This week I’ve felt the overwhelming spirit of cooperatives, having visited three agricultural and credit institutions founded, owned, and managed by a collective of individuals working together.  I’ve met a range of people, too – cooperative chairpersons, managers, employees, members, borrowers, and overall beneficiaries in the community. Their words and their stories really speak for themselves. Not every story is one of success – but every story was one of gratitude for an institution built by and for people just like themselves in the interest of creating a stronger community and a better life for its members.

Zlatka, pictured with Doverie's Chairwoman Jordanka Ilieva

Zlatka Dimitrova, Borrower & Member of Doverie Credit Cooperative

Zlatka Dimitrova is one of the founding members of Doverie. Her daughter, Velichka, and her two grandsons are all members of the cooperative and work together to raise bees at a 200-family apiary at their home. Her current loan is for 700 BGN (about 400 USD) to help pay for her medical expenses. She is not able to work right now because of her health. I asked her why she originally joined the cooperative in its founding days.

“I wanted to be a member of the cooperative to support the cooperative. Nowadays, our coop is big and increasing [in members]. We can rely on this coop [to] always provide for our needs. … I’m so relaxed and secure there, as if I’m home. And I can share anything with the chair lady.”

Velichka Dimitrova, Borrower and Member of Doverie

Velichka and her mother, with the bee houses in behind

Velichka runs an apiary with her mother and her daughter. Her two sons each have a loan of 5000 BGN (totaling about $7500 USD) to invest in the 200-bee family apiary.

“The money we receive from the business goes back entirely into the business. We’d need to double the bee families in order to turn a profit.”

Sunai Mitev, member of Doverie Agricultural & Credit Cooperative

Sunai’s family contains four members of the Doverie cooperative. He is currently repaying about a $15,000 loan to the cooperative with which he is purchasing implements, such as drip irrigation and some machinery. They rent the land they farm from their neighbors, providing income to the community. In addition, their family farm, he says, employs “half the village” – some 500 people from neighboring villages throughout the year, where unemployment is upwards of 50%. I asked him about the impact of his family’s efforts on the community.

“Not only do these people rely on us for employment and income, but we provide community and relationships.”

Sunai Mitev (front) and his brothers

Velichka Slavova, Chairwoman of Niva 93

Velichka Slavova is a founding member of the cooperative Niva 93. Niva, which means “field,” is a production cooperative that rents land from its members to cultivate a very wide variety of products – grains, coriander, fennel, rape seed, honey, apricots, plums, cherries – in addition to running a town market. The coop is quite a force in the town – it provide 103 permanent jobs and about 150 seasonal jobs. It also provides funding to the local kindergarten. I was pleased to see that Niva was led in large part by women. Velichka, who is a founding member of the coop and has been its chair since nearly the beginning, was also once the mayor of the village. We commented to her that it was exciting to see women in such positions of leadership.

Women in power: Ivanka Ilieva, Niva's Chief Accountant; Mira Andonova, Oikocredit Bulgaria Country Manager; Velichka Slavova, Chairwoman of Niva

“Our entire accountancy department is women. 4 of the 9 members of our management board are women. Our head accountant is a woman; the manager of our trade union is a woman. This is quite normal for us here.”

Chairman Yuri Dudev (glasses) and Executive Director Pavlim Hristov speak with German SA member Ulrike Pfab

Chairperson Yuri Dudev, Russe Kasa

Yuri Dudev is the chairman of Russe Popular Kasa, a credit cooperative financed by Oikocredit since 2002. Russe is an industrial town in Bulgaria that has been hit hard by the economic downturn, resulting in high unemployment. I asked him to describe the mission of Russe Popular Kasa.

“The idea of the credit cooperative is the base of our work. To combine the resources of all our members which are very small separately but when joined together they become an economic power. In this way we can help the people who want to develop a business.”

