Kiva Chronicles

 By James Allman-Gulino, KF11 Uganda

Social Responsibility: The principle that companies should contribute to the welfare of society and not be solely devoted to maximizing profits

(source: dictionary.reference.com)

EDESA requires every ECC it serves to have a Social Responsibility Program.  This means that the organization must  be making efforts to achieve social, environmental, and financial sustainability.

Last Friday Luiz Jimenez (EDESA executive director), Gerardo Barillas (FINCA coordinator) and I visited ECC Vivero Datraban in Upala, Costa Rica.  The purpose of the visit was to participate in one of the ECC's social responsibility efforts - a reforestation and education/awareness campaign.  They were great hosts - check out the video below for a recap of the day.

[vimeo 14185866]

*Update: additional video fresh from editing.  An interview with Vivero Datraban's Vice President Vicky in which she discusses the ECC's social responsibility efforts and the importance of microcredit to her community.  Enjoy.

[vimeo 14249182]

Until next time - lovers, fighters, financiers, and planeteers - keep on keeping on.  And while you're at it, take care of your triple bottom line by making a loan at Kiva.org.

Peace, Love, and Platanos.

John Murphy is a Kiva Fellow Serving at EDESA in Costa Rica.  In his spare time there he enjoys playing pool and foosball, practicing his Salsa, and expanding his international social network.

By Amber Barger, KF12, Mongolia

The goals of the United States Peace Corps and the Kiva Fellows Program fit quite well with each other. Because of this, I’m able to serve as a Peace Corps Volunteer (PCV) and Kiva Fellow at the same time. Both programs promote cross-cultural awareness and capacity building within the given host community. Let’s look at how the volunteer programs relate to each other.

The United States Peace Corps' mission has three goals:

1. Helping the people of interested countries in meeting their need for trained men and women.
2. Helping promote a better understanding of Americans on the part of the peoples served.
3. Helping promote a better understanding of other peoples on the part of Americans.

The Kiva Fellows Program corresponds with the Peace Corps structure. The Fellows focus on helping to improve the knowledge, capacity, and systems within their assigned Microfinance Institution (MFI). Then, inherently, by working with the Fellow, the MFI staff learns a bit about the culture that the Fellow comes from. The Fellows also create an international awareness on behalf of their host communities by visiting borrowers, posting journal updates, creating borrower press profiles, writing on the Fellows blog, etc. Kiva Fellows can meet the needs of all three of the Peace Corps’ goals.

From my own experience, I’d say that Peace Corps, as a whole, focuses more on culture aspects like learning the local language, integrating into the host community, and living like the local people, than the Kiva Fellowship Program. Peace Corps supports community integration by providing intensive language training, local culture trainings, a living stipend at the same level of locals, and a contract period of 27 months of service. The Peace Corps framework lends itself to integration within the community, and then from developing relationships within the community, the Peace Corps Volunteer can build successful work programs.

The Kiva Fellowship can be a much shorter program, with a minimum of three months of service. In my experience, the Kiva Fellowship Program focuses more on the capacity building of the MFI and implementing a work plan that focuses on creating an international awareness of the host country’s people. The Fellowship Program attracts professionals who have a variety of skills in consulting, microfinance, marketing, photography, non-profit management, investment banking, etc. Each Fellow has a unique set of skills that the program matches with an MFI that needs those specific skills. The Fellowship Program creates a work plan that the Fellow and host MFI follow to meet the goals that Kiva has for that specific MFI. During the Fellowship training week, it focuses mostly on the Fellow’s work plan items and how to do them within the context of Kiva.

If you’re looking for an entry into international development, I’d encourage you to look at both Peace Corps and the Kiva Fellows Program. I often hear a saying that says, “You can’t get a job in international development without a job in international development.” These volunteer programs are great stepping stones into the field. About eight Kiva Fellows have been past Peace Corps Volunteers and I know of a couple of Kiva Fellows who are looking to join the Peace Corps.

I look forward to using my two years of experience as a Peace Corps Volunteer to assist me in my Kiva Fellowship.  Please follow me over the next year as I try to give you a look into Mongolian borrowers, culture and business practices, among other things.

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Check out how to apply to be a Kiva Fellow.

Check out more information about Peace Corps International and Peace Corps Mongolia.

If you're an Returned Peace Corps Volunteer, please join the Kiva RPCV lending team.

Amber Barger is currently serving as a Kiva Fellow in Mongolia. She has lived for the past two years in rural Mongolia as a community economic development Peace Corps Volunteer. She is also extending a third year with the Peace Corps as a Peace Corps Volunteer Leader.

By Peter Marchant, KF12 Zambia

Maize is a staple of the Zambian diet. On average, each Zambian consumes about 200 kilograms of the stuff each year. Farmers across the country grow maize on small plots, but they often find it difficult to sell their crop at a profit.

Zambia is sparsely irrigated, so farmers plant nearly all of the maize in the country at the start of the rainy season in late October or November and harvest when the rains let up. The market is flooded with maize at harvest time (roughly may to July) and prices fall by as much as 30%. The government purchases around 300,000 tons of the 2.7 million produced by Zambian farmers each year, but while the government price is generally higher than the market (especially around the harvest) actually getting paid can take months and a thriving grey market for government purchasing contracts means most smaller and poorer farmers end up selling their maize to middlemen at significantly lower prices.

To take advantage of rising prices in October and November, Zambian farmers need both a safe place to store their maize and immediate access to capital to pay household expenses and purchase inputs for the next planting season. Empowerment Microfinance Institution has partnered with a USAid project called Zamace and a food facility project run by the Italian NGO CeLIM, to offer farmers just that combination of services.

Under E-MFI’s warehousing pilot program, farmers can bring their maize to local packing points where they sort it into 50 kilo bags. A truck collects the maize and deposits it in a secure warehouse where the grain is stored for a small monthly fee. E-MFI provides the farmers with a short-term loan at 2% monthly interest (due in a lump sum when the maize is sold) for up to half the value of the stored maize. The farmers can use the loan to cover household expenses and pay the warehouse fee. For E-MFI, the maize serves as collateral to ensure a high repayment rate.

Under the program, farmers will be able to sell their maize at significantly higher prices than what they would see in June or July. By combining microfinance with logistical support and organization, E-MFI and its partners help farmers get the most from their labors by providing a packaged service that neither warehousing nor microlending could offer in isolation.

