Inflammation and stories on Microfinance

Gender Based Inequality in Nepal
As more Nepalese men leave their homeland in search of employment, the women—especially in rural areas—have begun to take a larger role in society. Even with these new-found responsibilities, the women of Nepal remain trapped in the cycle of poverty and gender-based inequality that has plagued the country for generations. In Nepal, a woman can run a farm yet have no access to the profits the land yields.

Nepal’s economy relies largely on foreign aid, and despite the tremendous progress since the 1990s, 40 percent of the population continues to live below the poverty line. That number declined by 11 percent overall since the mid-90’s, but this still leaves one third of all Nepalese children living under such conditions.

Unemployment leads thousands of Nepalese to migrate to neighboring India in search of a way to provide for their families. Unfortunately, the open border allowing this migration also renders human trafficking, for both sexual and hard-labor purposes, much easier. The trafficking of an estimated 200,000 Nepalese women has filled brothels across India. Someone known to the family often tricks the victims with the promise of a well-paying job. In other cases, women are simply kidnapped and smuggled across the Nepalese border into India. Low-paid border police are easily bribed—an issue activist groups currently target with practical training for the police regarding how to spot a victim of trafficking.

Abuse also follows women who migrate willingly to countries like Lebanon. Under the Kafala system, one employer receives the work permits, meaning women who dare leave an abusive employer risk deportation. Because legal employment pays little, if any, wages, many Nepalese migrants turn to the illegal informal sector. The Nepalese government has reacted with heavy restrictions on women’s travel and migration to the country.

Evidence suggests that the expansion of women’s rights can relieve a country from poverty sooner. Yet, historically, gender inequality has been ingrained in Nepalese society. Chhaupadi, the practice of forcing a women in menstruation or having recently given birth to live apart from the family until the bleeding ends, is still practiced throughout the western and central regions of Nepal. Within the Nepalese family unit, women cannot live individually, which incapacitates victims of domestic abuse who might otherwise leave. Few women report abuse or trafficking to police.

The future of the Nepalese women requires addressing the two main factors of her suffering: economic and gender-based inequality. Microloans offered to rural women proves to be one method to fight the temptation of falsely-alluring jobs abroad. Survivors of trafficking have also received such loans. In 2007, the Nepalese government enacted the Human Trafficking and Transportation Act, but without proper implementation, the Act fails to serve its purpose. The issue demands further international attention, and increased financial independence for women in Nepal.

– Erica Lignell

Sources: The Economist, Unicef, BBC News, FORBES, The Guardian, AlJazeera, The New York Times, The New York Times(2)
Photo: Google Images

Brazil has created an anti-poverty program, Bolsa Familia “Family Grant,” which gives cash money to mostly women. Since its implementation in 2003, around 11 million families, a quarter of Brazil’s population, have joined the Bolsa Familia program. This program is the largest of its kind and is based on a conditional cash transfer.

If a family earns less than 120 reais ($68) per family member each month, the mothers are given debit cards and up to 95 reais ($35 to $70) each month by the federal government. As part of the program, their children are required to attend school and receive vaccinations. If a family does not meet these conditions, their payments are suspended after several warnings.

Similarly, microfinance programs in Brazil give women loans to empower them and alleviate poverty. Although evidence from several studies supports the idea that microfinance empowers women, these microfinance programs have not succeeded due to their reinforcement of “informality of labor and the creation and persistence of gendered discourse that places greater burden on women.” The microfinance loans, despite the programs’ positive intentions, may place women under greater stress. Instead of pursuing activities that may benefit themselves and their families, these women can become trapped by the programs, and become less independent as a result.

The microfinance programs give loans and credit to primarily women because they believe that females are more reliable than men, and that they will use the money on food, education and family; women will not squander the money on alcohol, drugs and gambling.

However, are women truly more reliable than men? Although researchers argue that women repay loans faster and save more money than men do, this may be due to popular perceptions of the female gender. Women are believed to be more honest, sensitive, caring and nurturing due to their gender and traditional female roles of childrearing and domestic chores.

There are two main concerns about the program. First, corruption and fraud could prevent beneficiaries from receiving 100% of the money. Local officials could also report inaccurate information on eligibility to receive kickbacks. Second, these programs are meant to be a “temporary boost” to aid the poorest families in Brazil. Critics worry that it could turn into a permanent program upon which many families will remain dependent.

