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kiva
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 Kiva.org. 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

tujijenge_tanzania_microfinance
Tujijenge Tanzania is a microfinance company based in Dar es Salaam, Tanzania. Founded in 2006, the organization is both the largest and fastest growing microfinance institution (MFI) in Tanzania. Broadly speaking, MFIs are companies that provide financial services to low-income individuals, or that provide services in areas without access to “typical” banking. They operate off of the idea that poverty-stricken individuals can remedy their own situation if given access to financial services.

Today, Tujijenge Tanzania is part of the larger, not-for-profit company Tujijenge Afrika, a Swahili name that roughly translates to mean “let’s build ourselves, Africa.” The company was founded by six microfinance practitioners, who now serve on its board of directors. The founders sought to remedy a problem that they observed in African society by employing their own skills. That is, 90 percent of the country does not have access to financial services. They saw that few MFIs existed, forcing residents to rely on expensive banking alternatives that perpetuated a lifestyle of poverty.

Tujijenge Tanzania aims to provide financial help to individuals, both men and women, who are engaged in all manner of small businesses, ranging from stationery shops to restaurants. The company operates by sending Loan Officers into local communities to give presentations about their services. Interested individuals then form groups of up to 35 members and receive four weeks of training from the Loan Officers. This includes instruction on lending methodology and creating viable business plans. During this period, the group must satisfy several requirements, including electing leaders and opening an account with a commercial bank (the company partners with both Bank of America and Kenya Commercial Bank).

Furthermore, every member is required to save 20 percent of the expected amount of the loan during this training period. This serves the dual purpose of teaching the discipline of making weekly payments, as well as demonstrating that the individual is engaged in a serious, capital-generating business. Upon completion of the training period, if all requirements have been met, the group can make a formal application for a loan. After receiving the money, the group will continue to meet every week, both to make repayments and to discuss general business issues and practices.

Beyond making loans to small business owners, the company is also engaged in a wide variety of product development. Currently, Tujijenge Tanzania is in the process of developing a mobile banking solution for their clients to help serve those in less accessible areas.

In the past, they have developed both solar loan and agricultural loan models in collaboration with organizations such as Oxfam. They have also engaged in market research in the promotion of medical and life insurance all around Africa.

– Rebecca Beyer
Feature Writer

Sources: Tujijenge Afrika, KIVA

Save_for_Change
For many poor families, a safe place to save, or simply access to a small loan could be a ticket out of poverty. However, this basic service is not available for a large portion of families, particularly those living in rural areas. Even where loans are available, the poor often do not qualify for them. Saving for Change (SfC),launched by Oxfam America, provides these critical services to nearly 680,000 members, most of whom are women.

Traditional community finance or “microfinance” institutions give those who do not have access to credit the opportunity to borrow a small amount of money. Once this loan is paid back, the borrowers are able to increase the loan amount, allowing them to build small businesses or homes. Oxfam, however, takes a slightly different approach to this microfinance model, forming large numbers of savings and credit groups in the poorest parts of the world.

Members of these groups have the ability to share their savings and make loans with each other using their own resources rather than taking out a loan from a credit union, bank, or microfinance institution. Villagers come together to make groups of about 20 people that function like a community bank, to save money, make loans, and even pay each other interest, which adds to the group fund.

Typically, members are trained to save regularly by meeting each week to put a few cents into the savings box, and to borrow from the group’s fund as needed in the form of loans that are later paid back with interest. At the end of the cycle, usually about one year, the fund is divided among members who receive a portion of the profit in addition to their own savings. The return on the savings is 30 to 40 percent or more.

The end of the savings cycle is also scheduled strategically, usually before the start of the hungry season when members are most vulnerable. The money distributed is used primarily by women for livestock, food, and business, with 41 percent of the share-outs going towards income-generating purposes.

An extensive study entitled “Saving for Change: Financial Inclusion and Resilience for the World’s Poorest People”, conducted by Oxfam America and Freedom from Hunger in May, found promising results on the impact of community-based savings groups. The study was done in Mali over a three-year period, where villages were randomly selected to either receive the savings program or not. The study found that among those who join Saving for Change:

  • 82 percent live on less than $1.25 a day
  • Most members are financially and socially active women, many who own livestock or run a business
  • Women who join are more likely to be in a leadership role in the household or community
  • Women who are less socially active tend to join about six months after the first group formed in their village

The study also reported that women in Saving for Change villages felt the following advantages:

  • Saved 31 percent more than women in control villages
  • Took out twice as many loans from savings groups
  • Were 10 percent less likely to be chronically food insecure than those in control villages
  • Increased livestock holdings, owning 13 percent more livestock than those in control villages ($120 more), which can buy three ewes, four goats, or one calf
  • Reported more village-level solidarity than non-SfC members

Ali Warlich

Sources: Christian Science Monitor
Photo: Oxfam

micro_opt
Microcredit, microfinance, micro-insurance… There is a microfinance revolution occurring around the world, and it is changing the perceptions of what can be done for those living in poverty.