Peter Marchant is a Kiva Fellow serving his second placement with Empowerment Microfinance Institution in Zambia (not yet a Kiva country). Previously he worked with AqroInvest Credit Union in Azerbaijan. Click on Azerbaijan Borrowers for a list of Azeri borrowers currently on Kiva or check out Supporters of Azerbaijan to join the Azerbaijan lending group.aMAIZEing

By Yelena Shuster, KF 11, Azerbaijan

Being a loan officer has its perilous moments. The scary Caucasian shepherd dogs that guard client's homes and threaten to bite you and the difficult to find addresses of remote properties that one must search for in the unrelenting summer heat are obstacles. Then there are the numerous unforeseen hazards one encounters trying to go the extra mile as a loan officer...

Last week one of our loan officers at Komak went to meet a new client, a tomato farmer from the Absheron region. To get a better picture of the borrower's greenhouse for his Kiva profile, Emin climbed on the roof of a 3 meter high building. Then he slipped and fell onto the hard pavement below, shattering his ankle completely.

I wish I knew more about the state of medical care in Azerbaijan. When I saw Emin in the hospital last week he was reluctant to tell me details. He was sharing a small sunny room with another man, who's chatty wife laughed at my inquiries about the hospital. After I'd told her about the insurance system we have in the United States she said, "So it's the same, without money one doesn't get treatment." "Almost" I insisted, "except in the US one is guaranteed treatment in the emergency room but may end up with debt of hundreds of thousands of dollars or lose their house." She nodded her head disapprovingly.

A colleague from Komak brought Emin his salary (Emin will be paid while he is not working because it's a work related injury) which was to be used for paying the nurses and doctors. Supposedly, each time a nurse comes to give an injection, she must be "tipped."

"And what if he doesn't tip her?" I asked. "In that case the injection will hurt more..." came the reply.

For the next 3-4 months our dear Emin will be unable to walk. He’ll work from home in his other official capacity, as Komak’s IT guy.

In Azerbaijan, there is no such thing as preventative medicine. People visit doctors only when the problems become extreme and cannot not be self-medicated. In Baku, the capital, pharmacies are everywhere and no prescription is needed to acquire medication.

According to a study from 2008, "The emergency medical system surveyed in Azerbaijan is inefficiently organized, under-financed, poorly equipped and lacks adequately trained staff."

The findings of [the study] demonstrate a lack of emergency medical capacity not only in disaster situations, but also in routine emergency cases. Most hospitals cannot provide an adequate response if multiple critical patients present simultaneously. Additionally, most life-threatening situations cannot be treated adequately due to a lack of critical equipment and medications, and inadequate training of medical personnel in evidence-based emergency medicine.

I have one week left with Komak and I am pleased to write that my experience has been great. The director, Aydin, calls himself my “moral father in Azerbaijan," and my colleagues treat me with respect and care. I appreciate the efforts they made to make sure I secured a visa before I arrived in Azerbaijan (major issue for many foreigner volunteers in this country) and the help they provided in obtaining a registration card here. I’ve enjoyed chatting with Afitab, the young Kiva coordinator, who’s helped me see deeper into Azerbaijani culture.

Since coming to Komak in May, I’ve seen their Kiva portfolio almost double and I am very happy about this. Through Kiva, Komak has the opportunity to serve more entrepreneurs for whom access to credit are obstacles (though not the only ones) to prosperity. At the present time, there are two loans set to expire on Kiva within the next 2 days. If you're interested in helping Azerbaijan support our  borrowers.

By Jeremy Gordon, KF11, Kenya

On July 26th, Erick Bii updated the 21 lenders that had supported his loan with the state of his business, the impact of his loan on his family, and his recent challenges. To read the full journal, click on the quote above.

To communicate with his lenders, Erick didn’t need to travel to the Juhudi branch office in Litein, or even sit down with a loan officer at his farm. Instead, he responded to a series of SMS questions sent to him via his mobile phone. Erick chose to receive his survey in Kiswahili, but in several of [our] [early] [tests], borrowers preferred to send their updates in English.

There are a couple of exciting aspects to this method of getting journal updates. First, there’s no need for an intermediary: the text message responses are received and compiled automatically at Juhudi’s main office, and sent to Kiva’s website as soon as they’re reviewed. We want our lenders to read the exact words of the entrepreneur, so for now, journals received in Kiswahili will be posted as is—we’ll show the English translation of the questions ask, but rely upon our lenders to provide a translation of the responses (perhaps from Kiswahili speaking acquaintances or lenders, or failing that, a web service like Google Translate).

Secondly, the system we’ve developed has the option of customizing the questions sent based on the type of loan received by the client. Because Erick’s loan was to purchase an insured dairy cow, his survey included a question about how much milk he was able to sell. But we can take that a step further and ask the entrepreneurs what you, the lending team, are most curious about. In the not too distant future, I would love to see lenders proposing questions for the client whose loan they’re supporting, and for Juhudi to incorporate the best ideas into that client’s survey.

It’s in pilot testing now, but Kiva journals like this one could become more frequent on Kiva’s site. Because journals are such an important part of Kiva’s mission to connect entrepreneurs and lenders, we’re eager to hear what you think about this project. Would you be interested to read SMS responses in the next journal from your portfolio? What would you most like to hear from the entrepreneurs you’ve supported?

Jeremy is a Kiva Fellow working with Juhudi Kilimo in Nairobi.

Stranger or not, one lender's praise and thanks served as motivation enough to display this individual email on the official WAGES bulletin board for over a year!

The recipients of Kiva loans are often also personally touched by Kiva's ability to make connections. I’ve met dozens and dozens of Kiva borrowers, the real people that exist behind those profiles and take the loans Kiva lenders fund. Each time I meet a borrower, I explain to them that thirty individuals around the world saw their photo, read their story, and chose to fund their loan. Usually what touches the borrower most is that someone in another country chose him. That choice was real and it was personal – both to the lender and to the borrower. And, after the fact, their choice to lend caused change in that borrower’s life that was personal too.

Take Vladimir Alekyan in Ukraine who, upon learning about the Kiva lenders who funded his loan, took me inside of his newly built greenhouse and exclaimed “This is your help!” (See the video below)

[youtube=http://www.youtube.com/watch?v=iJSjzXro_e0]

At the time it really moved me the way Vladimir expressed it, equating the greenhouse with the support of Kiva lenders. Of course, it was after a week of hard construction work that the lenders' financing materialized into the greenhouse, but at the time thats not how Vladimir was thinking of it. The connection was personal, his greenhouse existed because of Kiva lenders, and for that he was grateful.