While the microfinance programs have failed, Bolsa Familia has seen early success. The program has reduced income inequality across the country, encouraged the growth of small businesses and increased the rate of economic growth. The cash money allows women to be more financially independent from their husbands and to have a larger decision making role in the household. After 10 years of the Bolsa Familia program, researchers have found that the program is empowering women and changing traditional gender roles in Brazil.

– Sarah Yan

Sources: Deseret News National, Economist, Prospect Journal
Photo: Keck Journal

Grameen Bank Loans
Ever heard of Whole Foods, Ben & Jerry’s or Starbucks? These fortune 500 companies all started out of generous individals’ belief in the store founders. This belief manifested in the form of financial investment and loans given to the companies that Americans know and love today.

The American dream promotes the idea that anyone, no matter the circumstance, can achieve success. Although there are many rags to riches stories built on hard work alone, Kiva International founder Jessica Jackley shared, “85% or more of funding for small businesses comes from friends and family.” One of the best gifts in life is to be recognized, valued and believed in by someone. Jackley holds this belief as her approach to eradicating global poverty and creating lasting change. Change, according to Jackley, happens not when we give to relieve our own suffering but when we give out of a “genuine hope in change.”

By providing small loans to farmers, seamstresses and goat herders abroad, among others, Kiva creates relationships between lenders and borrowers that promote respect and maintain dignity.

On the Kiva website there are stories featuring young entrepreneurs like Virginia in the Philippines who needs money to help buy fertilizer and insecticide for her rice production. Lenders can give one time loans in the amount of $25 to help borrowers like Virginia reach their goals.

Think of success stories like Bill Gates and Steve Jobs. If no one had ever believed in or invested in those men we would have a very different world today.

Africa is host to millions of men and women that, if believed in and invested in have potential to better the world as well. Now, their requests are simple, such as buying another goat to make money to pay for their child’s education. That child, however, is another story to be believed in.

2006 Nobel Peace Prize winner, Dr. Muhammad Yunus is known for his pioneering of microfinance, or “financial services to low-income individuals or those who do not have access to typical banking services.” Yunus started what is known today as microfinance by lending money to poor women in Bangladesh in the 1970s.

Eventually, Yunus opened his first bank for the poor, Grameen Bank, meaning “rural,” or “village” in the Bangla language in 1983. The Grameen Bank is built on a structure that drastically opposes conventional bank norms. Yunus’ bank is majority owned by low-income women with no collateral or legal instrument. Rural borrowers own 90 percent of the banks shares whereas government owns only 10 percent.

With organizations and efforts like Kiva International and Grameen Bank, about 160 million people in developing countries are served through microfinance. (

– Heather Klosterman

Sources: Business Pundit, Kiva
Photo: WordPress

Interested in empowering the poor? Look no further than Kiva, a San Francisco based nonprofit that has provided over $542,899,850 in small loans to poor entrepreneurs around the world. Founded in 2004, Kiva makes it easy for individuals to lend as little as $25 to provide affordable capital to beneficiaries and help them start or improve a small business.

This practice of lending is known as microfinancing, and Kiva operates under the idea that poor individuals are able to lift themselves from poverty if given access to the proper financial services, such as access to loans and savings accounts.

Kiva keeps things personal and helps prevent the dehumanization of the poor by connecting the lender and the borrower directly. Using a person-to-person setup, Kiva allows potential lenders to browse the stories, pictures and loan proposals of beneficiaries before choosing an individual to lend to.

Kiva loans have a 0% interest rate and 100% of each loan goes directly to the borrower. Kiva does not take a cut, rather, their business operations are funded through donations from various grants, corporate sponsors and foundations.

The lending process begins with the selection of Field Partners in the 73 countries where Kiva works. These partners consist of social businesses, schools, microfinance organizations or other nonprofits that are committed to using credit to empower the poor.

Kiva Field Partners identify borrowers, administer loans and send pictures as well as stories of the borrowers to a team of volunteers that translate the stories and publish them to Lenders then browse these stories and are able lend anywhere from $25 to the full price of the loan to the borrower they select.

As the borrowers repay their loans, Kiva provides repayments to lenders. Kiva boasts an impressive 98.93% repayment rate over 1.2 million funded borrowers. Once loans are repaid, individuals can re-lend their money to another borrower – and another, and another.

Traditionally, credit is often available to the poor through informal or erratic means. However, in many cases, these informal moneylenders charge such high interest rates that business owners are left with little working capital.

Kiva’s work allows the poor to attain affordable credit, which opens the door to economic opportunity. Studies by the Consultative Group to Assist the Poor (CGAP) show that borrowing money helps households manage cash flow and regulate consumption as well as deal with everyday crises that may arise. Tangible impacts seen include households making greater investments in the education of their children, better nutrition and living conditions, and an increase in healthcare services when needed by members of the household.

