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Micro credit vs. Micro credit-plus…..
January 11th, 2009My name is Kayla Villnow, and I work for Esperanza International down in the Dominican Republic. I have left a couple of posts, but not nearly as many as I could! Being that one of my New Year’s resolutions is to contribute more frequently, I thought I’d start off with a question for the Mykro community… what do you think is better, a simple micro credit model, or a micro credit-plus model?
Just in case there are some of you out there who don’t exactly know the difference, I’ll start by explaining the primary differences. First off, a micro credit institution (more commonly referred to as MFI’s) will administer micro loans to borrowers in both a group-lending model, as well as an individual borrower model. The loan officer works with the borrower to collect payments and help the business along– and that is that. This breed of MFI typically secures more outside funding, breaks even sooner, and even begins to turn a profit after a few years.
Moving along to our second point though, what is a micro credit-plus institution? A micro credit-plus institution still will do the credit administration first, but then after the credit, this breed of MFI believes that the poor need more than just money to tranform their lives. Typical services to supplement the credit include discounted health care services, preventative health care education, literacy courses, vocational training courses, technology courses, youth programs for children of borrowers, life/disability insurance, and savings programs. The goal of providing this package of services is to help the borrower acheive economic as well as spiritual transformation; the poor often suffer from low self-esteem, illiteracy, and many more issues that can be just as detrimental in their transformation as lack of capital is. Micro credit-plus institutions look to implement holistic and sustainable change in the lives of their borrowers.
Providing all of the above services definitely takes a toll on the particular MFI’s ability to reach self-sustainability. But then you have to wonder, is that necesarily the purpose of microfinance and microcredit? Should the focus be to provide credit services to the world’s poor contingent only upon breaking even in a business model?
I worry lately that with academic giants like Stanford and Harvard chipping in their two cents on micro finance, things will move too far into the modern business mold, and too far away from the people microfinance should be helping. Maybe because I work for a micro credit-plus institution I am biased, but I believe that the benefits our model gives to the borrowers — the actual people we are working to help — far outweighs the negatives of not breaking even.
Microfinance was born out of a dream to allow the poor to participate as productive members of modern society, and I believe it’s important to keep micro fianance human. I worry that too many bottom lines, industry jargon, and stuffed up academians will take the plus right out of micro finance…
As so, in conclusion, I personally believe that micro credit-plus is a better model. Although its merits will surely be deflated by hard numbers, theories and profit-minded people, I have seen the differences that it makes in real people down here in the Dominican Republic and Haiti, and those differences my friends, are how a micro credit-plus model keeps micro credit human.
A Story of Hope and Dedication – Shely Perez in the Dominican Republic
August 27th, 2008The following story is submitted on behalf of Esperanza International, the interview was conducted by volunteer Travis Vaughan. Shely comes from a highly impoverished community on the north coast of the Dominican Republic; she is a Haitian immigrant.
Shely Perez has been an extremely influential leader her community, encouraging other women and small business owners to become involved with Esperanza. She says that in the past, many of her community members have been tentative about taking out loans due to the usurious interest charged by local loan sharks, but that they have all been appreciative and grateful for the opportunities Esperanza has brought them.
Shely has been with Esperanza for a bit more than a year, and has been an example of success and hope for many of the women her community, La Cienega, located on the North Coast of the Dominican Republic.
When Shely is not out selling clothes, she is attending the many needs of her seven children. She shares the responsibilities of earning an income for the family and caring for her children with her husband Chichi — as such, when Shely is at home taking care of the kids, Chichi works in construction, building small homes in their community. Shely has found that she has best been able to give back to her community by teaming up with other women from her Bank of Hope to provide business mentoring to those living nearby.
While receiving only a middle-school education before becoming a mother at the age of fourteen, Shely nevertheless has a natural knack for understanding business. The concept of profits and losses, recognizing a market, keeping detailed records, and the importance of savings all seem to come naturally to her. While thousands of women sell clothing in the streets of the Dominican Republic, Shely has found her niche selling used men’s clothing. By selling used clothing that consistently looks new, and for a lower price, she has been able to rise above the majority of the competition and be one of the most successful clothes vendors in her community. A recent loan enabled her to purchase a motorcycle, which in turn has vastly increased her ability to reach new communities, and attract more customers. Her wise investment in a motorcycle coupled with her ability to secure a niche in the used clothes market has allowed her to establish relationships with clients whom not only expect her regularly, but whom also bring new business to her and bolster her reputation. This type of success and growth has set her apart from the many competitors in the clothing sales industry.
