Last weekend I attended Rotary’s Symposium to Eliminate Poverty Sustainably (STEPS) and was blown away at the commitment to service of Rotarians around the world. This symposium gave me the opportunity to hear about the projects Rotarians have supported in Peru, Indonesia, Haiti, and Afghanistan.

Marilyn Fitzgerald, author of If I had a Water Buffalo: Sustainability and Life Lessons  [1], is a member of Rotary’s Action Group for Microcredit (RAGM) who gave a fascinating presentation to this large group of engaged and well-intentioned Rotarians. Marilyn reminded the audience to think carefully about who knows best in a  community where we as outsiders are going in to achieve development, and warned against the trap of seeing problems from our Western perspectives and failing to ask the community to identify their own needs and challenges. She urged us to remember that even the most well-intentioned development worker can cause harm if the beneficiaries are not stakeholders in all stages of a project. From her field stories, Marilyn has clearly had the opportunity to evaluate a variety of development projects and, in her experience, microfinance projects were the most successful as they give people an opportunity to improve their situations in life with pride and dignity. She shared two notable stories:

The first: Marilyn and her Rotary Club decided to support school expenses for children in a village in Indonesia. Each year, she went to her club to raise the $72,000 it would take to cover the educational expenses for the children and each year she would go back to visit to see how things were moving along. On one of her trips, a villager named Nyoman asked if she would instead buy him a water buffalo which would allow him to triple his rice production and cover the costs of his three children’s education. Initially, Marilyn declined – she was not in the water buffalo business and the project was focused on education not agriculture. But upon learning the cost of a water buffalo was $250, she requested the gift from her family that Christmas. Her family gave her the $250 for the water buffalo and the funds were sent to Nyoman. A year later, she went back to see a very excited Nyoman, his thriving rice field, and the water buffalo – named “Marilyn” in her honor. Subsequent to this, two other requests came – one from the women in the village for piglets they could raise to earn income; the other from the children for baby chickens they could take care of and sell the eggs. Both the women and children would use part of the earnings to cover the costs of education. Three years later, the villagers could cover the cost of educating  their children. Marilyn reflected on the fact that $650 put toward income generating activities had attained a goal (providing education for the village’s children) and had eliminated the need to raise $72,000 annually. Imagine how much money could have been saved had the villagers been asked early on how they could be assisted in building futures for themselves?!

"Newer Math"... and smarter math, too! A slide from Marilyn's presentation

Her second story: On a trip to Guatemala to visit Rotary support projects, Marilyn was taken to see several local entrepreneurs including a woman who made and sold tortillas. On such trips, it is often customary for funder-representatives like Marilyn to be given the 5-star treatment and to be showered with gratitude by the beneficiaries of the funds. Upon arriving at this vendor’s stand, the translator presented Marilyn and told her, “This is Marilyn from the United States! She gave you the loan to start your tortilla stand!” The woman, unfazed, looked Marilyn directly in the eyes and replied, “And I paid you back!” Marilyn reflected on how we in the US would react if a loan officer from our bank showed up at our place of business expecting such fanfare.

Hearing these stories reinforced for me the power of Oikocredit’s focus: Investing in People! Our staff, investors, and volunteers are prepared to share what they have, and recognize that development must be done with respect and in cooperation with those who benefit from our investments.

Like many people, I begin each year with much reflection and contemplation. Personally, I’ve been looking for inspiration, thinking about the conditions in the world and my contribution to the solutions. How can I be a citizen of the world and a contributor to my society at home and abroad?  What is my responsibility to the larger society, especially towards the children of the world? I’m slowly reading It Takes a Village: And Other Lessons Children Teach Us and compelling arguments are made as to why I should invest my spiritual, mental, and financial resources for children who are not my own (my godsons and the recent additions to my extended family are the children I generally claim). I’ve long known that children need to be inspired and that every child needs a champion. I look back on my own life and recognize just how blessed I was to have waves of inspiration – family members, teachers, and counselors. I was told that I could be and do anything and my childish eyes, ears, and heart believed all was possible. I carried that optimism with me throughout the years.

Last night, I attended Tavis Smiley’s Remaking America: From Poverty to Prosperity. The stage was filled with heavy hitters in American society – among them Michael Moore, Suze Orman, and Cornel West. The discussion was as much about different approaches to poverty alleviation (from government policies to individual decisions) as it was about the characteristics of poverty (lack of money and educational opportunities, and food insecurity).