In summary, using the resources provided by lenders via Kiva allows poor households, “to make the transformation from ‘every-day survival’ to ‘planning for the future.’”

– Madisson Barnett

Sources: Monica Brand: Stanford, CGAP, Kiva
Photo: Kiva

En Vía, meaning “On The Path” in Spanish, is a very unique organization geared at empowering women to lead successful lives and create small businesses in the Oaxaca valley of Mexico. The owner of En Vía, Carlos Topete, founded the group when he heard about Muhammad Yunus, the Nobel Peace Prize winner in 2006. Yunus was the creator of the microloan idea, which makes it possible for people with little money to receive loans without interest.

From there, Topete’s organization blossomed. In 2008 he used his own money to form En Vía and was able to help 12 women living in poverty receive microloans; by 2011 Topete was able to reach out and help 260 other women from multiple areas of Oaxaca.

For many women, Topete’s strategy and way of running his organization are a blessing.

Guadalupe Lazo Hernandez is just one of the women En Vía has helped to get back on her feet. After her husband passed away she was struggling to stay afloat and feed her three sons with her weaving. She has received three microloans from En Vía so far, and her goal is to save up for a sewing machine so that her work is quicker, less costly and more efficient. She explains that the help from En Vía has far surpassed her expectations of just running her business, but instead she has been able to feed her children, supply them with school supplies and make their dreams possible along with hers.

Unlike other non-profits, En Vía does not just simply aim to supply women with money, clothing or food, but rather it allows them the chance to sell their products to Oaxaca travelers, gain an education and gain an understanding of how to expand their small businesses.

By charging a tour fee, Topete is able to generate more money for loans and give tourists the chance to see the advancement the women in the Oaxaca valley are making. The tourists are able to get first-hand encounters with the women and speak to them about their journeys. The tours also give visitors the opportunity to buy products to aid in the positive progression of the new lives of the En Vía women.

Topete wishes to extend and improve the entire community of Oaxaca. By involving tourists, connecting the different women involved in En Vía, and reaching out to other communities, he is laying down the foundation for a sustainable economy and giving the women resources for succeeding.

Oaxaca is a state dense with culture, history and traditions. With the help and push from En Vía, the women will be able to keep their cultures thriving by passing on what they have learned to their other family members and children. En Vía also allows the concept of micro-lending to expand outside of the Oaxaca community and reach other areas of the globe.

You can read more about Guadalupe’s experience and other women’s experiences on the En Vía blog, or watch a video from CNN of Guadalupe’s story.

– Becka Felcon

Sources: CNN, Wikispaces, En Vía, En Vía
Photo: Xica Cano

Bernard McGraw survived the catastrophe of Hurricane Katrina in the summer of 2005. Without a job, McGraw moved his family—his wife and six children—to San Antonio, Texas. 

Upon arrival, McGraw opened Bernard’s Creole Kitchen in an abandoned shack. Hoping to improve his restaurant, McGraw received business counseling and two micro-loans from Accion’s local office. The first micro-loan was used to relocate his business to a local college campus. The second micro-loan was used to buy equipment and compete for a city contract to operate his business at Stinson Municipal Airport. McGraw states “If we hadn’t had the support of Accion, I don’t know if we would be here today.”

Many families similar to the McGraws fall victim to poverty worldwide. According to PBS, 1.3 billion people worldwide live in absolute poverty—living on less than $1 per day. Approximately 70 percent of those in absolute poverty are women. According to UNICEF, 22,000 children die daily due to poverty.

Something has to be done.

Accion has been fighting global poverty since 1961 by giving micro-loans—small, short-term loans—to individuals and communities in need. The recipients of these loans typically do not qualify for traditional bank financing.  These people frequently live in underserved, remote, developing places. According to Accion, the average amount of a micro-loan is $998. Micro-financing brings financial services to the poor and marginalized. Accion clients include market vendors, sandal makers, artisans, and seamstresses.

Accion was founded by a University of California-Berkeley law student, Joseph Blatchford who began questioning how young Americans might be able to serve those in need globally while on vacation in Latin America.

What started as a group of student volunteers helping local residents improve their communities developed into a company providing financial assistance through micro-financing. From 1973 to 1977, Accion has provided 885 loans that have created 1,386 jobs. Realizing their success, Accion helped create BancoSol, the first commercial bank solely dedicated to micro-financing. Accion expanded to Africa, Asia, South America and North America.