During a loan officer training I held for HOPE Ukraine a few months ago, I explained to 14 doubtful loan officers that Kiva lenders really don't make money off their loans; in lieu of monetary profit, lenders profit from stories.

Kiva lenders get this information in primarily from journals - written accounts of a borrower's progress during or after their repayment of the loan. Recently, Kiva made this personal exchange even more personal by introducing a tool by which Kiva Fellows can email lenders before visiting a borrower to ask if they have any questions for the client. I recently tried this out for the first time and within a day received responses from four Kiva lenders.

For example, Paula from Spokane, Washington in the US asked Félicité Ayawavi Hounsou from Lomé, Togo, “What is your hardest challenge as a working mother?” When I asked Félicité, she told me that her hardest challenge is being the sole provider for her daughter, ten years old, and her younger sister, both of whom live with her. This exchange is really remarkable because it's a relevant question to a woman like Félicité from Lomé and a woman like Paula from Spokane. This new tool by which lenders can ask their borrowers questions levels the playing field and highlights the fact that on both ends of the Kiva lending process are real people who are probably not so different from one another as they might think.

Kiva is special and relevant precisely because it makes poverty alleviation personal. As people like Paula and Mark are personally touched by what they've learned, they're going to continue to make small contributions that amount to large life changes for the thousands upon thousands of borrowers who have themselves been touched by Kiva. In turn, people like Félicité and Vladmir not only receive financial support from Kiva lenders, they are also personally empowered by the realization that someone is cheering them on! If thats not person to person, then what is? 

Kiva lenders, what questions would you ask your borrowers? Hopefully as the tool becomes used more widely by Kiva Fellows, you'll have the chance to ask. Be on the lookout for emails from Fellows! And special thanks to former Kiva Fellow Jeff Zira for developing the lender questions tool.

By Sam Trauffer, Kiva Fellow

"The surest way to corrupt a youth is to instruct him to hold in higher esteem those who think alike than those who think differently."
Friedrich Nietzsche

Kyrgyzstan is one of the most corrupt countries in the world. In the Corruption Perception Index 2009, it ranks 162 out of the 180 countries that were covered. I knew this when I arrived here in Bishkek two and a half months ago to start my Kiva Fellowship but I didn’t know what the reality looked like nor how corruption affected everyday life.

The good news is that I haven’t had to pay any bribes in the last ten weeks (which has honestly surprised me). However, signs of corruption are obvious at many levels of public life. One of the most shocking examples occurred when I learned that many of my Kyrgyz friends work fulltime while finishing their studies simultaneously. I have always been impressed by people who can study for hours after work and have to admit that I would not be able to do this for a long time. I asked my friends about this and they only smiled and said that it is not that difficult to pass their exams: “Instead of studying all year I just pay the professor when exams are near! That’s all you need to do. Everyone else does the same thing…”

Professors are not the only ones who top up their salaries with bribes. In an environment where the (now ex-) president allegedly installed a rule of corruption and nepotism, taking and paying bribes has become the rule rather than the exception. Other factors which breed corruption include:

• low salaries for public employees which makes it an attractive (and sometimes necessary) way to increase their income

• a weak national identity which lowers the inhibition threshold to cheat the central state

• a high level of bureaucracy which only makes it possible for officials to offer “short-cuts” to the official procedures

• little transparency due to the absence of independent media

• a sense of complacency among the population

…just to name a few. All of these are present in Kyrgyzstan.

What can microfinance do to fight corruption? The MFI itself must take measures to prevent its staff from being involved in corruption to insure its very survival. In particular, a high degree of transparency towards stakeholders is vitally important to getting international funding. Lenders expect a strict adherence to a Western standard of both accountability and ethics from the organizations they invest their money in.  If an MFI were to be non-transparent, no-one would ever invest in it.

Beyond this, microfinance can also help its clients to live without (or with less) corruption. While common jobs are often acquired by knowing the ‘right people’ and giving favors, self-employment becomes the alternative for those left out of the loop (be it due to a lack of connections, the unwillingness to pay bribes, etc.). Microcredit, delivered with the absolute minimum amount of red tape, gives an equal chance to every willing person to improve his or her living situation. One important remedy to alleviate corruption is to offer alternatives to simply paying a bribe. I’m proud to say that Bai-Tushum & Partners is helping to provide options for people who want them.

By Drew Loizeaux, KF11 Uganda

Conversations about microfinance are a near daily occurrence in the life of a Kiva Fellow. Sometimes they are with happy recipients of loans and other times they are with skeptics who question its value or impact. No matter what the topic or tone, I always learn something new and usually leave with an even stronger commitment to microfinance than before. In hopes to relay this experience, I want to share with you a recent sampling of some of the conversations I have found myself in.

Last week, I was in the field doing a borrower verification of HOFOKAM clients, where I met and spoke with 10 of the clients funded on Kiva.  Two of them went out of there way to tell me repeatedly that the loan they received was a huge help and that they hoped and prayed that they could continue receiving them in the future. One of the two had recently been robbed of all of her clothes that she sells and said that if she was not able to take out another loan she didn’t know if she could restart her business. It is great, when as a Kiva Fellow, you get the chance to see and hear the real and tangible stories of people working hard and succeeding in spite of extremely difficult circumstances.

Later in the week I had two other conversations about microfinance, one with a Ugandan and one with a foreigner, that were a bit more critical. I was talking to a Belgian who works on water projects in the area and the topic of interest rates was brought up. When I told him that the average interest rate where I worked was about 27% he gave a sharp look of disapproval. He expressed surprise at such high rates and wondered if microfinance was really helping. I agreed that yes, the high interest rates can be troubling and I think there are some MFIs out there who could, and do, take advantage of people that this was not one of them. I explained that after factoring in cost of administering the loans and the high rate of return on such small investments for the borrowers, 27% isn’t nearly as bad as it sounds.