Erdinch Osmanov Hasanov, client and member of Russe Kasa

Erdinch has a busdriving business in the town of Russe, Bulgaria. His most recent loan allowed him to purchase a new bus to add to his enterprise, which now consists of 2 buses and three employees, not including his family members who are also engaged. Like all members of Russe Kasa cooperative, he was brought to the coop by another member and engaged in a personal relationship with the Executive Director (pictured above), Pavlim. Pavlim consulted on his business plan and helped him secure his first loan. We asked Erdinch, What does Russe Kasa mean to you?

Erdinch on his bus

“If it wasn’t for the loan I received from Russe Kasa, I would not have this business today.”

Georgi, atop one of the sofas just built in his shop

Georgi Georgiev, Carpenter and Furniture Maker, client of Russe Popular Kasa

Georgi Georgiev is a client of Russe Popular Kasa, a microfinance cooperative with close to 700 members. Russe Kasa has been an Oikocredit partner since 2002. Georgi has a carpentry and furniture business that employs seven people. His current loan from Russe Kasa is helping finance new machinery and the renovation of his shop. Commercial banks can sometimes offer lower interest rates to business owners with more collateral. We asked Georgi whether he would ever consider taking a loan from a bank.

“No. I tried it once, but I had a bad experience with these banks. The conditions [of the loans] kept changing.  … I like the spirit of cooperatives.”

Read the Study Tour Bulgaria: Voices of Oikocredit’s Clients">full post on Oikocredit USA">Oikocredit USA.

Sashka, 24, is an agricultural expert on staff at Niva 93

If the future is in the young people, then Bulgaria’s future is looking statistically bleak. There is an undeniable brain drain in this country. Population growth has dropped drastically since the 80s. The birth rate is down and the population over 65 is growing. Over 1 million Bulgarians have emigrated since the 80s, most of whom are young adults.*

From observation, it’s clear that the elderly dominate the rural populations of Bulgaria. That’s in part why Bulgaria’s cooperatives are structured as they are – after forced privatization in the 90s, young inheritants of land had mostly emigrated or moved to the city, no longer carrying on the agricultural traditions of their elders.

Chairwoman Velichka Slavova and the cooperative's cheif Engineer, looking out over Niva's 3,000 Hectares of cultivated land

The result: village coops banned together to rent these small parcels of land, providing these youngsters with membership in their village coop, a connection to their ancestry, and a small amount of income each year. In return, the cooperatives cultivated the land en masse, producing more lucrative and marketable amounts of produce to support themselves.

Coop Chairwoman Velichka Slavova

But the brain drain in Bulgaria is a problem, and according to Chairwoman Velika Slavova, her greatest fear for the future of her country is the emigration of young people. “Bulgaria used to be very strong,” she says. “The future of the country is in the young people,” says Yordanka Dimitrova, manager of the coop Trade Union.

To reverse this trend, Niva ’93 is investing in the future of her village’s young people. Hristos Slavovo (30 years), finished his masters in agronomy 3 years ago, paid for in part by the Niva cooperative. Now he is the head agronomist and manages the orchard that was developed with Oikocredit funds in 2003. Sashka Atanosova is also an agricultural specialist with Niva. At 24 she is one of the youngest members of the Niva staff, and she too has received a scholarship from Niva to study agronomy and come back to invest in her community.

Sashka and Hristo with Chairwoman Slavova

Of the 103 full time employees of Niva, 13% are under age 30 and 50% are between age 30 and 40. As Chairwoman Slavova told me, reducing unemployment is the number one most important factor for her community, and it’s what will keep young people investing their efforts here in “Professor Ishirkovo” – the village of 1,600 in which they live. When I asked Hristo and Sashka if they enjoyed working at the coop, they both laughed and said “of course!” Perhaps they were putting on a bit of a show for me. But there’s no question that they’re here, working for the coop, thanks to the investment in their future by a cooperative that understands the importance of investing in young people.

*http://en.wikipedia.org/wiki/Demographics_of_Bulgaria#Age_structure

Read the Study Tour Bulgaria Day 2: The Future is in Our Youth">full post on Oikocredit USA">Oikocredit USA.

