#tbt: A New Law and New Hope


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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2004. The RESULTS International Conference is only three weeks away (July 18-21), and grassroots activists from the U.S. and around the world will be in D.C. to lobby the USAID Administrator and World Bank Directors. Therefore, in the weeks leading up to that great event, we’ll review advocacy successes and struggles in the early 2000s wherein we achieved breakthroughs in poverty measurement in order to target the extreme poor and other concessions from USAID and the World Bank.

The revolution in reaching the very poor is most evident in a new U.S. law and the resistance to it by some leaders in international development. The law, which was enacted in June 2003, calls for the U.S. Agency for International Development (USAID) to develop and certify two or more cost-effective poverty measurement tools that measure $1 a day poverty. The new tools are to replace loan size, which is currently used and has proven to be inadequate for poverty measurement. As Freedom from Hunger President Chris Dunford remarked, “The average loan size for entering clients tells you more about the institution making the loan than it does about the poverty level of the person receiving it.”

Download the full 2011 State of the Campaign Report in our Resource Library

Download the full 2004 State of the Campaign Report in our Resource Library

After the newly mandated tools are certified, institutions receiving microenterprise funds from USAID will be required to use one of them and report the number of entering clients who start below $1 a day. The law is an effort to bring accountability and transparency to the long-standing Congressional commitment to have at least half of USAID microenterprise funds benefit very poor clients. This new law, particularly if it is adopted by other aid-giving countries and institutions, would have a great impact on the Microcredit Summit’s commitment to reaching the very poor and provide tremendous support to the MDG focused on halving the number of families living below $1 a day by 2015.

While the new law demonstrates the revolution that is taking place in microfinance, efforts to expand the revolution have been met with resistance. This resistance comes from major development institutions that have been asked to adopt policies similar to the new U.S. law — The World Bank, the regional development banks, and the United Nations Development Program (UNDP).

In November 2003 more than 700 parliamentarians from the United States, the United Kingdom, Canada, Japan, Australia, India, and Mexico wrote to the heads of the World Bank, the Asian, African, and Inter-American Development Banks, and UNDP. The parliamentarians lauded the institutions’ commitment to achieving the Millennium Development Goals (MDGs) which they said are “crucial to building a safer and more equitable world — and will show our constituents that development programs are truly making a difference.”

The parliamentarians continue with a concern that:

…sustainable microfinance for the very poor has not received sufficient priority in your policies and practice aimed at cutting absolute poverty in half by 2015, the most crucial — and most difficult — of the MDGs. As important as it is to support well-designed health, education, and good governance programs, these interventions alone will not ensure that some 600 million people move out of poverty.

The parliamentarians ask the heads of these powerful institutions for the following:

  • Increased funding for microenterprise: We urge you to make substantial increases in the proportion of your institutions’ lending and grants that go to microenterprise and actually reach clients. For example, the World Bank estimates that an average of $168 million in funding, less than one percent of Bank resources approved annually, is approved each year for microenterprise. We believe resources devoted to microenterprise should at least be doubled (emphasis added).
  • At least 50 percent of funds reaching the poorest: By December 31, 2004, we would like to see your institutions make the commitment to having at least 50 percent of your microfinance funds reach clients who are below US$1 a day when they start with a program.
  • Use of cost-effective poverty measurement tools to ensure meeting the target: By December 31, 2005, the microenterprise institutions should be required to use cost-effective poverty measurement tools that can determine which families start below US$1 a day and use the same or similar tools to show which families have moved above US$1 a day.
  • Annual reporting of results: By December 31, 2006, we would urge your institutions to report, on an annual basis, the amount of funds provided for microenterprise and the percentage of those funds that reach families who begin with a program at below US$1 a day.

In their letter, the parliamentarians discuss the new U.S. law and say, “We believe your institutions should be a vital part of this process and urge you to adopt a similar procedure.”

Relevant resources

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


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.


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

Microfinance India Summit 2013 Workshop On Transforming The Lives Of Poor Clients


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Learn how you can help ensure that microfinance is part of the movement to end extreme poverty by 2030. EspañolFrançais Continue reading

Reflections from the 2013 Summit: Press Conference; Expanding Value Chains to Include the Poor

The key question in this workshop session was how to help include the poor in value chains; poor producers are generally too small to transact directly with large buyers. This exclusion leads to the poor selling to small poor buyers which reduces prices and decreases value for the poor producers. This problem is most exacerbated in agriculture, livestock and other perishables. In the absence of proper storage facilities – i.e. cold storage facilities and/or proper transport facilities, low-income producers are forced to sell as they produce which may not be the most favorable keeping in view price fluctuations.

