Five Year Report on FINCA Haiti

Five years after our original loan to FINCA Haiti, we’ve received a very nice report on the program. (We’ve previously also reported on this program here.

It turns out (much to our surprise) that we provided about 10% of the pool available for microloans in Haiti, and that at any given time, our funds have provided support to some 400 families there. We’re very encouraged to hear about the impact of FINCA’s Haiti program, and our contribution to it. We’ll be leaving the loaned funds there for now, where they will continue to cycle through new microloans and clients.

Posted 10 months, 2 weeks ago at 12:00 pm.

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Rocky Mountain MicroFinance Institute

We’ve been looking for more strategic investments within the U.S., and particularly within our local area, but they seem to be few and far between. This is not to say that there aren’t lots of domestic charities doing good work. But they seem mostly to focus on helping with today’s problems.  I usually refer to these as “finger-in-the-dike” efforts. These efforts are certainly necessary, and we do lots of grants of this sort, but they aren’t our main, strategic focus.

To fit within the strategic portion of our portfolio, the work has to hold the promise of achieving long-term, sustainable, and scalable change. And, of course, it has to be within one of the areas of focus of our mission statement.

So we/re excited to have discovered the Rocky Mountain MicroFinance Institute (RMMFI). As its name suggests, RMMFI makes small loans to budding entrepreneurs. But that turns out not to be the only thing — or even the most important thing — they do. Using a mix of paid and (mostly) volunteer staff, they run a sort of pre-entrepreneurial program to help would-be small-business owners determine whether or not this path is for them, and whether or not they’re ready to take the plunge. Those who are — or become — ready then go through a serious training curriculum, ten at a time. This training lasts 12 weeks, and teaches the aspiring business owners about business opportunity selection. planning, finance, marketing, operations and various other aspects of making a small business successful. In addition to classes, volunteer mentors and coaches provide one-on-one coaching.

The incentives built into this program are both interesting and clever.  The candidates are — as a matter of policy — urban poor, looking for a leg up. Almost all the candidates come to the program because they’re looking for a loan, and RMMFI will make a loan to any student who successfully completes the program. But the amount of the loan for which the candidate is eligible depends on ratings on a series of three presentations the candidate makes during the program. These presentations demonstrate understanding of important aspects of a successful business, and the final presentation is of the candidate’s business plan.  This forces the candidate to be both thoughtful and comprehensive in his or her preparation for the launch of the business.  And I find it particularly interesting that many of the candidates who graduate start their businesses without a loan, having learned during the training of other ways to use their available resources to get started without debt. :)

In its first five years (through 2013; click here for report), RMMFI

  • Helped some 1400 individuals consider entrepreneurship.
  • Graduated eight classes, which resulted in the launch or expansion of 65 businesses.
  • Distributed 36 loans, with zero write-offs thus far.

I (Rudy) have become somewhat involved with the RMMFI community, observing their student presentations, taking part in critique sessions, and engaging in discussions about the program with those who manage it. I’m pretty impressed.

There is substantial evidence that the folks who go through this program are much better prepared to deal with creating and running a successful business as a result. My greatest concern as a possible long-term investor in this program is its scalability. It’s clear that this kind of program won’t scale up by, say, running 10 times as many folks per year through it. The way that it might well scale up is by expanding to other communities, and perhaps eventually by serving as a template for use by other organizations. These are possibilities that are under active consideration by the RMMFI Board.

Another concern that comes naturally to mind is the degree to which such an intensive program can be sustained by the involved staff and volunteers. The best answer I can offer is that there’s a remarkable sense of community and enthusiasm associated with this whole affair. I think they may have hit upon a magic formula. Time will tell.

 

Posted 3 years, 10 months ago at 12:07 am.

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Another View of FINCA Microloans in Haiti

As described here, we made a long-term $50,000 loan to FINCA, in early 2012, to be used for microloans in Haiti. We had looked for other ways to do something helpful in Haiti, given the terrible series of disasters there, as well as an ineffective government and many other problems. Initially, we donated funds to Catholic Relief Services for use immediately after the 2010 earthquake. But one of the (several) problems with charitable emergency response is that it tends to be very short-term. Donors forget, or move on to the next disaster. Our orientation is to look for long-term, sustainable ways to make a difference. We were in negotiation with FINCA anyway, and when they offered Haiti as one of the possible applications for our loan, we agreed.

A bit later, we discovered that another NGO, Sustainable Communities Fund (SCF), had made an almost identical arrangement. Kim LaFranchi, their Director of Operations, then made a trip to Haiti to learn more about how the program operates, and how well it was working. She and SCF have kindly allowed us to post the report of that visit on our website. We’re very pleased to do so, as it provides a more concrete view of how microfinance works, and specifically how the program we’re sponsoring in Haiti works.

The report is here.

Posted 4 years, 6 months ago at 4:52 am.