Can you imagine receiving a hug and a kiss from your loan officer? It’s a regular occurrence among the staff and members of Doverie Credit Cooperative, an institution built on mutual trust, loyalty, hard work, and lots of love. I spent the day with the coop’s Chairwoman Jordanska Ilieva and her son Vladimir, visiting clients and seeing Oikocredit’s investments put to work in the soils of Eastern Bulgaria.

The Basics: Need to Knows on Coops
Coops in Bulgaria are pretty heavily regulated – credit cooperatives can only provide loans to  individual persons, not to businesses. There’s also a limit to the amount of money a coop can lend to an individual – no more than about $25,000, which seems like a lot until you’re trying to expand your microenterprise into a real and profitable business. This places limits on individuals attempting to make a real go at creating a small or medium sustainable enterprise. MFIs do not exist in the traditional sense given regulations – only cooperatives or commercial banks. And commercial banks will rarely go near a small farmer or individual borrower such as those served by Oikocredit’s cooperative partners in Bulgaria.

The Warm & Fuzzy Stuff: Doverie means “Trust”
“Warm & fuzzy” gets a bad rap when you’re talking finance, but it’s actually pretty important stuff for Doverie Agricultural Cooperative, an institution with zero loan defaults and a hefty level of respect in the villages surrounding Dobrich, a city of 100,000 in Eastern Bulgaria. Doverie means Trust, actually. It is a small cooperative of about 333 members, almost 250 of which are active borrowers in the cooperative. New members are brought to the cooperative by old ones — that means that membership is built on personal guarantees and social cohesion. Turns out that’s good economics, because the coop is extremely successful.

Pictured: Ivan Mitev (married to Nazmie in the scarf). He has 3 children: Mr Sunai MItev, Gyunai Mitev, & Nedred Miteva; Sasho Mihaylov, father of Galin Mihaylov & Stalislav Mihaylov Emi Janov (in yellow t-shirt), father of Eugeni Emilov; Gakya Jivkva, mother of Silvester Stefanov & Silviya Stefanova

Take the Mitev / Mihaylov family (pictured above). In 10 years, they turned their 2 Hectare farm into a 300 hectares*, employing 500 people throughout the year, most of whom are members of the minority Roma population from neighboring villages. They harvest watermelons, sunflowers, and grains such as rape seed and wheat. Their produce is in such demand that it is exported to the capital city of Sofia and the Czech Republic. For a small family farm, built from the assistance of cooperatives, this is an incredible feat.

About 40 workers on the watermelon farm stopped their fertilizing work to pose for a photo for us

The Hard Facts: A Reliable, Sustainable Business
The Mitev / Mihaylov family employs about 500 workers per year in villages where unemployment is 50% or more. And while the family doesn’t own all of the land it cultivates, it pays rent to the land owners at almost 100% more than what private commerical farms will pay. This is typical in Bulgaria, as land ownership is based on historical borders from the pre-Soviet era, and plots of land are now too small to cultivate on their own and are thus more lucrative when rented to a coop or business, like the Mitev / Mihaylov family, who can cultivate en masse.

Ivan on the land, with workers he employs behind

Four of the family members are official cooperative members, and each has taken about a $15,000 loan, repayable over the course of several years. With these funds they are now paying for labor, rent, transportation for exporting, and new technical implements such as a drip-irrigation system. The farm is basically organic – meaning no chemicals and very few carbon-emitting machines or techniques used, but gaining EU-certification in organic farming is quite timely and expensive and Ivan and Sasho have simply not bothered.

Recently Doverie started a subsidiary company in the same cooperative spirit that is registered as a financial institution and can thus extend larger loans to clients organized as businesses or institutions – like the Mitev / Mihaylov family. They continue to be members of the original cooperative and take individual loans, thus supporting the growth of the cooperative, but have also expanded and are now considered “bankable.”  Thanks to Oikocredit’s commitment to this cooperative, Doverie has been able to expand upon the extension of small credits to include small-to-medium business loans, paving the way for small farmers like Ivan and Sasho to achieve financial inclusion.

