The Puzzle of Poverty: Embera Puru Edition

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>>Authored by Kristin Smith, Program Intern for the 100 Million Project

jjjjJust a few weeks before joining the Microcredit Summit Campaign team, I traveled with Global Brigades to teach financial literacy workshops and provide microenterprise consulting to small business owners in an indigenous community in Panama.

The program, founded in 2003, sends university students from the United States and select European countries on a series of brigades to Panama, Honduras, Nicaragua, and Ghana to “strengthen the health and economic development of communities” by meeting a certain aspect of their “holistic model.” Learn more.

Their holistic model attempts to assess and address the most dire needs of developing communities in an intentionally sequenced process to help them achieve a state of sustainable self-sufficiency.

Panama holistic model

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Under the holistic model developed specifically for Panama, the process begins with Global Brigades employees researching the region and evaluating the community through a process of “integrated community development” to understand its most pressing needs.

Initially, the program sends medical and dental brigades — passionate volunteers working to mobilize positive social change — to the communities to provide mobile medical and dental clinics. Community banks are then established by a group of community members with guidance from Global Brigades staff to encourage saving for health needs and emergencies. Once established, the community banks begin distributing loans to community members for environmental projects and new business developments.

My brigade, composed of my colleagues from the University of California-Berkeley and others from Arizona State University, was excited to complete the Global Brigades puzzle (that is, the holistic model). Our role was to teach financial literacy and perform business consultations in the community of Embera Puru.

Embera Puru is an indigenous community of some 250 individuals in the Darien Province. Located in Eastern Panama near the Colombian border. Embera Puru is an Embera community, one of the largest indigenous groups in Panama and Colombia. The community members’ main source of income is agriculture, producing crops such as plantains, yucca, rice, and otoe (a local root vegetable), and creating artisan handicrafts.

With guidance from Global Brigades, the community established a caja rural (community bank) to encourage savings and loan making within the community. Embera Peru’s caja now has 21 members with 21 active savings accounts, but there are still many among the 266 inhabitants without this means to save.

Comparable to a savings group, a caja rural is a group of men and women who pool their funds to create a solid financial base, providing savings and loan services for themselves and for the entire community. Despite the initial contributions of Global Brigades, the caja is entirely owned and operated by members of the community.

Because the indigenous communities of Panama are predominantly closed economies, community groups eschew money from the outside and make weekly savings deposits into the community bank to begin their work. Group members manage the fund themselves, make decisions about who can receive loans and under what terms, and hold each other accountable for loan repayment.

As part of our business consultation work, we met with representatives from the community’s “Environmental Committee,” a group of farmers producing beyond self-sufficiency for distribution within the community, to ask simple questions to best understand the level of business assistance they needed.

The president of this group, a man by the name of Marcelino, also happens to be the treasurer of the caja rural, as well as a community teacher. Through conversation with Marcelino, we learned that his bookkeeping records won their bank a prize for “Caja with the best bookkeeping management” at a board of directors microfinance workshop in Panama City.

Analyzing the business’s books and records, we found a very thorough system and were stumped on how else to proceed with our consultation. (Aside from our recommendation that they include an inventory management system in preparation for increased production.) Not long into our conversation with these experienced committee leaders about potential business obstacles, we found ourselves confronted with an irritated committee leader and community elder who expressed his frustration with the focus of our questions and our work.

He argued that the group’s record-keeping strategies were highly insignificant in comparison to the group’s utter lack of inventory. It turns out that there was a community water shortage resulting from a collapsed well and a series of unfinished agricultural projects throughout the farm.

“Money,” he said. “We need your help on the farm, we need more crops, and we need money.” My observation was that the present infrastructure severely lacked sufficient capital to support a self-interacting and self-sustaining community.

As I sit now at my desk here in Washington, D.C., far removed from this man and his community, I face the internal debate of whether our work and efforts in microfinance are indeed meeting the direst needs of these people. My short time in Panama reinforced my understanding that development is a puzzle that we do not always equip ourselves to solve. Regardless of the practicality of the services we were working to provide, if other pieces of the complex puzzle are not fully in place, the outcomes in general are undermined.