Multiple examples from numerous organizations were shared in this session that aimed to address just this conundrum – how to help poor farmers and other micro-entrepreneurs better integrate in value chains. This essentially requires the establishment of a national enabling environment through linkages of small producers to specialized organization at each step of the value-chain.

The Jollibee Foundation shared its investment into and organization of onion farmers cooperatives which helps increase prices for farmers up to 75% more than they would be able to without the value chain. Jollibee Foods requires a steady supply of onions for its ‘secret recipe’ but unfortunately onions are only grown once in the year in the Philippines. While larger farmers can store these onions in proper storage facilities, smaller farmers need to sell the onion as soon as they harvest them. Naturally this reduces profit margins for small farmers. Jollibee Foundation has helped organize farmers into cooperatives by ensuring purchase of onions grown by the farmer cooperatives. As a consequence of this steady and confirmed demand, MFIs give loans to the small farmers to help them form these cooperatives. Through these cooperatives, a win-win situation emerges wherein the farmers earn better prices for their onions and Jollibee is assured a steady and fresh supply of onions.

Another value chain development project for small farmers that was featured was cashew nut processing through NABARD in India. NABARD has been able to secure a direct buyer for processed cashew nuts in Wal-Mart USA as a result of which it has been able to help small farmers form into a production cooperative. The production cooperative is trained and supported in replacing manual techniques such as breaking the shell by hand with using machines to do the same. Moreover NABARD has also introduced drying machines and trained the farmers on techniques of how to grade the quality of the cashew nuts processed. NABARD also involves the local governmental agriculture officer that helps with monitoring and trainings aspects at various steps along the value-chain. As a result of this value chain, poor farmers have been able to earn much fairer prices and have been able to register themselves as production cooperatives.

The main crux of the session was that there are multiple ways in which Financial Institutions; especially MFIs can support value chain development in small/poor farmers. The process needs creativity, an enabling regulatory environment, willing partners, and involvement of multiple stakeholders!

Institutional Action Plan Raffle Winner: WAGES Togo


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Congratulations to this week’s winner of the Raffle for Institutional Action Plan Submitters! Women and Associations for Gain both Economic and Social (WAGES) began its activities in 1994 as a project of Care International Initiative in Togo. It’s goal was to … Continue reading

Raffle Winner: Hekima (DRC)

Congratulations to this week’s winner of the Raffle for Institutional Action Plan Submitters, Hekima of the Democratic Republic of the Congo!

Submit your IAP to be included in the next Raffle
(download the IAP | submit your completed IAP)

Hekima’s mission is “to contribute to the transformation of the economic, social, and spiritual lives of the economically active poor of the Democratic Republic of Congo (DRC) as a sustainable, innovative microfinance institution of the highest quality,” (2004). Hekima began operations in the Kivu regions of Eastern DRC in 2007, an area marked by over a decade of war as well as social, economic and institutional collapse. Within this challenging environment, Hekima strives to serve the economically active poor, giving special attention to female entrepreneurs. They follow the community group lending methodology, which allows for disbursement of loans to clients lacking conventional collateral. Hekima identifies this dimension as a major objective to achieving its mission. The MFI’s business plan calls for operating in the war-torn and volcano-damaged Kivu regions of Eastern DRC, areas that they consider underdeveloped and underserved by observation. They choose to also work in rural Kavumu in order to serve poor women farmers. Targeting these geographies has allowed them to reach their intended clientele; 100% fall below the $1 a day poverty line, and 94% of them are women. While Hekima does not use a targeting tool to select clients, the formidable challenges faced by the population in the regions in which they operate clearly render them poor and socially marginalized.

Providing high-quality financial products and services appropriate for their clients’ needs is a major objective for Hekima.  A recent Kiva evaluation found that Hekima shows strength in this area, with a variety of loan products available to clients, including those adapted for both productive and social needs. The effective interest rate for their main loan product is 65.7%. Hekima monitors their pricing policy on an ongoing basis, working to keep operational costs as low as possible to ensure that the costs to clients are also reduced as much as possible.

To improve the livelihoods of their clients, Hekima provides some financial literacy training on how to manage credit as a group and establishes roles amongst the members of the group.

