Each semester, students enrolled in the Global Microloan Program will update this site with their weekly program logs and final student presentations.
The Fall 2009 student teams include IT and Communications, Marketing and Fundraising, Accounting and Audit and Finance and Risk Assessment.
Fall 2009 Team Members
By Jonathan Hong
After two class meetings, I can tell there’s going to be a challenging road ahead this semester. The content of the course goes way beyond the text readings because there’s so much to do with our growing loan applications. I joined the technology and communications team with Dara, Leonard, and Joseph. We’re responsible for communicating with all the other task teams in the class, getting technology resources out to our field partners, and maintaining the content on our GLOBE website… although I’m sure there’s going to be plenty more to do. I have a feeling everything is going to pick up very soon and we’re going to be getting a lot done. I think the best part of the course (even though we haven’t done much yet) is the fact that we’re getting hands on experience. Being this is my first log I guess I can set some goals for the class. I hope we can get university-wide involvement with this program, get the word out in the community and possibly get some media attention, hear back from our borrowers as soon as they get started with their loan funds, and finally I hope the class remains successful for years to come. In regards to the course content, I’m very interested in what Muhammad Yunus has to say in his books. There’s a whole industry emerging known as microfinance and its young enough that any direction can be taken with this concept. I hope to see in my future how this all turns out, especially because it changed millions of lives in Bangladesh. One of the ideas that stuck with me most is from one of the New York Times articles a few weeks ago. Basically, money does the talking. Apparently when microcredit is extended to women (traditionally seen as unworthy and abused by their husbands in developing countries) they gain respect through their successful business ventures. I think it’s just shocking to know the inequalities that still exist in this world. More to come in later entries!
By Jessica Smith
First hearing about the GLOBE program, I became very excited to learn that as a student I could be a part of making an actual difference in the world through business. Now, just a few weeks into the semester I am even more thrilled about the program.
The main reason I am attracted to the idea and success of microfinance is that it fulfills the right to credit for all. That enables people to life themselves out of poverty, through their own hard work that they take pride in. Microfinance not only affects the individual borrower but the group they borrow with, their families and the community in which they live. Through our work in this class we will reach out and help people in developing countries we may never have been to, the St. John’s community at large and even beyond.
The fact that the default rate on microloans is much smaller than loans of large sums, with collateral put up, shines an encouraging light on this underfunded area of finance. Because microloans are not charity or grants, the borrower takes pride in the business they create with they money. Once the money is paid back, the borrower is empowered and encouraged that they created a business for and by themselves. Charity doesn’t empower people because they aren’t working for anything, they don’t have to strive to achieve goals.
The empowerment of women is one of the most important aspects of microfinance in my opinion. When half of the population is oppressed in some areas, they are utilizing only half of their potential. Most microloans are rewarded to women. Women have a better record of repayment and also are found to use the funds of the loan in better ways than men, such as paying for school or medicine for the children of the family.
Typically, initial funding for microfinance institutions comes from donor money. One main goal of the Marketing and Fundraising team will be to spread awareness about the program and thus generate interest in donating. Once money from borrowers is repaid, it is ‘recycled’ into the microloan system and the money is loaned out once again. Eventually this can turn the institution into a self-reliant business, not having to rely on donor money or spend time and resources on recruiting patrons.
Women and Microfinance
By Lubna Lundy
Microfinance has contributed to the development of self sustained independent individuals and society and at the same time the development of microfinance has taught myself and others more about the shift in cultural norms and how women play a pivotal role in micro-lending. I have been impacted me most is the astonishingly large number of women who are clients of the Grameen Bank and take part in microfinance. More than 95% of the clients are women when in the beginning most borrowers were men.
So much is changing in the world and evident through microfinance; social transformation is reflected in the shift of borrowers from men in the beginning to mostly women borrowers now. More interesting than the actual shift is what events led to this cultural movement. First, in Bangladesh there was a rapid decline in fertility rates from 7 children in the 1970s to just 3 children in 2000 according to Beatriz Armendariz’s Economics of Microfinance. Having fewer children left women with more time to get jobs and take advantage of self-employment. It seems to me that with fewer children women also began to make more to time to educate themselves. In Bolivia, there was a drop in illiteracy rates in women from 54% to 21%. Bangladesh also saw a decrease in illiteracy in women from 1970 to 2000 as illiteracy rates dropped from 88% to 70%.
Besides decreased fertility and illiteracy rates, other factors such as motherly concern regarding their children’s health and education and misrepresentation make women the ideal microloan candidate. With this knowledge of the general culture of women abroad, I often reflected on my role and perceptions as a woman here in America. I saw a great deal of parallels between the social movement of females abroad compared to the female role transformation in America.
From the Suffragist movement to the current “independent woman” that is praised in the media, there are similarities in the movement of women from homemakers and housewives to working women who contribute to society in ways more similar to that of a man. This gender “role” transition is normal to me in America, however initially I found it hard to believe that it is also taking place in more traditional societies. However, as the world becomes more global I am sure that we can expect to see more changes in societies all over the world. I am just thankful that I can take part in a program that plays a role in aiding this positive change.
By Yelena Gurgova
Throughout the course of my life, I have always had an important goal; to help people in need. I have always wanted to make a difference in the life of someone, somehow, someday. For this particular reason I signed up for the GLOBE Microloan Program.
When I originally heard about the Microloan class I was hoping to get hands on experience working with the poor. I was inspired by Muhammad Yunus, who as an individual was able to make a difference in the lives of millions of people, one day at a time. Meeting Mr. Yunus and listening to him speak has helped me understand that one person can really make a difference. With each class session I feel that I am coming closer to my goal; to help people. I am looking forward to giving out microloans to these families, so that hopefully one day they can live a better life.
By Joseph Canicatti
For microfinance to continue to grow and garner ever more support, it is undoubtedly essential that its impact be measured. The results, whether positive or negative, will have an effect on almost every party involved in the microfinancing industry. Microfinancing institutions will use the information to see how effective they are in achieving their missions. Donors can use the information to see where and to whom they want to support. Policymakers can use the statistics to support projects that work and discontinue or cut back on those that don’t. And finally, all the microfinancing clients, (both present and future) will ultimately be affected because they are the ones that use the services given by the parties’ mentioned above.
The object of measuring the impact of microfinance however, from what I have gathered from my readings, is a very daunting task. There is almost an unlimited number of variables and obstacles, which must be overcome for the sole purpose of getting an accurate assessment. Measuring the impact of microfinance is difficult because it is trying to evaluate humans; multi-dimensional beings in which no two were created equal. This is important to note because a large part of microfinancing involves borrowers receiving loans and trying to make a profitable enterprise. The success of the borrower’s enterprise will depend largely on his/hers skill of entrepreneurship. Thus, entrepreneurial ability is usually unmeasured and so when studies are done, comparisons to different regions may be misleading interpretations because they have to do with how well clients make profits and not necessarily the other associated factors. Further imperfections of measuring wealth include the possibility of richer households dropping out of the pool of borrowers which will make it seem like microfinance depletes one’s income when in fact it may not be true. Just as poorer households dropping out of the borrower’s pool will overstate impacts. Studies may also be flawed due to human self-interest. Field personnel are getting paid to produce evidence of the impact of microfinance and depending on who is giving the pay checks the impact of microfinance can either be exaggerated or understated.
Experts say that it is imperative to begin researching and gathering data when a microfinance institution is brand new so it can measure its impact over time. A good starting point for impact analysis is from the MFI’s mission or goal including economic, sociopolitical, cultural, personal and/or psychological impacts. The reality is that measuring the impacts of microfinance requires both time and money, two resources that microfinance institutions do not have an abundance of. Although it may take more time for an MFI to reach sustainability, measuring impact is possible. Accordingly, those paying for it are advised to hire high qualified field personnel in order to get the most accurate results. Researchers must survey a diverse sample that represents the whole of the population. Accuracy in the study will be obtained if the researchers initiate these various components: a continuous presence among clients over time, engagement in formal interviewing and issuance of questionnaires, making active observations, and cross-checking with others to get different point of views of the same affair. MFI’s must be serious at achieving their goals and just as serious as measuring their impacts.
By Patrick O’Donnell
This past week, we delved deeper into the GLOBE program. We are all seeing what kind of impact we can have as a class, and how we can spread awareness amongst the St. John’s community.
The readings were interesting in many ways. In The Economics of Microfinance, the author talks about the grey area that exists with lending in other countries. Much of the statistical data is skewed because some of the remarkable numbers aren’t so remarkable given the fact that some of the poor aren’t paying the loans back or lending as much, and the wealthier groups of people are carrying the data. So the numbers are rigged in a way because the wealthier clientele is carrying the load. The numbers aren’t telling the entire story, according to the author, so there needs to be other ways to cut through the grey area and find what works.
I also found it interesting how women are so unaccustomed to lending, and even forbidden from doing so. In Banker to the Poor, Mr. Yunus goes into a house with women, and tries to convince them to borrow. The problem isn’t their desire to do so, but the society they live in. Women aren’t even allowed to leave their houses without being in their husbands’ presence, so how are they going to go to the bank to pay back their loans? There are so many hurdles to overcome, and Mr. Yunus finally breaks through with a few women after much persuasion. The point is that it isn’t as easy as asking someone to borrow, and then they sign on the dotted line. It is trying to break through the culture of a society, and turn it on its head.