Final Word: the real tension between ‘Business Sense’ & ‘Warm & Fuzzy’…
It was made very clear to us by Chairwoman Ilieva that Doverie would not have been able to survive were it not for Oikocredit’s risky investment in the coop back in the 90s. Oikocredit has been there for the cooperative and is now benefiting from this risk, given that Bulgaria’s portion of our investment portfolio continues to perform quite strongly. Now, however, EU government institutions are starting to take note of these lucrative coops and extending loans at cheaper prices than Oikocredit. At the same time, commercial banks have taken note of the success of farmers like Ivan and Sasho’s family and are willing to extend commercial loans at lower rates than a coop like Doverie. It remains to be seen whether this cooperative model will survive given these fluctuations in prices.  But it was clear from the warm welcomes we received all day today that  warmth and trust still count for a lot, and that “socially responsible finance” still weighs heavy on the “social” and “responsible” aspects here in Bulgaria.

*1 hectare = 10,000 sq. meters

Read the Study Tour Bulgaria Day 1: Trust & Loyalty = Good Business at Doverie Credit Cooperative">full post on Oikocredit USA">Oikocredit USA.

5.12.2012

8:45 AM

On the plane from London to Sofia, Bulgaria

I’m most likely the only person on the plane who doesn’t speak a word of Bulgarian. It’s nice, in a way, to get lost in the totally new sounds and play the game of blending in with nods and mumbles. But it also feels rather lonely rather quickly to be so isolated.

This is the 21st country I’ve ever traveled to, and it’s certainly not the first time I’ve arrived somewhere alone not speaking the language. Trips like this remind me always of two very important things, almost simultaneously.

The first is a wholly embarassing experience I had crossing the Ukranian / Hungarian border by train late one night. I was alone and spoke not a word of Ukranian, only some Russian learned during my 3 months spent working in Russian-speaking Zaporozhye with HOPE Ukraine, the largest MFI in Ukraine*. It had just been discovered that I had overstayed my 90 day visa by 3 days and was being escorted off the train at 3 am through a series of border-guard bureaucracy hoola-hoops before I was eventually allowed to cross into Hungary. By the end of the ordeal, I had almost befriended a very cool border guard whose job it was to escort me through these procedures. He didn’t let on immediately, but actually he spoke impeccable English and during our last 15 minutes together as the sun is rising in Chop, he finally asks: “So what are you doing here anyway?” Fair enough – I appeared to be the unseasoned American traveler who had just spent 3 months in Ukraine and picked up zero words from the national tongue and couldn’t accurately count to 90. I explained that I had been part of a funding project for Ukrainian small entrepreneurs, market workers, and greenhouse farmers aiming to spur sustainable economic development. “But, why?” I offered that I believed all people deserved opportunity for growth, and this work was in an effort to help the entire world community, of which we are all a part. My guy was not convinced. “But what do you care about Ukrainian farmers? What business is that of yours?” I felt lost. Not to mention unwelcome – I was in the process of being kicked out of the country.  What was I doing there?

The second most important thing I’ve learned is the humbling & motivating factor of this question – “why do you care?” Traveling to 21 countries teaches you that all people are basically the same. Cultures are rich and diverse and vibrant, languages can be isolating and frustrating, and national borders are certainly nothing to be taken lightly. But all people basically are united by similar objectives, we can all communicate with smiles and eye contact and hand gestures, we all want to provide safety and security for ourselves and our families. It’s important – essential – to be humble, to learn as much as you can in a new place, to observe and assimilate as unobtrusively as possible. That gives integrity to my work as a representative of Oikocredit USA’s investors. And in my line of work, capital speaks a fairly universal language. Some people have more; many have less – much less. Most Oikocredit investors seem concerned with balancing out that inequity simply because we are all one people, responsible for looking out for one another because the natural market does not.

That’s really why I’m here. And the more we all learn about the reality and complexity of poverty in many different places, the more humbled and motivated we can all be to arrive at dynamic solutions to alleviate it. To be continued!

Tomorrow I visit our field partner Doverie in Dobrich, Bulgaria. I’ll tell you about why the Bulgarian cooperative model is so unique and why Oikocredit is one of the leading supporters of sustainable agricultural development in this struggling East European Country.