A theme that ran through the conversation was the power of solidarity, that is, the power of strength in numbers which translates into a movement. That theme brought my thoughts back to Oikocredit and our Join the Movement campaign. We count over 43,000 investors globally who have chosen to contribute some of their individual and institutional energies – through their investment portfolios and volunteering their time – to a vision of empowerment, and achieving social and economic justice. We (Oikocredit investors, volunteers, and staff) recognize that we can be creators of or contributors to hope…and we actively make the decision to contribute our voices through our diverse resources.  I am proud to stand with like-minded people who recognize that we can each be a catalyst for all that is possible, fair, and just in the world.

My childhood was one of inspiration – and I continue to be inspired by those with whom I work and those who are the beneficiaries of our efforts. I love the fact that hope was embedded so deeply in my DNA and that a strong desire to achieve success was balanced by a commitment to serving those less fortunate, those with fewer opportunities. Today, as the national director of Oikocredit USA, I’m channeling all that I’ve been blessed with – education, training, rich work experiences – to help to create a little bit of hope for every person, every community, our investments reach.

I look forward to a productive and successful 2012 with our investors, colleagues and volunteers, here in the US and around the world!

Hope defined (Merriam Webster)

: to desire with expectation of obtainment

2

: to expect with confidence : trust

Part 1: The Investor

Being an investor in Oikocredit is more than just a passive contribution to global poverty alleviation. Sometimes, being an investor in Oikocredit requires work – I can attest to that on behalf of the investors who are patient with our basic service features – paper-based statements, lack of online account access, and payment of interest and/or principal by check instead of electronic delivery. My job at Oikocredit USA for the last year has largely been client service; I’m the go-to-gal when it comes to questions, problems, and praise. Though we don’t have sophisticated systems, our investors can rest assured that their funds are invested in incredibly innovative and world-changing projects for the benefit of the less fortunate across the globe. So here’s to our investors, who are the very beginning of the Oikocredit value chain!

Volunteer investors from our Northwest Support Association in Seattle discuss expansion strategies

But the work of many investors doesn’t end with just a commitment of investment capital. Many are investor-volunteers who have helped to raise over half (60%!) of Oikocredit’s nearly $700 million portfolio. That is an incredible statistic, and a most certain attestation to the active commitment of Oikocredit investors our social mission. It’s a commitment to equality and compassion using the vehicle of finance. This throng of Oikocredit investor- volunteers compiles a long line of links to complete the first part of the Oikocredit value chain.

Part 2: Oikocredit!

International staff gathers at the Oikocredit International Annual Staff Meeting this fall

Oikocredit makes up the second section of links in the value chain. The funds from our investors are placed in our general development portfolio and are disbursed to partners in over 70 countries. We’ve got staff in the Netherlands and on the ground in developing countries with all sorts of expertise – they are charged with managing the portfolio, monitoring risk, developing the social performance policy, supporting institutional capacity building of partners, and working to ensure our loans (funded by investors) are paid back – which they have been for the last 36 years we’ve been in business. We have our investor relations offices in the US and Europe working to raise funds and educate local constituents on our work. It’s a dedicated, diverse and tight-knit crew of over 200 staff people around the world who make up the second section of links in the Oikocredit investment value chain.

Oikocredit USA interns and myself with Frank Rubio, Regional Manager in South America

Part 3: Our Partners

Our project partners are the third link. Who are they? They’re the 890 mostly locally-based organizations who are the direct recipients of Oikocredit’s funds. It’s difficult to pigeon-hole our project partners – they’re pretty diverse and they engage in lots of different kinds of activities. Our partners are microfinance institutions (MFIs), agricultural cooperatives, trade cooperatives, organizations that provide training and capacity building, among others.

Ikongo Rural Co-operative Savings and Credit Society in Kasese, Uganda, one of Oikocredit's partners

The value chain from investor to end-borrower would simply not work without this third stretch of links. Oikocredit believes that effective microfinance and sustainable economic development requires localized solutions. We pick our partners because of their respective commitments to reaching local people with particular needs by utilizing targeted approaches. These institutions turn our loans into financial products and services that assist nearly 30 million individuals today.

Part 4: The End-Borrower

A borrower of Adhikar Microfinance, Oikocredit's project partner in Orissa State, India providing sustainable and affordable loans for women. Adhikar focuses on the social as well as financial empowerment of its clients.