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iDE Farm Business Advisor Zambia Performance Enhancement Project (2012)

One of our favorite charities is iDE. Their mission is to increase the income of the 2 billion small plot farmers in the world, who earn less than $2/day. iDE doesn’t operate by giving handouts, but uses a far more effective and sustainable approach. They regard the smallholder farmer as an entrepreneur who will take advantage of effective technology and information, as well as supply and marketing systems, if they’re designed to be affordable and relevant to use on very small farms (1/4 acre to perhaps 2 acres).

iDE is well known for simple and inexpensive treadle pumps capable of bringing irrigation to such farms, but I’ll cite a different example, to illustrate the idea clearly. iDE has developed a 200,000-litir water storage system that can be purchased by the farmer for $400, and is capable of storing enough water to irrigate 1/4 acre of farmland for a season. The system is filled during the monsoon season, and used during the dry season (when crop prices are highest and most farmers are idle due to lack of water) to add a full growing season. This technology alone can add $500 income in it’s first year of use, paying for itself in less than a year while adding a large long-term income boost to the farm family. This is a very typical example of an iDE technology.


Donald Tembo from Chibombo District in Central Province of Zambia accessed a $380 loan in October 2011, facilitated through an iDE Farm Business Advisor. With this money he invested in a treadle pump which enabled him to irrigate four times as much land, expanding his garden from 1/8 hectare to ½ hectare and sell his tomato, melon, cucumber and green beans at the market. (Reprinted with permission from IDE Wellspring, May 2012.)

These folks do a great deal more, though, providing multiple relevant technologies, and connecting them to microfinance so that farmers can afford to purchase the systems. They set up multiple, competing in-country manufacturers for the devices, so that the systems are an on-going business for local firms, maintenance is locally available, and the sustainability of the approach does not depend on iDE’s continuing presence.

They also help develop supply chains and marketing venues suitable for smallholder farmers, and provide technical knowledge about agricultural techniques, crop selection for more profitability by small-plot farmers, and lots more. Indeed, they’ve developed (in Cambodia) a system for training selected local farmers to serve as Farm Business Advisors (FBAs) to the other smallholder farmers in a local area. The FBAs derive a sustainable income from the sale of techological devices in their area, while providing an ongoing source of information and advice on farming matters. This program has been very successful in Cambodia.

iDE is now expanding this program to other countries in Asia, and also in Zambia as a pilot project for Africa. They’re optimistic that the approach can be adapted to Africa, but recognize that in Africa they will encounter differences in culture, climate, economics, available physical resources, and lots more. So it’s important to be rigorous in designing the program in Zambia, and to include an objective assessment of the effort as it’s carried out.

To this end, iDE is conducting the Farm Business Advisor Zambia Performance Enhancement Project. The goal of this project will be to develop an initial cadre of trained FBAs in Zambia. This will involve assessing the training needs of the FBAs here, developing training materials, training an initial cadre of 200 FBAs, objectively assessing the success of these FBAs over a period of time, and disseminating experience and best-practice information to other candidate countries in Africa. The bulk of the project is being funded by RLG International, but we’re funding the assessment and information-dissemination phase of the project. Here’s iDE’s proposal, describing the project, and here’s the first progress report.

We, too, are quite hopeful that this award-winning model will prove effective in Africa, as there’s a tremendous need there, and a tremendous potential gain. We’re pleased at the opportunity to take part in this work.

Posted 5 years, 5 months ago at 10:12 pm.

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Loan to FINCA for Use in Haiti

Microfinance is clearly one of the more effective ways of enabling small-scale entrepreneurs in developing countries. We’re particularly impressed with the activities of FINCA, which has a great history of effectively providing microloans in such areas. We like supporting FINCA with donations, which help with their overhead, but we’ve wished we had a way to help provide lendable funds. And it turns out that we do.

For one of our 2011-2012 special projects, we took advantage of a special relationship between FINCA and the Greater Kansas City Community Foundation (aka Greater Horizons), where our donor-advised fund is housed. This special relationship allowed us to make a significant loan to FINCA, which they in turn will use (repeatedly) to make small loans to entrepreneurs. When our loan to FINCA comes due — after being used for 500 or more individual loans by FINCA — we’ll likely receive the entire principal back, or very nearly that, but we think those funds will have accomplished a lot in the meantime. We’ll see. We’ll also have the option to allow FINCA to continue using the funds, year-by-year, if we choose.

In addition, we had a choice of geographical areas in which these funds might be used. We chose Haiti, at least for the initial term of the loan. We had provided some short-term help (through Catholic Relief Services) after the 2010 earthquake, but we try to use the bulk of our grants to fund programs with a long-term focus and a sustainable approach. We think this FINCA project fills the bill.

Posted 5 years, 10 months ago at 5:41 am.

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Financing

Where earlier preconditions are present, access to capital is often the remaining roadblock to self-sufficiency. We’re enamored of microfinance, which is making real inroads with small amounts of money at the grassroots level. But we’ll be on the lookout for other approaches.

Posted 9 years ago at 7:49 pm.

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