Increased financial access serves as the window of opportunity for many entrepreneurs throughout the developing world, but without the proper environment and sufficient infrastructure, access to money is rather trivial.

Prioritizing the views, aspirations, and goals of clients or other program beneficiaries is critical as well. As economist William Easterly often argues, no matter how well-intentioned our efforts, without proper feedback from those receiving the assistance, how are we to measure the effectiveness and progress of our efforts? Under my interpretation, Global Brigades was not responsive to the needs and aspirations of its clients.

While the Embera Puru puzzle remains unsolved because the other pieces were never correctly and fully placed, I am glad to know that the industry and many of its institutions are making great strides towards increased attention to feedback from clients and beneficiaries as well as accountability of institutions to deliver on their objectives. Despite the puzzle’s sheer complexity, we have all the pieces and the ability to work with the poor to solve it.

I encourage Global Brigades to join the Microcredit Summit Campaign in making a specific, measurable, and time-bound Commitment on their efforts to end extreme poverty.

Related reading

Esteeming the beauty of the savings group

Photo courtesy of Paul Rippey

This savings group in Malawi runs their meeting following an austere and beguiling ritual
Photo courtesy of Paul Rippey

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>> Authored by Paul Rippey, Co-Founder and Editor, Savings Revolution. This article is also being published in Savings Revolution

In his EvangelIi Gaudium (Apostolic Exhortation), Pope Francis says that ethics “calls for a committed response which is outside the categories of the marketplace.” What a wonderful phrase!

The categories of the marketplace that Francis is referring to are things like profit and loss, return on investment, market share, business cases, and financial inclusion.

We have, maybe unknowingly, maybe indifferently, often let these categories become the sole points of reference for discussions of what is important in microfinance. They have become the criteria for decision-making and the measures for evaluating our actions. They have largely pushed other values out of the way — values like truth, beauty, harmony, integrity, virtue, and mindfulness.

I thought about this when I visited a beautiful savings group in Malawi last month. I don’t mean it was beautiful in some abstract sense, like “they followed their procedures beautifully.” I mean that it was beautiful because of the way it looked. The members — who had invested in similar outfits, white shirts and green chitenje clothes, all spotless — sat in a circle, taking a moment to adjust their positions so the circle was as perfect as they could make it. They ran the meeting following an austere and beguiling ritual: each member coming forward in turn and kneeling in the center, conducting her affairs with the group and then returning to her place before the next member came forward.

That beauty seems to have arisen spontaneously from the members. It was the value they added to the cash-management and meeting procedures they had carefully learned. I can’t quantify the added value of the beauty, because it is in a different category from the familiar averages and ratios — amounts saved and lent, attendance, and portfolio performance.

What if we could predict with reasonable confidence that a certain development investment would likely encourage people to lie or might reduce trust between people or could make the world uglier? Would we still want to support it, even if it raised incomes of poor people? Would we at least take those other factors into consideration, along with ROI (return on investment)?

I believe that some of the resistance many people have to turning savings groups into adjuncts to banks, or helping people enter the consumer society, or putting great emphasis on financial inclusion over other values — this comes from the fear that we are giving up non-marketplace values in the process. I don’t know how to solve the equation of balancing marketplace and non-marketplace values, but I am confident that both are important and that the beauty of the savings group I saw in Malawi makes the world a better place — even if we can’t put a price on it.

Related resources

E-workshop Takeaways: “How to Build Savings Groups and Other Breakthroughs in Financial Inclusion”

SfC Group in Mali_607x272

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As part of their 2014 Campaign Commitment, Carsey School of Public Policy co-hosted a learning event on Thursday, December 11th with us to share the value of starting and scaling up savings groups. William Maddocks (Carsey School of Public Policy) facilitated an engaging discussion, featuring Jong-Hyon Shin (Fundación Capital in the  Dominican Republic), and Jeffrey Ashe (The Carsey School of Public Policy).

