Greening the Microcredit World

[Guest]

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[SeanHowell]

Microcredit is a way make a dramatic change to an individual, a family , and with enough momentum a region.  Often times, these loans are going to some of the least developed regions that in some ways are running sustianable regional agricultural programs.  I'd like to help continue microcredit-world's look into what are green viable businesses that we can locate in these regions.

One consulting organization is http://greenmicrofinance.org/

There are numerous projects in the works. 

Recently there was an article in Harvard Business. It reported on the fact that microcredits often support current consumption than fuel new enterprise.  Creating solar solutions would actually add resources to a region.

• http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_action=get-article&articleID=F0709C&ml_issueid=BR0709&ml_subscriber=true&pageNumber=1&_requestid=38428
  
  Consider these facts: Many heads of microfinance programs now privately acknowledge what John Hatch, the founder of FINCA International (one of the largest microfinance institutions), has said publicly: 90% of microloans are used to finance current consumption rather than to fuel enterprise.

Green Microcredit
Environmentalists have begun to partner with microcredit NGOs to provide financial services for the poor that are ecologically appropriate and sustainable. They are teaming up with Rotary International to send solar ovens to poor families victimized by the 12/26 Asian Tsunami in Sri Lanka. Another three-way partnership is between Fonkoze, the major microcredit NGO in Haiti, a U.S. green NGO, and a solar-energy vendor piloting equipment that will generate electricity for Haitian microentrepreneurs. Several NGOs and universities are collaborating on research about pro-green policies for microcredit as well as holding conferences and funding student internships in green microcredit. HELP International trains its college-student volunteers to implement Square Foot Garden methods, using compost to double or triple vegetable produce for poor families in Central America. A number of other NGOs are giving loans for environmentally sustainable projects like bio-gas systems, micro-drip irrigation, Lorena Stoves to reduce in-house smoke particles, low-tech water pumps, and so on.  (http://www.kbyutv.org/smallfortunes/innovations/)

JPMorgan and Bank of America both are dramatically expanding developed world Green Lending
http://en.wikipedia.org/wiki/Green_lending

UN is working on Green Micro-Credits

http://www.uneptie.org/energy/act/fin/docs/UNEP%20Energy%20Finance%20Brochure.pdf
Such programmes are underway today in India (photovoltaic), Tunisia (domestic solar water heater), Morocco (hotel based solar water heater) and China (renewable energy), and others are in development in Egypt and Indonesia. Although the local context for each varies considerably, there are many common elements that have allowed UNEP to build experience and transfer best practice across countries and regions.

The Sustainable Energy Finance Initiative, or SEFI19, aims to foster a sustainable energy fi nance community that brings together
fi nanciers, engages them to do jointly what they may have been reluctant or unable to do individually,
and catalyses public-private alliances that together share costs and lower barriers to investment. SEFI
operates using a three pronged strategy of information provision, networking and partnerships.

http://sefi .unep.org

I'd be interested to see what other resources people have assembled for green microcredits and if we can put together a team to 1) Identifiy MFIs already engaged in green lending and 2) identify existing MFIs not using green microcredits that could have a decent ROI for going green.

[Soriak]

I'm not sure this is such a good idea... environmentalism is a luxury that they just can't afford. The installation cost of photovoltaic energy, for example, is extremely high. According to http://www.solarbuzz.com/StatsCosts.htm it would cost $20,000 to replace 1/4th of the energy need of an average household in Sacramento.

The installation cost wouldn't pay off for 10+ years (possibly much longer, given their low consumption and cheap electricity available) and this is assuming nobody steals or breaks it in the meantime. If there ever were a malfunction, they'd have no way to repair it: no money AND no one capable of doing so in the community. I have to admit, however, that I don't know how high a household's electricity bill is in the developing world.


Regarding the HBR article: They make a good point about loans spent on current consumption. Kiva, however, funds mostly loans that fund investment (mostly expanding the business) - with the exception of the occasional home repair loan. (which, I suppose, may be an investment too - one in safety and health)

[BenElberger]

Hey Guys,

As a heads up, we are pursuing some interesting partnership opportunities in this arena but nothing to announce yet.

In terms of the cost efficiency of solar units for electricity, I've personally heard answers from all over the spectrum on whether it makes sense.  Some say it's a huge cost savings because people need to pay for kerosene to cook anyway so when you take out those costs, the net savings are big and pay off soon.  Others say the systems break down quickly, most companies don't provide the necessary service to fix them, and loan terms need to be sufficiently long to make it work.  We'll hopefully be able to get better and more answers on this over time and hope to show you some greener loan options on Kiva soon!

Ben

[hbcheney]

Hi,

I just saw a PBS show about Kiva. It sounds great and I want to participate, but, the one concern I have is that the businesses are not being screened for environmental impacts. 

For example, one the businesses featured on the PBS show was a woman named Molly who wanted to expand her charcoal-selling business in Uganda.  A week or so ago I saw another PBS show about how the mountain gorillas in Africa are almost extinct b/c native people are burning down their habitant to create charcoal, since charcoal is one of the only viable businesses they have there.

I wholly support fostering third world businesses and helping them become more self-sufficient, but NOT if those businesses have serious detrimental environmental impacts.  There are enough already-existing businesses all over the world (the US included) that at minimum are not environmentally sustainable and at most are causing severe damage to our planet… let’s not foster any more of them!   

Can you tell me what Kiva is doing about this issue?  Thank you.

[Kay]

Kiva does not screen the businesses for their environmental impact.  Kiva's stance is at that each lender can choose to lend--or not to lend--to each business posted, for whatever reason.  Hence, you essentially have to provide your own screen.

[miGIRLS]

 
WARNING: I rambled on here, so feel free to skip this post.

I think this is just going to have to be one of those issues for now that is governed by the feelings of individual borrowers. There's an environmental impact of most anything, or a health impact, or a cultural impact, or something negative. For example, I cringe when I see a wood table with raw chicken laid out on it for sale, and I am thankful I don't have to  eat it, but I still fund the loans.

Some businesses do grate on me enough to avoid, like lottery ticket businesses, and cigarettes. But, I try to look past my ideals. I am a militant non-smoker and prefer not to support that industry, yet most grocers sell smokes and I will fund them. Off Kiva, I support an Army unit with care packages and they enjoy cigarettes. I don't think our military personnel should be allowed to smoke, but they are, so when they're sitting in a cold, muddy bunker getting shot at, their need for a smoke wins over my ideals.

Does it make sense that if we boost an entire area out of poverty, the environment will benefit? When people are not so desperate just to survive, they can be more concerned about their forests. The USA hasn't set much of an example. Don't we live in the most wasteful nation on earth? I don't expect Kiva to limit the subsistence of those in poverty based on my "green" trends. I drive a 22mpg car, shower daily (a very Western perk), and my dogs eat better than many people. Limiting the opportunity for a person to simply survive past the average life-expectancy because butterflies will thrive in their forest is a bit beyond my environmental conscious. And, I love butterflies. 


We still need to work on our own detriments, like our incredible consumerism which is causing massive environmental damage through China ... But isn't that why our products are produced there? Because US compliance with EPA and OSHA regulations are expensive, so we import from countries where those guidelines are non-existent? Aren't we pretending we are green-friendly, when we are really just exporting our destructiveness? We all live with some level of hypocrisy, because we're human, and we're culturally or naturally self-serving and self-indulgent, along with enjoying a fair amount of denial.

I support efforts to protect our environment, and applaud any efforts my KivaFriends make  to do so. Maybe we can make an impact together to help some communities, so they can afford to indulge in industries which are not as destructive. We can make a big difference by changing the BIG picture. 

As many KivaFriends know about me, I'm conflicted just by the issue of DEBT ... I teach Dave Ramsey's Financial Peace University course and am passionate about the principals, yet I'm a Kiva loaner to people elsewhere. Does wearing an orange FPU "FREEDOM" bracelet, and a green Kiva "I'M A LOANER" bracelet make me carbon debt neutral? 

Peace & Prosperity

   and

Karen

[miGIRLS]

If you haven't ordered a Kiva bracelet, you've missed this little bit of humor in the description.

Wristband is green with "I'M A LOANER" on one side and the Kiva logo on the other. Fits most people with wrists.

 

Fits most people with wrists?  

[Dagfinn]

Karen, Karen, Karen - I love you today and all of tomorrow for those words 

I think you hit it right on - have nothing to add, just to say YEZZZZ you got it absolutely right!

[Peter S]

Out of so much to agree with in that excellent post of Karen's, I just wanted to focus in on this...

...I don't expect Kiva to limit the subsistence of those in poverty based on my "green" trends...

...and widen that thought out slightly with an example of the "law of unintended consequences" that seems to operate in surprising ways whenever environmental issues are involved, and should make us extremely cautious about requiring Kiva to export our environmental concerns to the developing world.  Nothing is ever as simple as it seems...