This coming week, many things are in the works. The Staten Island team is meeting this coming Tuesday to get familiarized with our vision, and they are also ready to get their hands dirty in their attempts to help us on another front. I thought it was quite strange how few people actually know about GLOBE on campus, so I think the Marketing team has a lot of work to do with regards to spreading the word both in Queens, and Staten Island as well. If we can convey that message, maybe it can spread to other parts of New York as well.
Our team is looking to get wristbands, much like the LiveStrong bands that were promoted by Lance Armstrong. They will sport the GLOBE logo, and will be sold around the campus, maybe even Staten Island as well. Maybe if some students see others wearing the bands and inquire about the meaning of them, maybe they will buy bands as well, and perhaps spread the word to other students about what we are trying to accomplish.
Other members of our squad are working on a newsletter that will be distributed and displayed amongst the campus buildings to update what is going on with our program and what might be coming soon. It can provide students with knowledge about our goals, and it gives students things to look forward to.
Overall, I look forward to the coming weeks as we try to build the pieces of this puzzle and then eventually put them all together as a class. It should be interesting…
By Chenele Francis
When asked to pick teams, the finance and risk assessment team was the only choice in my mind. After all, practice in my field is what I need. However, we are quickly learning that the usual technicalities of finance and risk cannot be fully applied to our task in a black and white manner. In fact, I think when it comes to money and social objective regular business practices just may not fit. Nonetheless, here begins our journey to doing something good for a community while trying to maintaining a degree of fiscal responsibility that would allow us to continue and even grow the fund.
During our meetings so far, an initial challenge we faced is one of a test of conscious. Plowing through loan applications from Nigeria, we soon realized that we were up against a difficult task. Deciding which loans to approve ultimately affects the lives of people in extremely unfortunate circumstances. What basis do we make our decisions with such limited information; the saddest story, the most questions answered, a recommendation from the sisters or personal opinion? None seems hardly fair.
Being very structured by nature, I could not fathom beginning this process without establishing some sort of criteria. Of course assigning set standards to applicants who are completely new to the formal lending process seems unrealistic, and harsh. So how do we proceed? How do I proceed, when I cannot resist feeling hesitant to give the first loans without more information?
This is a question I sought the advice of my family to answer. All the females in my family work in the banking system in Trinidad and were eager to offer their perspective on the matter. While their thought processes emulated the cut and dry nature of the formal loan system, their insight was beneficial. Also, they all agreed that regardless of circumstance criteria was necessary in order to sustain our microloan initiative.
Sifting through the application, I was able to find ways in which to make the application simpler so as to solicit more information while making the job of the sisters easier. For instance, the use of close ended questions with answer options in the form of check boxes. Also, giving the approved applicants a set, but reasonable repayment structure may help in training them in good practice towards saving and lowering the risk of default.
Other options that came through the readings include the tactics of a young Muhammad Yunus who began his microloan offerings by utilizing a popular Bengali custom called “mushti chal.” This translated to handful of rice and began when women would put away grains of rice from their meal every day so that a reserve of rice could build up for their family’s future. Similarly, he encouraged borrowers to pay daily amounts towards their loans. While the amount was small, it had the intended effect of encouraging greater accountability and again training borrowers to save.
Dr. Yunus also required repayments to start one week after the loan, with an interest rate of twenty percent and installments of two percent of the loan every week. This was quite effective, especially in group lending situations. However, establishing a collection point was tricky as local business men often took advantage of borrowers. In our case, it may be helpful to attempt this since the Daughters of Charity can serve as a trustworthy collection point.
This whole exercise proves one point, a point that is made in the readings, “The twentieth century will be chiefly remembered in future centuries not as an age of political conflicts or technical inventions, but as an age in which the human society dared to think of the welfare of the whole human race as a practical objective,” as said by Arnold Toynbee. We are university students managing a hefty fund that provides loans that help take people out of trying circumstances we cannot relate to, within countries across the globe. Grasping that concept is powerful within itself.
However, though we may seek to help our efforts are but a tiny drop in the pool of initiatives done every day by social entrepreneurs around the world. As one book points out, they may go unnoticed in the news; their impact on actual lives will always be so profound it outweighs that. This was the case of James Grant who led countless projects to help save the lives of children dying from something as simple as dehydration. Appointed Head of Unicef, under the recommendation of President Carter, his efforts which saved the lives of millions did not merit mention on the people of the century lists over the achievements of popular actors.
Another significant cause was that of global warming. While it remains an ominous threat; immediate concerns seem to be tied up in the impact on property and income than the very quality of life. As expected, in the poorer nations there is a better understanding on the implications on “lives and livelihoods.” This is because the direct impact is greater since on a regular day, these countries are plagued by natural disaster, imagine their position as the ozone continues to deteriorate. This can all be tied back to Muhammad Yunus’ attempt to encourage people to look at the worm’s eye view of things. Kofie Annan, the past Secretary General has in the past worn “…..a significant part of Bangladesh is likely to disappear completely by the end of the century.”
The blame falls on the hyper-industrialization of our developed nations. Statistics according to the World Institute for Development Economics Research at United Nations University indicated that in 2000, the richest 1% owned 40% of the world’s assets. Meanwhile, India, China and Indonesia had 42% of the world population, but only received 9% of its income.
Now developing at a faster rate than before, China’s emissions grew by 43% and India by 55% while others who started the trend like the United Kingdom were decreasing.
All this is the name of progress, but no one stopped to consider the impact on anything other than profit or economic growth. A 2004 study of air quality showed that of eight three Indian cities, 84% of the population was breathing in dangerously polluted air. Is this what developed nations are teaching the less developed; profit at all costs. The Kyoto Protocol designed to reduce emissions by 2012 was rejected by many, including the United Sates; yet we go abroad and establish our plants that continue to reap havoc on the very thing that gives us life.
There seems to just be so many extenuating circumstances that play on our ability to move forward as a global community. To help one person in one country the best way possible, there are so many economic, environmental, political, technological and social factors to understand. More respect is warranted for the social entrepreneurs of the world.
By Ashley Jo Hobbs
The last week our group accomplished a lot of key points that we needed to cover towards the research paper. Once we decided on our topic it was actually pretty easy from to expand on who was going to write about what and how we are going organize the research. My part is how microfinance has led to the empowerment of women both politically and socially, so it is actually something that I am really intrigued and excited to learn and write about.
Our group is still working on our measurements for success, but today’s meeting we all know that we are not leaving class until we have finished the design we started on. Once we break out in our groups, it comes to a point where we need to say in the beginning that we need to cover and address topics x, y, and z in order to spend our time wisely. I feel confident that my group will have concrete measurements by the end of today’s session.
As of now, Muhammad Yunus’ books are by far my favorite! He has a way of explaining things in an interesting light by using examples and past experiences of his own. Additionally, David Bornstein’s collection of inspirational stories make you want to choose a career that is going to change the world. The last chapter we read about Unicef changing healthcare for the betterment of children seemed like an impossible task, but it goes to prove that if you believe in something – anything is possible. The books by Joanna Ledgerwood and Beatriz Armendariz are very dry and dense. It is hard to get through them without falling asleep… they present critical information but it is presented in a manner that makes it uninteresting.
By Jonathan Hong
Good news, we met with the university web development team and it looks like the GLOBE microloan site is about 85-90% complete! I’m pretty sure we’ll be done with the content filling way before the semester ends which is a plus. The road ahead doesn’t seem as challenging once we’ve set foot in one of the projects we want to have done. I want to focus on the Muhammad Yunus’s book “Banker to the Poor” for a moment. This week’s reading assignment was good because Muhammad Yunus speaks about his experience in trying to develop a microcredit organization in Arkansas. With the help of Bill and Hillary Clinton, he got a project started to help the poor in Arkansas. What struck me most in this chapter was how unprepared the people were for Muhammad Yunus to easily offer credit if they had an idea. There was the same uncertainty and fear exhibited in this country like the Bangladeshis borrowers. People were reluctant to trust this foreign man ready to give them hundreds or maybe even thousands of dollars to pursue an idea. I was inspired by the motivation of these Americans wanting to pursue a small business venture. After all, this is what our country is made of.
In our class work we’re starting to come up with suggestions and changes for the GLOBE website online. It would be nice to have a way of getting more pictures from our applicants to fill in a face to their story. We also are in the process of developing individual team profiles for the website. There’s a guest speaker coming tonight from Project Enterprise which is an organization that helps NYC residents and communities obtain small loans to pursue opportunities. It’s going to be exciting to hear from someone in the field who deals with microcredit in the developed world. It might correlate with what Muhammad Yunus discussed in this week’s reading. I forgot to mention one more news event! Our test wire of funds went through to Nigeria. We’re all still waiting for a response so hope for good news to come.
By Josh-Roc Rang
In my recent reading on Yunus’s book, I began to see how much the author had to overcome to bring the idea of microfinance to the United States. The mission of Grameen Bank worked well in Bangladesh, but bringing it to a developed nation proved to be more difficult than even I had imagined before reading the chapter. In the U.S we tend to be very skeptical of those who want to borrow money because of our natural distrust in one and other. What was shocking to me is how we identify the poor in our country. When Dr. Yunus went to Arkansas after the meeting with Senator and Mrs. Clinton, he was only shown the well-off poor, rather than the poorest of the poor. This showed to me the unfortunate disregard we had for the poorest of our country despite being very interested in a program geared towards them. Dr. Yunus was dedicated to finding those poorest of the poor despite have these hand-selected individuals being put in front of him. His perseverance to find those in need and go as far as to ask the welfare office for information proves that he is indeed dedicated to his vision for Microfinance. The most notable characteristic that I have began to admire about Dr. Yunus through these readings would be his dedication and his ability to stay on track with what he wants and expects despite people thinking he is crazy. I have been used to many people (including myself) bending their ideas and dreams to the status quo, and to read about someone who kept his mission going despite criticism and discouragement proves to me that just because society does not think its the best alternative, does not mean it is not one worth pursuing.