To be sure clients are reaping benefits from their services, Hekima has a system in place to measure improvement in client economic status over time via information gathered after each credit cycle. The MFI does not yet integrate social performance management into credit agent training to ensure services are being delivered in a focused and effective manner, but they intend to do so in the near future. Staff appraisals and incentive schemes will be tied to social performance goals. Hekima also includes clients in decision-making through solidarity groups, where all client representatives are women.

On Kiva’s evaluation, Hekima scored well on its efforts to “do good” while “doing no harm,” an important objective for them. They can be commended for their strong commitment to the Smart Campaign’s Client Protection Principles. Hekima exhibits social responsibility towards staff as well, with long-term contracts, staff training, specific policies for women, and health insurance. While there is no formal elected consultative body of employees, the staff communicates issues, concerns and ideas to management at weekly meetings. Continuing to listen to employee voices, and maintaining a schedule of regular, systematic surveys of employee expectations and/or satisfaction, will likely help Hekima sustain their low staff turnover rateof 4%.

To promote local social and economic development in the vulnerable Kivu regions, Hekima looks to work specifically with women, especially those widowed in the recent war. By offering women the opportunity to be entrepreneurs and leaders within their Solidarity Groups, Hekima is empowering them to become change agents in their community.

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


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

The Soul of Microfinance

The following post is a guest contribution from Sam Daley-Harris, Director of the Center for Citizen Empowerment and Transformation and former Director of the Microcredit Summit Campaign. This post concludes April’s theme, the “Soul of Microfinance,” as well as the student-led coalition, Month of Microfinance.

“The only thing I know for sure is it’s not all about the money.”Earlier this month I spoke to a group of students from eight high schools in the state of New Jersey. The group is part of a club that educates high school students about economic, financial, and investment principles. They wanted me to demonstrate to the next generation of leaders in finance how finance, in this case microfinance, can positively impact the global community.As we waited for the last group of students to arrive, the organizers played a segment from a television show called Sharks. The show features a panel of five wealthy investors called “Sharks”  who consider presentations from entrepreneurs seeking funding for their business. Just before I spoke, one of the Sharks said to the entrepreneur who had just presented, “It’s all about the money.”

When it was my turn, I looked out at the students and said, “The only thing I know for sure is, it’s not all about the money.” This was my cue to launch into a version of the TEDx talk I delivered in 2010 titled, “Purpose, Poverty, Pitfalls and Redemption.” I described how committing my life to ending poverty has given purpose to my life and outlined the pitfalls I faced recently. Specifically I explained about the recent period in microfinance when, for far too many, microfinance became “all about the money,” when the wellbeing of the investors was more important than the wellbeing of the clients. It was also a period when there was little interest in initiatives like the Smart Campaign for Client Protection, the Social Performance Task Force, and the Seal of Excellence for Poverty Outreach and Transformation in Microfinance.  Thankfully, that period is clearly passing.

I told the students that when I began to see and commit to microfinance that could bring redemption, that could restore people’s honor and worth, I was returned to my original purpose and vision. To illustrate microfinance for redemption, I recounted a story told to me by Ingrid Munro now of Jamii Bora SACCO in Kenya.

After the post election violence in Kenya, Jamii Bora received funds to rebuild one of the markets that had been destroyed in the rioting. They decided they had to find the rioters who burned down the market and engage them in rebuilding it.

I don’t know of any microfinance organization in the world that, if given funds to rebuild a market destroyed in rioting, would say, “We have to find the rioters and engage them in rebuilding it.” And if they said it, I don’t think they could find them. And if they found them, I don’t think they could convince the rioters to help rebuild what they had destroyed.

But Jamii Bora’s staff are all former members of the program, people who were former slum-dwellers, some of them former beggars, prostitutes, and thieves, so they are close to the ground.

The leader of the gang that destroyed the market was known as “The General.” Jamii Bora staff talked with him about helping rebuild what they had destroyed. His initial reaction was to be angry at her staff because they didn’t realize how dangerous he was.

But they convinced the General and his gang to help rebuild the market. They paid the gang to guard the materials at night and paid them to help rebuild with others during the day.

After the market was rebuilt, Jamii Bora engaged the General and some of the gang in microfinance. The General created a business that uses sheet metal to build cases that children use to keep their things in when they go to simple boarding schools.

He came to Ingrid and told her that he hadn’t gone to his home village for 13 years because his mother was so ashamed of him. But he had just gone home and his mother cried for three days because she was so happy about how he had turned his life around.