Besides micro-financing, Accion offers client education and industry training. Also, Accion’s philanthropic business model reaches further by creating new micro-financing lenders. By educating clients on financial literacy, technical understanding, management skills and business logistics, borrowers receive more than dollars; they receive power to escape poverty.

Accion’s multi-faceted attack on poverty has granted more than $56.8 billion in loans. Additional successes include the following: 63 micro-finance institutions in 32 countries, 15.8 million people served, 97% loan repayment and 2.3 million active savers with $3.4 billion in savings deposits.

Eliminating poverty is a complex task. However, the commitment, diligence, and expansion of Accion have benefited millions of underserved, excluded, and impoverished human beings. That deserves acknowledgement from us all.

Leonard Wilson, Jr. 

Sources: PBS, NY Times, Global Issues
Photo: Blogspot

The number of Uruguayan citizens living below the poverty line of less than $1.25 a day has halved since 1990. This drastic reduction in poverty in Uruguay means the South American country has successfully achieved the first of the United Nations Millennium Development Goals.

In 2012, the rate of poverty in Uruguay, defined as those earning less than $1.25 a day, decreased to 12.4 percent of the overall population. Uruguay’s Minister of Social Development, Daniel Olesker, points to labor and health reforms to explain these achievements.

Ever since the 2002 economic collapse of its neighbor, Argentina, Uruguay has slowly struggled its way out of indigence. In 2004, the poverty rate hit a high of 39.9 percent and has steadily decreased since due to efforts on behalf of the government to provide more funds for social inclusion programs.

In early 2005, the then-President of Uruguay, Dr. Tabaré Vasquez, revealed a two-year Emergency Social Program to aid the most vulnerable members of Uruguayan society. The program addressed pressing issues such as food, shelter, health, work and education for the most destitute in Uruguay.

Other programs aimed at reducing poverty in Uruguay include a family allowance program wherein “vulnerable” families are given a subsidy of around 700 pesos per month, a sum equal to about $31. Families in more extreme conditions may receive up to double that amount.

As a result of these reforms, the number of homeless people living in Uruguay fell to .5 percent of the population. Despite the success of these public policies, it continues to elude the segment of the population in the lowest rung of the income distribution.

The current President of Uruguay, José Mujica, is known as a champion of the poor and sets an example for citizens of Uruguay by living modestly. He donates 90 percent of his income as president to charities working on housing for the poor and lives on a small farm outside Montevideo instead of the presidential palace.

Jeff Meyer

Sources: Presidencia, The Guardian, El Mundo, Xinhuanet, La Republica
Photo: IPS

One of India’s leading do-good organizations is ASOMI, a micro-finance institution focused on transforming the lives of thousands of individuals.  ASOMI provides credit services to those in need of loans to improve their small businesses. Their focus on the disadvantaged section has paved the way for new opportunities for those in need by changing the attitudes of several impoverished communities. Moreover, ASOMI believes that micro-finance is the solution to current socio-political issues.

Some of the loans currently being offered range from individual loans to dairy and agricultural transportation loans, which have helped several families in both rural and urban areas of Assam. The rate of interest for most of these loans is 10%, requiring an initial deposit of 10% of the loan amount. These terms are feasible for many and as of today, ASOMI has made 17,503 loans, covering 26,456 families financially. Urban microcredits are also offered for small shopkeepers with daily payback collections instead of the larger monthly payments.

In these ways, ASOMI’s Microcredit Program has enabled several businesses to reach success, evident in the brand Sorbhog Marka Noodles. When a group of women hoped to manufacture noodles in Sorbhog they needed loans which ASOMI provided. They not only received money for their start-up but were also taught the rules and regulations for manufacturing in the Sorbhog area.

Aside from offering loans, ASOMI also provides a certificate course in management development for each of their existing employees and new loan applicants. This course allows individuals to develop a range of skills including credit management, record keeping and corporate governance. Sorbhog Marka Noodles is, however, just one success story among thousands. By combining loan opportunities with business mentoring, both men and women are able to become micro-entrepreneurs.

ASOMI currently has over 53 branches, an amazing feat considering the organization only began 9 years ago. The organization has support from private Indian finance institutions and government organizations including the Central Bank of India and State Bank of India. This accredited organization hopes to foster sustainable employment opportunities and with over 200 employees working hard on this mission, there is no doubt that it will continue to have tremendous impact for those in Assam.

–  Maybelline Martez

Sources: ASOMI

InSight: Generating Micro-Business Financial Identity
A common obstacle for any business owner, regardless of which country they live and work in, is access to credit.