By Elizabeth Stylianou
The finance group is meeting every week and discussing our project extensively. We have several objectives for the next few meetings. We have chosen four applicants to receive loans. Now we are determining the specific loan criteria, such as the repayment schedule and duration of the loan. We are looking into our costs and examples from other microfinance institutions to decide upon an interest rate. We are also working on revising the loan application and creating criteria for future classes to decide which applicants should receive the loan. This time we went on a majority rules basis and we each had our own reasons for accepting or rejecting applicants. We also are creating questions to further understand the objectives of the rejected loan applicants so that we can hopefully be comfortable enough giving them a loan next time around.
The two new applications that came in are from a different part of Nigeria. I was very excited when I saw them because they had pictures attached and seemed like very promising businesses. It is also good to see a man applying for a loan because all the other applicants from Nigeria have been women.
Last week in class, Professor Sama said, “Pay it Forward! Don’t Pay it Back!” I think that is a great slogan for our microfinance class. It’s not about making money and profiting; it’s about helping out the less fortunate. In the article “Developing-world idea gains favor at home — microcredit,” they discussed the importance of knowing who we are lending to. This is crucial when issuing microfinance because we want to lend to those who genuinely need money to start a business and keep it going. We are not here to give alms to the poor who will use up the money quickly and just come back for more, once again in survival mode. We are also not here to give money to help people pay off debt. That becomes a vicious cycle which people can never break out of.
By Ashley Rahill
Last Practicum, my group and I came up with a template for our research paper. We discussed that each of us should put together an outline on how we will go about stating information on our particular sections; this way we can look at what each member has and make sure that our sections do not overlap. Since our topic, Gender, is very broad, we want to make sure that we do not end up repeating ourselves throughout the paper.
In our groups we also added questions to the application. We mainly added questions to the section where the Daughters fill out. However, we did add a few more questions for the applicant to fill out. We noticed that in the section where that the Daughters fill out, they just copy and paste for each applicant, so after they fill out the new questions once, no more extra work will be done. Our goal is to figure out ways to measure success without adding more work for the Daughters. We added questions about the country exposure conditions. In other words, we added questions to try and get a feel of what life is actually like in Nigeria. We will soon construct an ‘end of loan’ questionnaire. This questionnaire will go in accordance to those questions in the application. For example, on the application and on the ‘end of loan’ questionnaire it will ask: how many of your children attend school [did the number change?].
Our team can not accomplish too much in perspective of the loans. However, a test wire transfer has been sent and we are only waiting on confirmation that the Daughters in Nigeria received it. This will help add to our group work –now that we can work collectively, with the Finance team, to keep track of funds going in and out.
As a team we decided that we will make formats of each form for each Accounting and Audit Team here after. This way we can keep the funds organized and every class can use the same spreadsheets so now confusion will occur.
This week, in the readings, in Banker to the Poor by Yunus, I felt uneasy reading Chapter 5. This chapter discussed how Yunus actually started Garmeen. First, he was able to convince a bank to loan women money to start their own businesses; the banks refused. Yunus became the guarantor and took out loans from the bank on behalf of the women. He directed his loans toward women; therefore, he had to find a way to market Garmeen to these women to gain clientele. The part that shocked me was the way Yunus had to go about marketing Garmeen to women. Men could not speak to women and so he had an in-between. The details of what he went through confuse me. It is hard for me to understand cultural differences. I went abroad to seven countries two semesters ago and living was so different from life in America. It took awhile to get use to, but eventually it wore on me. Yet, hearing about the culture in Bangladesh is unfathomable to me. Women are beat by their husbands, and that is acceptable. It is just a different world and what Yunus did to speak to the women was daring. In the long run, he acted the right way and eventually gained the trust of those women. Yunus is a very patient man.
By Joseph Canicatti
In today’s world, it is imperative that businesses are as efficient as they can possibly be and Micro-finance institutions are no exception. Technology is almost necessary to every organization and without it businesses are sure to fail. The implementation of a management information system will greatly aid the MFIs in making better managerial decisions which could mean the difference between sustainability and bankruptcy. The management information system monitors the operation of the institution and then provides reports that reflect the information that management has chosen to track. Theses reports give an accurate portrait of exactly what is occurring in the institution and are looked upon by not only staff management but also the board, funding organizations, regulators, and many others.
The fact is MFIs are running on either a loss or a small profit so managers must be aware of the type of system they are looking for. The starting point in the development of a management information system is to determine what information the instuition needs to make appropriate decisions so they may perform well. The better the information the better the MFI can manage its resources. However, there is no room to experiment as management information systems can be very expensive; the more complex the system, the higher the cost of purchasing (or developing) the software, the higher the level of expertise needed to use and support the system, and the higher the risk of programming and date entry errors. For MFIs, especially the ones looking to scale-up activities, one of the most critical constraints to growth is due to their inability to track the status of portfolios in a timely and accurate manner. The management information system is the answer to continued growth and expansion because the reports will strengthen the management’s capacity to enhance financial performance and expand client outreach.
By Matthew Schoer
While planning the major fundraising and promotional event for this semester, I constantly look toward microfinance teachings and ideals for help. I believe that a major concept in microfinance is to unite communities with the goal of strengthening the community and bringing the community, as a whole, out of poverty. One idea that developed from this concept is to use our community to help assist us in planning this event.
The first community that came to mind is the St. John’s University community. The marketing team and I have begun to reach out to the various student organizations on campus for help. It would be foolish to not use the valuable resource that we have in these students. Our main goal is to raise awareness of microfinance. By reaching out to the student organizations for help, we are raising awareness amongst their members and we are also developing a larger group of contacts to reach out to.
The second community that came to mind is the local Queens community. It is important that we let people know about the cause we are supporting. The people who live and work around campus are valuable resources. There may be several business owners who would be interested in donating to our cause, whether through money or items that can be auctioned off. If we decide to have a luncheon, a local restaurant owner may be able to sponsor us with food for the event. We may also be able to receive a dinner for two or a gift card to raffle off. I am expecting that an important cause such as microfinance will gain the interest of many people from the surrounding community.
The third resource that came to mind is the other St. John’s campuses. We have already formed a partnership with a sales promotion class on the Staten Island campus. This partnership allows our message to reach thousands of more students and faculty in a different community. It allows us to share ideas with another group on how to better fundraise and get our message out. I believe that it is important to keep reaching out and develop future partnerships with the Manhattan campus and even the Rome campus. All of St. John’s needs to know about microfinance and the major effect we are having on the world.
By Denise Yepez
Last Tuesday, Nick Schatzki from Project Enterprise visited our class and gave an inspiring presentation about this institution and the growing impact micro credit has on society. He began by informing the class of the Microcredit Summit Campaign and of, Jamii Bora (Good Household), which has become the largest microfinance institution in Kenya. This immediately caught my attention because he spoke about the influence it has made on many destitute people, regardless of their background. These influences include empowering its members as well as helping them improve their well-being and their family’s welfare.
Nick Schatzki then began to describe domestic microfinance. It was interesting that he pointed out the major differences between the poor in the United States and the poor in developing countries. He stated that there are one billion people living on less than one dollar a day, however, the American poor don’t feel the need to borrow money because they aren’t suffering enough. He then describes how Project Enterprise is modeled after Muhammad Yunus’s Grameen Bank, and the opportunities it has provided for thousands of borrowers. For example, the institution adopted group lending and discovered that these peer groups have proven to be successful. The loans Project Enterprise disburses have a 12% interest rate, a standardized repayment schedule, and some of the payment goes into a slush fund in case of default. It was also enlightening to discover that many of these borrowers value networking more than taking out a loan and that they desired schooling and training just as much as they wanted a loan.
Project Enterprise has provided over one million dollars worth of micro loans to help and support small entrepreneurs in under-resourced communities. Many of these entrepreneurs would open businesses such as daycare’s, bike shops, florist shops, construction, and office cleaning. This is significantly different from the type of businesses borrowers in developing countries would establish. For example, our current loan applications from Nigeria deal with opening much smaller businesses such as petty trade. This demonstrates the difference in levels of poverty in a developed and developing nation.
An interesting and new concept that Mr. Schatzki presented was Social Enterprise, in which a large business is aimed at fulfilling social purposes. An example he gave was of Dannon Yogurt opening one of its companies in Bangladesh and developing yogurt with the nutrients needed by Bengalis. This is a concept that I look forward to leaning more about and hope that many companies will adopt.
By Ashley Rahill
In class this week, Nick Schatzki, one of the founders of Project Enterprise, came in to speak with us. He is a motivational speaker and definitely kept my attention. One of the topics that he discussed was how he began Project Enterprise, which was a very difficult task. Nick said that it very hard to get the ball rolling and to get people interested in micro lending. Project Enterprise goes to borrowers who are located in New York City, mainly. Project Enterprise does not look for business history, credit history, or collateral in lending to those in poverty, it is all on good faith. Nick mentioned that the return rate was somewhere around 96% (before the recession). So once these loans are given to borrowers in New York City, what type of jobs do these people begin? According to Nick, the most popular entrepreneurial jobs consist of florists, cleaners, and street sellers.