There are many visions for microfinance, including this one:  using microfinance for redemption. The dictionary defines redemption as restoring one’s honor or worth, setting one free. That’s what the world’s poor need—redemption that restores their honor and worth and sets them free.

Sam Daley-Harris is founder of RESULTS and of the Microcredit Summit Campaign and launched the Center for Citizen Empowerment and Transformation in 2012. www.citizenempowermentandtransformation.org
sam [at] empoweringcitizens365 [dot] org 

Breaking the Stovepipe Syndrome to Reach the Extreme Poor

The following is re-posted with permission from Microlinks’s blog. Click here to see the original. You can also watch a screencast of the March 21 After Hours seminar and a post-seminar interviews with panelists Jaya Sarkar (Trickle Up) and Jan Maes (The SEEP Network). 
This blog post was written by Carine Roenen of Fonkoze and Sabina Rogers and Bridget Dougherty of the Microcredit Summit Campaign who attended the recent After Hours Seminar, “Lessons Learned From Sequenced, Integrated Strategies of Economic Strengthening of the Poorest.”
“Economic strengthening” is all about breaking with the “microenterprise myth” that everyone, even the ultra poor, can start a business—that all they need is a loan. Building on a deeper understanding of the idiosyncrasies that characterize extreme poverty, organizations have developed promising interventions that incorporate “push” strategies that help build assets for those who cannot make ends meet and “pull” strategies to bring the excluded into the system.
During USAID’s Microlinks After Hours Seminar “Lessons Learned From Sequenced, Integrated Strategies of Economic Strengthening of the Poorest” on March 21, 2012, Aude de Montesquiou (CGAP), Jaya Sarkar (Trickle Up), and Jan Maes (The SEEP Network) presented integrated strategies that aim to meet the needs of the ultra poor so that they can negotiate their way out of poverty.
Understanding ultra-poor populations and developing appropriate interventions
“A household in extreme poverty is in a state of bankruptcy—not capable of covering its minimum expenditures for daily survival—and the sequenced strategies we are discussing today are very similar to remedies used for bankruptcies:  cash injection to pay for most critical needs followed by debt reduction and asset (re)building.” – Jan Maes, The SEEP Network
pull quote reading being ultra poor should become unacceptableTo overcome the roadblocks of the past, organizations promoting the economic rights of the poorest realize that they need to better understand who their clients are and what their psychological, social and economic characteristics are. De Montesquiou explained that many among the extreme poor lack what is necessary to be successful entrepreneurs, such as confidence, knowledge, assets, and tools. Maes stressed that, even among the extreme poor, we need to recognize that there is a wide range between “destitute” and “struggling to make ends meet.” We need to look at the causes of their poverty and the nature and degree of their vulnerability. By understanding this nuance, we can design appropriate activities, programs, and services that integrate the right components (e.g. asset transfers, handholding, and financial services) with the proper sequencing to address these vulnerabilities.
From pilots to proof-of-concept
Organizations participating in the CGAP Ford Foundation Graduation Program are testing this model of integration and sequencing. De Montesquiou presented qualitative and monitoring results for Fonkoze, their partner MFI in Haiti. The Fonkoze Foundation developed its Chemen Lavi Miyò (CLM), or “Pathway to a Better Life,” program to provide a multipronged livelihood protection and promotion service to carefully target ultra-poor women in rural Haiti. Specifically, CLM provided the women with assets for entrepreneurial use, enterprise training, health services through Partners in Health, housing support, a consumption stipend, and social links with village elites—all facilitated by the close support of a CLM case manager.  This push strategy decreased food insecurity among participants by over 50%. Severe wasting among CLM children decreased from 13% to 4% and Personal Potential Index (PPI) scores show 16% of participants passed the $1/day line. After 18 months, more than 90% of the participants were ready to participate in Fonkoze’s regular microfinance program. Thanks to support from the MasterCard FoundationConcern Worldwide, the Haitian Timoun Foundation, and Fondation Kanpe, the program has now been scaled up to include more than 2,000 families.
In her presentation, Jaya Sarkar described Trickle Up’s challenge as “struggling to make our initiatives more effective” and adapting a series of interventions in their graduation pilot in India. Since 2009, the graduation model has been Trickle Up’s standard approach in India. Now, they are mainstreaming learning into the rest of the organization by effectively using the push strategy developed through the pilot project to learn about the ultra poor and better designing pull strategies through other programs. When Trickle Up moved from the pilot phase to proof-of-concept, they shifted their focus, putting an emphasis on self-help groups (SHGs). They found, as Sarkar described, impact in unexpected areas. In particular, they found that groups were taking collective action. SHGs in Mali were creating a social safety net for members and creating access to financial services for non-members in their community, thus enlarging the population that directly benefited from the intervention. In India, they found SHGs are taking action on social issues, improving public shared space, and advocating on behalf of others for better service from banks.
Call to action
“What do the ultra poor need?” asked Jan Maes. That is the key question, and to figure this out, integrated strategies will be needed to learn from a variety of sectors such as microfinance, social safety nets, market development, protection and promotion, women rights, and others.  The STEP UP Initiative from The SEEP Network aims to connect these silos of practice, breaking the “stovepipe syndrome,” to enable multidisciplinary learning. Maes encourages practitioners to join STEP UP to enhance discussion on these issues.