When Oikocredit talks about “investing in people,” end-borrowers are the people we mean –end-farmers, market vendors, trainees, etc – who are the final link in the chain. These individuals add value to their local communities and familes…and to Oikocredit’s investors. End-borrowers use their funds to generate more income, increase their cattle, and expand the acres of coffee plants or cocoa trees they own.

Last month I got a rare opportunity to shake hands with two of these individuals. Fatima Ali and Felicia Mensah are cocoa farmers and members of Kuapa Kokoo, a cocoa farming cooperative made up of 64,000 farmers in Ghana. To call these women impressive would be a gross understatement – they’re hard workers, successful farmers, leaders in their communities, exceptional women in their society, and young mothers to boot. Fatima is the youngest member of the National Executive Council, which governs the cooperative and devises strategies for growth and development.  Here’s a clip of Felicia and Fatima explaining to me what it would take for me to become a member of their cooperative…

Felicia explained to me the overarching idea of Kuapa Kokoo, which is ‘Nobua’: “if you help me, I also help you.” This reminded me of an email received from an investor who wrote to explain why he invests in Oikocredit. “It is not just a money thing,” he wrote, “but it is my way of linking myself with others who are sharing the vision of helping people develop a better life for themselves.”  I think these ideas are shared throughout Oikocredit’s value chain. That’s what gives my work value, and makes me a proud link in the Oikocredit investment value chain!

When you think microfinance, countries like India or Bangladesh might come to mind…

However, according to the Economist Intelligence Unit, the leading country is Peru!  This is the 2^nd year Peru has been awarded “Best environment for microlending”, due to a positive regulatory framework, investment climate, and the quality of services offered. In 2010 the microfinance sector in Peru grew at an average rate of 19%!

PRISMA Microfinance Clients

Oikocredit has been investing in Peruvian microfinance since 1980, and has impacted more than 2.7 million end-borrowers with almost $8 million in loans. Peru is a very important country in Oikocredit, ranking in our Top 10 portfolios. Our project partner PRISMA Peru sums up our dedication to investing in Peru in their slogan: “25 years working where the need is greatest”.

We choose to partner with microfinance organizations in Peru because of statistics like these:

• 33% of the population lives below the national poverty line of $1.25 a day
• 2.1 million children live in extreme poverty, representing more than half of the overall impoverished population[i]
• 69.7% of the rural population lives in poverty[ii]
• only 25% of the population has formal access to credit

Like many other countries in the Global South, Peru’s economy is dependent on mineral exports, especially gold[iii]. A mining export economy fueled by foreign direct investment can lead to a growing rich-poor gap, a problem which also plagues many Latin American countries[iv]. Microfinance seeks to address these inequalities and empower Peruvians living at the Bottom of the Pyramid to grow small businesses and improve their lives.

PPI Trainers at PRISMA in Peru

Despite a GDP growth rate of 8% (comparable to India!), Peru still has a high poverty rate. PRISMA Peru was founded in order to fight poverty and chronic malnutrition in 1994. Today it makes loans of more than $12 million USD to poor Peruvians, 73% of whom are women, and 47% of whom live in rural areas[v]. PRISMA offers training, microinsurance, and housing loans in addition to traditional microfinance.

PRISMA is a good example of the success that the microfinance industry has had in Peru. Its typical borrower is a 39 year old female without primary education or access to public health services, working in the informal sector in a rural area. The organization is noteworthy for its strong savings program, competitive interest rates, pricing transparency, and dedication to social performance- characteristics which are on the rise among Peruvian microfinance institutions.

As one of the leading advocates for social measurement in microfinance, Oikocredit is proud to call PRISMA Peru our partner: PRISMA has become the first microfinance institution (MFI) to use the PPI (Progress Out of Poverty Index), a poverty-screening methodology designed by Grameen Foundation and Mark Schreiner[vi]. “PRISMA is one of the best models of PPI implementations in Peru,” said Yolirruth Nunez, Regional Social Performance Management and Capacity Building Coordinator for Oikocredit’s programs in Peru and Ecuador. And they have been spreading the word: PRISMA’s Managing Director, Diego Fernandez Concha, has been traveling the world teaching other MFIs how to use the PPI to better reach their target populations[vii].

Peruvian microfinance is now leading the world: competitive lending has helped to drive down the price of interest rates and has extended access to financial services for many families[viii]. The potential for new microfinance clients in Peru is huge. In the coming years, Peru could see an estimated 40% growth in the microfinance market[ix].