Project Enterprise copied Grameen’s model of group lending. The way the group lending works is through peer review. Every week the borrower’s get together and ask each other questions on how their business is doing. Many questionnaires have been given out to the borrowers, where they state that the networking and group discussions are worth more than the actual loans.
The world is headed towards more of a social enterprise. This means that big companies are building themselves up in countries like Bangladesh and once they have gained their investment in full, they pull out of that business. This leaves the resources of a building and trained Bangladeshi employees to take over. Those companies that are involved in social enterprise do not spend any money because they will get their investment back in full. I like this idea of social enterprise. I had never really understood the concept until Nick came in to speak to our class.
In our practicum we didn’t have much to discuss. We came up with a format to audit funds going in and out of the program. We also, since there wasn’t much for us to do, each took a country to write a blurb about the life there for the upcoming webpage. I wrote about Nigeria because I was interested in where the loans we were giving out were going. I was astounded to find out that, according to a 2007 census that 10 million people in the population had access to the internet. Yet, Nigeria is a large country and the most populated of West Africa. The state that we are mainly concerned with is Edo, which is a very rural area of Nigeria, which is where the poverty lies.
Also, we were able to speak with the Finance Team about what they are doing and where they are at. Since the ball is rolling, my team now has work to do. We, the Finance and Accounting Teams, will be getting together before our next class. We will be discussing where they are going with the loans, what the fees are, what costs are involved, etc. My team will then be able to figure out a method of how we will format spreadsheets to contain all the information of the flow of funds. The spreadsheet and format that we do decide upon will be used for the next classes –this way a history of funds can be easily obtained.
Another note that I wanted to mention was that I was able to attend the career fair. At the fair one company that I was interested in continuously asked me about this program. They were so intrigued that we used actual money to help those in rural countries to begin their own businesses. Also, I had an interview last week and they asked the same questions about the program. This program seems to be something that no one has heard of. I just wanted to add this tidbit because I find it interesting how people want to know more about the program and what happens on the inside of it. I’m proud to say that we are the first class to be able to have such a large impact on those in poverty in the world.
By Dara Chav
I feel like the website is coming together. With the information session coming up, I feel we will be able to take some of that and add it to the content of the website. This will be a great opportunity to finally get some video and event information on the GLOBE Facebook page. We have completed the team descriptions and sent them along with some suggestions to the web designer, Luci. We haven’t quite received all of the country descriptions but I am sure those will be coming in any time now. Getting back to the information session, I am hoping we can get a decent amount of people to visit since we will be able to raise the visibility of GLOBE and get people to join the Facebook group at the very least. The midterm presentation we did was already helpful in raising the amount of fans on the page. The page only had about 170 fans when we received it. So far it is up to about 300 so we have almost doubled the amount by simply telling the students in class to join the group and to tell their friends. I am confident that this number will continue to increase. Even though our goal of 1000 fans might not be met, we can try to get as close as we can. I am excited about the information session because we will finally be able to update our Facebook and Twitter with something new from this semester.
By Jessica Smith
Nick Schatzki came and spoke to our class about the microfinance organization, Project Enterprise, he co-founded in New York. He stressed the importance of not only giving loans but to encourage group support and provide business development services. He also expressed his sincere excitement for spreading microfinance through out the university level. Microfinance and social business will be the largest revolution with in the next 25 years by his prediction. Not only will it create economic stabilization it will bring people out of poverty in numbers never experienced before.
Hearing the stories of two of Project Enterprise’s entrepreneurs was so inspiring and uplifting. The work of microfinance is about changing people’s lives from the bottom up. When the honored entrepreneurs spoke, you could feel their emotional sense of accomplishment and gratitude to the establishment that gave them the tools to help themselves. That is the major theme of social business and microfinance: give people the tools they need to get out of poverty and your investment will be returned and recycled to create more positive change.
The Project Enterprise event was also a brainstorming opportunity for what we would like our event to be like. The idea of supporting their entrepreneurs by featuring their goods as gift bags seemed like a great idea. Although we have not given our first loan it could be considered to feature borrower’s products in the future.
The Project Enterprise event was not just about celebrating the two entrepreneurs but it was also a great fund raising campaign. Like many other microfinance institutions, Project Enterprise still needs money to operate and issue more loans and support. Not only did they update current supporters on their progress, they also strongly encouraged donations. At our GLOBE event we will be focused on thanking our donors and supporters. Each group will talk about their area of experience and we will share inspirational stories of borrowers of other microfinance institutions. We will be encouraging continual support for the program by showing our accomplishments.
By Lubna Lundy
I can relate to a great deal of people and personal stories described in David Bornstein’s How to Change the World: Social Entrepeneurs and the Power of New Ideas who had to undergo a lot to persuade others to follow their ideas and understand their vision. These individuals had to learn the importance of persuasion and work with the right individuals to bring their ideas to light. While Bornstein emphasizes the “Power of New Ideas” in his title, he also elaborates more on the role of ideas in social entrepreneurship when describing the role of a social entrepreneur. He specifically notes that in the past “theories of social change have concentrated more on how ideas move people than on how people move ideas giving light to Victor Hugo’s famous adage: “There is one thing stronger than all the armies in the world, and that is a good idea whose time has come.” More importantly, Bornstein highlights the crucial fact that if people do not move ideas they will remain simply ideas.
I could not believe that the idea of a “Penny Post” for an expensive postal system in the 1800s was considered preposterous. Had Rowland hill not been persuasive or articulate enough in his approach to implementing this new system which also included stamps, we could have faced the possibility of higher costs for postal service. Likewise, this idea of persuasion brought me back to my internship at the Bank of New York Mellon when the President and CEO of the company, Bob Kelly stressed this fact in our Welcome Brunch. He found that persuasion skills were critical in his career path. At the same time, I am also witnessing the power of persuasion in my own experiences as President of Phi Eta Sigma Honor Society and as a Financial Representative at Northwestern Mutual Financial Network. You encounter so many individuals who will knock your ideas down or simply do not understand your vision. For this reason, it helps to be that “obsessive person who has the skill, motivation and bullheadedness to do whatever is necessary to move forward: to persuade, inspire, seduce, cajole, enlighten, touch hearts, alleviate fears, shift perceptions, articulate meanings and ARTFULLY maneuver them (your visions/ideas) through systems.”
Without the energetic and motivated individuals who would not take no for an answer, microfinance would have simply been an idea. However, there are still dissenters who will question the impact of microfinance and the efficiency of the system. The only thing we can continue to do is what we have been doing from the beginning—working diligently on laying the foundation for a program that will continue to help people in the future. At the end of the day, “microfinance is not an idea that can be explained effectively with a theory but through anecdotes in the form of stories from all the individuals we help.”
By Adam Gertz
There are a couple issues that I have begun to take up with the concept of Microfinance as I have thought about it more and more. One of the issues I have taken with the idea of Microfinance is what seems to me to be extremely high interest rates attached to many of these loans. It seems that in Microfinance an interest rate of 18% to 20% is on the low side, and can get as high as triple that rate. I cannot remember if it was spoken of in class or in our readings, or if it was something I read independently, but somewhere down in Latin America I heard a story about people who had taken loans as high as 60%. These people were not able to pay these loans back, and were forced to take out more loans in order to pay back some of the initial loans, leaving these people in a far worse place than they were initially, in massive debt with sky high interest rates. Even in cases less extreme than this it seems that rates around 20% is way too high especially when these are supposed to be socially conscious companies giving out the loans. It seemed to me almost as though these companies were praying on the weak, especially since microfinance has such good repayment rates.
In this week’s reading in Muhammad Yunus’s book there was a section that addressed this issue that I was having. In chapter 8, it mentions one of the new social businesses that had been launched, the Grameen-Jameel Pan Arab Microfinance. When explaining the company it is said that rather than distributing profits to its shareholders, it will recapitalize them. This seems like a reasonable enough idea; it allows the business to be able to grow without requiring donations or the selling of bonds for the company to raise money. I do still believe the loans should have lower interest rates, especially when you can get better rates in America from profit seeking companies with no aspirations to be a “social business”.
If you keep these companies private it seems that there is a better chance for success, you can keep its shareholders limited to a small amount of likeminded individuals who share the six qualities of successful social entrepreneurs as mentioned in How to Change the World. Willingness to self-correct; willingness to share credit; willingness to break free of established structures; willingness to cross disciplinary boundaries; willingness to work quietly; strong ethical impetus. Yunus lost me when he spoke of “a full-fledged social stock market.” I do not see how this could possibly work. The sole responsibility of the executives of publicly traded companies is to maximize profit for its shareholders. I do not see how this can be done all while trying to maintain a social business. It seems that eventually the shareholders would start to drift away from the six qualities of successful social entrepreneurs and would begin to demand profits from the executives.
Hopefully this week’s speaker can clarify any issues that I have and better explain why microfinance works in the ways that it does, as I still struggle to understand some aspects and have not fully wrapped my head around every realm of the industry.
By Joseph Canicatti
It is imperative to measure the performance of a MFI so that donors, practitioners, and consultants can determine the efficiency, viability, and outreach of the MFI’s operations. There are many financial ratios used in order to determine how well or poorly a MFI is doing in its various parts of the business. The performance indicators include portfolio quality, productivity and efficiency, financial viability, profitability, leverage and capital adequacy, scale, outreach, and growth. It is important to remember that these performance indicators are a great resource when comparing a MFI’s own performance in different periods but the ratios may not always be compatible to compare to other MFIs because of variance in the calculations of theses ratios.