Grameen Foundation in a $162.5 Million Credit Guarantee Partnership with USAID

On Monday, USAID has announced a partnership with Grameen Foundation for a $162.5 Million Credit Guarantee. By this valuable partnership, it will easier for the microfinance institutions (MFI) to access private credit as USAID and Grameen Foundation will share the credit risk.

As we all know, effects of the actual financial crisis also has an influence on the MFIs. As the unemployment rate increases, more and more people are trying to setup a micro-enterprise and this has increased the demand for microcredit.

According to USAID and Grameen Foundation, the 3 major ways that MFIs get funding are reinvestment of repaid customer loans, loans from commercials banks and finally grants from donors. As the financial crisis has reduced the access of commercial financing to the MFIs, this partnership between USAID and Grameen Foundation will provide credit enhancement for the MFIs.

Moreover, the partnership will lend money in local currency as they believe that this will present less risk of currency market fluctuations. In the actual financial meltdown, this partnership should give a helpful hand to worldwide MFIs who will profit from this partnership, an estimated of 691, 500 micro-entrepreneurs will benefit the loans provided by these MFIs.

The Partners

Grameen Foundation is “global non-profit organization that combines microfinance, technology, and innovation to empower the world’s poorest people to escape poverty. It has established a global network of 46 partners in 25 countries that has impacted an estimated 18 million lives in Asia, Africa, the Americas, and the Middle East. Grameen Foundation was founded by Alex Counts, who began his work in microfinance with Grameen Bank founder and Nobel Peace Prize recipient Dr. Muhammad Yunus.”

USAID is an independent federal government agency that provides foreign assistance worldwide. “USAID has been the principal U.S. agency to extend assistance to countries recovering from disaster, trying to escape poverty, and engaging in democratic reforms.”

To consult the Press Release

End Poverty all Together!

For its fourth year Stand Up and Take Action will take place worldwide this year October 16 to 18 to advocate the leaders of the planet and request them to keep their promises to eradicate poverty and to carry out the Millennium Development Goals (MDGs).
MDGs were established “in September 2000, building upon a decade of major United Nations conferences and summits, world leaders came together at United Nations Headquarters in New York to adopt the United Nations Millennium Declaration, committing their nations to a new global partnership to reduce extreme poverty and setting out a series of time-bound targets – with a deadline of 2015 – that have become known as the Millennium Development Goals.” (United Nations Millennium Development Goals)
Stand Up and Take Action is co-organized by the UN Millennium Campaign and the Global Call to Action Against Poverty (GCAP). The inception of UN Millennium Campaign was launched with the signatures of the 189 world leaders onto the Millennium Declaration and agreed to meet the MDGs. GCAP is a grouping of various organizations from the civil society calling the leaders to end poverty and inequality around the world.
Visit Stand Up 2009 and Take Action: be part of the movement to end poverty! You will find on the Website information about events happening all around the world, success stories and information on how to create your own events or join one!

Hans Rosling updates us on Global Development

Talking at the US State Department this summer, Hans Rosling uses his fascinating data-bubble software to burst myths about the developing world. Look for new analysis on China and the post-bailout world, mixed with classic data shows.

See more of his presentations on global development and poverty at his website gapminder.org.

Freedom From Want from Ian Smillie

Freedom from Want describes the success story of the Global Grassroots Organisazation BRAC whose goal is to end up poverty. It is now available to anyone eager to learn more about the spread of its work in health, education, social enterprise development and microfinance. BRAC’s accomplishments are a source of inspiration and hope for the many government or non-profit enterprises who also wish to make a difference in the life of thousands.

This book is available on the Amazon website.