Oikocredit is firmly placed within this center of growth in the microfinance world. Operating in Peru since 2005, our microfinance partners reach over 2.7 million end-borrowers, and our fair trade cooperatives include 70,000 small farmers in rural communities[x]. At Oikocredit we combine our social mission, tailoring services to meet the needs of our end-borrowers. We select project partners that have a strong focus on poverty when considering new clients, such as the following Peruvian MFI partners: PRISMA, Manuela Ramos, and FINCA Peru[xi]. When possible, Oikocredit works with project partners to expand services (such as gender training and health programs) to fit the needs of their clients.

Microfinance clients benefit from clear and easy to understand pricing of financial products. Clients can make better financial decisions if prices from one institution to another are easily comparable.

In my previous blog, I identified two reasons for lack of transparent pricing in microfinance: 1) there is no single market for micro-loans, and 2) there is no single pricing methodology used in the industry. In this installation, I will delve more deeply into the market context and conditions that result in a lack of a single market price for micro-loans.

Microfinance pricing is complicated and data shows there is not one single price for any type of microloan product, regardless of lending methodology (group loan, individual loan, etc.) or purpose (business, housing, etc.), around the world. In fact, seemingly similar microfinance loan products offered by several financial institutions in a given market, such as business loans borrowed by groups in Rwanda, could have very different prices. When you have multiple loan providers in one market with a variety of operational characteristics, serving different market segments (low –moderate income, rural vs urban, etc.) and no standards for pricing disclosure, this could mean confusion for borrowers. If the same product has different prices and these prices are communicated in different forms (e.g. interest rate only vs. fee plus interest), how can a client compare prices and choose the best option available?

Investors and donors trying to understand the issue of pricing transparency in the microfinance sector should recognize the challenges in analyzing and deciphering “market price” within the market — across the microfinance industry broadly as well as within specific country-markets.

On the Market Level

A common and flawed assumption is that all microloans that serve the same market carry the same price. This is not true. Prices can vary significantly in some markets. Take a look at the wide fluctuations in Figure 1 (below) showing nominal portfolio yield rates, a proxy for price, for financial institutions of several countries that reported to the MIX Market in 2009. Nominal Portfolio Yield has often been used as a representation for the “price” of a microloan because it tells us how much an institution has earned through its lending operations. For years, this has been the best representation of the “price” an institution charges its clients.

Here is a fictional example of two microfinance institutions (MFIs) to help you understand how nominal portfolio yield serves as a proxy for pricing:

This means, theoretically, that for every average dollar loaned, MFI A made $0.20 and MFI B made $0.30. In the early days, when MFIs offered only one product each, the portfolio yield was a useful proxy. When MFIs started adding more products but charged nearly the same price for each product, portfolio yield was still sufficient. Now, however, MFIs are more sophisticated in their pricing and this is no longer the case. Today’s microfinance institutions offer multiple products to various market segments and these products often carry different prices. Thus, the average portfolio yield can be highly misleading for understanding what borrowers are actually paying. For example, an MFI with an average portfolio yield of 30% could mean an institution is charging a 25% price on one product and 80% on another product. If the product priced at 25% constitutes more of the loan portfolio, the Nominal Portfolio Yield will be skewed downward, obscuring the existence of the much more expensive product.

Figure 1

This graph looks confusing because it is! Whether you are looking at Bangladesh, El Salvador, or the Philippines, a variety of differences in the market context mean that identifying the average “market” price will be extremely difficult. Looking across different microfinance markets around the world, it becomes impossible to say what the average or “market” price in the microfinance industry is since the nominal portfolio yields are so different by country.

On the Institution Level

For years, analysts in the microfinance sector have tried to identify an “average price” in a given market by looking at institutional portfolio yields. Many people have considered average portfolio yield for a specific country’s microfinance market to be an accurate representation of the average price of a microloan. Figure 2 shows the portfolio yield for 23 financial institutions with varying institutional characteristics and product lines in Bolivia. The yield ranges from 13% to 37%. Can you really say what the “market price” is in Bolivia?

Figure 2 

The Importance of Loan Size

Figure 3 below presents the nominal institutional portfolio yields with the average outstanding loan balance for 23 MFIs in Bolivia. There are two important messages in this graph. First, let’s take a look at the downward sloping curve: the curve indicates that institutions with higher average outstanding loan balances earn lower yields on their portfolios while the institutions with the smallest outstanding loans have the highest yields.  In other words, it looks like institutions that provide bigger loans charge a lower price, while institutions that provide smaller loans charge a higher price.