Portfolio quality provides information on non-earning assets (decreasing revenue and the liquidity position) of a MFI. Repayment rates measure the rate of loan recovery and based on past experience MFI find it useful for projecting future cash flow. The arrears rate shows how much of a loan has become due and has not been received. Because it only considers payments as they become past due and not the entire amount of the loan outstanding, it understates both the risk of the portfolio and the potential severity of a delinquency problem.
Portfolio at risk refers to the amount in the arrears but also the remaining outstanding balance of the loan. Identifying delinquent borrowers may infer why they are defaulting; it is helpful to know whether the large or smaller loans result in greater delinquency. A MFI’s definition of delinquency (the amount of time passed since the borrower stopped making payments) and write off policy also influences the quality ratios and the MFI’s level of risk. If loans are written off too quickly the portfolio at risk ratio will be unrealistically low and if the loans are written off too slow then the risk ratio will be too high. The loan reserve ratio ties into delinquency because a MFI must allocate a percentage of the loan portfolio to adequately manage loan losses. The loan ratio can then be used to see if the reserve amount is sufficient to cover these losses and also can be compared in different periods to see if loan losses as a percentage of average outstanding portfolios is increasing or decreasing.
The productivity ratios are mainly used to analyze the credit officers because they are the primary generators of revenue. These ratios include the number of active borrowers per credit officer, portfolio outstanding per credit officer, and the total amount disbursed in the period. Efficiency ratios measure the cost of providing services to generate revenue and include the operating cost ratio, salaries and benefits to average portfolio outstanding, average credit officer salary as a multiple of per capita GDP, cost per unit of currency lent, and cost per loan made.
The two levels of self-sufficiency are operational and financial. Operational self-sufficiency generates enough operating revenue to cover operating expenses, financing costs, and the provisions for loan losses. Financial self-sufficiency includes the operations criteria but also earns enough to cover indirect costs such as the adjusted cost of capital. Financial viability can also be determined by calculating the subsidy dependence index which measures the degree to which a MFI relies on subsides for its continued operations. A subsidy dependence index of zero means a MFI has achieved financial self-sufficiency whereas a subsidy dependence index of 100 percent indicates the MFI must double its interest rate if they want to eliminate subsidies.
By Matthew Schoer
While doing my reading for this week, I was introduced to the concept of incentives within microfinance institutions. I had not previously realized that managers for microfinance institutions give out rewards to certain staff members based on their performance. This is an interesting concept as it drives home the fact that microfinance institutions are social businesses and not simply charity. This is a business in which profitability and productivity are both important. In order for microfinance institutions to continue running, they must bring in enough revenue to meet their expenses. This is no easy task and it may be necessary for staff members to work harder at certain times to produce positive results.
While I do see the purpose of using incentive schemes in microfinance, I have my questions concerning its use. I believe that the staff of a microfinance institution should have a personal desire to succeed both personally and as a business. In order for a social business to succeed, it must be driven by more than profit. It must be driven by the intention of giving back to a specific cause and with selfless intentions. If people are only working hard in order to receive bonuses, then that business is doomed to fail. People will begin to give out loans in a manner that will grant them the biggest return, even if it may not be beneficial to the person taking out the loan or the local village. I am put off by this movement to a more profit-driven business.
On the other hand, I do believe that incentives can help motivate workers in microfinance institutions if they are used the right way. I believe that recognition through a ceremony or certificate is the best form of incentive for social business. It assures the recipient that the business acknowledges his or her work and that the business is appreciative. It can foster good feelings within the individual while avoiding the use of monetary bonuses which may lead to corruption or possibly greed. I believe that microfinance institutions must remain true social businesses and do so by avoiding unnecessary incentives and only using them in the most effective manners.
By Chenele Francis
“Still, there are necessary conditions for success, not sufficient conditions” This quote, taken from The Economics of Microfinance, speaks volumes to the outlook of microfinance not as a social venture but as a business. MicroFinance, while widely measured by its strides in social development and its widely publicized repayment rates of 98%, is still a business. As a business, sound management is what matters most, it is what determines the ability to keep making these strides in social development.
As indicated by the Microbanking Bulletin 2002, all the microfinance programs have been successful in covering their costs; this includes low end and high end lenders. The lower end lenders cover about 60% of their operating costs while the high end cover up to 150% of their costs. The high end lenders however, have higher costs per borrower and possibly as a result greater delinquency. With the social goals of these lenders being the only constant factor, what plays into these variations of efficiency?
One study by Woller and Schreiner showed that interest rates, administrative efficiency, loan officer productivity and staff salaries play a huge role in the self-sufficiency of Microfinance Institutions. With social objectives replacing the usual profit motive, how can these problems be addressed? For microfinance institutions finding the right balance between financial stability and social impact is difficult when social responsibility isn’t just a by-product or means to better corporate image. For these organizations, social responsibility attempts to replace the profit motive. Subsequently, financial bottom lines and setting monetary incentives to encourage productivity among employees and managers may not work in the same way.
Who is hired and how they are compensated are management decisions that are approached differently. They way such issues are handled lend insight into the true motives of the institutions and their ability to stick to that primary objective. As a business grows and becomes more successful in covering costs, are the rewards used to compensate management or to further create social impact? It is relatively easy for a business to claim that its main goal is sole but the sincerity of this is only revealed in its management strategies and decisions.
The costs and risks within this industry are particularly high. In fact they have a long standing history of deterring traditional banks. The readings cover the stories of microlenders operating in different economic climates, with varying structures of management and ownership. Each company struggled to provide adequate incentives to motivate their employees while still pursuing their social agenda.
The common thread here is the trade-off between risk and incentive. This has been marked as the “multitask problem,” leading a company to maximize its financial strength and tackling the social objective of poverty alleviation. This is illustrated by a graph, comparing poverty reduction to the loan sizes. The curve of the poverty reduction is downward sloping to indicate that the impact on poverty reduction declines with the loan size. Conversely, financial performance increases with the loan size. This shows that giving a larger loan, benefits the company financial since economies of scale are achieved, but the intended impact on poverty does not correlate.
This establishes the previous point about financial bottom lines while beneficial to financial performance, are detrimental to the social objective. It is clear that a theory of management that delves into the social motive as if it were the profit motive, and the place of the profit motive in social ventures are needed. A business with a core objective of social impact cannot operate as if the profit motive does not exist. It is that very motive that lends itself to the success needed to achieve that social impact. Management must thus continue to find an appropriate level of trade-off until new management principles are developed.
By John Vidulich
This week we had John Buley from JPMorgan come into talk about microfinance. John does what I want to do and he proves is possible. John plays a large role in JPMorgan’s investment bank and helps contribute to JPM’s success. He also spends about 20% of his time on social business. This man is proof that a company can be successful and still maintain profitability why investing in social business. Some examples of investments that JPM was involved with were Anti-Malaria nets for people in Africa. They were place over homes and sleeping areas so that at night people would not become infected. He stated that a large portion of people are dieing from Malaria and this is inexcusable. The nets cost the company about $8 each but what happened is the nets were being used for other purposes such as fishing. I love the innovation by these people and remind donors and investors of Microfinance that THIS is exactly what we want. A small investment not only saves lives but improves standard of living.
However, this was just one piece of the large puzzle. John spoke for over an hour where he explains micro finance and he had answered questions. My question to John was “If your responsibility is to share holders and the general idea for shareholders is to maximize value, how do you justify the not so financially profitable concept of micro finance?” In short, John said that value is relative; the value is not limited to financial gain but also social gain. This question is extremely open ended by I liked his answer.
We prepped for the members who were meeting with the Budget Dean. We wrote on different questions on the actual fund and also different ideas for the Dean. We will recap this tonight. We also prepared Group Expense reports where groups can log any expenses incurred.
By Leonard Hamlin
Muhammad Yunus and the Grameen Bank have pioneered a different way of addressing economical issues in society. Throughout it’s existence the Grameen Bank has been attacking poverty through it’s microloan process and also in other ways. In his book Banker to the Poor, Muhammad Yunus describes the history of the Grameen Bank during the 1990’s. He spoke on the development of the Grameen Bank and how quickly his idea became successful. From giving a first loan of a few simple dollars, to the bank making it’s billion dollar mark in loans in just two years. All of the accomplishments made by Muhammad Yunus are evident but what caught my attention is the consistency in his mission. The accomplishments were mentioned in his book, but he also addressed the trials and tribulations that the Grameen Bank incurred over time. There were tough times for the bank in Bangladesh where the government chose to forgive all loans from government banks that were under 5,000 taka (about $125). This caused most of the Grameen borrowers to assume that their Grameen loans were going to be forgiven. If Grameen Bank were to write off loans under $12, it would have been the end of the bank. The issue was that the wealthy individuals that were able to obtain governmental loans were able to have loans disappear, where the poorest of the poor Grameen borrowers still had their loans in place. Another issue was a cyclone hit that killed many and stranded survivors had to rebuild their homes and restart their businesses. Still Muhammad Yunus and Grameen Bank found a way to help borrowers build homes and start their businesses again. What is important is that Grameen sticks to their mission to eradicate poverty at all costs. Through whatever issues arrive,and even the temptation to become profit driven, they continue to stay on task to battle poverty. Grameen Bank continues to put that effort in other venues and opportunities as every social entrepreneur should. I was surprised to see their involvement in the Nimgachi project and trying to revamp the fisheries in Serajganj, Bangladesh. Muhammad Yunus found another way to help reduce poverty by making fishing more prevalent for the poorer population.
