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microplace » Women's Courage

Posts Tagged ‘microplace’

Despite its name, IFAD is no fad

February 24th, 2011

Before I begin this week’s post, I’d like to provide an update on my microfinance project—this past week, I got my first repayment on my microfinance investment through Kiva.org. Of my $25 invested, I so far have recouped $3.12 from the Let’s Unite Group, which aims to increase the production capacity of a rural bakery in Sierra Leone. I’m excited to re-invest it, but I think I’ll wait til I’ve recouped more of the investment before helping someone else. I wish Kiva would provide status updates—I think it’d be more rewarding and satisfying to know if the borrowers are faring better off now. As for MicroPlace, the for-profit alternative, it seems as though I will not see any return until September, so further updates are unlikely.

For this week’s topic, I want to address how microfinance could potentially help to support small farmers in Africa. This past week, former UN leader Kofi Annan claimed that with aid, Africa could feed the world’s farmers. With the help of the UN’s International Fund for Agricultural Development (IFAD), small African farmers have already been helped—“partnerships involving IFAD and AGRA have leveraged US$160 million in affordable loans to agriculture from commercial banks in Ghana, Kenya, Mozambique, Uganda and the United Republic of Tanzania.” (http://www.reliefweb.int/rw/rwb.nsf/db900sid/KHII-8EA5VF?OpenDocument)

More relevant for the subject of this blog, of IFAD’s microfinance portfolio (as agriculture is investment-intensive, holding an exclusively microfinance portfolio would in many places be an ineffective strategy) 80% has been loaned to women. In African nations, these small, low-interest loans seem particularly poised for success, as small agriculture has long been the pattern in many nations, and women have long played a crucial role in raising plants. Through IFAD’s loans, it is conceivable that more countries could start to shake some of their dependence on foreign crops, that they could help to curb issues of hunger, all while simultaneously giving rural citizens the ability to empower themselves. And by charging a small interest rate, the impact of IFAD stands to grow with time. And although countries continue to have issues with loan defaults (take a look at http://allafrica.com/stories/201102240919.html for a discussion of Rwanda’s incredibly low rate of repayment), I still remain optimistic that ethically minded organizations like IFAD can effect some valuable change.

Microloans, Micro Impact?

January 20th, 2011

As I have continued my research into the topic of microloans, I came across an article in the New Yorker (http://www.newyorker.com/talk/financial/2008/03/17/080317ta_talk_surowiecki), which argues that despite much of the fanfare surrounding loaning small sums of money to struggling entrepreneurs, the net impact on their economies is negligible. Most microloan requests are not, in fact, for massive expansion of business or for the hiring of new employees; rather, the majority of them serve to carry a business over through a down period.  Phrased differently, most microloans go toward single entrepreneurs who are working toward goals of personal subsistence, versus toward the goal of creating thriving businesses that hire many of their countrymen.

Indeed, a quick survey of most requests on Kiva and Microplace confirms this. The first result I found, that of Rebecca Del Socorro Garcia Mendieta, is a woman seeking additional funds so that she can buy additional supplies to grow her personal business in retail. Understandably, she has an entire family to support and thus may not be inclined to hire additional workers she would have to pay, but it means that the impact of the loan could prevent more substantial change. (http://www.kiva.org/lend/266894). This is not to say that her work is invalid, simply that in countries with high unemployment especially, some more consideration should be given to entrepreneurs who want to create jobs.

Or, take as a counterexample Microplace, the for-profit microloan aggregator I mentioned in my previous post. Microplace deals largely with umbrella organizations, which make the individual loans. There, it is impossible to see what entrepreneurs specifically want to be doing with their money, nor what their plans for hiring additional employees are. (https://www.microplace.com/investments/details/FINCA+Microfinance+Notes+-+4yr+-+350bps?cmp=featured_listing)

As a part of this project, I have reached out to Kiva to ask whether they would be willing to begin featuring information about whether microloans will be used by entrepreneurs who hope to create businesses that employ more people than themselves alone. Whether they respond remains to be seen.

Next week, if I hear back, I’ll talk about the response and then focus on some of the organizations such as the Omidyar Foundation and Google.org that have begun to get into funding mid-level entrepreneurial ventures in the third world.