Empowerment is an important focus of aid and development work. A family that, instead of being given rice and feed for a season, is educated and provided with tools to grow rice and feed themselves, can become self-sustaining. However, providing this kind of empowerment assistance can be difficult. How can organizations provide loans or credit to people who do not have bank accounts? How can they insure farmers when the value of their crops does not reach the minimum premiums? How can they make health insurance available to families living in poverty?

There is a market available for all of these services, but it is taking a revolutionary approach to provide it. Insurance has typically been the domain of the middle and upper classes. Insurance providers have always targeted those with significant investments to protect, as that is where the money lies. But for small-scale farmers, with fewer assets, the dependence on the success of their investments is greater than that of the wealthy. It is these people at the bottom of the economic scale who need insurance the most, as they are the ones without a safety net.

Recognizing this, the international foundation Syngenta has begun offering an insurance program for small farmers. The project originated in Kenya, and offers insurance for farms as small as half an acre, charging them a rate of $5.25 a season. The project is run remotely, with local supply stores acting as purchasing points for insurance and weather stations used to calculate damages due to climate effects, resulting in minimal overhead costs. Operating in Kenya and Rwanda, the scheme has already sold more than 64,000 insurance policies, largely to farmers who have never before had the option of buying insurance.

Similar programs are being developed around the world, with some focusing on micro-credit while others provide insurance at a fraction of the cost of traditional insurers. Furthermore, as the field develops, larger insurance companies are also embracing the model. In 2005, micro-insurance was offered by only 15% of the largest insurance companies. Today, two thirds of those companies are offering with micro-insurance. Some estimates place the potential market of micro-insurance to be between 2 and 3 billion potential policies.

Small-scale farmers with insurance are better able to provide for their families, even in the event of crop failure. This minimizes the potential for famine and also decreases the need for foreign assistance to provide for people in the event of crop failure.

– David M Wilson 

Sources: The New York Times, Syngenta
Photo: Dowser

microfinance-world-poor
Poor populations in developing countries worldwide are often ignored by most lending institutions. Traditional banks typically do not loan to those with little income or other forms of collateral. As a result, it is extremely difficult for those in poverty to advance economically without access to forms of credit, insurance, or savings mechanisms.

Microfinance services provide these low-income individuals with a broad range of financial tools involving small amounts of money in the hopes that services like capital, banking, and insurance will assist them in rising out of poverty. The World Bank estimates that there are around 160 million people in developing countries that are currently benefiting from microfinance. Many of the institutions that provide microfinance services are nonprofit organizations like Kiva and government agencies such as the United States Agency for International Development (USAID).

Many case studies have demonstrated that microfinance is responsible for helping low-income households meet basic needs, improve their economic welfare, and grow their livelihoods. Microfinance also helps to empower women by providing microcredit, thereby promoting equality and economic opportunities.

Microcredit provides poor entrepreneurs the ability to start or expand their businesses. Having this reliable source of credit makes it easier for them to manage cash flow and business activities. Even though the size of the capital lent seem comparatively small, sometimes less than a couple hundred dollars, it is a significant sum for half of the world’s population, who lives on less than $2 a day.

After using credit to start a business or buy land, poor individuals in developing countries can benefit from savings services that microfinance institutions provide. Since the poor are more likely to lose control of their money due to mismanagement, fraud, and corruption, secure financial services allow safer and more responsible transactions. Additionally, low-income families in developing countries are more likely to be adversely affected economically due to many uncontrollable factors such as death, illness, and natural disaster. Access to credit, insurance, and savings can make these precarious conditions easier to manage and maintain financial security.

Empirical evidence from the Consultative Group to Assist the Poor (CGAP) shows the benefit that microfinance services can provide to the world’s poor. For example, members of the Grameen Bank, a nonprofit microfinance organization for women, who use microfinance services have over 40% higher incomes than those who do not. Development in countries like India, the Philippines, and Morocco has also been advanced due to microcredit. Businesses have expanded and industries have diversified.

Individuals in developing countries are in dire need of a broad range of financial services. Microfinance services provides these people with the opportunity to develop their own businesses, build assets, and manage their incomes and risks. Those who are given access to microfinance services live in significantly better economic conditions than those who do not. And in time, many of these people are able to pull themselves out of poverty.