By Adolfo Lopez
After the first few weeks of not knowing exactly where we were going or what we were doing, things are definitely starting to fall into place and getting a little hectic at the same time. In the next couple weeks we have a small event planned by the library and our big thank you event on the 17th. We still have some things that we are not sure about (the food for example) but I am confident that everything will pan out just fine before the big day arrives. The Staten Island campus is also working on their event over there. Their event looks very promising, since they have been concentrating on just that event alone, they have come up with a variety of ideas. They apparently have a lot of prizes to give away along with games and food. We were disappointed when we first realized a big Micro-Finance Day event wouldn’t be possible, but looking at how things have worked out, I think it happened for the better. Since we have the help of the Staten Island campus, we can no have a big event for student awareness and donations, and at the same time also have a more low key event for our donors. It is also really exciting to see our ideas coming into reality like the newsletter, website, and promotional video. I feel this term we have accomplished quite a bit and we still have more to do. But overall, I already feel very proud to be part of this GLOBE program and the stuff we are doing this term will definitely only help to build it.
By MacKenzee Sims
“Every time I hear people arguing that Grameen will collapse when another disaster hits Bangladesh, I respond that Grameen and its borrowers will emerge from our rehabilitation efforts stronger than we were before. And every time this has proven to be the case.”
As I read this chapter, I was struck by the resilience of Grameen and its borrowers despite the hardships that faced them at seemingly every turn. When the military government that had ruled Bangladesh for ten years toppled, Muhammad Yunus did not allow his borrowers to sit back and do nothing. He made sure the poor had a voice by helping organize them into active groups. The influence of Grameen borrowers became clear after the 1991 election and future ones. Hundreds of Grameen borrowers were voted to union councils, elected chiefs, and led the way in nearly wiping out a political party that had taken position against women’s rights.
Unfortunately their success was marred by a series of setbacks. First the new government decided to forgive all loans from government banks that were under 5,000 taka. This new rule didn’t apply to Grameen loans and understandably borrowers felt cheated. Grameen pulled through only to be faced with a cyclone that killed 11,000 people in one night. All that borrowers had worked for was gone. Many predicted this would be the end of Grameen, but it wasn’t. Muhammad Yunus responded by enacting new loan programs and helping borrowers rebuild something better than what they lost. The more I read, the more I was impressed by the strength of the poor. So many people have negative things to say about those who are faced with poverty. They must be lazy and weak. I encourage these people to read about Grameen. I’m sure they wouldn’t be able to believe those sentiments afterwards.
By Ashley Jo Hobbs
When looking at the bigger picture of life as a whole, it makes you realize what really matters and what doesn’t. It made me really think when Muhummad Yunus was discussing his dreams for 2050 of what type of world I would like to live in or have my children’s children live in. Wouldn’t it be nice if all of his dreams came true? What a sight that would be. Some of his ideals such as eliminating passports and visas or eliminating coin or paper currency, seem unfathomable to me, but who knows what the world will be like a thousand years from now.
Understanding his perspective, and keeping in mind his numerous awards and astounding accomplishments, makes all of his aspirations seem empirically feasible. But while reading both textbooks, I often find myself doubting the realism behind a few of his ideas. Maybe some are just more complicated for my understanding in relationship to others, or my lack of balancing his ideas in relationship to my preconceived opinions.
Chapter 9, from The Economics of Microfinance, seemed a bit misleading from the start. Measuring whether subsidization or self-sustainability is the correct avenue for microfinance institutions unfortunately relies on too many detailed factors. Although Yaron created a logical mathematical formula to measure the necessary sustainability dependence index (SDI), it really does not do an appropriate job of comparing the total picture of subsidized institutions vs. self-sufficient institutions. How could one solely rely on the cost-benefit analysis to determine which institution deserves positive appraisal and which do not? What is considered a benefit to one person may be considered a hindrance to another.
By Leonard Hamlin Jr.
Muhammad Yunus’s group lending method proves to be an efficient way to give responsibility to those who borrow from the Grameen Bank. In Microfinance, the borrowers and potential borrowers are the poorest of the poor and have nothing to offer collateral for their loans. If there is nothing to give borrowers an incentive to return their loans, how can such lending be effective? The Grameen Bank’s group lending method transfers the liability of microfinance loans from the bank to the borrowers. With group lending borrowers have to depend on each other to continue getting loans from the Grameen Bank. Borrowers have to depend on those in their groups to pay back their loans in order to recieve new loans. I think this is ingenious because the borrowers must consider other fellow entrepreneurs in their community. Another issue that group lending addresses is the difficulty that banks such as the Grameen Bank has in determining a safe borrower from an unsafe borrower. With barely any information on potential borrowers it is hard for banks to decipher whether or not a borrower is safe to give a loan. With group lending, borrowers form their own groups with other entrepreneurs. Naturally, those who are safe to lend to form groups together because they would have a better judgement on who is safe rather than the bank. The unsafe borrowers will tend to not repay loans early and not be able to continue with receiving loans. The question came to mind while reading about group lending, should GLOBE look into establishing a group lending model down the road when the number of borrowers increases. I think it will give another way to help ensure that loans are repaid and that the borrowers are safe to lend to.
By Adolfo Lopez
This week was the beginning of a streak of big events for the GLOBE program. During common hour today we had our first fundraising event and I think it was more than successful. It only took about an hour and a half to earn over 100 dollars. I honestly was a little bit disappointed when we weren’t going to have a dedicated Micro-Finance Day event, and while I was hopeful about the event today I wasn’t sure how well the turnout would be. My feelings quickly changed after the first 10 minutes of being there. People were actually come up to our table without our persuasion and were genuinely interested and eager to donate. We made a few quick sales in the first 15-20 minutes and while we didn’t keep the pace for the whole time we were there, I think we definitely made an impact. We had some competition with another bake sale literally right next to us in front of the library, and while I don’t know exactly how much their sales were but just by looking at the action during that hour or so, we definitely had some more activity by our table. What surprised me, the most, was how much interest people actually had in the program. From students to professors, to maintenance employees, they were all very eager to learn about what GLOBE was all about and what we are doing. We sold about 15 wristbands, gave out a lot of newsletters, and sold most of out brownies, cupcakes, and cookies. To make it even better, a lot of people gave donations just to help out without wanting anything back. Overall I think we really got the word out some more and it really has me excited about next week because it felt really good to actually talk about all the things we’ve been doing and put it all to work. We are even talking about possibly having another quick event like today before the term is done.
By Elizabeth Stylianou
Grameen Bank uses a group lending system to issue and collect loans, and many microfinance institutions follow their lead in this respect. Group lending can be helpful to borrowers. It gives them a place to socialize and to exchange ideas and advice. In the group, if one person fails to repay their loan, the whole group suffers. This is helpful for the bank issuing a loan because a defaulter’s peers will pressure them to pay so that they don’t face the consequences as well. With group lending, the bank goes to the borrowers for group meetings and to collect loans. This is more convenient for borrowers. In our case, we are not conducting group lending. We need to figure out if it is feasible for the Daughters of Charity to go to the borrowers on a monthly basis to collect the repayments. At this point, we have to discuss this with the Daughters in the field to determine what is easier and best for them.
Banks need as much information as possible to choose appropriate borrowers. This is an issue we had as well, since the applications we received were not completely filled out. “If the bank gets more information, it can always do better” (BA 86). Group lending “can mitigate the moral hazard, adverse selection, and enforcement problems” that arise from information asymmetry (BA 86). Allowing borrowers to choose their own groups actually helps banks because neighbors who live around each other and know each other will seek the best people to join their groups. They will choose people who are most able to repay the loans so that the whole group will not be penalized or have to take on the slack of a defaulter. Some may choose friends; however this may not be the best option since friends often go easier on each other. “Greater diversity means that group members’ incomes are less likely to vary together, and thus group members’ ability to insure each other increases” (BA 108). What kind of diversity do they mean? It could be diversity by location, type of business, age, or educational background. Type of business is the most logical type of diversity because when one type of business is doing well, another type may not be, so groups can help each other.
Technology in the field is very important because it allows borrowers and lenders to stay in touch even if they can’t be directly in face to face contact in the field. This is often the case when borrowers are located far distances from each other. For us, this is extremely important. Being in contact with our borrowers will help us to understand them better. If we could see how they live now, how they change along the way, how they establish their business, and how far they come after the loan, we would better understand our borrowers and the success of the loans. Furthermore, with technology, we could eventually offer educational programs to borrowers.
Group lending transfers responsibility from the bank to the borrowers, which in the case of microlending seems like a good option. If this wasn’t the case, most of these borrowers would not receive loans. “Twenty eight percent of dropouts in Bangladesh left in part because of the frequency of meetings” (BA 110). This was also the case for 11% of dropouts in Uganda. Many enjoyed the social aspect of meetings as well as sharing ideas and learning from each other. For many, the time it takes to travel to and from the meetings and the time in the meeting itself could be better invested in the business itself.