*At the time I was serving as a Kiva Fellow in Ukraine, prior to my position with Oikocredit.

Just arrived - with Lasarina, Nikolay, and Mira from the Oikocredit Bulgaria team

Read the Bulgaria Study Tour Day 0: Why Have I Come?">full post on Oikocredit USA">Oikocredit USA.

Oikocredit is known worldwide for taking bigger chances on smaller organizations that may be considered riskier investments. But as was shown in Bulgaria – and has been shown time and again throughout the world* – our willingness to take those chances often pays off, and helps those most in need. This installment of Tour Around the World with Oikocredit explores our investments in Bulgaria, and introduces this former Soviet Bloc country ahead of our staff person Leah’s trip there next week!

A client of Martiza Invest, an agricultural cooperative in Bulgaria

When Oikocredit staff first visited Bulgaria in the early 90s, they were skeptical to say the least. Loan applications had been flowing in in large numbers but we weren’t sure how impactful we could be in the former Soviet Bloc. “We were not at all sure that we could operate there,” wrote Erik Heinen, Oikocredit’s former Project Support Officer. “Those were the cowboy years of new capitalism in the former socialist states. Some people managed to make a fortune in a short time, while others were left empty handed.”

The community-based village cooperative farms were in a state of despair. They no longer had any livestock. People were growing winter and spring wheat, barley, maize, seeds and sunflower. The staff writes of broken down tractors, decades-old equipment, dilapidated tractors with old implements that were little more than scrap metal. However, it was also clear that these farmers were expert agronomists and that the agriculture sector and its rich Bulgarian soils were worth an investment.

Although a member of the European Union since 2007, poverty in Bulgaria is very real. In 2008, a fifth of Bulgaria’s population was reported as living below the poverty line with an income of about $120 per month**. Today, Oikocredit invests in 64 projects in Bulgaria, the vast majority of which are agricultural cooperatives.

Our Portfolio at Risk in Bulgaria (meaning, those loans which are delinquent for 90 days or more) is only 0.3% – an incredible achievement!And the success of our project partners has not gone unnoticed in Bulgaria – three of our project partners have been chosen as “farmer of the year” and three cooperatives have gained the prestigious “cooperative of the year” award by the national government. Oikocredit’s impact in Bulgaria is immensely successful.

Oikocredit attributes that success in large part to the strength of our staff there, and to a willingness to take a chance on Bulgaria when no one else would. In a few weeks I’ll be visiting a few of these projects and reporting back to you about Oikocredit’s impact there!I hope you’ll follow my progress at Oikocredit USA on Facebook, and @OikocreditUSA on Twitter, #OikoinBulgaria.

A client of Rakovski Cooperative surveys his farmland

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* Oikocredit is currently daring to invest more in Africa than most MIVs. Our portfolio allocation in Africa is 15%, a much higher average than most other microfinance and social investors.

**http://www.euractiv.com/enlargement/bulgaria-poor-not-only-eu-standards-news-493653

Read the Tour around the World with Oikocredit: Bulgaria">full post on Oikocredit USA">Oikocredit USA.

To begin our series, Oikocredit USA National Director Sharlene Brown sat down with Steve to learn some of the motivations behind and benefits to poverty measurement and the PPI specifically. Prior to her role at Oikocredit USA, Sharlene was a Senior Program Officer for GF in charge of implementing and training on the PPI.

Sharlene Brown: What is the motivation for the poverty measurement initiative in the [microfinance] sector?

Steve Wright: Measurement of poverty is absolutely critical because the underlying principle of microfinance is that it serves the poor. Poverty measurement is a necessary prerequisite [because] you must know whether your clients are poor, and then whether your products are being consumed by the poor. There’s no value judgment in the PPI – it’s simply essential business intelligence for any organization focusing on poverty alleviation.

SB: What has been Grameen Foundation’s vision for PPI adoption by organizations in the field? And, has that vision been realized?