Figure 3

But remember – yield is no longer an accurate representation of price when an institution offers multiple products at multiple prices.  This means that it is impossible to tell from this graph alone if low-income borrowers of institutions that also provide loans to up-market clients receive low or high prices.  The second message is reflected in the dots in the area circled in red: here, we see that there is a range of yields being earned on loans of similar size. What we don’t know from this graph is the real price that is articulated to the client when she or he takes a loan from an institution. In other words, how is the price reflected – as an interest rate, fee plus interest rate or some other formulation?

When we look at real pricing data collected by MicroFinance Transparency and use the Annual Percentage Rate (APR) calculation to represent price, we see a similar curve as the portfolio yield curve above (Figure 4, below). However, this graph shows actual prices paid by clients in the market. The image below shows us APR data for a number of institutions in Bolivia correlated to loan size. What we see is that for every loan size, there is often a range of prices available in the market.

Figure 4

If you wanted a loan of 5,000 Bolivianos, you could pay anywhere between 20% and 70% APR. Similarly, for different types of loans (business, consumption, housing, etc.) there is not one set price but a range of prices being offered in the market. When we look at the Bolivia data just for business loans, below, we see that there is still a wide range of prices offered at different loan amounts. How can a client determine what the market rate for a business loan is in this case? What would you say the market price for a microloan in Bolivia is given this information?

Figure 5

The answer is there isn’t one. Different institutions offer different products with different features to different market segments in a given country. Each institution has a unique cost structure that influences its loan pricing strategy and contributes to the wide variety of prices in one market. It is only when we look at real pricing data, segmented by loan purpose, loan size and other features that we begin to see how complicated and varied microfinance pricing can be.

Pricing can be even more complicated when you consider the different terms applied to any given loan product. In the next post I will discuss pricing on the borrower level, taking a look at the factors that clients are faced with when making a decision about borrowing.

As COO of MicroFinance Transparency, Alexandra Fiorillo manages the Global Programs department with projects in 30 countries. Based in New York City, she trains regulators and policy makers, microfinance investment vehicles, MFIs and other financial institutions serving low-income communities on consumer protection and financial transparency.

Click here to learn more about investing in Oikocredit!

I visited New Orleans for the first time in 2000 to attend the Essence Music Festival with two close friends. Enchanted by this historic city, we left with intentions of returning with some regularity, but that didn’t happen and then the years went by. As is now written into the annals of history, Hurricane Katrina hit the city in 2005, and the devastation that befell New Orleans was unimaginable. I recall friends overseas being shocked that there were Americans who lived in such poverty as images of New Orleans’ poorest neighborhoods, leveled by the storm, replayed on news networks around the world.

Construction teams work to rebuild one of New Orlean's neighborhoods

Just last week, I visited New Orleans for the first time since my trip in 2000 and since Katrina hit. I attended SRI in the Rockies, the longest standing social investing conference series in the US.  I wasn’t certain about the condition in which I would find New Orleans. I stayed in the French Quarter and quickly learned that this historic area had experienced little damage relative to the Ninth Ward & St. Bernard – two places regularly covered by the media during the storm. In collaboration with HOPE Credit Union, based in NOLA, the conference organizers held a series of community development tours, allowing us to see the city’s rebuilding efforts in action.

I was amazed, as I always am, at the multitude of stakeholders – the government (local and federal), foundations, nonprofits, and individuals – that have come together to help rebuild New Orleans. As I visited a lovely home in a new affordable housing development for low-income individuals and families in Faubourg Lafitte, I thought to myself, “This is what makes us a great nation!” There are so many Americans willing to come to the aid of their neighbors in times of crises. The multitude of actors from private to public makes rebuilding communities and giving families a second chance possible. It is possible for us to recover from the very worst natural disasters because of the ecosystem of support within this country. Organizations like Habitat for Humanity, Enterprise, Providence Community Housing, among others, are on the ground rebuilding communities. In fact, the tour guide said Habitat for Humanity has built over 450 homes since Katrina, and have adapted to the needs of local musicians and developed the Musicians Village where musicians with a stream of regular gigs can obtain low cost homes and become homeowners.