We would like to thank the panelists as well as the E-workshop attendees, especially those who participated to the Q&A session. We invite you to comment on this post to continue the discussion about savings groups and other breakthroughs financial inclusion. Please click on the links below to explore the session content.


RESOURCES

Listen to the E-Workshop RECORDING

Have a look at the E-Workshop SLIDES

Review the E-Workshop QUESTIONS


Savings groups picture Eworkshop

A savings group replication agent trains a new group. She is using the all-oral curriculum which makes it possible for communities with low or no literacy levels to create and run a savings group with complete autonomy.

Summary of the E-Workshop

The E-workshop focused on two main issues:

  1. A 2-hour training method to create new savings groups
  2. The link between savings groups and conditional cash transfers.

Jong-Hyon presented her own experience in the Dominican Republic, and Jeff talked about the takeaways from his research in West Africa.

The live discussion with participants also touched on a wide range of topics, including the benefits and challenges of youth savings groups, the role of religious institutions in supporting the savings group movement, and the benefits of bank linkages for both the commercial banks and savings groups members. Check out the full recording of the session available here.


SG Eworkshop picture 2_602x338

A youth savings group in Mali. Photo courtesy of Jeffrey Ashe.

 Takeaways from the panelists

 

Jong-Hyon Shin (Fundación Capital) : Group quality: 2 hour vs classic VSLA?

Without doubt, the groups trained by classical VSLA enjoy higher quality than the groups trained in 2 hours. There are 2-hour groups saving as much as the conventional groups, but it is true that the group quality is not even, while the conventional groups demonstrate rather consistent performance. 2-hour training can get the groups to start saving, but it’s not enough to build a strong group. I believe that a group should have at least 3-5 subsequent monitoring visits in its first cycle. This is why I am working with PROSOLI, Dominican Republic’s CCTs, in which the group members will have a periodic visits from their trainers. Another measure to complement 2-hour training is to pay attention to the selection of members. When the members are sufficiently interested, and there is a mutual trust within the group, chances for subsequent intervention drops dramatically. In sum, it is ideal to have groups trained by costly and labor intensive conventional methodology, but if we are to achieve the scale, simple training may not be an undesirable option.

Jeff Ashe (Author of In Their Own Hands: how Savings Groups are revolutionizing development)

Two and a half billion people worldwide need a better way to save and borrow. Savings groups provide an alternative, safe and convenient place to save and easy access to small loans; an approach to mitigating poverty that is uniquely scalable because it is based on catalyzing the capacity of people to mobilize their own resources with only transitory outside help. The cost: a dollar per person and trending downward as what is learned in one village spreads virally to neighboring villages. Within ten years, savings groups with 100 million members could improve the lot of the poor in a million villages, at a cost of less than one percent of what these countries will receive in foreign aid. The extraordinary growth, success and durability of savings groups are due to following these principles:

  • Start with a vision of scale and design for viral replication – multiple groups in thousands of villages in a single country
  • Less is more, and the simpler the better
  • Build on what is already in place
  • Be sustainable – 89% of groups worldwide are saving and lending without outside support
  • No giveaways – giveaways keep control in our hands, not theirs
  • Keep costs low – the problems of poverty are vast
  • Insist on local control, the key to building skills and lowering costs.
  • Embrace learning and innovation

Are savings groups the silver bullet for eradicating poverty? No development effort can deliver on that promise – but savings groups are perhaps the best and most practical place to begin. The strategy of savings groups is based on an awareness that good ideas spread as they always have: through talking with neighbors and helping one another. We will judge ourselves successful when development passes from our hands to theirs.

SfC Savings Groups Mali (June 2010)

The map of the Savings for Change (SfC) program shows the rapid expansion of savings groups in Mali over the last 6 years. Red dots are groups 5-6 years, yellow is 3-4 years, and green are groups only 1-2 years old. SfC is a program run in partnership by Oxfam America and Freedom from Hunger.