SW: The vision is that for any organization focused on poverty alleviation, we want to make it possible for them to use it. [We want] to lower the cost and raise the ease of use.

Has it been accomplished? Not yet. It’s about scale.  We’ve become the industry standard in microfinance, but we have a long way to go yet in the greater development sector. … We are adding approximately 5 new PPI users per month, [and] we’re confident we will add at least another 60 users this year. We’ll have at least 210 organizations using PPI by next April.

SB: What does it take for an organization to be a successful user of the PPI?

SW: The organization has to be focused on poverty alleviation – that’s critical. PPI is a carrot, not a stick. You can’t make someone measure poverty – it has to be viewed as an investment by the organization, as information that is critical to accomplishing their mission. You have to, as an organization, intend to alleviate poverty. Without that intent, the PPI will be viewed as a cost as opposed to an investment. In addition to the intent to alleviate poverty, the most successful users of PPI are those with engaged leaders who are interested in measuring their success relative to their ability to reach and to serve the poor.

The logistical trick is primarily technology. How do you integrate the data effectively into your internal databases? More importantly, how will you use this data to provide insight? Leaders need to be able to answer, “in each region, what is my poverty outreach? How does my poverty outreach compare to national poverty incidence? How are my products being used by the poor?”

SB: One of the points I tried to make in our recent webinar on poverty measurement is that PPI can be used by organizations outside of the microfinance sector. Can you give an example of such an organization?

SW:  Last time I checked, 70% of our users are MFI practitioners; that means 30% are a combination of intermediaries or non-microfinance practitioners. That’s really exciting for us – [there has been] a 10% increase [in non-MF practitioner users] over the last 6 months.

One particular example is Good World Solutions. They’re a technical assistance organization in the fair trade space, working in India and Latin America. They perform PPI surveys for fair trade supply chains in order to understand, for example, how poverty has changed over time in a particular factory. It’s very interesting! This is how big corporations with factories overseas should handle their operations – measure and be brutally honest about the level of poverty and then commit to reducing that poverty through employment.

SB: Are you seeing any trends or interesting discoveries about what it really takes to move clients out of poverty?

SW: All we’re doing is measuring. What takes people out of poverty? How long does it take? PPI data can be used as input to answer those questions but they are not explicitly PPI questions. That said, [Grameen Foundation’s] Financial Services group has seen some very exciting work around sequencing financial products trying to answer the question, “what is unique about the very poor and what products can be designed specifically for them?” Savings, insurance, livelihood support and conditional cash transfers are all part of the product mix.  What the PPI can do in this context is confirm the poverty levels of the clients that are consuming these different products to ensure targeting and uptake are effective.

SB: What are the benefits to investors – individuals and organizations investing in microfinance via a vehicle like Oikocredit – offered by the PPI?

SW: If you’re investing in a microfinance investment vehicle [like Oikocredit] and you’re doing that because you believe that microfinance is a poverty alleviation intervention, then you need to know if the organizations you are investing in are serving the poor. The PPI [allows investors to carry out] due diligence: are the organizations they’re investing in serving the poor? How does the organization know that? PPI is one very good way.

Steve Wright is the Director of the Social Performance Management Center (SPMC) at the Grameen Foundation. Prior to joining us,  Steve was the Director of Innovation and Technology at the Salesforce Foundation. Steve has also been a high school administrator and teacher as well as being a Peace Corps volunteer in Micronesia. He is based in Oakland, CA.

Read the Poverty Measurement in Microfinance: An Interview with Steve Wright, Social Performance Director for Grameen Foundation">full post on Oikocredit USA">Oikocredit USA.