Habitat for Humanity's "Musicians' Village"

My thoughts then went to the many developing countries I’ve visited over the years…and I realized that the internal ecosystem of support we have here is absent in most of those countries. When disaster strikes, there are few internal stakeholders that can take the lead. Regardless of what we think of the Federal Emergency Management Agency (FEMA), there often is no such equivalent in developing countries. There is no CDFI Fund that invests hundreds of millions of dollars in low-income communities or a community investing sector that manages almost $42 million in assets, receiving significant support from private investors motivated by social concerns and desiring to support the development of affordable housing, small businesses, and the development of community facilities such as hospitals, clinics, and schools.

Oikocredit focuses its investments in the poorest countries of the world because those communities lack that internal ecosystem of support we sometimes take for granted. We, and our investors, recognize the lack of opportunity in such communities doesn’t equate to lack of ability, and so we invest in such places to help to lay the foundation for an ecosystem of support. Oikocredit’s project partners are, in many cases, the only internal actors in their local ecosystem, taking the lead to reduce poverty and build infrastructure by investing in the women, men, and children of their local communities.

Photo of Tamil Nadu region, South India

Oikocredit’s Social Performance Manager, Ging Ledesma, traveled to Tamilnadu by way of Bengaluru, India last month. Where’s that? Bengaluru is another way to say Bangalore, a city you may have heard of, home to over 7 million people. Tamilnadu is located to the southeast of Bangalore, and is home to Oikocredit’s project partner Activists for Social Alternatives (ASA).  ASA is a wide-reaching microfinance institution that began in 1986 to provide financial support to poor Tamil women. Today, ASA’s work also reaches five other states in northern India, and the organization’s services have also expanded to leadership training and children’s schooling.

Clients of ASA in India (photo courtesy of Oikocredit)

While she was there, Ging visited one of ASA’s schools, the Vidiyal Matriculation Higher Secondary School, in Valanadu Kaikatti. Oikocredit recently lent about $1 million to this partner to expand the school’s facilities and build a dorm for students. Here’s an excerpt from Ging’s report:

“The four-story building was built to accommodate 1,000 students. Today, it has 1,497 students and a visit to the classrooms confirms that they are literally overflowing. In some classrooms, we find children working on their schoolwork on the floor. On the top floor, wooden dividers sectioned off a large hall into three classrooms.”

Ging writes that building the school was ASA’s way of thanking the community. The vast majority, 80%, of the school’s students are children of farmers, farm and day laborers, many of whom are first generation literates.

This is impressive, given that nearly 42% of India’s rural population live below the national poverty line (about $.50 a day!). The school’s fees are lower than government schools, and the graduation rates are higher – “this school’s passing rate for the past five years has been 100%,” says Mr Paulraj, the school principal.

A vast country, it is nearly impossible to create a comprehensive profile of India within the confines of a blog. India is home to 1,189,172,906 people – the second-most populous country in the world. At least 13 distinct languages are spoken within its 35 states and territorial regions. India is made up of enormous metropolises like New Delhi or Calcutta, beautiful beaches such as those of Kerala or Goa, great deserts like the Thar Desert in the northwest.

An estimated 42% of India’s population live below the international poverty line of $1.25 per day[1], though rates are dropping significantly thanks to wide-reaching poverty reduction efforts like the UN World Food Programme. One in three Indians live below the national poverty line, and half the poor are women.

Like the country itself, the microfinance sector in India is also vast, varying, and the need is great. Of all the 71 countries in which Oikocredit invests, India’s MFIs and economic organizations receive the greatest percentage of our funds. Oikocredit provides loan to 94 microfinance institutions in India.

To get a truly in-depth look at microfinance in action in the Tamilnadu region — and the principles by which Oikocredit operates in order to ensure the protection of our partners clients –  check out Ging’s three-part blog series from the field here, or follow the links below.

All blogs by Ging Ledesma, Social Performance Manager, Oikocredit International

Promoting Best Practices

First Generation Literates

Protecting Clients in India

Access to Education

A brief history of cocoa in the Ivory Coast

Global Witness (2007 Report)

French colonizers in the late 19^th century encouraged cocoa as a money-making cash crop, and even after gaining independence, migrant farmers continued to grow this precious commodity imported by European high-society. In the 1970s, cocoa production outstripped another cash crop, coffee. By the 2000s, cocoa was so profitable that over $38.5 million in revenue was used by opposition forces to fuel conflicts [viii]. In 2010, political power-players hijacked cocoa production, resulting in an international boycott[ix]. Today, over 50% of the Ivory Coast’s agricultural production and 35% of its exports are based on cocoa [x].