– Rahul Shah 

Sources: KIVA, CGAP, Lend with Care
Photo: The Guardian

Solve_Poverty
The lack of financial services for the world’s poorest is one of the greatest obstacles to economic growth in developing nations. Pindie Nyandoro, one of the chief executives of Africa Standard Bank, makes the case that the state of Africa’s small farmers and entrepreneurs defines the developmental ceiling of the continent. According to him, the post-2015 development agenda needs to support innovative financing and legitimize the informal financing sector in Africa. The unbanked need our consideration.

He recognizes much of the good work is already being done. Nyandoro commends mobile banking services—like M-Pesa, Ecocash, and Mzansi, to mention a few—for their innovative approaches versus traditional banks. Utilizing mobiles is exactly the kind of specialized financing that African countries need because Africa has some of the lowest private-credit-to-GDP ratios on the planet. Their approaches also need to reduce up-front costs like finance infrastructure and public education about finance basics.

Another approach he applauds is the “SME Quick Loans” of the Standard Bank Group, which substitute psychometric testing for conventional credit analysis. Their practice makes desperately needed loans available to millions who otherwise can’t access lending services because of their background. Theirs is another example of financial service being tailored to riskier, but still profitable, circumstances with great success.

The place where he sees the most potential, however, is in informal finance. Although only a residual sector in more developed economies, he argues that its regulation in Africa is the key to prosperity. Informal credit associations, savings groups, and the limitless army of entrepreneurs that form them make up 60% of employment and income in Africa. In his view, policy that legitimizes them, shapes public education around them, and otherwise caters to them could transform an otherwise unstable sector into a booming revenue-churner.

He warns that, without the right policy action and pressure, the truly massive potential of this group could continue going untapped—and economic growth in Africa could slow down. They are the key. And the upfront costs of reaching out to them, in his view, are worth it.

– John Mahon

Sources: ECDPM, The Guardian
Photo: International Land Coalition

Pro_Mujer_International_info
Pro Mujer International is a development and microfinance organization helping women in Latin America. They provide financial, health, and human development services to help women break the cycle of poverty. Pro Mujer equips women with the tools and resources necessary to build their own livelihoods through microfinance, business training, and health care support.

Pro Mujer is motivated to affect change in Latin American society. They understand the conditions of income disparity and gender inequality. They believe that when women are given the tools to lift themselves out of poverty, they will also lift their families too. According to Pro Mujer, women are more likely to reinvest in their families to provide education, healthcare and to improve living conditions.

The organization is committed to a client-focused approach that actively seeks results. They strive for integrity, transparency, solidarity and they work to maintain commitment to human development. Pro Mujer was founded by Lynne Patterson and Carmen Velasco in 1990 in Bolivia. Their vision for an organization to help lift women from poverty has today become one of Latin America’s premiere development and microfinance organizations for women. Pro Mujer has since been able to allocate over $1 billion in small loans and services including empowerment training, preventive health education and primary healthcare services.

Examples of the financial services provided by Pro Mujer include small business loans, education and housing loans, savings accounts, and life insurance. Their business and empowerment training programs teach women to be more economically independent and informed decision makers as well as teaching basic financial literacy, and empowerment training on domestic violence, communication and leadership skills. Additionally, Pro Mujer is able to provide healthcare assistance including pre and post natal monitoring, family planning, and sexual and reproductive health services to name a few.

Pro Mujer’s current CEO is Rosario Perez. Perez began her career in private banking where she was charged with leading multinational businesses and teams and executing organizational transformations. She is now responsible for Pro Mujer’s portfolio of more than US $100 million and 1,700 employees. Her employees serve more than 2,547,000 clients in Argentina, Bolivia, Mexico, Nicaragua, and Peru.

– Caitlin Zusy

Sources: Pro Mujer, Mastercard Worldwide

initiatives help rural senegalese farmers
For rural Senegalese farmers, waiting for the rains to nourish their crops in the oppressive heat of May and June is a nervous time. With climate change comes unpredictable harvests, and without reserves, one failed harvest means that families go without food, children drop out of school, and communities fall further into poverty.

Since many rural Senegalese farmers are recovering from the food crisis in 2011 and 2012, it is a particularly difficult time. By the time they have planted their seeds, they have had to spend the majority of their money and savings, and face months of hunger until they can harvest their crops. Even then, it is a gamble; it only takes a few weeks of dry weather, or an insect infestation, and everything can be lost.

Oxfam, along with the World Food Programme, La Lumière, has just started a program to aid the farmers by reducing and spreading out their farming risk. The program, Rural Resilience Initiative, has already been launched in several other African countries, but has only just reached communities in Senegal. It is based on the fact that it costs less to manage risks then it does to provide relief in a crisis; by planning ahead, these farmers can be prepared for whatever the weather brings. With the initiative, rural families have the opportunity to manage their own risks from harvest to harvest. There are four components: risk taking (credit), risk transfer (insurance), risk reserves (savings), and risk reduction.