His question did hit on a big issue in microfinance right now though. How can we make sure that people are not charged rates that will hurt, rather than help them? The fact of the matter is that in many places that MFIs operate there often times is very little regulation or consumer protection.  What the answer to that is I don’t know. Some people have suggested capping the amount of interest over cost of capital that can be charged, but that creates a problem where rural clients that are expensive to reach will be left out completely. Despite the lack of consensus, I think Kiva, by publishing interest rates of its partners on the site, helps bring this issue to light and pushes the industry as a whole to better serve its clients.

The conversation with Ronnie, the Ugandan, started after I said I involved with microfinance and he replied, half kidding, “So you are one of those guys ripping us all off?” I was very interested why that was his first response to microfinance and asked him why he had said this. He mentioned that some people can use loans poorly and in those cases microfinance can be harmful rather than helpful. I agreed with that point and our conversation went on for a while. We talked extensively on the strengths and weaknesses of microfinance and he had a great understanding of them all. In the end, we agreed on just about everything and I finally asked him the question that I am constantly trying to answer myself: given that we both understand that microfinance, like any financial product, can be used well or poorly and that those who use it poorly can sometimes end up in a real hard situation, do you think microfinance is a good thing? He thought about it for a while and said that given the choice of microfinance existing or not existing, he would choose to keep it as those who do use it wisely would be hurt by its elimination.

It is a tough question, but I think he is right and for me this gets to the heart of why microfinance is a good thing. We all would like there to be some way to make everyone’s life better, but that just isn’t how the world works. Sometimes you succeed and sometimes you fail, but to not have the opportunity to do either is really the worst possible situation.

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If you are interested in hearing professionally produced conversations about microfinance and micro-businesses, I recently listened to two fantastic podcasts done by Planet Money on the subject.  The first one is about how in Jamaica, access to credit for the poor is directly affected by the borrowing of its government. The second one is about a woman in Haiti, who had all over belongings destroyed in the earthquake but with the help of some donations was able to increase her income by ten fold.

By Kevin Henderson, KF11, Mongolia

“What is microfinance?” I’ve been asked this question a lot during my time as a Kiva Fellow. I used to answer by saying “microfinance is extending credit to people who do not have access to the traditional financial system” then remembering Kiva Fellows training I would add, “but not just credit, it’s providing other financial services, too.”

I think because Kiva is a lending platform and the field partner I primarily work with in Mongolia, Credit Mongol, is exclusively a lending institution*, it’s easy to forget about the “other” part of the equation. So I was very interested to learn about a program at XacBank, Kiva’s other field partner here, that is using funds from Kiva to provide more than just credit. Since August 2009, XacBank has provided Kiva borrowers with savings accounts when their Kiva loans have been repaid. To start the borrowers-turned-savers off XacBank returns 9% of the interest a borrower pays over the course of his or her loan.

Offering the poor a safe, liquid option for savings can be as valuable as providing credit. Savings can protect against interruptions in income caused by, for example, the loss of a job or illness. Providing a secure location for deposits can also remove the temptation to spend frivolously (see a great article on this topic by Nicholas Kristof in the New York Times). Deposits are also beneficial for the sustainability of the lending institution because they are a source of capital.

Savings programs are actually commonly called the forgotten half of microfinance. Due to the high administrative costs of accepting small deposits most banks have been unable to offer this service. Unlike microcredit, which is often funded by donor aid and organizations such as Kiva, there haven’t been many organizations committed to funding savings programs.

XacBank began offering the savings account program for Kiva borrowers when they were looking for a way to share the benefit of Kiva’s 0% interest capital. Since Kiva loans are usually pre-funded from the bank’s source of capital and there isn’t a guarantee they will be funded on the Kiva website, XacBank can’t offer a lower interest rate to Kiva borrowers and instead decided that returning interest in the form of savings accounts would be the best way to contribute to Kiva and XacBank’s common goal of alleviating poverty.

The greatest challenge in implementing the savings program has been extending it to all Kiva borrowers. XacBank can only afford to offer the program to borrowers who repay their loans as scheduled. 55% of borrowers are ineligible because they repay early. However, of borrowers who do receive accounts, Xacbank has found that so far they have all kept their accounts open and some clients have even started making small deposits.

I’m getting better at explaining that microfinance is about more than just lending. For me the best reminders are these press releases from XacBank describing proud Kiva borrowers receiving their account passbooks. XacBank translated these press releases into English to share them with Kiva lenders.

XacBank branch in Arhangay province started opening savings accounts for its Kiva borrowers

January 29, 2010. Branch staff informed our clients of this happy news via phone. Microentrepreneurs all were very happy no matter if they received 1000MNT or 10,000 MNT in their savings account. Mongolians are very superstitious. The day we organized the event to hand them a savings book was a special day in the Buddhist calendar that wealth is increased a lot if someone has wealth on this day. One of XacBank’s repeat clients Ms. Davaadorj wore her best traditional dress because she respects this event and her understanding was that she was getting a benefit from an international organization. She was very proud of herself for becoming a Kiva borrower. All microentrepreneurs who received Kiva benefits through savings accounts expressed their gratitude to both Kiva Microfunds and its lenders and also to Munhmandah and her colleague Ms. Botagoz who are working on this project. In this picture: Kiva borrower and Micro Entrepreneur Davaadorj C., branch manager Galya Ch. along with branch staff.

Motto: Let’s take the Kiva loan. Let’s pay it back on time. Let’s get the benefit from it.

April 30, 2010. Invitation to the Kiva event in Uvurhangay province was distributed to XacBank’s micro entrepreneur clients. The event was held on the following day. Best performing micro borrowers were awarded a Kiva savings passbook with total amount of MNT 418,000. At the event XacBank promoted its microfinance services and products to participants. Furthermore, XacBank’s success stories and microclient successes were presented during the meeting. There was high satisfaction shown on our borrowers’ faces.

* I don’t want to imply that Credit Mongol has forgotten about the importance of savings in microfinance. As a non-bank financial institution they are prohibited from accepting deposits.

Kevin Henderson is serving in Ulaanbaatar, Mongolia as a member of Kiva Fellows 11th Class

You can lend to a borrower in Mongolia here!

By James Allman-Gulino, KF11 Uganda

One of the newer fields that’s getting more attention within microfinance is trying to measure microfinance institutions’ (MFIs) social performance, which broadly is an indication of how well an MFI meets the social goals outlined in its mission and vision.  Social performance is reflected in a wide range of indicators, including:

• an MFI’s policies towards employees, like providing health care or maternity leave;
• to what degree an MFI targets the poorest of the poor for financial services;
• an MFI’s policies on environmental conservation;
• how low an MFI keeps its interest rates;
• how transparent an MFI is about these interest rates and other loan terms; and
• how an MFI’s services translate into improved lives for their clients.