Microfinance institutions require immediate repayments, which may be difficult for some borrowers. Households should have some other form of income stream to help pay the early installments. This is an important question that needs to be answered on our application. Most of our potential borrowers left it blank. I began wondering if microfinance institutions rely on another income flow to make their business work. Are they really helping the poorest of the poor? How about those households that don’t have any other form of income? They deserve microfinance too. In the end, as long as people are being helped, well then it’s a start. Many microfinance institutions require some sort of collateral, such as saving. “Demonstrating the ability to save demonstrates characteristics like discipline and money management skills that correlate with being a good borrower” (BA 136). This gives borrowers a sense of pride because they are capable of saving, and makes banks more willing to lend because they have some collateral. Different microfinance institutions follow different paths that best fit their needs. In GLOBE, we are making our own path, learning what works, and making our mark in the world.
By Ashley Rahill
We, as a team, have accomplished so much in the past few weeks. There is much preparation for everything that is going on: Luncheon on November 17 and the final presentations and the research paper. As a group, we decided to create a small presentation for November 17 in order for donors to understand the flow of funds and where their money is actually going. In this presentation we are going to discuss the types of spreadsheets we have designed, how they work, the general governance laws, and basic statistics and facts about where the money is and how much of the donations go to help actual women in Nigeria.
We are also constructing another set of slides for the final presentation. Our objective for the final presentation is to ultimately show the future accounting class how the spreadsheets and movement of funds are calculated. One thing the accounting team wants to preserve is the smooth flow of funds and for all parties to know exactly where the monies are at all times.
This week we spent a great deal of time designed governance laws for the GLOBE program. We have these regulations set in place because it is important that the same rules are used each semester in order for each class to effectively enhance on the program. We have general governance laws, along with separate governance laws to be followed by each individual team.
As for the spreadsheets, they are definitely coming together. We have hit a few speed bumps, such as automatically coding each item. All in all, the spreadsheets look good and have a section of explanation which will help future classes in understanding each section. It absolutely organizes all the funds and where they are. It shows in depth areas of borrower information, as well as purchase order data.
I wanted to add my thoughts about the interest rate dilemma, as I did in class. I feel that we have already lowered the interest rate significantly. However, for sake of comprising, I believe that we should have a small interest rate, but I do not think that we should have no interest rate at all. Having interest rates gives the borrower a sense of responsibility and teaches them how to manage their money. We are not looking to make money, but all interest rate funds would go to helping more women on the field, not in our pocket or for marketing purposes. I know that this is a huge problem at the moment, but giving out a loan without interest rates, isn’t a loan. I look forward to seeing how this argument plays out.
I wanted to mention something that caught my attention in the readings this week: group lending. I think group lending has had its benefits and at some point in the GLOBE Program, I would like to see group lending. We do not have any expenses; therefore, we may be able to do a trial and error on group lending. I feel that group lending keeps the women in a close knit interaction with others who have the same questions, dreams, and desires. According to the “Grameen-style” of group lending, the advantage of group lending is that the cost of screening, monitoring loans, and the cost of enforcing debt repayments could be reduced. Grameen Bank wanted to test this theory before changing its entire model. They noticed that members were there for each other in times of need and this looked like a positive thing for each member as a person and entrepreneur. In the long term, Grameen Bank decided to extend the responsibility of repayment of loans. This is what I believe makes group lending interesting. Each member is responsible for repaying their loan back, if a member does not pay the loan back, they put all members of the group at risk. This creates a great sense of team work, which I believe it how many things are accomplished in this day and age. It is good to be there for someone, and in helping someone, they are contributing to the group as a whole.
By Jonathan Hong
I don’t think I’ve stressed enough how much of a journey this program has been for me. Before taking this course, I was just a student among thousands. By joining a program in its early stages with phenomenal growth potential, I feel my St. John’s experience has become amazing. To think that there are only a few more weeks left is disappointing. However I can say we still have a lot more to do.
Today was absolutely a success. We held an appreciation luncheon to thank all of those who made this program get started. Everything from the media presentations to the food was well done. I enjoyed the amount of things we had to show our audience even though this was only a glimpse of what is happening. Every team was prepared with a report on their progress. I think the borrower renditions were instrumental in giving our audience a way to experience their hardships. It illustrates what this program means and the possibilities that arise for entrepreneurs.
I did a decent amount of photography today and continued to update the Facebook page. I feel this is one of the most important things the IT team has accomplished in maintaining communications with the outside world. Our team has brought creativity and generated ideas to improve this program. We are extremely happy with the progress we have made.
The only things left to do are: the extensive research assignment and the final presentations in December. These are probably some of the biggest assignments we’ve worked on and I look forward to presenting them. Right now I’m feeling quite accomplished because it was a great day. Every team pulled through and gave it their best. I think the ladies who worked on the table center pieces deserve a round of applause! They were so creative and added that extra touch to make the guests feel welcome. Hooray Fall 2009 GLOBE!!!
By Josh-Roc Rang
We finally had our luncheon event and it was really a day I will remember for the rest of my life. I felt the energy from my fellow classmates and donors and it just reminded me of how important what we are doing is. It also saddens me because I know this program is ending soon and we will not be able to do this as a class again. In our microfinance book saving mobilization was a topic that addressed the issue of saving and the misconception that the poor do not save. I felt that allowing the poor to save would be an excellent way to also help them get out of poverty. By putting your money into a savings account and gaining interest on it, they are making more money and also creating a cushion for themselves by keep money aside for a rainy day. The fact that Ledgerwood made a point to say how important it is for the government to watch over these savings institutions makes perfect sense. If these entrepreneurs do not have the necessary information to assure they are picking the proper institution, it is important that their government watch over these institutions to assure the savers are protected. This will allow growth within the country and give these people the opportunity to grow and move forward in their lives whether it be saving for their children’s education, or improving their current small business. I personally felt that the implementation of a deposit insurance program would be very premature at this stage for many of these developing countries. The reason for this is because many of these developing countries also have developing bodies of government, which makes it hard for them to assure the savings is protected. If they implement the insurance program without a strong government to back it up if worse comes to worse, these entrepreneurs will lose faith in the whole system of saving and be set backwards instead of moving forward. The overall system of savings is one of the best ways to help these entrepreneurs build up their lives and I feel it is the next move to help our fellow borrowers grow.
By Mackenzee Sims
So wow. What an event! I never thought in my wildest dreams that it would turn out as well as it did. And now that it’s over and it won’t worry you…well I can explain to you a little bit of the drama that ensued when creating it. Liz and I were sure it was going to be easy. It was going to take no time at all! Oh, how wrong we were. It started off when we couldn’t find a proper sized globe. Our options were 15 inches or 2 inches. Clearly neither of these options was going to work. After some debate over painting Styrofoam balls (which are outrageously priced!), we decided on paper mache. I’m not even going to go into detail the amount of drama that caused. Liz was quite a miracle worker! Then there was the problem of the container. When we went back to the store, the blue box containers were gone. So we ended up back with the original idea of the martini glass. Liz went out and found a great collection of glass beads and doilies but when I showed up at her house she was at a loss as to what to do with them. We arranged them, but something was off. We debated about that for a while. So she and I ran back to the store, found some tissue paper, ribbon, and some shiny blue grass. I put them together, using two different colors of tissue paper. Liz liked white, I liked blue. We decided we were done deciding and just went with both of them. The final product that you saw today…that was finally finished and decided upon yesterday night.
It was only after we finished, and were pleased with the result, that we both remembered the tables were 72 inches. Our little centerpiece was going to be swallowed up by the table! So Liz grabbed some doilies and we placed those underneath. We printed out some large country name tags and I arranged the country fact sheets I created around the centerpiece so that it visually increased the size. Speaking of those country fact sheets, I don’t know if you’ve ever tried to draw a country on the computer using a touchpad…but I highly suggest against it. That was probably one of the hardest things I have ever done on a computer. You’ll be pleased to know that the outlines of the countries are highly accurate. When I saw that someone had actually taken a few of those, I was so excited.
I was excited about the entire event actually. The food turned out to be delightful, much better than any Chartwell’s buffet I’ve ever had! The people at my table, including the two Staten Island girls were very pleasant. I got to know Adam a little better while we were greeting and directing people. He did a miraculous save with one man. He was listed as James but introduced himself as Jim, and of course had a last name I couldn’t spell. However, Adam found him right away. A few people outside actually stopped and asked about what was going on. Ashley did a beautiful job of explaining it to them. I really enjoyed all the team presentations as well. It was nice to be able to stop, see and appreciate what the other teams have been doing. We’ve all been running around lately trying to get things done and haven’t had the time for that.
By Adam Gertz
This week was our big presentation to the donors, faculty members and other people important to the GLOBE program. I think that things went really well. Everything went really smoothly and looked really good. I got the feeling that our guests were impressed by the event and all that our class has accomplished. The video that was shown at start is very impressive and was a great way to set the event off. I think that we were able to accomplish everything we had hoped to achieve.
I thought the set up of the room and the decorations look really nice. The centerpieces with the paper mache earths and the flags to coincide with the table’s country along with the blow up globes with the countries marked that we are lending to was a really nice touch. The food was really good, there was a great selection of and plenty of it. I think going with Josh’s catering company was a good decision.
Every group did a good job presenting. Everyone was able to convey their messages and their semester accomplishments. It seemed as though our guests were pleased with what we have done. I must say that the best part of the presentation was the finance team. I thought having each person represent a borrower and speak as though they were the individual was a creative and good idea. The impression that I got from speaking to the people at my table was that the guests were most concerned with who it was that was receiving the loans, what the repayment periods were and what interest rates we were going to be charging. I thought the way that the finance team presented was great and it was a good way of putting a face with a name, in a sense. It gave our guests a good idea of who we are helping and the situations they are dealing with as well as what kind of business their money is going to help start.