The twenty-first century has brought with it increasing dependence on loans and financial institutions for basic individual purchasing power – let alone entrepreneurial success.

An emergent non-profit organization has taken advantage of cell phones – a technology available to a growing percentage of the global population- to create wide spread access to these vital financial services.

For micro-business owners in the less developed world, there is an abundance of informal transactions and very little access to financial identity. Providing financial identity is something Shivani Siroya, a 2013 TED fellow, CEO and founder of InVenture, describes as the most important objective of her latest venture.

According to InVenture, 400 million people lack access to financial services due to insufficient credit scores, which means that they do not have a clear idea of how much they earn, spend or need to save. In other words? They lack financial identity.

Without financial identity it is not only challenging to manage a business, it is almost impossible to secure loans and credit lines needed to grow a business.

Siroya invented InSight, an accounting tool that enables individuals and small-business owners in the less developed world to keep track of their finances and build a financial identity for themselves. InSight is operated through SMS and compatible with any cell phone, it allows individuals to input their daily earnings and expenses, and utilize financial tracking tools. This process provides proof of growing businesses and the data collected is made available to financial institutions; making connections between those in need and those able to provide large-scale loans.

Siroya was inspired to connect micro-business owners to the credit market by creating a cell phone operated credit scoring service due to the misconception that divided the two worlds.

According to Siroya’s research, financial institutions largely disregard micro-business owners as potential credit recipients due to their “untrustworthiness,” a judgment passed based on the amount of their transactions comprised of cash, which is inevitable without access to financial institutions.

Siroya wants to change this perception and decrease the percentage of micro-businesses that currently operate under considerable credit constraints, which is currently an estimated 85 percent.

This is a dream that is being realized. As micro-business owners in the less developed world start to utilize InSight, their “buckets of receipts” are replaced with income statements on their cell phones.

Perhaps the biggest impact of all, has been for some InSight users who have reported doubling their savings for the first time.

Zoë Dean

Sources: TED Blog, InVenture
Photo: Vintage 3D

“Buy a Belt–Feed a Family.”  That is the motto of Mission Belt, a company whose co-founder appeared on the critically acclaimed show Shark Tank and scored a deal with fashion mogul Daymond John.

With the simple idea of designing a belt with no holes, emerged a company designed to fight global hunger and poverty. The strategy? Micro-lending.

The company was named Mission Belt because it had one mission–to help people break out of the cycle of poverty.  The company policy is to donate 100 percent of one dollar from every Mission Belt sold. According to company statistics, the dollar they donate often represents 20 percent or more of their profit. They work with a “non-profit, peer-to-peer ‘micro-lending’ organization” called Kiva, which distributes money in the form of $25 micro loans to people in the developing world.

One dollar goes a long way in this case, because when the borrowers repay their loans, those funds can be lent out over and over.

So far, Mission Belt Co. has made 1,492 individual loans, with the majority going to the agricultural sector.  According to the Creative Director of the company, they chose the agricultural sector (primarily targeted towards helping women) so that they can directly help people feed themselves and their families.

“We like to think of it as corporate responsibility to give something back. We feel strongly about the work we do, and the contributions to this micro-loans have meant the world to so many people around the world.”

Nate Holzapfel, co-founder of Mission Belt Co., is a regular contributor to the Huffington Post online and recently wrote an article about his thoughts on the secret to life. He says that helping others is what has been the secret to his success personally, financially and emotionally. “Realization of ourselves and our humanity is the key to empathy, which is essential if you want to truly be happy.”

It is not uncommon to see U.S. companies engaging in corporate giving on a large scale. In a 2011 survey carried out by The Chronicle of Philanthropy magazine, data revealed that in 2010, total cash donations by 180 of the nation’s largest companies were $4.9 billion.

Among the top companies listed was the supermarket Kroger, which created a loyalty program where 2-5 percent of a shopper’s bill would be donated to a community group of the shopper’s choice. Wal-Mart Stores also topped the list, with an announcement of a $2 billion five-year strategy to fight hunger.

Goldman Sachs was also recognized, despite criticism remaining surrounding its generosity in light of the liquidity crisis. It was among the companies who donated the most cash in 2010, and is also known for a project called “10,000 Women,” a five-year investment which provides female entrepreneurs in the developing world with a business and management education.

– Rifk Ebeid

Sources: Sharktanksuccess, Mission Belt, Huffington Post, Forbes, Goldmansachs
Photo: Twisted Sifter