Micro-credit – Turns the world around – but does it have problems?

I was thinking about micro-credit and how the promotors of basic micro-credit programs have what they think is a persuasive argument. “We get 95% (or more) of our loans completely paid off. Isn’t this reason enough for funders to be satisfied with their investment?” But when you think a moment about this argument, then intuitively you realize that one of the key reasons for such high levels of reported success is that the program is not really targeted at the poor. It targets people who are “safe”, being at a higher level of “poor”, and who have a greater sense of responsibility and want to make a success of whatever business or venture they are getting funding for.

The meat man
THE BUTCHER – micro-loan recipient

But there are a huge number of people in the world, particularly in the Lean Economies who are extremely poor, lack skills and education, have problems with health, both physical and mental, resulting in a demographic that need additional support along with micro-credit loans. Do micro-credit providers add this component, or do they simply avoid support to problem people?

For promotional purposes, though, the purveyors of these schemes will find it easier to promote their fund-raising efforts if they can point to the very high repayment rates they get on the loans. It will be much more difficult for them to chase down funding if they have to report much lower numbers re: loan repayments. A whole new strategy is needed to explain a micro-credit program which is multi-dimensional with as much emphasis on teaching life skills, on training, on counseling than on loan repayment. Subsidizing micro-credit for the very poor could be a strategy. Is this being added to the mix for multi-problem and very poor potential recipients? I would hope that support for this demographic wouls be embraced and a strategy of fund development that takes this into account, be developed.

The attached link goes into great depth on some of the problems with micro-credit and its prospects. Before blindly embracing the claims of organizations regarding their excellent loan repayment records, donors should get a better understanding of the bigger picture.

Google World Bank article
Does Microfinance Still Hold Promise for Reaching the Poor?

Sustainability; Rotary Style

Rotary is one of the biggest providers of humanitarian support competing or collaborating with World Vision, Care Canada, Samaritan’s Purse, Oxfam, the Red Cross and the list goes on.   Rotary’s  long term world-wide program supporting the elimination of POLIO is coming to an end.  But there is much to do in support of overcoming poverty, teaching skills, maternal health, education and the list goes on.aids-victim-with-child.jpg

Many Rotary clubs have projects they carry out in developing countries on their own.  Someone in the club spots a need and the other club members help to raise funds, or agree to volunteer.  Many Rotarians with skills go to the Lean Economies as engineers, carpenters, teachers, and water specialists to lend a helping hand and some resources.  I have been told that as much or more than half of the funds raised by Rotarians for international projects go there, without the involvement of the Rotary Foundation.

But, having the Rotary Foundation involved can have substantial benefits through the way that funds can be leveraged.  In our Rotary District, a $5000 allocation from a club can lead to a minimum of a $30,000 project thanks to the power of leveraging.  This can be very attractive but comes with its own issues.

The Rotary Foundation has a set of principles and rules that clubs wanting to access funds for projects must adhere to. These are strictly adhered to and include a needs assessment, detailed write-up of the project, a carefully crafted budget, oversight by Rotarians at both ends of the project and a comprehensive report at the end.  It is all worth it when the project is successful and leaves behind it a legacy of ongoing effort which comes about because of the rules around “sustainability.”

Here is what Rotary says about Sustainability

Sustainability means different things to different organizations. For Rotary, sustainability means providing long-term solutions to community problems that community members themselves can support after grant funding ends. How can you make your project sustainable?

Be sure to: • Start with the community. Host sponsors should work with members of the benefiting community to identify a need and develop a solution that builds on community strengths and aligns with local values and culture.

• Encourage local ownership. It’s a true sign of a project’s success when community members embrace the project as their own. Empowering community members to assess their needs and plan projects that address them leads to the most effective projects and the most sustainable outcomes. Identify key community members who can help pioneer lasting improvements.

• Provide training. A project’s success depends on people. By providing training, education, and community outreach, you strengthen beneficiaries’ ability to meet project objectives. Confirm that a plan is in place to transfer knowledge to new beneficiaries. Collaborate with local organizations to provide this training.

• Buy local. Purchase equipment and technology from local sources whenever possible. Make sure that spare parts are available locally, too. Build capacity so that community members can operate, maintain, and repair equipment on their own. Compensate your project’s vendors appropriately so they have an incentive to continue providing supplies.

•Find local funding. Getting funding from local governments, hospitals, companies, and other organizations integrates your project into the local community and supports your project’s long-term success.

• Measure your success. First, gather data before you begin the project to determine where you are starting from. Include clear and measurable outcomes in your project plan, and decide how you’ll collect data throughout your project and afterward. Maintaining a strong relationship with the community can help you collect data and also address any issues that the data bring to light. Weaving basket2

These are the principles that now guide Rotarians who wish matching funds from the Rotary Foundation.  But these principles miss the mark to some degree and as a result projects using  lucrative leveraged funding never reach the most vulnerable.

A good example:  A project was carried out in southwestern Uganda for eight years with the purpose of assisting AIDS orphans many of whom live in child-headed homes.  During the course of the project, more than 700 orphans were assisted.  They received the basic s of life where necessary – food, clothing, bedding, utensils.  Some people in the local communities most of whom live in poverty were rallied to be care-givers to the orphan children.  They were trained and mandated to take a family and oversee it, checking in to make sure the family had the necessities, that there was no illness, or other troubles.  They sometimes helped with the meals, and taught some children how to keep their tiny homes in good condition and repair.schoolchildrn

The children were also backed up by Rotarians who each took groups of children to provide guidance to them.  They became surrogate parents in some cases.  They watched out for the very troubled children and helped in very practical ways such as helping the children learn about how to grow food on their property.  All children were also expected to go to school.  School fees were also paid so that going to school was part of the program.

Some of the older children were sent as apprentices to learn motor repair, sewing, hairdressing and other skills.  .

Unfortunately the program failed to meet the SUSTAINABILITY criteria of the Rotary Foundation and it has been discontinued.

It was set in a desperately poor area of Uganda where AIDS was and still is rampant.  There was no chance that the community would be able to raise all but the most minimal of funds to sustain the physical needs of the children and their school fees.  It faltered on the first criteria – “long-term solutions to community problems that community members themselves can support after the grant funding ends.”

The Sustainability criteria are a very good fit when there are physical elements to the projects.  For example building wells and water harvesting systems, and training the people in the community to carry on after start-up, meets sustainability criteria.  This can be seen to be true for training mid-wives, repair and maintenance of wheelchairs, and training in the area of agriculture where a legacy of training can leave even young farmers with the ability to continue on.

What the SUSTAINABILTY criteria does not take into account is helping in areas of abject poverty, disease, poor education, and crime.Cooking matooke2

In my opinion, Rotary needs to rethink its formulas for support of projects to ensure that its drift towards supporting the better off poor, an easier objective, doesn’t blind Rotary to the needs of the very, very poor.