2007 Agricultural Production Ivory Coast (data from International Cocoa Organization)

The cocoa supply chain goes like this: farmers sell their crops at cheap prices to middlemen, who trade to big chocolate companies that make all the profits. The average yearly income of a cocoa farmer in the Ivory Coast = $30-$108 [xi]. About 40% of cocoa farmers are not native to the Ivory Coast, and must face local prejudice and poor living conditions [xii]. For the children forced to work on plantations, their lives are much worse. They lack healthcare, sanitation, education, and face poor nutrition, chemical exposure, exhaustion (80-100 hr. work weeks[xiii]), separation from their families, machete-related injuries, and whippings as a form of punishment. Sometimes, families from neighboring Mali are so impoverished that they sell their children for $50-$100 to human traffickers, hoping for an opportunity to earn extra income [xiv].

Photo: Jessica Dimmock

A study by the Payson Center for International Development at Tulane University found 1.8 million children working in dangerous conditions in the cocoa industry in the Ivory Coast. However, stamping out child labor and trafficking is a tricky goal to accomplish. With corruption, few resources, and a rural-urban disparity in governance, the government can do very little.

While forced labor and human trafficking are certainly social ills, the Child Labor Tracing System says that the real problem is not children working in the agricultural industry, but lack of education and infrastructure combined with widespread poverty in the Ivory Coast[xv]. Oikocredit and our project partner Divine Chocolate are seeking to provide positive solutions that mitigate child labor in the cocoa industry. Farming families and women who feel empowered are more likely to invest in education for their children—and thanks to entrepreneurial training, they have the income to do so.

Divine Chocolate partners with a farmer’s cooperative in Ghana called Kuapa Kokoo  to grow cocoa that is environmentally-friendly and child-labor free [xvi]. Farmers own 50% of the company, and women hold leadership roles such as President of the Cooperative. Thanks to fair trade prices, the cooperative members earn a livable wage that has allowed them to build a school, dig a well, and construct public toilets in their community. A local credit union frees farmers from reliance on big chocolate company loan sharks, and offers start-up capital for small businesses that operate during the off-season for cocoa [xvii].

COCOVICO market

Oikocredit has also made a long-term, sustainable impact in the Ivory Coast. For over 20 years, Oikocredit has maintained regional offices in the financial capital Abidjan and has continued its commitment even during times of civil war.  In 2006, Oikocredit funded the creation of the Coopérative de Commercialisation de Produits Vivriers de Angre (COCOVICO), a women’s cooperative organization that operates a large fruit and vegetable market in central Abidjan. Cocovico has empowered Ivorian female microentrepreneurs, offering them an opportunity to improve their living standards via small trade. During the 2010 presidential conflict, the market served an even greater purpose, housing  refugees fleeing opposition forces.

Rosalie Botti, COCOVICO President

The coop has since expanded its scope to support community initiatives such as a kindergarten, police center, public toilets, and a medical facility [xviii]. These kinds of projects discourage child trafficking by providing a living wage and the necessary infrastructure to offer an alternate future for children.

By offering fair finance to people who otherwise don’t have access to credit, Oikocredit provides support for fair trade activities around the world, such as Divine Chocolate. “Fair trade reminds us that trade is about people, their livelihoods, their families, sometimes their survival”[xix]. Remember our global family the next time you’re out shopping for your favorite chocolate bar…

Kuapa Kokoo farmer's cooperative

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[i] [http://onegoldenticket.blogspot.com/2011/01/chocolate-consumption-statistics.html]

[ii] [http://www.laborrights.org/stop-child-forced-labor/cocoa-campaign/news/as-profits-soar-chocolate-industry-fails-to-deliver-on-p]

[iii] [http://nupoliticalreview.com/nupr/?p=64]

[iv]  U.S. State Department data. [http://thecnnfreedomproject.blogs.cnn.com/2011/09/19/the-human-cost-of-chocolate/]

[v] [http://www.10campaign.com/]

[vi] “When the economy is bad, chocolate is still selling well” [http://www.time.com/time/business/article/0,8599,1890565,00.html]

[vii] Senator Tom Harkin (D-IA) and Representative Eliot Engel (D-NY)