In some ways social performance for MFIs is analogous to the idea of corporate social responsibility, which speaks to how corporations pursue explicitly pro-social goals and limit any detrimental byproducts of their operations.

The trickiest aspect of social performance is the last indicator I mentioned, trying to capture how microfinance changes the lives of the poor.  Unsurprisingly, this is the ultimate goal of any development-related intervention; the idea is to empower the poor and enable them to create better standards of life for themselves.  Measuring this is often called impact analysis, or impact assessment. But while this analysis is important, since we want to see if and how much microfinance actually benefits borrowers, it’s also extremely difficult (and expensive) to measure.  For instance, a farmer might get an agricultural microloan but experience a severe drought, leading to a large drop in income.  The impact of that loan would actually seem to be detrimental in that case.  On the individual level, obviously we could see that the decrease in the farmer’s income was due to other factors; but when you’re trying to study impact over a wide population, you often can’t account for all such factors.  This makes it very difficult to analyze microfinance “interventions” to really see what benefit microfinance creates in the lives of the poor.

As an organization that explicitly supports microfinance as a tool for “alleviating poverty”, Kiva has interest in working with MFIs that bring a strong social focus to their operations.   Kiva’s partner MFIs, which do tremendous work in their outreach to the poor and often set the bar for ethical conduct amongst non-governmental organizations, also want this non-financial aspect of their operations to be properly appreciated.  It is for this reason that Kiva and its Field Partners are beginning to work on measuring their social performance in the fields I bulleted above.  To do this Kiva and its partners are using the CERISE Social Performance Indicators tool, which analyzes an MFI’s social performance across a wide range of operations and attempts to quantify the results.  The results can help an MFI see where in their operations the social mission is strongest, and where otherwise they may need targeted attention or improvement.  In the future, MFIs might also use the resulting scores to emphasize their social performance to lenders, who could be interested in supporting certain MFIs with a particular social focus.

However, what the new use of the CERISE tool won’t include is the type of impact analysis/assessment that I noted above.  While both Kiva and our partner MFIs would love to measure how microfinance improves the lives of borrowers, it’s simply too difficult to isolate Kiva loans as the lone source of that improvement, and to quantify exactly how a borrower’s life has “improved” thanks to a loan.  Our social performance measurement will instead focus on MFIs’ operations and their internal policies, to capture how responsibly they act towards their borrowers, employees, and the local communities they serve.

If you have any questions about social performance or the ideas behind it, please feel free to leave comments and I’ll try to respond.  I will be one of the Kiva Fellows spearheading our new work on social performance and helping Kiva’s Field Partners to collect CERISE data, so I hope to comment more on this topic throughout my Fellowship.  Thanks everyone-

James is a Kiva Fellow in Kampala, working with Kiva partners BRAC Uganda, MCDT SACCO, and Pearl Microfinance Limited.  To support their work in Uganda, consider making a loan to clients of these field partners today.

By Jenny Jin, KF11 Kenya

It's an exciting time to be in Nairobi, Kenya right now - especially for anyone who's interested in development.  This city is filled with passionate locals and expats who are working on social enterprises, green companies, and tech startups of all different perspectives and approaches to tackle big challenges.  I arrived in Nairobi six weeks ago after living in Silicon Valley for the past three years, and I found a city even more energetic about innovation than where I had come from.

What's great is that much of the work to address the most relevant issues in Kenya positively affects the microfinance sector. Below is a small sampling of the organizations that I want to share which are partnering with microfinance institutions or are developing products with the typical borrower in mind:

Solar products

Many solar-focused companies - ToughStuff, My Sunshine Box, to name a few - partner with MFI's to distribute their products as asset loans where clients can get the product and pay it off over a loan period.  It's great for borrowers who live in parts of Kenya that don't have power and have to rely on dangerous kerosene.  They can use these solar products to keep their shops running at night to earn more revenue, or center a business around recharging their community's cell phones.  Expect to see more of these loans on Kiva soon!

Mobile Information Technology: Google SMS Tips, FrontlineSMS:Credit

In rural East Africa, most people don't have access to the Internet, but most do have access to a mobile phone.  Google launched Google SMS Tips in Uganda where people can send a SMS message to Google to receive agricultural and health info to help their businesses.

Frontline SMS helps non-profits create a SMS communication system to collect information from the people they're reaching. You can imagine that this could potentially be applied to microfinance institutions in ways like repayment reminders or even collect repayments - which FrontlineSMS:Credit is working on.

Agricultural products

Agricultural products, such as the deep irrigation pump at Kickstart, are also looking to partner with microfinance organizations in the same way to distribute their pumps to rural farmers as asset loans.

Developing Grassroots Products: Fab Lab

Fab Lab is University of Nairobi's Fabrications Lab, providing affordable 2-week mechanical engineering classes to locals.  Fab Lab's philosophy is that Kenyans shouldn't be daunted by the barrier of a 4 year ME degree to create useful products if they have great ideas.  Fab Lab also teaches people how to create a business plan, the basics of operating a business, and connect them with volunteer lawyers and VC contacts to get their business underway.

Jenny is a K11 Fellow with KADET (Kenyan Agency for the Development of Enterprise and Technology).

by Elena Kuehn, KF11 Vietnam

“What a woman! How much energy! Wow…” thoughts that have crossed my mind several times during the last two weeks. I was visiting Fund for Poor Women (FPW) in the Thanh Hoa province and got to know the people working there and could meet many of the Kiva borrowers. It wasn’t easy to arrange these meetings as most FPW clients work in agriculture and leave their houses when the sun rises and work until late at night. They can however be encountered at home during lunch break when they try to escape the sun during the hottest time of the day.

