Inflammation and stories on Microfinance

$27 Sparked a Global Development PhenomenonA global development phenomenon that has changed the nature of poverty started with only $27 in Bangladesh.  $27 was the amount of a loan awarded to a group of village women struggling to start a small business. With that small loan, the women were able to start their business, pay back the loan, and create a profit.

The source of funding was from Professor Muhammad Yunus. He loaned out money on the belief that the key to fighting global poverty was through economically empowering the world’s poorest people. So he started with a $27 loan and went on to create the Grameen Bank. His idea became known as microfinance and the Grameen Bank has become the global standard for microfinance. The interview above shares some of Professor Yunus’ vision for fighting global poverty.

Small loans have changed the way the world’s poor participate in the global economy. Entrepreneurs all over the world with ideas have access to funds and credit that was previously unavailable to them. The results have been remarkable with most loaning institutions boasting over 99 percent repayment rates. Those that previous struggling on $1.25 a day can now afford to send their children to school and expand their business and afford luxuries like electricity.

For his outstanding efforts in microfinance and global development, Professor Yunus was awarded a Congressional Gold Medal. This is the highest level of honor Congress can award an individual person.  Only 153 of these have been awarded since their establishment in 1776.  Professor Yunus joins the ranks of George Washington, Martin Luther King, Jr., and other trailblazers who have impacted and benefited humanity in tremendous ways.

To get involved or find out more about microfinance and global development, check out Professor Yunus’ website or Kiva.

 – Amanda Kloeppel

Source: UN Foundation

Microfinance Blogs
Blogs are a great way to hear a variety of voices and experience an issue from diverse perspectives, and there are a variety of sites full of information, opinions, and more. Below are 10 interesting blogs that present unique perspectives on the topic of microfinance.

  1. The Consultative Group to Assist the Poor (CGAP) Microfinance Blog discusses the benefits and challenges of various tools used in microfinance and provides a forum to learn more about new microfinance initiatives. There is a variety of contributing writers who share their expertise on the nuances of microfinance, and CGAP also presents fact-based blog entries in addition to opinions on how to improve the industry.
  2. The Nicholas D. Kristof blog is a favorite of many readers of The New York Times. This blog is not directly related to microfinance but discusses many of the world problems that microfinance addresses.  It tackles many development issues around the world and discusses issues ranging from hunger to education to women’s rights.
  3. A Grameen Foundation blog (Creating a World Without Poverty) discusses Grameen’s work in microfinance and showcases thoughts and feelings from the organization’s volunteers in the field. It provides a variety of voices experiencing microfinance in action around the world.
  4. The Wall Street Journal’s India Real Time blog provides a “daily pulse for the world’s largest democracy.” This blog is not solely about microfinance or poverty eradication but it does provide many articles related to daily life and the economic growth of India. It offers regular comments and critiques of the Indian microfinance industry.
  5. The Center for Financial Inclusion blog from ACCION International covers and comments on the many new ventures currently in progress in the field of microfinance. It also discusses methods for how to enable more people to access microfinance services in the future.
  6. Defeat Poverty provides reviews on current books in the field of development and microfinance, in addition to covering many other issues related to poverty eradication.
  7. The India Microfinance blog discusses the issues and triumphs of the microfinance industry in India. It discusses many specifics on the financial tools used. India’s microfinance industry is critiqued by many and this blog provides voices that speak on either side of the issue.
  8. Banking with the Poor Network blog discusses microfinance in Asia and around the world, with a focus on a wide variety of organizations.
  9. The MF Transparency blog deals with some of the challenges faced by for-profit and nonprofit microfinance organizations and offers information and resources that encourage transparent pricing.
  10. The myKRO blog serves as an online community where microfinance organizations can raise awareness about their work, offering and receiving commentary about their actions with other players in the field.

 – Katie Brockman

Source: Opportunity International
Photo: Fairview High School

India Experiments With Cash Assistance Program

With social programs across the world, corruption and inefficiency are always an issue. In India, the Public Distribution System, or PDS, is the largest network that provides food and other necessities to the 350 million who live below the poverty line. Economists have recently begun to formulate an experiment to get aid directly to the hands of recipients in the form of checks that they can spend as they choose.

PDS currently uses ration cards which allow people to buy grains at a cheaper price. However, there are quite a few middlemen and illegal happenings which can end up leaving anywhere from five percent to 15 percent of the original amount to the ration cardholder. With this new proposition, however, the government must deal with many theories and statistics of failure and the possibility of biting off more than they can chew.

