, http://www.freedomfromhunger.org/
—William Maddocks, Sustainable Microenterprise and Development Program Coordinator, The Carsey Institute at University of New Hampshire, http://www.carseyinstitute.unh.edu/

Commitment and creativity in reaching the poorest in remote areas

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Lea en español *** Lisez en français The Microcredit Summit Campaign would like to thank everyone who participated in the Virtual Conference on May 2, 3, and 4 entitled “Extending the Conversation on Reaching the Poorest: Another look at the … Continue reading