Shely was elected as the bank president (which is now at 25 members) one year ago. At each meeting, she opens the group in prayer, organizes all of the payments, does the final count of the money before passing it to the loan officer, and translates between Spanish and Creole. The majority of the women in her particular group are Haitian, and many do not speak Spanish yet. Shely’s dedication to her peers and their success is evident as she diligently reads them their responsibilities and rights as Esperanza associates at every meeting. As questions arise amongst her peers, she diligently seeks out the answers from her loan officer, striving to thoroughly facilitate communication between the loan officer and her group members. Shely is a true leader, and will undoubtedly play an important role in helping others to improve their own lives.
One of the unique ways that Shely shows compassion and empathy for others is through her sales on partial credit. While some may discredit this act of compassion as nothing more than strategic business, Shely has altruistic motives for offering clothing to clients when they can’t pay. She recognizes the poverty that surrounds her and is quite familiar with what it is like to be short of money, she believes is her duty to offer a necessity such as clothing to those who don’t have the means for paying for it upfront; when possible, Shely does not deny someone the dignity of being clothed. Through her due diligence and the strong relationships she has formed with her customers, she consistently recovers all of her debts while providing a basic service to those who otherwise would not have the means to pay for clothing articles in full.
Shely’s greatest challenge has been her living situation. Several years ago, Shely found herself living with her husband and, at that time, five children in a tiny rented home. Not only was there not enough room to sleep, but fighting and conflict between neighbors was constant and made for an unsafe environment — it was not a suitable place to raise children, she said. Leaving that home and purchasing the land to build their first home was no easy feat on her husband’s small income. However, today she stands with pride next to a home that she calls her own and gets even more excited as she points to the back half of her house that is partially completed, and constructed entirely cinder-block. Her own dream house is becoming a reality as we speak (s house of cinder block and concrete withstands the hurricanes and tropical rainstorms that leave so many poor families homeless in the Dominican Republic every month).
Shely has risen up as a true community leader in her church and community. She attributes much of her new found success in the last year to the confidence and sense of purpose she has gained as a small-business owner and president of the local micro-bank. Two years ago, she said that she was depressed and felt helpless as she and her husband struggled to feed and clothe their children on his salary alone, not being able to participate as an earner for her household was frustrating and demoralizing. Now, Shely not only stands with more respect in her house, but also stands as a respected recognized leader in her church and community alike.
Shely, her husband and their 7 children
Shely’s family standing in front of the new house they are building out of concrete block, which the income from their loans is helping make possible
Introduction to Microfinance and to myKRO.org
May 29th, 2008It’s a blistering hot day. A child runs by you, nearly naked, his skin smeared with mud and powdered by dust, his bare feet pattering down a road littered with garbage.
Under the shady branches of a mango tree sits an ebony faced woman, fanning herself, rearranging the countless pieces of gum and candies she has for sale in a deteriorating wooden briefcase.
You look over your shoulder. Now you see a lightly-framed man atop a rickety old bicycle, his face worn by years in the sun. He pedals slowly towards you, dragging behind him a cart full of brightly colored peppers, squashes, carrots and eggplant.
Now you look forward, and you realize that on just this one road people are running all types of businesses—they offer candies, vegetables, used clothing, tires, gasoline by the quart—you realize that you can change the faces, and you can change the country, but the micro enterprises you see on this very road, and the poverty you feel are commonplace to at least 90% of the world’s population. The very thought that so many people live so meagerly bears heavy on your heart, but then you realize that although their businesses are small and they are poor, these people are using their skills and creativity to make a living, and that they have the same potential to succeed as you do, the only difference is that they do not have the same access that you do, to education and credit.
In today’s world, in a modern and developed world, credit is an undeniable necessity. To say that credit has played a central role in the development of the richest nations, companies and entrepreneurs is indisputable. But what about the poor nations, the 90% of the world who lives outside of that ‘developed’ realm of life? We talk and debate year after year about how we can help our worlds poor, how we can eradicate hunger, how we can lift the poor out of poverty—and as we spin in circles trying to find the answers, we forget that the answer is actually very simple, that the answer lies in the potential and abilities of each individual out there, that it is not us, the ‘rich’ who are going to change their lives, but rather they themselves. The vast majority of the poor are intelligent and creative individuals, individuals that when given basic skills and tools that the ‘developed’ world has at their fingertips, prove that they too can excel as entrepreneurs, and productive members of their societies.
At myKRO.org, we believe that micro credit, the extension of small and manageable amounts of credit, and business training to the worlds poor is a dignifying, sustainable, and realistic way of alleviating poverty and extending the opportunity to a better future to our world’s less fortunate.
We invite you to read more, and to share your thoughts on how we can use this wonderful tool to make our world a better place. If you are interested in helping out, there are a couple ways to help:
