A Focus on Microfinance During the Obama Administration? We Hope, We Hope.

[Guest]

.

[Jill]

I’m not much of a multitasker so I only caught part of it, but….

While I was just now incredibly happily writing a former student I just heard from after over fourteen years of having lost all contact, I was watching/not watching Hillary Clinton’s confirmation hearing as presumptive Secretary of State that’s being held, right now, before the U.S. Senate.  Ears immediately perked when I heard her mention the word, microfinance, in her testimony.

What I managed to catch, which, hopefully, others of you will be able to expand upon, was her talking about how much she believed in women’s and in poverty issues, and so, had been especially interested in microfinance for some many years, now.  She then went on to say that Barack Obama’s mom had been very involved, herself, in microfinance when they were living in Indonesia and had actually planned to attend a conference, I believe in Beijing (but maybe not) that Hillary Clinton actually went to but that Obama’s mom missed because of the illness that soon after took her life.

Anyway, Hillary Clinton then went on to say that she knew that Obama’s views were, and of course, had to be “informed” by his mom’s passion for microfinance and she, at least, implied that microfinance would have special attention during the upcoming administration.

No, she didn’t mention Kiva, specifically, but we most of us know that husband, Bill Clinton, featured Kiva in his book, Giving.   I'm posting this partly because I felt tremendous pleasure even hearing microfinance and its importance discussed and felt quite grateful both to Mohammad Yunus (sp?) and to Kiva for waking me up to its great value in the world.

[Peter S]

thanks Jill, for alerting us to that.

here's a full transcript of Hillary Clinton's Statement at the Senate Confirmation Hearing today:
http://www.foxnews.com/politics/2009/01/13/raw-data-hillary-clintons-statement-senate-confirmation-hearing/

and here's a relevant excerpt from it:

Today more than two billion people worldwide live on less than $2 a day. They are facing rising food prices and widespread hunger. Calls for expanding civil and political rights in countries plagued by mass hunger and disease will fall on deaf ears unless democracy actually delivers material benefits that improve people’s lives while weeding out the corruption that too often stands in the way of progress.

Our foreign policy must reflect our deep commitment to the cause of making human rights a reality for millions of oppressed people around the world. Of particular concern to me is the plight of women and girls, who comprise the majority of the world’s unhealthy, unschooled, unfed, and unpaid. If half of the world’s population remains vulnerable to economic, political, legal, and social marginalization, our hope of advancing democracy and prosperity will remain in serious jeopardy. We still have a long way to go and the United States must remain an unambiguous and unequivocal voice in support of women’s rights in every country, every region, on every continent.

As a personal aside, I want to mention that President-elect Obama’s mother, Ann Dunham, was a pioneer in microfinance in Indonesia. In my own work on microfinance around the world – from Bangladesh to Chile to Vietnam to South Africa and many other countries -- I’ve seen firsthand how small loans given to poor women to start small businesses can raise standards of living and transform local economies. President-elect Obama’s mother had planned to attend a microfinance forum at the Beijing women’s conference in 1995 that I participated in. Unfortunately, she was very ill and couldn’t travel and sadly passed away a few months later. But I think it’s fair to say that her work in international development, the care and concern she showed for women and for poor people around the world, mattered greatly to her son, and certainly has informed his views and his vision. We will be honored to carry on Ann Dunham’s work in the months and years ahead.


Peter

[charity]

I am happy to see the mention of microfinance, but even more happy to see the apparent acknowledgement that we must do something about the suffering and injustices of people around the world.  In my opinion, making sure ALL people are healthy, well fed, educated, and have opportunities for betterment are going to be the only way we as a planet can achieve some sort of peace.  To me, providing developmental aid to poor countries is the best investment in the "War on Terror" we can possibly make. 

[Tatiana]

So true, Charity.

[Jan & John]

Thanks Jill and to Peter for the follow-up...

and I immediately focused on the phrase...

"...delivers material benefits that improve people’s lives while weeding out the corruption that too often stands in the way of progress."

...which is one of the main reasons why I like the focus of lending as opposed to just giving money to charity with no idea of whose pockets I have been lining.  Our 'people in power' need to take responsibility for where all our 'AID' money is actually going. 

jan

[RichardF]

Don't just hope.  Do.   

whitehouse.gov - CONTACT US

President Obama is committed to creating the most open and accessible administration in American history. To send questions, comments, concerns, or well-wishes to the President or his staff, please use the form below:

To: Contact Us, the White House
Subject: I have a policy question

During Secretary-designate Hillary Clinton's confirmation hearing, she stated, "We will be honored to carry on Ann Dunham’s work  [in international development] in the months and years ahead."

What is this administration's policy on international development that supports individual responsibility and participation, such as  person-to-person microfinance through organizations like www.Kiva.org?

[rinkuhero]

It'd be nice for Kiva to get some promotion from the US government, but I kind of also like that it's just people doing this, not governments. Part of the appeal of Kiva is that it's people voluntarily loaning to people, if the government gave, say, $10m to them to loan with, it'd lose some of that feeling.

[leslieforman]

I, too, was thrilled to hear Hillary Clinton mention microfinance in her speech!  I am especially inspired to hear that Nancy Barry is a close advisor to Barack Obama.  Nancy is a microfinance expert, having been president of Women's World Banking for many years.  She and Barack Obama's mother were colleagues there.  Her current initiative is called Enterprise Solutions to Poverty, and she focuses on fighting poverty through the core business models of multinational companies working in emerging markets. 

I wrote a full article about her here on the Wokai Adventures blog: http://wokai.typepad.com/my_weblog/2008/12/obama-microfinance-and-china.html

Happy Year of the Ox!
Leslie

[TheTatiana]

Maybe government grants could help fund kiva itself, the servers and infrastructure, while private lenders still provided the bulk of the loan funds.  Alternatively, the government could help with the establishment of MFIs in the developing countries, and kiva could provide some interest free loans for them.  Either way I'd be delighted to see the U.S. get involved in doing things like this and funding schools for girls all over.

[RichardF]

Perhaps the USAID site will be a good place to watch for developments on this question.


USAID Welcomes Secretary of State Clinton

FOR IMMEDIATE RELEASE
January 23, 2009
Press Office: 202-712-4320
Public Information: 202-712-4810
www.usaid.gov

WASHINGTON D.C. - On her second day on the job, Secretary of State Hillary Rodham Clinton visited the U.S. Agency for International Development's (USAID) headquarters to address the USAID staff and underscore her support for the Agency's work as "an equal partner, along with defense and diplomacy, in the furtherance of America's national security."
...


USAID and Microenterprise Development

For the past three decades, support for microenterprise development has been an important feature of U.S. foreign assistance. In this era of globalization, generating economic growth in developing countries while reducing poverty is a fundamental development challenge. To ensure that the contribution of microenterprises to key subsectors and national economies is maximized, and to ensure that the poor are not left out of market development, micro and small enterprises (MSEs) need access to finance, business services, and improved inputs; they also need a conducive enabling environment that facilitates rather than inhibits their participation in markets. Therefore, USAID focuses on three areas of strategic support: financial services, business development services, and enabling environment.
...
Please visit www.microLINKS.org to learn more or to share your views and experiences as we continue to deepen our understanding of what works, and broaden our reach to improve the lives of the poor majority through microenterprise development and economic growth.


microLINKS - Microenterprise learning, information and knowledge sharing

About microLINKS

microLINKS is a knowledge-sharing family of applications and tools designed to improve the impact of USAID microenterprise programs and activities. microLINKS gives you access to the latest information on microenterprise; best practices; proven approaches from USAID Missions, partners, and practitioners; a library of documents, reports, and tools; and an environment that supports and enriches communities of practice.
...

 
A microLINKS example...

After Hours #23: Risk Management and Microfinance: In Search of Market Failures
Microfinance After Hours Seminar Series   (Presentation 5 of 9)

On July 16, 2008, USAID's Microenterprise Development office held its twenty-third Microfinance After Hours Seminar, on the topic of "Risk Management and Microfinance: In Search of Market Failures". Tanir Helayel (MF Analytics) and Konstantin Andreev (Cygma Corporation) discussed  the increasing and evolving multidimensional risks facing the microfinance industry – and some possible solutions. Thomas Debass (USAID/MD) moderated the panel and the ensuing question & answers session.
 
Click here for a screencast of this presentation.

[rinkuhero]

Sounds good. From the transcript: http://www.usaid.gov/press/speeches/2009/sp090123.html

"I'm going to demand a lot. I don't think we have a choice. We have, with President Obama, someone who believes in development and diplomacy. Coming to the State Department yesterday sent a very strong signal. A few of you may even know, as I mentioned in my testimony before the Foreign Relations Committee, that the President's late mother was an expert in microfinance and worked in Indonesia. I have been involved in microfinance since 1983, when I first met Muhammad Yunus and had Muhammad come to see us in Arkansas so that we could use the lessons from the Grameen Bank in our own country. I was actually looking forward to being on a panel with the President's mother in Beijing on microfinance."

[Peter S]

. . . Alternatively, the government could help with the establishment of MFIs in the developing countries, and kiva could provide some interest free loans for them. . . .

This is already happening to a certain extent, through USAID - see links provided by Richard on previous page.

A number of Kiva's Field Partners reference support from USAID in their "partner page" on Kiva.  In addition to the five I noted in February last year (in this post here), we now also have Ameen in Lebanon and XacBank in Mongolia to add to the list.

Perhaps under President Obama and Secretary of State Clinton that list will get longer.

[RichardF]

More from USAID and Microenterprise Development Microenterprise Results Reporting, Annual Report to Congress, Fiscal Year 2007 (1.0 MB pdf) ANNEX C: REFLECTIONS ON THE POVERTY ASSESSMENT PROCESS (pp. 32-33) (pdf pp. 37-39)

As reviewed earlier in this Report, recent legislation calls for USAID to develop and certify low-cost tools to allow microenterprise institutions to measure the percent of their clients who are “very poor” – defined as living on less than $1 a day at purchasing power parity or being among the poorest half of those under the national poverty line – and to require their use by USAID-supported institutions. As USAID reads the relevant legislation, Congress’s underlying intent was two-fold: first, to provide microenterprise institutions more effective means to understand the economic status of their clients and to target their programs toward poorer clients; and second, to give USAID a means to track its success in meeting the legislative mandate that at least 50 percent of USAID microenterprise funding should directly benefit the very poor, and to report on that success to Congress and the public.

USAID has worked hard to meet these goals. In consultation with the broader microenterprise community, USAID has developed (and continues to develop) a set of poverty assessment tools that enable institutions to estimate their clients’ living standards in relation to one or more specified poverty lines, rather than simply distinguishing between more- and less-poor clients. USAID’s tools enable both microenterprise partners and other development programs to measure the living standards of a sample of households, with reasonable accuracy and at relatively low cost – certainly far lower than measuring each household’s income or spending directly. Calibrated against an appropriate poverty line or set of living standards, such tools can help partner institutions develop a better understanding of the kinds of clients they are reaching. Moreover, once a tool has been developed for a given country, it can be re-calibrated against different or additional lines relatively easily. In sum, USAID’s poverty assessment tools provide a general means to measure absolute household poverty accurately and relatively cheaply.

Unfortunately, the law as currently written requires that USAID’s poverty assessment tools be calibrated against what appear to be unrealistically stringent standards of being “very poor.” The pattern of results from the first round of implementation of the poverty assessment tools strongly support this interpretation:
• among the 31 institutions that implemented the tools, only one reached the 50 percent target, and none exceeded it;
• the two institutions with the second- and third-highest reported shares of “very poor” clients tied at 43 percent; and
• the simple average of “very poor” clients among all 31 reporting institutions was 21.6 percent.

To the extent that this sample is representative of the broader set of USAID partners, this pattern of results means that USAID could not meet the legislative target of 50 percent of funding benefiting the very poor through any reallocation of funds among its current partner institutions. That dramatically limits USAID’s ability to meet the poverty targeting mandate that the law creates.

The only obvious way for USAID to achieve the poverty target would be to devote a large share of USAID microenterprise funds to subsidize the higher costs of partners that committed themselves to target exclusively households living in extreme poverty. Doing so would drive up their costs substantially and compromise USAID’s longstanding emphasis on sustainability, which is widely considered to be one of the central tenets of best practice in microfinance. Sustainability is strongly and repeatedly endorsed in the 2000 and 2004 Acts as one of Congress’s central goals for USAID’s microenterprise development efforts.

By requiring that USAID calibrate its tools against an unrealistically stringent standard of being “very poor,” the law as currently written actually reduces the potential for those tools to help partners effectively target their programs toward poorer clients. Properly designed poverty assessment tools would provide partners with as much information as possible on the actual living standards of all their clients – including those living on more than $1 per day, but nevertheless living in what virtually any American would view as desperate poverty – suffering serious malnutrition, high rates of disease and child mortality, and constant vulnerability to a wide range of economic and health risks. Essentially all such clients lack access to formal finance. These are exactly the type of clients that USAID’s partners are eager to serve; as the results of the poverty assessments reported here confirm, they represent the majority of clients of those partner institutions. In contrast, the law as currently written mandates that USAID’s tools classify all clients who spend more than $1.01 per day as “not very poor,” suggesting that all other information should be discarded as unimportant.

Requiring USAID to calibrate its poverty tools against an unrealistically low poverty line may also undermine partners’ motivation for applying the tools carefully and consistently. Though simple and low-cost compared with full-scale household surveys, implementing a USAID poverty tool nevertheless absorbs several thousand dollars plus several weeks of staff and management time to attend USAID training, train internal staff, hire and train interviewers, plan and conduct the assessment, enter the data, and write the summary report. In line with the requirements of the law, the first set of USAID poverty tools boil all that time and effort down into a single number per assessment: “percent of very poor.” Having made that effort, if the partner looks at the results and concludes that the assessment tool is calibrated against a poverty line that is too far below its organizational mission to be relevant, that conclusion could easily reduce the effort it puts into obtaining accurate results in subsequent years.

Finally, it is not clear what policy objective is served in mandating the development and implementation of poverty assessment tools limited to answering a single question – what percent of clients fall below a certain line – especially when that line is set so low that it excludes most clients of almost all USAID partner institutions. Especially at a time when the microenterprise field is moving away from a narrow focus on poverty measurement toward social performance measurement, which looks at a wide range of economic and social indicators – and which is finding favor among major private investors in microfinance – it makes little sense for USAID to focus its measurement efforts so narrowly on a data point not grounded in clear, practical implications for its partner institutions.

USAID welcomes the opportunity for a renewed discussion over the appropriate parameters of a poverty targeting mandate for the microenterprise institutions it supports, particularly regarding the definition of the “very poor.” With a growing number of poverty assessment tools coming on line, with the experience and results from the first year’s application of those tools in hand, and with growing experience elsewhere in the microenterprise field with alternative social performance measurement, we now have an opportunity for a far richer and better-informed discussion of these key issues than was possible when the legislation was passed. Shifting the focus of USAID’s poverty assessment tools to more realistic poverty lines, developed in collaboration with the microenterprise community and Congress, would enable USAID to better target its programs toward the poor while continuing to support progress toward sustainable, cost-effective microfinance and microenterprise development programs.

[RichardF]

Don't just hope.  Do.  

whitehouse.gov - CONTACT US

President Obama is committed to creating the most open and accessible administration in American history. To send questions, comments, concerns, or well-wishes to the President or his staff, please use the form below:

To: Contact Us, the White House
Subject: I have a policy question

During Secretary-designate Hillary Clinton's confirmation hearing, she stated, "We will be honored to carry on Ann Dunham’s work  [in international development] in the months and years ahead."

What is this administration's policy on international development that supports individual responsibility and participation, such as  person-to-person microfinance through organizations like www.Kiva.org?

Here is the reply I received.  I couldn't find anything at www.WhiteHouse.gov related to microfinance as international development.

From:	The White House - Presidential Correspondence
To:	Me
Date:	3/18/2009
Subject:	Thank you for your message

Dear RichardF:
 
Thank you for taking the time to share your views.  Americans across the country are eager for information about the state of the economy, national security, and a host of other issues. President Obama is committed to making his Administration the most open and transparent in history, and the Internet will play a major role in delivering on that promise.  We hope that you will join us at www.WhiteHouse.gov to learn more about President Obama's views on a range of topics, as well as his efforts to provide a window for all Americans into their government. Your voice is shaping our country's future, and we encourage you to join us online, share your thoughts, and build a community of connected citizens that will help address the pressing issues of our time.

Sincerely,
 
F. Michael Kelleher
Special Assistant to the President and
Director of Presidential Correspondence

[rinkuhero]

Isn't that a stock response that they send to everyone?

[A Nonny Mouse]

Yes, I agree...I was going to say what a spiffy form letter you've received!   

Nonny

[TheTatiana]

I wonder how they aggregate the data they receive from that source?  Like, would you categorize them by issue, then rate them on a scale of 0 - 10 of how substantive they were with 0 being something from a total crackpot and 10 being something from someone who cited lots of relevant documentation?  Then multiply sum each issue's responses * substance rating and use that to rate total issues?

Unfortunately, that would mean really important things that only a few people recognized would still be lost in the shuffle.

I wonder if any of these get read?  I hope so.

[RichardF]

Rejoice Aware is currently in the business of selling charcoal in the market. She is requesting a loan to stock more bags of charcoal to sell. Rejoice is 40 years old and married to a peasant. She has eight children and her children go to school. With the extra profits from her loan, she hopes to be able to build a charcoal store.