Ford Motor Company:
on a page about its FFVs, Flexible Fuel Vehicles
Benefits of Ethanol
Wondering what all the fuss about using ethanol is about? Consider the benefits of using ethanol:

• Because ethanol is produced from crops, it's renewable and reduces the United States' dependence on imported oil
• Compared to gasoline, ethanol emits 18-29% less CO2 (greenhouse gas)
• The use of 10% ethanol (E10) in gasoline nationwide would cut gasoline consumption by over 10 billion gallons annually
• Today, ethanol is produced mainly from corn, but can be made from virtually any starch feed stock such as sugar cane, wheat, or barley.
• Ethanol is biodegradable when spilled

well, that sounds fine, but before anyone rushes off to buy an FFV running on E85, and bask in the warm glow of a reduced carbon footprint, maybe they should pick up on the clue given in the phrase "feed stock" in the Ford quote and stop by here first:

26 October 2007 An independent United Nations human rights expert today called for a five-year moratorium on biofuels.

Jean Ziegler, the UN Special Rapporteur on the right to food, told reporters in New York that converting crops such as maize, wheat and sugar into fuels was driving up the prices of food, land and water.

Noting that the price of wheat has doubled in one year, Mr. Ziegler warned that if the prices of food crops continued to rise, the poorest countries will not be able to import enough food for their people.

While the arguments for biofuels is legitimate in terms of energy efficiency and combating climate change the effect of transforming food crops such as wheat and maize into agricultural fuel is “absolutely catastrophic” for hungry people and will negatively impact the realization of the right to food, he said.

“It is a crime against humanity to convert agricultural productive soil into soil which produces food stuff that will be burned into biofuel.”

Mr. Ziegler argued that biofuels will only lead to further hunger in a world where an estimated 854 million people – 1 out of 6 – already suffer from the scourge; 100,000 people die from hunger or its immediate consequences every day; and every five seconds, a child dies from hunger.
more: http://www.un.org/apps/news/story.asp?NewsID=24434&Cr=food&Cr1=

or here (from the International Monetary Fund recently)

. . .But more recently food prices have jumped sharply, at least in part because of an attempt to encourage the use of so-called biofuels in industrial countries. Biofuels are a type of renewable energy source; that is, you make ethanol from corn, mix the ethanol with gasoline to drive your car, and also grow more corn. As an approach to energy security, this has some appeal—it's a diversification of energy sources.
. . .
The surge in corn prices over the past two years has been remarkable—prices have roughly doubled both in the United States and worldwide (although they have fallen slightly in recent months). This then has knock-on effects on other crops, as land is switched from wheat on the margin, for example, into corn or, as has been most marked in Europe, out of dairy production and into crops used for biodiesel (for example, rapeseed, whose prices have also increased sharply). In the IMF staff's assessment, a significant part of the latest jump in food prices can be traced directly to biofuels policy.
. . .
the effect in rich countries will be limited for a simple reason. Food is a relatively small part of what people consume in most advanced economies—about 10–15 percent on average, and some of that relates to processing and distribution rather than the cost of the raw material—and is therefore a small part of the consumer price index.

Food is a much larger component of the consumer price index in many poorer countries. For example, in China and other emerging markets, food is about 30 percent of what consumers buy, and, in many low-income developing countries, it 50 percent or more. This means that the same global increase in the prices of corn, wheat, milk, and meat immediately becomes higher inflation in poorer countries.
. . .
The really bad news is for poor people in urban areas. Quite aside from considerations of macroeconomic policy, the impact of high food prices on these people is straightforward and downright painful. They need to pay more for what they eat. With population growth continuing in many poorer countries, rising food prices will put increasing pressure on the budgets of the very poorest. People who produce enough food for themselves and the market can benefit (depending on exactly what happens to the prices of what they produce and what they consume), but the urban poor and many of the rural poor are losing out.

That increasing pressure on the budgets of the very poorest has already resulted this year in many Mexicans being unable to afford the corn to make tortillas.

Each of us as individuals can make decisions about which entrepreneurs to fund - as Kay said, you provide your own screen - but for me personally, while American and European policies on biofuels are exporting hunger to the developing world, I'm more than happy $25 at a time to help people put food on their plates in any way they see fit.

P

[Robert]

Converting agricultural land to energy production not only causes problems in the food sector, but is simply unable to solve the energy problems.

I quote from a report about this issue in France, page 41:

"In 2003, the total area occupied by bio-crops in France was 320’000 hectares. This included 300’000 ha dedicated to VOME production and 20’000 ha for bio-ethanol. It is expected that in France sufficient agricultural land is available to meet the 2010 goal of European Directive 2003/30/EC. The estimated area that is required for biofuel production in 2010 is between 1.5 and 2 million hectares. However, the general director of Diester Industrie is not certain if sufficient conversion capacity to produce biodiesel can be built before 2010."

Directive 2003/30/EC prescribes in Article 3 (1) (b) (ii) that 5.75% of petrol and diesel in the transportation sector must come from agriculture products by 2010. If a large agricultural country such as France has trouble to meet this political requirement, what about large non-agricultual countries, such as the UK? Importing from Ukraine for instance, which used to be the grain chamber of the Soviet Union? And where sshould the rest of Europe or the world get the agricultural energy from? Maybe from the Amazonas? It simply can't work. It's not only a price issue, but also a quantity issue.