Since 2009, Oikocredit has provided support to Bharathi Women Development Centre (BWDC), an organization that works to achieve sustainable development in their community by focusing specifically on the women of Tamil Nadu, India. Acknowledging that the majority of the world’s 1.3 billion absolute poor are women, the BWDC places a special emphasis on their empowerment. Of the organization’s 12,055 active borrowers, 99% are women. BWDC not only offers traditional microfinance services, but the organization has developed several social empowerment programs to combat problems that contribute to and exacerbate poverty in rural communities. BWDC participated in the “Financial Inclusion Improves Sanitation & Health” program, which is an initiative to promote the construction of toilets in neighboring communities. According to the project’s website, “[towns in the region] don’t have toilets for our usage. We do [public] defecation, but not in day time,” meaning that finding access to sanitary toilets during the day is nearly impossible. As a result, BWDC reports, “in our area the women were faced [with] health problems and spend lot of money for medical purposes.” In addition to the obvious health problems associated with public defecation,  women of the community were also embarrassed. “There was one public toilet, but [it] is very far from our house and they are charging [2 rupis] for [the] urinal and [3 rupis] for [the] latrine, [w]hich is very costly for us.” As a solution, BWDC provided sanitation loans to members, who were trained to construct proper clean-flush toilets, which are now in use. You can read more about BWDC’s health efforts here.

However, lack of access to clean water is merely one of many problems contributing to the more than 500,000 women who die every year in childbirth or during pregnancy. According to the WHO, these complications are a leading cause of death among women in developing countries*.

If you want to learn more about this topic, join Oikocredit USA for an International Women’s Day webinar with Dr. Kanan Patel-Coleman, an expert in maternal and child mortality.

Register now for the webinar by clicking here.

Dr. Patel-Coleman will share an international perspective of this important issue that is so strongly linked to global poverty. Since 1995, Dr. Patel-Coleman has used her public health and environmental expertise to serve with Lifewater International, a non-profit water supply, sanitation, and hygiene training organization. She has traveled all over the world to raise awareness of health related issues that often have disproportionate adverse effects on women and children. Currently, she leads a team of health risk consultants who evaluate harmful chemical pollutants, including special considerations of mothers and children. To register for this important webinar, click this link.

*For instance, the Maternal Mortality Ratio (MMR) in Africa is 620, while in Europe it is 21. MMR is defined as: “the annual number of female deaths from any cause related to or aggravated by pregnancy or its management (excluding accidental or incidental causes) during pregnancy and childbirth or within 42 days of termination of pregnancy, irrespective of the duration and site of the pregnancy, per 100,000 live births, for a specified year.”  http://apps.who.int/ghodata/?vid=240

Read the International Women’s Day: Highlighting Inequalities & Applauding Solutions">full post on Oikocredit USA">Oikocredit USA.

Oikocredit USA: Give us some background on when the pricing transparency movement began in the sector? 

Chuck: Twenty-four years ago when I wrote my first article on interest rates, I was fascinated by pricing yet nothing had been written about pricing. MIX didn’t publish pricing information. For some, it just wasn’t on our radar; for others, it was intentionally hidden. In 2007, as the commercialization of microfinance became more of a reality, the whole industry started talking about pricing.  We realized that Compartamos, the Mexican MFI that had just made its initial public offering, was charging 130%, but nobody knew that [previously]. So the industry said, ‘how can we get the issue of pricing transparency out there?’ I was something of an expert at that point and, as a result, 9 months later a group of us created MicrofinanceTransparency.

Before MFT, nobody was looking for pricing transparency. We were the first, but happily we’re no longer the only ones. Pricing transparency information is spreading – that’s an indication of success. In a handful of years we’ve gone from obliviousness about pricing to a broad level of keen interest in pricing.

Today, transparency efforts are taking place in 25 countries reaching also 500 institutions that reach almost 50 million clients.

Oikocredit USA: How have pricing methodologies evolved in the history of the MF sector? 

Chuck: There was no pricing standard or methodology for a long time. It was very common to practice confusing pricing: they would charge a flat interest instead of declining balance; they would very frequently charge fees; MFIs used compulsory savings as “security deposits” on the loans. All these factors and more influence what the true price really is.

Bangladesh provides a good example: in Bangladesh in 1996, all MFIs charged a declining balance interest rate. Then in 1997, the first MFIs started switching over to a flat interest rate because it looked cheaper[1], but reaped twice as much income. And this is the downward spiral of non-transparent pricing – as soon as someone starts to hide the price, others will do the same to appear competitive. Once everyone is hiding their prices, the market becomes broken.

