I’ve been in Scottsdale, AZ for the last two days at a summit on microfinance with Opportunity International. Although I was very involved in microcredit a number of years ago (see my blog for my time with the Reuters Digital Vision Program, the Grameen Foundation Technology Center and the Mifos project), and have been supporting organizations like Unitus and Namaste-Direct, I haven’t been hearing the stories recently or having as much contact with direct practitioners.
I learned about Opportunity International back in August, and a new friend who is working there invited me to come to the Summit. It’s been really enjoyable to re-connect with microfinance, hear more of the stories of how these small loans impact peoples’ lives, and chat with others who share that interest.
The program was a packed day plus a little on either side of it. A few of the highlights:
Learning about Product Innovations
Many MFI’s (Microfinance Institutions) offer a limited range of products: mostly just loans, varying in amount and duration, and whether they are granted to a group or individual, but loans are their bread, butter, meat and potatoes. One of the key reasons is that the level of government regulation goes up significantly when you start taking deposits (they don’t want you going out of business and losing depositor funds). Opportunity International has gone through the work to get the necessary licenses to take deposits (they have a combined gross loan portfolio of $515M, with $108M in depositor funds). Opportunity International has also added insurance products (primarily life insurance, that pays out to cover outstanding loan balances if the borrower dies).
I got a chance to talk with Nathan Byrd, the key person behind their Educational Finance projects, and heard more about their plans there. In addition to more traditional ideas, like making loans to schools for capital improvements, or loans to students to cover tuition, they’re pioneering a savings/insurance product that does a great job of meeting customer needs. It’s a savings account with some fringe benefits: assuming you meet certain balance minimums (very modest by US standards, something like $50), you are automatically eligible for a linked insurance policy that, in the event of your death (except for suicide) while a child is still in school, pays 5x the balance for school fees to ensure your child(ren) can continue their education.
One of the other talks was by John Magney, the head of their agriculture finance group. He gave some nice background about the (financial) ecosystem needed to support farmers, citing groups like market information systems, input providers (like seeds & fertilizer), output markets (to sell produce), finance, and external services (training and certification). One of the interesting stats that he provided was that small scale farmers might pay up to half of their income for money when they needed it (“income smoothing”). School fees are due in January, but crop sales don’t start until May, so farmers may end up going to a money lender or selling their crop futures at a cut-rate.
Impressive Women Leaders
Opportunity International hired a new CEO, Vicki Escarra, less than two months ago. She has an impressive background in both the non-profit sector (most recently, CEO of Feeding America, doubling their number served, and raising their budget to nearly $100M) and in corporate America, (raising through the ranks of Delta from flight attendant to managing all operations to CMO). She did a wonderful job talking about her personal commitment to the cause and talking up the achievements of the organization.
The keynote speaker was Carly Fiorina. While she didn’t (and wouldn’t) get my vote for Senator, she did give a masterful talk about the importance of women leaders, and her personal challenges since leaving HP (death of a daughter, fight against cancer).
Mother-daughter co-authors Bonnie St. John and Darcy Deane spoke about their book How Great Women Lead. Darcy, at 13 years old, was impressively poised, being interviewed before a group of more than 200 people. I was even more impressed when I heard afterwards she’d gotten 3 hours of sleep the night before.
A Powerful Poverty Simulation
The OI crew had put together a series of personas of typical borrowers and the dilemmas they face. Each table had about 6 of them, and we paired up to read the bio, the choice they faced, their options (that ranged from bad to horrendous) and choose which we would do. We discussed them briefly around the table and then with the whole assembly, and moved on to phase 2, where we envisioned the case where all of the people were part of the same borrowing group, and one of the borrowers was unable to make her weekly repayment. Given the joint liability for the loans, a default by any member implies all of the group members would be unable to get a future loan. Realistically, the other members will cover the delinquent member’s payment, but apply some social pressure to make sure it doesn’t happen again (and maybe make some interventions to help guarantee that…)
For a sample, consider the 29-year-old making for $1.50/day selling sodas who had her savings stolen, and faced the choice of marrying her 12-year-old daughter off to a 50-year-old man for the dowry he offered, or ending the schooling of all 4 of her children when the next round of fees is due (and potentially not having enough to eat).
I’ve tended to operate at the “products and numbers” level of microcredit: interest and repayment rates, technology solutions for managing mobile payments, and the like. This simulation was a reminder that each of those loans does make a difference in a real person’s life, but even so, things can still be pretty dire.
Meeting Interesting People
The main reason to go to a conference is nearly always the people that you meet, and this one was no exception. From a couple that owns a dairy farm in California’s Central Valley, to the retired president of an advertising agency, to the college senior interested in pursuing a career in microfinance or social entrepreneurship, it was a group that was concerned with other people and using their resources to make a difference in the lives of the poorest.
Thanks, Jennifer, for the invitation and encouragement to come!