“Thanh Hoa women are strong workers”, is a sentence that was often repeated to me. And seriously, I don’t doubt that. I met Mrs. Linh, who like many others is multitasking between several jobs and raises pigs, cultivates rice and has a food stand but also is the head of a large family with many children and grandchildren most of whom are still living in the family house. Also there was Mrs. Chin, who manages a bakery where she and her son produce 1’500 breads every night. After her husband deceased 15 years ago she first closed the bakery as she thought she could not handle it single handed. But with the help of a FPW credit and her younger son she found the courage to open it again she even managed to expand the bakery and employs two workers today.
“The credit gives the women confidence”, says Mrs. Xuong, the director of FPW. So it’s not only the direct financial support that enables the women to better care for their families but also the recognition of the important role they have. Interviewing the borrowers and entering there private spheres with a video camera I was afraid to be seen as an intruder in peoples life. But Mrs. Xuong sees that differently: “The fact that FPW and through Kiva even people from other countries care for them, that you even visit their house, makes them understand how important they are.”

Join the Thanh Hoa Lending Team!

By Eva Nemirovsky, KF11 Kyrgyzstan

Sometimes. But, maybe not for Kyrgyz microfinance borrower using the Kiva platform. Poor Kyrgyz people make sure to look good for pictures, so good, in fact, that one may misleadingly think: “these people don’t need a loan!”

One issue that Kiva often discusses is why some loans are funded faster than others. There are some patterns worth noting, most significantly, that in Central Asia loans take a lot longer to fund. Some have argued this is due to the loan amounts being much greater, however, thus far at Mol Bulak Finance all the borrowers have been part of a group and therefore the loans have not differed too greatly from others on the Kiva website.

My hypothesis is that poverty in post-Soviet Union countries is not easily understood by outside nations. Kyrgyzstan gained its independence less than two decades ago; it is a young State that had almost no political history before Russia fully took over operations around 1920. Similar to Kazakhstan, Kyrgyzstan was a mostly nomadic culture throughout its entire history. The Soviet Union abruptly changed all this and unnaturally imposed its political, economic, and cultural norm onto the Kyrgyz territory.

Not everything was negative; the Soviet Union vastly improved Kyrgyzstan’s living conditions. For one, the USSR was famous for its superior education system and efforts were taken to make all Kyrgyz citizens literate. Fortunately, Kyrgyzstan continues educating its people until the ninth grade. This explains the striking 98.7% literacy rate in the nation today. If one compares this figure with the 39.3% literacy rate in Senegal (another Kiva site), one is automatically inclined to associate this with poverty. It is remarkable to realize that in per capita GDP, Kyrgyzstan rates 184^th out of about 195 countries of the world. (Statistics from online CIA factbook)

With the collapse of the Soviet Union, Kyrgyzstan lost its vast market and the period effectively drained the country from much of its natural resources. Ultimately, Russia was centerfold and “if the strengthening of the centre required it, a policy of plunder in the borderlands would be proper and correct.” (Sources taken from Kyrgyz Republic by Stewart and Weldon).

Today, Kyrgyzstan has little developed industry. After a seventy-year Soviet rule, innovation is not accessible, business enterprise is difficult. The people living below the poverty line (which account for 40 percent of the country), have a minute variety of jobs to choose from: mainly trading and farming. Working in agriculture is difficult mostly because, if they wish to stay afloat, farmers must learn multiple trades. For example, if a borrower buys a cow with her loan, she cannot dedicate all her time to the livestock because her income would be insufficient—I learned that to raise a cow and use it for mating or meat purposes takes about three years. This borrower also has to: have a daycare, grow potatoes, and be a taxi-driver.

Two weeks ago, the instant I arrived to visit a borrower in Balykchi, he started to negotiate fish prices with the microfinance institute’s driver. I was there to verify that his loan was being used to buy a calf, but I was obligated to wait ten minutes for him to conclude his deal with the driver. Since this borrower’s activities did not make enough money for his household, he had become a part-time fisher.

This form of poverty is something I never had to study in school. When I first saw the Kyrgyz Kiva loans my initial reaction was to think that these borrowers did not need microfinance, but now, having seen it face-to-face, I have learned otherwise.

Pictures can also be deceiving, especially in the former Soviet Union where the legacy of controlled life lives on. To take a picture, or merely to go out of the house, citizens dress up; the possibility of public scorn is just too great.

Eva Nemirovsky is a Kiva Fellow working with Mol Bulak Finance in Bishkek, Kyrgyzstan. Join the Kyrgyzstan lending team. There are borrowers from Kyrgyzstan with Mol Bulak Finance who you can help by contributing to a loan today, and many other entrepreneurs from around the world on the Kiva site.

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Las fotos realmente valen mil palabras?

Por Eva Nemirovsky, KF11 Kirguistán

A veces sí. Pero quizás no para los prestamistas Kirguiz de microfinanzas que usan la plataforma de Kiva. Los pobres de Kirguistán siempre se aseguran de salir bien en las fotos, tan bien, de hecho, que uno equivocadamente podría llegar a pensar: “esta gente no necesita un préstamo”!

Un tema que se discute bastante en Kiva es porque algunos prestamistas son financiados más rápido que otros. Hay algunos patrones interesantes, específicamente que los préstamos en Asia Central tardan mucho más en ser financiados. Algunos argumentan que esto es porque las cantidades de los préstamos son más altas, pero hasta ahora he visto que en Mol Bulak Finance los prestamistas forman parte de grupos y el total de los préstamos no excede la cantidad de otros préstamos ofrecidos en el sitio Kiva.

Mi hipótesis es que la pobreza en países post-soviéticos no es fácilmente comprendida por naciones extranjeras. Kirguistán se independizo hace menos de dos décadas; es un país nuevo que antes de 1920, no tuvo amplia historia política. Como Kazakstán, Kirguistán siempre fue de una cultura nómada. La Unión Soviética cambio todo este esquema y agresivamente impuso nuevas normas políticas, económicas, y culturales.

No todo fue negativo; la Unión Soviética mejoro la calidad de  vida en Kirguistán. La imposición de su sistema superior de educación, es un buen ejemplo. Los rusos se esforzaron para que toda la gente en Kirguistan pudiera ser alfabetizada. Por suerte, hoy Kirguistan sigue ofreciendo educacion publica a sus ciudadanes hasta noveno grado. Esto explica el alfabetismo excelente del 98.7%. Si uno compara esta figura con el  39.3% de Senegal (otra ubicación de Kiva) automáticamente, uno lo conecta con pobreza. Aqui es importante notar que el Producto per Capita PPP en Kirguistan es clasificado como numero 184 de 195 paises! (Estadisticas del CIA Factbook en internet).