Then the industry adopted the “portfolio yield” in order to understand pricing – we would take an institution’s income, divided by the weighted average of its loan portfolio, and calculate the portfolio yield and we would call that “the price”. However, that proved misleading once institutions started introducing more than one product with more than one price.

Now, MFT encourages MFIs to use “annual percentage rate” or APR. We feel that APR is the most comprehensible, for us and for the clients. We discourage the use of “total cost of credit” or TCC – represented by a monetary amount, rather than a percentage.

Oikocredit USA:  What do MFIs who endorse MFI find are effective ways to impart this pricing complexity info to borrowers?

Chuck:  A lot of that depends on the country in which you’re operating. If the country is moving toward truth-in-lending legislation, then information might be more readily available. We can teach clients not to trust the marketing – to always ask what the APR is. Once you have the APR, it’s very simple – lower is cheaper.

If you’re in a country that doesn’t have such legislation in place, you still want to educate people clearly and quickly. You warn them of the traps – ask how the interest is calculated, whether it’s a flat or declining rate. You can teach them that the more fees there are, the more expensive it is.

In countries where we are present, MFIs that have reported their data to us can go to MFT’s website and show their clients an objective data source.  They can show their clients the price of their loan, and it’s competitiveness relative to other MFIs in the market.

MFT has financial literacy materials available. We’re training in Malawi this week and Rwanda next week. These materials are available on our website and any MFIs can download these materials for free to teach their clients how to look for pricing transparency.

Oikocredit USA: What are the benefits of transparency to investors?

Chuck:  Among investors, there’s a fear that an institution receiving funding may someday end up in the headlines as charging exploitative prices to their clientele. Up until now, the due diligence process consisted of looking at an institution’s balance sheet, risk and return, but many if not most investors were not going in and looking at the pricing of products.

MFT provides a pricing calculator and it’s free, and I have investors contacting me almost every day telling me they’re using the calculator. Investors should work pricing information into funding decisions.

Oikocredit USA: What metrics do you use to calculate an MFI’s transparency?

Chuck:  MFT calculates a transparency index which can also be used. For example, if an MFI tells their clients they charge 20%, and we go and calculate the APR as 50%, then that MFI’s transparency index would be 40  (on a scale of 100)- meaning they only represent 40% of the true price. Investors should look at the transparency index as an indication of risk, and to understand its commitment to its clients.

Oikocredit USA: Are we seeing a greater move toward transparency?

Chuck:  Everybody in the industry is talking about it. Regulators are interested in it; networks [of MFIs] are supporting our movement and want to be involved in perpetuating it. As a result, MFIs are proud and display publicly the fact that they practice pricing transparency voluntarily. In fact, [in these countries] MFIs are in many ways more transparent than traditional banks. Microfinance as an industry is leading the way in client protection and transparency – voluntarily.

Oikocredit USA: Where can investors and other interested parties find pricing data?

Chuck:  http://www.mftransparency.org/data/countries/

The MIX [Microfinance Information Exchange] publishes an institution’s portfolio yield, which is the weighted average of all their products but it’s not reflective of the true price of any specific product.

From the MFT site, there is a widget that allows the user to view MIX data for the institution; this is accessible as a part of our collaboration with the MIX.

[1] Chuck comments “Grameen Bank actually has the lowest prices of anyone in Bangladesh – but it got press for high prices. But all other MFIs in Bangladesh are charging flat interest rates [while] Grameen Bank charges declining. So actually, Grameen Bank is by far the cheapest, charging 20% declining, while others are charging 12% or 15% flat.”

Read the Pricing Transparency in Microfinance: Interview With Chuck Waterfield, CEO of Microfinance Transparency">full post on Oikocredit USA">Oikocredit USA.

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.

Read the Director’s Corner: Examining our Good Intentions">full post on Oikocredit USA">Oikocredit USA.

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

Read the Director’s Corner: Contemplations in Early 2012">full post on Oikocredit USA">Oikocredit USA.