The cash system would require recipients to open bank accounts. Only 40 percent of Indians currently have a bank account due to the impracticality of it for rural dwellers who either do not have close access to a bank or are not able to pay the fees required to have one. The idea of banking correspondents has been suggested to counter this issue. These correspondents can be explained as human ATMs who physically go to villages and customers, allowing them to withdraw money.

Reetika Khera, an economist from the Indian Institute of Technology conducted a survey asking PDS users their preference for food vs. cash. Although two-thirds said they preferred food, Paul Niehaus of GiveDirectly (an NPO that works to transfer donations electronically to poor Kenyans) warns that surveys are not the best way to test the theories. Most people who are a part of PDS have been living in a paternalistic system, as Indian economists say, where they have become comfortable and accustomed to the ration cards and are told how to spend their benefits.

These cash systems have been implemented in Mexico and Brazil where families must meet certain benchmarks and goals in order to receive their benefits. Although India’s population is significantly larger, certain states which have already put this new system to use have noticed an improvement in the distribution of funds and a decrease in corruption.

– Deena Dulgerian

Source: Co.EXIST, NY Times

Social Enterprise Helping India's Salt Harvesters
Sabras, a social enterprise organization based in India, is using micro-lending to help the country’s poverty-stricken salt workers gain freedom from predatory lenders and non-cooperative banks.

In the state of Gujarat, where nearly 70% of India’s salt is sourced from, self-employed salt pan workers are subject to harsh physical conditions as well as predatory loans leading to little profit. Temperatures reach harsh highs in summer and lows during winter, causing adverse health effects for workers. Since the workers are self-employed, a majority of them need to borrow money from lenders who fix the price of the salt much lower than it normally would be, cutting profits for the salt pan workers down to nearly nothing, most often just 1% of the market value. Most of the banks in the country are not willing to lend to poor people, leaving the workers without options.

Rajesh Shah, the founder of Sabras, recognized these hardships and created an organization that is not only for the poor but mostly owned and operated by the poor as well, with workers holding nearly 74% of shares in the company. Before there was an alternative lender like Sabras, workers were forced to take out loans with interest rates as high as 48%. Sabras’ interest rates are just 12.5% with the ability to purchase advanced solar pumps that allow workers to increase output over the long run.

Sabras has already made a large impact as nearly 70,000 people are employed in the salt industry in Gujarat. Shah contends that the company’s 400 shareholders have seen a profit increase of 400% within the last two years since they used Sabras loans to purchase the solar pumps.

Looking ahead, Sabras hopes to begin including women in the salt industry’s processes in order to increase profits and improve the quality of life for them as well.

Christina Kindlon

Source: The Guardian


For those of you who are not familiar with crowd-funding, please let me invite you to try it. Basically, any individual anywhere in the world can easily go online and make a direct financial contribution to another specific individual across the globe to support their needs.

One of the first huge success stories in this practice is, a non-governmental online organization that helps facilitate loans between lenders (like you) and borrowers in developing communities. The borrower, through the help of an independent community group in their area, posts their name, photo, business idea and desired amount of money to start their own business. The money is then collected online and given as a loan – it’s micro-financing from one regular person to another. Generally it’s a small amount of money (perhaps under $500) that can make the difference between someone who is starving, and someone who is immediately pulling themselves out of poverty. Each lender on average contributes $25, and literally within minutes of posting the loan request and bio, the borrower is fully funded.

Since starting in 2005 Kiva has mobilized 883,289 lenders, raised an estimated $398 million in loans, is now operating in 67 different countries and has repaid 99 percent of all money distributed.

A different type of funding group is They raise money online for surgical treatments in Zambia and Sierra Leone. Again, anyone can go to their site, view the bios and pictures of individuals in need and then make a direct payment to help whomever they specifically want to. The women being supported by this service all suffer from fistula and are in need of medical services. Fistula is a result of prolonged labor during childbirth when tearing in the skin can cause infection and incontinence. It is very much a result of poverty and lack of healthcare and is almost nonexistent in developed parts of the world. The condition is often debilitating and also carries with it strong taboos that further alienate the sufferer.

These sites and other crowd-funding groups allow regular people all over the world to pool their money and collectively bring about real life change for individuals in the most remote regions of the world. It’s fast and easy, any amount of money can be given, the impact is immediate and your sense of having made real change is compelling… Try it.

– Mary Purcell

Source: Kiva, Samahope