[viii] [http://www.globalwitness.org/library/hot-chocolate-how-cocoa-fuelled-conflict-c%C3%B4te-d%E2%80%99ivoire]

[ix] [http://www.foodproductdesign.com/news/2011/04/ivory-coast-cocoa-exports-to-resume-immediately.aspx]

[x] [http://www.globalwitness.org/campaigns/conflict/conflict-diamonds/cote-divoire]

[xi] [http://www.corpwatch.org/article.php?id=12754%22]

[xii] [http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=535:conflict-chocolate-your-role-in-cote-divoires-war&catid=91:rights-in-focus&Itemid=296]

[xiii] [http://www.huffingtonpost.com/john-robbins/is-there-child-slavery-in_b_737737.html]

[xiv] [http://www.corpwatch.org/article.php?id=12754%22]

[xv] [http://sanders.senate.gov/newsroom/news/?id=b25482c2-dd12-4f26-a3a2-c3a2e938e5d2]

[xvi] [http://3blmedia.com/theCSRfeed/Divine-Chocolate-Celebrates-International-Women%E2%80%99s-Day-Investing-Women-Cocoa-Farmers]

[xvii] [http://www.divinechocolate.com/about/story.aspx]

[xviii] [http://www.oikocredit.org/en/news-events/636/cocovico-on-the-road-for-oikocredit]

[xix] (quote from former EU Trade Commissioner Peter Mandelson by Oikocredit former Managing Director Tor G. Gull)

The Summer of Microfinance is traditionally a time when we ask investors to become ambassadors for Oikocredit, reaching out to their respective communities to share our mission and encourage a wider base of support.

This summer, Oikocredit did things a bit differently. We held a variety of public events through which we reached out to different communities, particularly those we don’t always reach such as: a crew of socially conscious young professionals; microfinance practitioners and other experts in the field; investment advisors and fiduciaries with experience in socially responsible investing… to name a few.

Here are some of our best photos from the summer campaign. If you have any you’d like to share, please let us know @ usa@oikocredit.org.

Special thanks to Fonkoze USA, the Center for Social Philanthropy, WAM DC, Grameen Foundation, Women for Women International, and Joe & Pat Kelly for helping us host a wide array of events this summer. And many thanks to all who joined the movement this summer!

Leigh Carter of Fonkoze USA, center, with two attendees of the DC Launch Party for the Summer of Microfinance 2011

Oikocredit USA's Terry Provance & Leah Gage at the Summer of Microfiannce 2011 kick-off party in Washington, DC

Fonkoze USA Executive Director Leigh Carter presents Fonkoze's model of economic empowerment in Haiti. Oikocredit was one of Fonkoze's earliest funders, and Fonkoze remains one of Oikocredit's most successful project partners -- our only partner in Haiti.

DC's young professionals mingle and crowd the DC Launch Party for the 2011 Summer of Microfinance

Josh Humphreys of the Center for Social Philanthropy at Tellus Institute pictured with Oikocredit USA National Director Sharlene Brown and Executive Director Terry Provance at our co-sponsored roundtable discussion for investment advisors and fiduciaries.

The Boston round-table discussion, co-sponsored by Oikocredit USA and the Center for Social Philanthropy at Tellus, addressed concerns regarding responsible microfinance investing, and the social performance monitoring Oikocredit undertakes to guarantee our project partners are delivering a social impact in addition to the financial impact for their clients.

Pat Kelly and her husband Joe hosted our DC-area Summer of Microfinance house party. In the intimate setting of her home, Pat recanted her story of joining the Peace Corps to work in Colombia, a revolutionary feat for a young single girl from Indiana in the 1960s. She is seated alongside Cathy Yi of Grameen Foundation and Alyssa Hansen of Oikocredit USA.

National Director Sharlene Brown, right, reflects on her own story of empowerment, recognizing the opportunities she's had as a Jamaican immigrant in the United States that many of our project partners' clients will never have. Also present is Deb Burand, Mary-Rose Brusewitz, and Nadine Payne.

Sharlene Brown pictured alongside host Pat Kelly and Mary-Rose Brusewitz.

National Director Sharlene Brown with Andree Simon of Women for Women International, discussing women's empowerment practices for microfinance experts and practitioners at an event co-sponsored by WAM (Women Advancing Microfinance)

Our panel discussion with Women for Women International and WAM drew a large group of microfinance experts and practitioners, leading to a lively and engaged discussion of best practices for women's empowerment in very poor communities.