Overall I thought everyone did a really good job and I must tip my hat to all of my fellow GLOBE members and congratulate everyone on their success thus far.
By Jonathan Hong
What a semester this has been…! It felt extremely short lived but filled with things to accomplish. “The social-business dollar is much more powerful than the charity dollar. Whereas the charity dollar can be used only once, the social-business dollar recycles itself again and again… to deliver benefits to more and more people” (Muhammad Yunus 2007). As I completed the final reading for this semester this line caught my eye from Muhammad Yunus’ book. He makes a point that accurately describes the Globe program. As great as charities are, it just isn’t what we do. The fact is that our class is a social entrepreneurship- we want to drive change and we want to do it through helping those who could not otherwise be able to.
Having completed a number of projects this semester and still have a few more before I leave, I can honestly say this class was worth every second of my time. We have loans ready to be wired as soon as the Daughters of Charity confirm the terms. This is a great step forward in the initial phases of this program. Just to give a brief on the accomplishments from the task teams I’d like to say the following. Our accounting team devised plans to record financial data for the future of the program, the finance team has processed loan applications and developed criteria to assess our applicants, the marketing team has organized amazing events and materials, and finally the IT-Communications team moved forward with completing the website content, optimize social networking tools and introduce media to the program. This only scratches the surface to the things we have really done this semester. In addition to providing Globe with the best of our abilities we all have learned a great deal. This is a great step for the class in learning to become future entrepreneurs and it gives us the experience to understand that it is definitely not a piece of cake.
As a team, we will soon complete our research paper and deliver a final presentation to all our peers, supporters, and faculty. This is going to be one of the most important things we do this semester as this program displays where it stands in the business college. It is going to attract loads of attention if the class pulls through again and displays the best of St. John’s students. I have no regrets in participating in this program. I am disappointed though that it is only one semester. I feel like the class has just begun to settle in. If we continued with the same set of students the program would soar to such great heights. I will definitely be around next semester but since this is my final year it would have been nice to continue on a year long project rather than cut it short. There was so much student engagement and freedom to express our ideas in class discussions. I doubt this experience will exist in some of the final courses I take next semester.
Finally, I just want to say it was awesome working with everyone in the class. I think we did an amazing job given the time constraints and all of our different schedules. I want to wish the future classes the best of luck and loads of success. I look forward to coming back to this program and finding out about our borrowers. I want to see how far these small loans can bring them out of poverty. I think this journey will end on a good note in the coming weeks. Thanks for reading. Go GLOBE!
By Patrick O’Donnell
This is the final log of the semester. My GLOBE experience is something to be reflected on and cherished. Of course there are highlights and lowlights for the Fall 2009 team, with the positives outweighing the negatives. I think this was such a great program because of the sheer effect it can have on people, something that cannot be done from the pages of a textbook or the slides of a PowerPoint lecture.
The greatest experience was the luncheon. Interacting directly with the other side of the program, the Steering Committee, the donors, and GLOBE supporters, is a helpful thing for the program. I picked up some things from those I talked to, like where they come from, their views on the program, and how impressed they really are that the students actually know what they are talking about. This is not something to be taken for granted by anybody. We are not in this for a grade, but rather to build something that can be sustained over a long period of time, and can affect many people across the world. GLOBE truly can be a global effort, and it has already spread in such a small amount of time.
Getting in contact with the Staten Island team could be the highlight of the Marketing team. We established the program in Queens, and already we have another foothold in another borough, on another campus. I view this as a divide and conquer approach. We helped them achieve their goals for the semester, in marketing and selling their product, while helping us to achieve our goal in raising funds for the program so we can make loans. It is also great to hear that somebody from the Staten Island campus has applied for the Spring team. Spreading the word to the other campus could lead to another team being formed on that campus, and it can lead to other greater things from there. Dividing the work, playing to our strengths, and making an impact will help this program really take off and be a phenomenon in the academic community.
The readings have also been a crucial part in our learning. The books have taught me about the actually microloans and the schematics behind them, the origins of microfinance, their lasting effects on the world, and the barriers that need to be overcome in the years ahead. There is a delicate balance in learning: between learning in a contained environment through literature and lectures, and through actual real world experience where we can all get our hands dirty in order to meet accomplish our goals. The readings provide a good balance, and the potpourri of books gives a different point of view, which makes the readings a lot easier to get through each week.
If there is one thing I learned from the program, it is that we can only get so much done in this short amount of time allotted to us. There are so many hurdles to get through on this relay race, and all we can do is accomplish as much as possible, and then pass the baton off to the next group of managers, where hopefully they can improve the program even more. I feel like we have done a lot this semester, but there is still so much more to do in order to make GLOBE the lasting force it ought to be.
By Josh-Roc Rang
This is our last log for the class and it really saddens me because I realize it will be time soon to go our separate ways and go forward to different paths. When I started this term I never realized how much this class would have an impact on me. I realized so much about social business and myself. I am a finance major and I joined the marketing team to take on a different endeavor and found myself enjoying doing the Newsletter, events and promoting material more than I ever enjoyed finance. For my entire four years of college I always wondered what really interested me and what I could see myself doing for the next 40 years. Until this class I never found a try passion for something and it was this class. Working with my group was a great experience and it challenged me in many ways to think differently about situations and also really kept me on track with everything I needed to do for the class. Unfortunately at the moment I will have to try and get a job to support myself at a financial firm because of my financial restraints as an independent who needs to support himself, but now I feel confident that I want to be part of one of these social businesses and help them promote awareness and work towards a better future. This class has had an immeasurable profound impact on my life and I will never forget how much it changed the way I perceive things in life. A social business is something that has the community in mind. As someone who lost a parent and did not have anyone to help support him I can really appreciate the concept of a community and not only just helping yourself, but others that are in need. We see so many things in the world that we look down on and say to ourselves “How can we let his happen?” but the true test is to see what we can do to change those problems and shape a better future for our children and next generation who will have to grow and build on what we leave them. I cannot believe I am working on the next and last issue of the newsletter but I hope whoever takes my place will continue to grow and build on what me and my fellow classmates left behind. We are really changing the world and it really reminds me of what Mahatma Gandhi once said, “You must be the change you wish to see in the world.”
By Denise Yepez
Throughout the semester, I learned a great deal about Microfinance and social business from the readings, lectures, guest speakers, and the program itself. The readings in particular, discuss the structure of Microfinance; however, it was especially interesting to read about Mohammad Yunus’ ideas on how individuals can participate in building a world with no more poverty. One step that individuals can take in realizing their dream world is to create a small organization called a “social action forum”. Once this group establishes their forum, they will create an action plan that will address local social objectives within that year. This may be a small step, but as these forums expand, they can continue to help address critical state and even national social issues. Individuals ranging from teachers to business executives can also help promote social business ideas. I think this class is a good example of what Mohammad Yunus is encouraging. Dr. Sama helped launch the Global Microloan Program and is guiding the class dedicated in disbursing loans to small entrepreneurs in developing countries, and in spreading awareness about microfinance. As the class continues to take momentum, I am certain that it will make a long lasting impact not only for the borrowers, but for the students as well. I am looking forward to seeing the Program’s progress years from now.
Mohammad Yunus also makes enlightening points about creating a dream-world for the future. Since many of us are caught up in our everyday lives and there are many constant changes, we don’t have a clear idea of where we want our world to go. However, once we have a clear idea of where we want the world to go, it will be easier to achieve our goals. If we continue to accept that poverty will always exist, then there will continue to be poor individuals. Poverty does not exist because certain individuals lack capabilities. As demonstrated by many other microfinance institutions, such as Grameen Bank and Project Enterprise, everyone is capable of lifting themselves out of poverty.
With the appropriate resources, everyone can lift themselves out of poverty. This program enables students to engage in social business and concepts of microfinance. By participating in the program, we are helping small entrepreneurs in developing countries support themselves and as a result making a significant impact. This program has been a great experience and has made a lasting influence, and I am grateful for being able to make a contribution.
By Ashley Jo Hobbs
Last log entry of the year! I feel like our first day of class was just yesterday. This semester has really flown by and now as it comes to the end, we still have so much work to do but in reality we have come so far. I am actually kind of curious to see what the next class thinks of our ideas and how they will adapt and progress throughout their semester in Globe. This was the most rewarding class any student could ever be a part of and I know everyone valued this class as much as I did.
This past weekend I was back in Oklahoma for a wedding and to take care of my mom and the most interesting thing happened. One of my friends told the father-of-the-groom about what I do in this microfinance program at St. John’s, and he was apparently absolutely fascinated. He approached me at the reception and introduced me to his daughter in law who is a professor at the University of Arkansas teaching African sociology, history, and culture. She was very interested in the program once I was done telling her all about what all we do and how things are organized. She wrote her doctorate on the study of impoverished African women playing entrepreneurs and therefore she understood everything I was referencing. Hopefully, I will be receiving an email from her soon so that she can start looking into microfinance avenues at her university. It is just interesting to me that no matter where you are (even Broken Arrow, Oklahoma) people are intrigued with the microfinance concept and wish they could be a part of something so significant.
With everything that I have learned about microfinance, I am fully confident that I will use this information throughout my entire life. Whether through my continued studies and or future career, there is no way that I could not involve myself and the people surrounding me in helping countries around the world. Dr. Sama you have been an amazing professor and friend to all of us- thank you for your encouragement and guidance as we tried our best to make the world a better place. Good luck with your class next semester and of course we are always here to help!