The program encourages farmers to save, providing them with access to loans and insurance so that if they are faced with a poor crop yield, they are eligible for a settlement (either cash or food vouchers). Farmers pay for their insurance by working on local projects that improve agriculture conditions in their communities. They build irrigation systems, make compost to fertilize fields, and plant trees to better their surrounding environment. In the small villages of Senegal, farmers are helping to build erosion control barriers out of volcanic stones, which help cut down on flash floods in heavy rain, and improve the quality of the sandy soil. As June passes, the rains should now be starting in Senegal, and fortunately, the hope of a good yield is now accompanied with the knowledge that, should the rains fail, these farmers now have something to fall back on.

– Chloe Isacke

Sources: Oxfam Blog, Oxfam America
Photo: Guardian

Caterpillar's Role in International Development

Caterpillar Inc. is an Illinois based company that plays a dominant role in energy, trade, and infrastructure for developing countries. Yet Caterpillar is more than just business. The philanthropic efforts of the Caterpillar Foundation, founded in 1952, have contributed more than $550 million towards human development around the world. The Foundation has partnered with a variety of key organizations to fund projects in the areas of environmental sustainability, access to education, and meeting basic human needs for food, shelter, and healthcare.

As a Fortune 100 company with 2012 sales and revenues of $65.875 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. They are best known for their big, yellow tractors. Caterpillar’s global reach and presence are unmatched in the industry. They have a presence in more than 180 countries around the globe and over 500 locations worldwide. More than half of their sales are outside the United States. As a powerful multinational corporation, Caterpillar has a very influential role in human development.

The Caterpillar Foundation invested $3 million during 2012 in a partnership with a World Resources Institute (WRI) project to promote the development of sustainable cities in China, India and Brazil. Through this “smart cities” initiative, WRI will work with five cities on strategies to increase energy efficiency, curb greenhouse gas emissions, and improve water quality, urban mobility and land use.

Specific project goals include solutions that will reach one billion people with new public transportation options; avoid 617,000 metric tons of CO2 emissions in the transportation area; reduce nitrogen, phosphorus and ammonia water pollution by 15 percent; and provide more reliable energy to 11 million industrial, corporate and residential consumers. In total, the Caterpillar Foundation expects to support this project with $12.5 million over five years – all in an effort to curb the negative environmental side effects of rapid urbanization in the developing countries.

The Resource Foundation is another partner of the Caterpillar Foundation. This $3 million partnership will reach more than 11,000 children in Latin America and the Caribbean over three years, beginning in January 2013. Through a regional strategy targeting specific communities in 10 countries, the program seeks to improve academic achievement, gender equity and life skills among primary school-age boys and girls from 54 schools.

The Caterpillar Foundation has also been a long-time supporter of Opportunity International’s microfinance programs in more than 20 countries around the world. The Caterpillar Foundation’s investment has helped Opportunity International provide life-changing microloans to more than 75,000 small entrepreneurs, create 30,000 jobs and give more than 60,000 rural families access to basic banking services. A majority of Opportunity International’s clients are women who reinvest more of their earnings into health care, education and their communities, which helps break the cycle of generational poverty. As of July 2012, Opportunity International has four million clients, 17,600 employees, 2.3 million insurance policies, and a 95 percent loan repayment rate.

– Maria Caluag

Source: Caterpillar,CSR Wire
Photo: Companies and Markets

chris_temple_Zach_ingrasci_claremont_mckenna_college_Economics_international_Development_college_documentary_opt

For Chris Temple and Zach Ingrasci, students at Claremont McKenna College studying economics and international development, the daily struggle that over a billion people living on one dollar per day face is more personal than it is for the average westerner. After a visit to Guatemala with a microfinance group, Temple began to lay the foundation for what some might call a radical experiment. Along with two filmmakers, Temple and Ingrasci set out to shine a light on global poverty in a bold way: by living it themselves.

For 56 days in the rural village of Pena Blanca, each of the four young men vowed to live on just one dollar per day. Because many people who live in such poverty must take work as it is given, the quartet paid itself random dollar amounts (often $0) each day to make the experience more realistic. The film even takes a pragmatic turn as the students investigate the powerful impact of microloans on the lives of people in the region. They do all of this while battling chronic hunger and parasitic infections.

Although the documentary, which was available on Hulu for a limited time, began as a small project with only four crew members, it eventually drew the attention of big names such as Jeff Klein, the former general manager for the L.A. Times, David Doss, the former executive producer of Anderson Cooper 360, and Mike Lange, who was the former CEO of Miremax.

Currently, the filmmakers are travelling to promote the film. Those interested in watching the film can find a screening in their area or even host one themselves via the organization’s website.

– Samantha Mauney

Source: Huffington Post
Photo: My Northwest