Con el colapso de la Union Sovietica, Kirguizstan perdio su mercado enorme y al mismo tiempo empezo a sentir los resultados negativos de los anos de ocupacion en sus recursos naturales. Al final, el territorio ruso era lo más importante en la época soviética, “si para fortalecer el centro se precisaba, la política del pillaje en las aéreas bordeando Rusia no sería problema y seria la acción correcta”. (Fuentes tomadas de Kyrgyz Republic por Stewart y Weldon).

Hoy, Kirguistán tiene poca industria desarrollada. Después 70 años de ser administrada por una política soviética, la innovación no es accesible, emprendimiento es difícil. Las personas que viven bajo la linea de pobreza (40% del país) tienen una variedad muy limitada de trabajos: mayoritariamente comercio y actividades agropecuarias. Trabajando en agricultura es difícil porque para sobrevivir los granjeros tienen que aprender múltiples comercios. Por ejemplo, si un prestamista compra una vaca con su préstamo, ella no puede decidirse todo su tiempo al animal porque su salario no sería suficiente—aprendí que criar una vaca para que tenga crias o para comer lleva tres años. Este prestamista también debe: proveer un servicio para cuidar niños, crecer papas, y ser taxista.

Hace dos semanas, cuando llegue a la casa de un prestamista en Balykchi, empezó a negociar precios de pescado con el chofer del instituto de microfinanza. Yo estaba visitando para verificar que el préstamo se estaba usando para comprar una vaca, pero fui obligada a esperar 10 minutos para que el prestamista y el chofer terminen su negociación. Este prestamista no ganaba lo suficiente con sus actividades agrícolas y fue obligado a hacerse un pescador part-time.

Este tipo de pobreza es algo que nunca estudie en la escuela. La primera vez que vi los prestamistas de Kirguistán en el sitio de Kiva pensé que los prestamistas no precisaban la microfinanza, pero ahora, después de haberlo visto con mis propios ojos, aprendí que no es así.

Las fotos pueden enganar. Especialmente en países post soviéticos donde el recuerdo de una vida bien controlada sigue viva. Para sacarse una foto, o simplemente para salir a la calle, los ciudadanos se visten bien; la posibilidad de ser mal vistos por el público es demasiado dañina.

Eva Nemirovsky es un Kiva Fellow trabajando con Mol Bulak Finance en Bishkek, Kirguistán. Únete al Kyrgyzstan lending team. Hay prestamistas de Kirguistán que están con Mol Bulak Finance a quienes tú puedes ayudar contribuyendo a un préstamo hoy.

 By Aurelie Dagneaux, KF11, Ecuador

by Teresa Dunbar, KF5, Cambodia and Philippines

It was the summer of 2008.  As I sat and watched the stock markets crash around the world from my Cambodian apartment, I could not help but get nervous about my job prospects post fellowship. At that point, I felt like I'd made a mistake by leaving a great job in philanthropy to follow my heart by becoming a Kiva Fellow to learn how microfinance works on the ground. I remember when I told my family of my decision, they thought I was crazy.  I was beginning to think they might be right. Watching US financial pillars crash and stock markets tumble each day, I worried and seriously asked myself, “What am I going to do once my time as a Kiva Fellow is done?”

Fast forward a year, and three Kiva Fellowship placements later: it’s the summer of 2009 and I sit in my apartment in San Francisco looking up jobs on the internet. I am a natural optimist, but nothing looks right for me. As a woman in her early-30s, I either have too much experience or too little, and my resume clearly shows I am neither an Administrative Assistant nor Executive Director. With unemployment rising and my options limited, it looks like I will need to make my own way.

I searched my soul for what made me happy, what I am good at, and what could make me some money. Inspired by the hundreds of Kiva loan recipients in Cambodia and the Philippines I had interviewed, I decided to start my own food cart and became the newest member of the San Francisco food cart scene. Yup, I started Asian Street Sweets (@asian_st_sweets), and cooked up some of my favorite Cambodian and Filipino street desserts. I would set-up at events or heavily trafficked street corners in the Mission.  My desserts usually included combinations of coconut sticky rice with fruit steamed in banana leaves, maybe some toasted sesame seeds, tapioca balls, or red beans. Many passers-by were curious, and all were pleasantly surprised once they tried it.

During my food cart adventures, I came to realize that I loved cooking as a hobby and not as a career. And, while I steamed my “nom som cheak” (Cambodian New Year's Day treat), I searched for other career opportunities.

Trolling through job website after job website, I finally came upon a job opening with Oikocredit USA (www.oikocreditusa.org). Established in 1975, Oikocredit is a non-profit organization that provides loan capital to fair trade businesses, co-operatives, microfinance institutions, and small and medium sized businesses in developing countries. They are able to do this because socially minded individuals invest as little as $20 and chose to make a modest 0-2% interest return on their investment, but more importantly positive social and environmental impact. Investing in fair trade cooperatives, development projects, sound environmental practices, and having conducted social impact studies for the past three years, I knew I had found the job I wanted.

I applied and during the interview process, the Executive Director Mr. Terry Provance stated, “I am impressed to see that you were a Kiva Fellow. Tell me about your experience and what you think about microfinance.” I explained my work with CREDIT MFI and ASKI MFI, and emphasized that I was not interested in working for just any financier of microcredit, I wanted to work for Oikocredit, a company that cared about its clients, the environment, and community development. Through my work as a Kiva Fellow, I explained my thoughts on what unhealthy microfinance looks like, and expressed that I was not interested in that kind of work.

A week later, I received a phone call asking if I wanted the job, and of course, I said, “Yes!” I am now the San Francisco Outreach Coordinator for Oikocredit helping individuals change the world through small socially responsible investments. It is challenging work as I search for new investors, but work I am prepared for thanks to my Kiva Fellowship.

To find out more about how you could have the life-changing experience of being Kiva Fellow, see http://www.kiva.org/fellows.  To learn more about socially responsible investment opportunities through Oikocredit, visit  www.oikocreditusa.org

By Iyanna M. Holmes, KF11, Liberia

When I began working my first office job in 1999 as a college intern, I immediately took note of how central of a role technology plays in the business world.   I have often asked myself, “What did people do before the internet, fax machines, and God Help Us….EMAIL.”  I imagined my mom at her first office job having to walk documents from the first floor to co-workers on the fifth floor or waiting days for a document that someone in the Atlanta office had mailed to her in Boston.  Then I’d roll my eyes at how tedious a process that must have been and give thanks that I was born into a time where a few clicks and an email attachment keep me from having to walk anywhere other than the food court or the ladies’ room.