Microloans: Promise and Peril

January 13th, 2011


“Can I borrow a feeling? Could you send me a jar of love? Hurtin’ hearts need some healin’. Take my hand with your glove of love.”–Kirk Van Houten

As with many authors before me have done with subject-driven blogs, I decided to start mine off with an italicized quote.  Over the course of the next two months, I will be exploring a subject much more substantial than this quote by Mr. Van Houten might portend, that of women, microloans, and the cultures they work within.

Microloans: a Primer

Much like their macroloan counterparts (generally just called “loans”), microloans are small sums of money banks or dedicated financial institutions make available to people, generally women, in impoverished nations.  With these loans, they theoretically can invest in themselves through learning a trade, developing a business, or improving one they already have.  Eventually, this grants them a degree of success that will allow them to repay their debts.

While microloans are anchored in philanthropic considerations, they are not intended as philanthropy.  Instead, loans given are expected to be repaid, with the central idea being that doing so fosters in entrepreneurs a sense that they are believed in and entrusted.  As stated on the Kiva.org website, they use microloans rather than donations because it imbues loan recipients with senses of:

  • Dignity: Kiva encourages partnership relationships as opposed to benefactor relationships. Partnership relationships are characterized by mutual dignity and respect.
  • Accountability: Loans encourage more accountability than donations where repayment is not expected.
  • Transparency: The Kiva website is an open platform where communication can flow freely around the world.



Although microloans have been used as far back as the 1700s and likely have parallels still earlier than that (see for a well-written discussion of the impact of micro-loans in helping the poor in Ireland, and how the semi-philanthropic efforts became less helpful with time), microloans as we understand them today emerged in the 70’s through economist Muhammed Yunus.  With his Grameen (Bangla for “rural”) Bank, he began loaning small amounts to impoverished women and men in a local village called Jobra.  Through its success and the eventual success of neighboring communities, the program expanded to encompass all of Bangladesh and, eventually, the poor nations worldwide.  Grameen Bank is currently 90% owned by the rural people that Grameen has helped, while the other 10 % remains in the hands of government.  (http://www.grameen-info.org/index.php?option=com_content&task=view&id=19&Itemid=114)

Other organizations have since followed in Grameen Bank’s footsteps, such as the aforementioned Kiva.org, the for-profit variant Microplace, and, more locally, the Valley Economic Development Center in the LA area.

Conflict and Controversy

Microloans are not without their dissidents.  The number of microloans issued per year appears to be growing at what some naysayers say is an unsustainable rate.  There’s an increasing rate of default, and some critics have alleged that microloan advocates have pressured rural workers into taking loans, only to harass them when they are unable to repay their mounting debt.  Additionally, it remains to be seen how open most societies are to the financial independence such grants give to women.  I hope to explore some of these darker sides to microloans through the course of this quarter.  (Check out http://www.nytimes.com/2011/01/06/business/global/06micro.html?_r=1&ref=vikasbajaj for a more in-depth look at some of the downsides of microloans.)

Firsthand Experience

As I wrap up this first post, I wanted to note that in order to better immerse myself in this subject, I signed up for Kiva and donated the last $25 needed for a woman named Ramatu Kamara in Sierra Leone to expand her baking business.  The time for repayment is anticipated to be ten months, and the organization has a relatively high delinquency rate (3.10%), so I am unlikely to see any meaningful contact or return this quarter, if at all.  That said, with any return on the money I will be able to re-invest in other entrepreneurs, or I can donate it all to Kiva.  (With Kiva, I can’t profit off of my loans).  That said, should any updates come in, I will be sure to share them.  By the same token, I will reach out to some of the other donors in the same project in order to get their impressions of the program. (Learn more about the recipient here: http://www.kiva.org/lend/264387#lenders_to_group).

For balance, I have also invested $25 through the for-profit MicroPlace, which I already feel a little bit uneasy about.  The money will be loaned to a South African organization named Kuyasa, which supports far more women entrepreneurs as they continue to recover from the impact of Apartheid.  The interest rate is low (1%), and I have justified my activity in the program to myself by promising to re-invest any proceeds I make in women.  I will be interested in seeing how my involvement here contrasts with what happens with Kiva, and I just hope that both actions result in far more good than harm.

Entrepreneurs Ramatu Kamara , Janet Kamara, Kadiatu Kamara, Liama Turay, and Marie Kamara.