To learn more about savings groups, we invite you to read Jeff’s book (In Their Own Hands) and Jong’s blog.


E-Workshops are hosted by the 100 Million Project of the Microcredit Summit Campaign and strive to feature the work of organizations who have announced Campaign Commitments to take specific, measurable and time-bound actions that demonstrate their commitment to the end of extreme poverty. 

Join Fundación Capital and the Carsey School of Public Policy in the global coalition to help 100 million families lift themselves out of extreme poverty. State your Campaign Commitment today by contacting us at mycommitment@microcreditsummit.org.

E-Workshop: How to Build Savings Groups and Other Breakthroughs in Financial Inclusion

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Photo courtesy of Jeffrey Ashe

Please note the date for this E-Workshop has changed to
Thursday, December 11th at 10:00 AM (GMT-4). 

Join us for an E-Workshop titled How to Build Savings Groups and Other Breakthroughs in Financial Inclusion

The Carsey School of Public Policy and Fundación Capital are co-hosting with the Microcredit Summit Campaign the next E-Workshop which will share insights on starting and scaling up savings groups. Both Carsey and Fundación Capital announced Campaign Commitments in 2014, and this latest E-Workshop will help microfinance and financial inclusion stakeholders to improve outreach and service with savings groups.
Register 2

What time in your country?

Join us for a discussion with Jong-Hyon Shin (Fundación Capital) and Jeffrey Ashe, which is moderated by William Maddocks (Carsey School of Public Policy). We will be discussing effective ways of forming savings groups and describe 2-hour trainings that Jong-Hyon led in the Dominican Republic.

The speakers will also share insights on linking savings groups and conditional cash transfer programs (see the recording of the Workshop titled Going to Scale: Savings Groups, Conditional Cash Transfers, and Financial Inclusion at the 17th Microcredit Summit), with the example of collaboration with ADOPEM and Fundación Capital in the Dominican Republic.

Through these valuable insights, you will gain a better understanding of the essential steps to start and scale up savings groups, and see how savings groups can contribute to financial inclusion and the end of extreme poverty.

Organization
Name
Carsey School of Public Policy
William Maddocks
Program Director, Microenterprise and Development
Moderator
Fundacion Capital
Jong-Hyon Shin
Country Project Coordinator
Carsey School of Public Policy
Jeffrey Ashe
Fellow
Co-Author of
In Their Own Hands: How Savings Groups Are Revolutionizing Development
Photo courtesy of Fundación Capital "What’s most significant about savings groups is that they are designed to be wholly managed by villagers themselves; by and large, they function as they are intended to function; and they reach impoverished people in remote rural areas who would otherwise go without any financial services, even microfinance."

Photo courtesy of Fundación Capital
“What’s most significant about savings groups is that they are designed to be wholly managed by villagers themselves; by and large, they function as they are intended to function; and they reach impoverished people in remote rural areas who would otherwise go without any financial services, even microfinance.” —David Bornstein, New York Times 


Join us for this exciting discussion to gain a deeper understanding of savings groups and hear from practitioners and researchers about their challenges, gains, and the practical applications! 


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

Learn about the 100 Million Project Project and Campaign Commitments.

Kudos and Lessons from One Movement to Another, Part 2

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I want to encourage you [the Savings Group movement] to continue to experiment with ways that will allow Savings Groups to start and spread without external subsidy. If you can do that, then the growth of your movement will not be dependent on donors but will instead depend on your ability to communicate your message and get others to spread it for you. Continue reading

Kudos and Lessons from One Movement to Another, Part 1

Gallery

This gallery contains 4 photos.

Setting ambitious targets is important for a global movement. It helps everyone who participates see how their work fits into a much bigger whole. While each individual person or institution may only be able to contribute a small portion of the whole, the sum of all these activities depicts an international force that makes it possible for us to believe that we will see the end of severe poverty in our lifetimes. Continue reading