But even in my wildest “imagine what it would be like” scenarios, never in a million years did I stop to ask myself, “How did people conduct modern day business before paved roads, a reliable postal service, unlimited phone plans, reliable electricity, etc.?”  Well here in Liberia, the questions are not hypothetical.

As a new Kiva Fellow working with the Local Enterprise Assistance Program (LEAP) in Monrovia, Liberia, my task, in a nutshell, is to have LEAP’s Kiva operations running like a well oiled machine by the time I leave.  The casual observer, which included me before this fellowship, could never begin to imagine the amount of work that goes into every loan listing, every journal update, and the process of collecting and reporting loan repayments.  And as someone who prides herself on finding the most efficient solution to any problem (work smarter, not harder), I was up to the challenge of helping to shape LEAP’s Kiva operations.  But after only two weeks in the office, at times I find myself overwhelmed by the restrictions that LEAP must work within.

Are we not receiving the borrower stories that get posted to the website in a timely fashion?  Great, have the loan officers email them in as they are collected?  What's that?  Many of the branches do not have internet access?  Well in that case, just mail them in from the other branches instead of relying on loan officers to hand deliver them.  What’s that?  It’s the rainy season?  The unpaved roads are muddy and hard to travel?  The postal service will likely still not meet the deadline?

Is it difficult for the loan officers to get back out to see the borrowers in order to get updates at the end of the loan?  Well why don’t we just call those borrowers from the head office and get those updates ourselves?  What’s that?  We don’t have any money to pay for extra pre-paid minutes for cell phones? (FYI, there is no office phone.  Each employee uses their own personal cell phone.  I haven’t seen a land line since I’ve been in Liberia.  I’m told that they were once widespread, but like so much of the infrastructure, were destroyed in the war).

And the list goes on and on… At times there are more employees in the office than there are working computers.  There are not enough digital cameras for every loan officer to carry one with them in order to provide photos along with the loan updates to lenders as Kiva would like.  An office car may not always be available so that LEAP’s Kiva staff can assist the branches with loan disbursals.  Inefficiencies at Liberia’s few banks lead to a delay in cash being delivered to LEAP (several huge burlap bags full of cash... not the most efficient way of making payments), which causes loan disbursal meetings to last four, five, sometimes even six hours - taking LEAP's borrowers away from the businesses that feed their families.  Electricity is fairly constant, though sometimes we have to switch to the diesel fueled generator when power from the Liberian Electricity Corporation (which is not widely available to begin with) fails.  The internet connection can be painfully slow.  I cannot tell you how many times I have asked a co-worker, who is sitting next to me, to email me a document, just to get a very confused look in response.  Now who’s the inefficient one?

Much has been written in the media in general, and on this blog in particular, about “high” microfinance interest rates, the operating environment that microfinance institutions (MFIs) must navigate, and how this makes operating costs much higher than they would be in the developed world.  As I sit in my apartment waiting for the electricity (read: air conditioner) to come on at the regularly scheduled time of 7pm, I have a newfound appreciation for the work, creativity, and ingenuity of LEAP’s staff and all of Kiva’s field partners who somehow always find a way to get the job done despite the myriad of resource and infrastructure constraints that they face in almost every aspect of their job.  I have a lot to learn, indeed.

Iyanna Holmes is a Kiva Fellow working with Local Enterprise Assistance Program (LEAP) in Monrovia, Liberia.  Join the LEAP Lending Team.  There are borrowers from Liberia with LEAP, and many other entrepreneurs from around the world, who you can help by making a loan on the Kiva site.

By Jeremy Gordon, KF11, Kenya

Kiva's success is exciting.  A door is now open allowing us to reach those living in places we can’t easily visit in person and to become personally involved in micro-finance.  Making my first loan on Kiva felt a bit like a rediscovery of the internet. International Skype conversations were impressive, but this was something novel—Kiva allowed me to lend my own resources to help achieve someone else’s goal, and I was hooked.

Because this sort of P2P lending is still new, we can't yet know the full extent of its impact on the microfinance ecosystem; even less can we predict the role it will play five or 20 years into the future.  I think it’s important to start a conversation, and to consider what influence we, as lenders, may have.

In some ways, the Kiva lending model is a free market susceptible to the same influences of supply and demand as any other. Perhaps certain loans (maybe agricultural loans to rural farmers) are consistently chosen by lenders more often than others (say, maintenance loans to urban taxi drivers). If loans of the latter type take significantly longer to fund on Kiva's website or are more likely to expire before they’re completed, a flexible market will adapt, and a Kiva partner may choose to post other loans that tend to fund more quickly or reliably.

I don't have the research to describe what, if any, bias Kiva lenders exhibit in selecting their loans, but there’s little reason to believe our choices are random. Transparency, after all, and the ability to choose which individual borrower we contribute our loans to are both central to Kiva's model.

Currently, it seems unlikley that the preference of lenders will influence the selection of loan recipients by Kiva’s partners.   Because of a policy that limits Kiva’s contribution to 30% of an MFI's funding, partners are free to simply rotate the selection of their portfolio posted to the website if they find that some of their loans fund better than others. That said, imagine a not so distant future where P2P lending is well-established and popular, and some MFI’s rely on several such sources to fund the majority of their portfolio (even today, some MFIs receive funding from both Kiva and a similar platform, MicroPlace). Under limited resources, when such an MFI considers its next batch of loan applicants, might it not consider the data collected from its past experience showing that certain loans are are more popular than others? Might they not feel some pressure to reject Halima’s loan for a juice freezer (or Ali's more controversial charcoal loan), for fear it will not fund through Kiva and their other P2P funding sources? Might western-world fads or biases translate into shifts in the availability of loans in certain industries, or to specific demographics? Is it possible, at some point, that entrepreneurs may be compelled (or even encouraged) to transition into a business more popular to western lenders?

I fully believe organizations like Kiva have a great opportunity to bring interest, energy, and capital to the microfinance industry, but I think some of these questions warrant dialogue. How much influence, as lenders, should we have?

Jeremy is a Kiva Fellow working with Juhudi Kilimo in Nairobi, and Yehu Microfinance in Mombasa. He recently discovered the subtle difference between two Kenyan staples: mandazi and mahambri.

By Brian Kelly, KF10, Sri Lanka