Month: November 2013

The Hidden Costs of Microfinance

Pardon me while I beat a sacred cow. According to some of my readers and commentors, that’s what I do best anyway. And this is a biggie, one of the charity world’s favorite idols, widely worshiped and highly regarded as one of the most respectable forms of do-gooding. Some may even say untouchable, infallible. Hell, it’s even earned its founder, Muhammed Yunus, a Nobel Peace Prize, so who do I think I am to criticize? Well, if you asked that question, then evidently you don’t know the Green Mango very well. That’s right, today I’m taking a swing at microfinance.

Okay, let me give you a moment to catch your breath for a moment before I explain myself. My issue is not entirely with the concept of microfinance programs itself. For Mr. Yunus and his Grameen Bank, it has famously worked very well. Maybe too well. The problem comes when the rest of the charity world sees just how well it worked for the first guy and then everyone else hurries to try to replicate it themselves and just end up screwing everything up. You see, in the charity world we are all constantly looking for the next big thing, the perfect model to follow. We like to think that helping people can be diminished to some simple formula that we can all apply to our own do-gooding. Very few people in the charity world are really looking to innovate unique solutions to the problems within their specific communities and demographics but they’re just waiting for someone else to make something work somewhere else so that they can try to imitate them. But the fact is they almost always end up doing a pathetic job in their replications. This is why even though I respect the noble idea of microfinance, the majority of such programs that I’ve had personal experience with have been failures at accomplishing their missions, many times unknowingly to those running them. So the problem lies much more in the nonprofits’ addiction to searching for idols to worship and then failing in their imitations but refusing to admit their failure because they are following such a widely accepted perfect model.

Here in Haiti imitation microfinance programs are more popular than high blood pressure at the Iowa State Fair (that’s right, shout out to my home state and deep fried everything!) These dime-a-dozen programs here often times function everyday thinking that they’re bringing positive progress to the lives of their clients without ever seeing the peripheral damage that they’re causing with the expectations that they enforce. They think that they are teaching responsible management skills when really they are just extending the system of dependency and debt out further to a place where its not their problem anymore.

I’ve even recommended to friends and students of mine here that they register for these types of programs in the past when they’ve asked my advice on making money. However, more often then not, these people have come back to me a few months later to ask me to loan them money so that they can pay off their debts to the microfinance program. And its not just my close friends but I’ve heard many people in the community talk about the difficulty they have coming up with the money to pay back their microcredit debt. Its so widespread of an occurrence that I can’t possible blame the individual for not succeeding at their business but its clear that there’s a problem with the inherent structure of these programs that makes failure more likely than success. Yet the structure still enforces procedures that coerce payment that allows the organization to claims success nonetheless.

And if there are that many that have asked me to pay off their loans, how many more out there are asking their neighbors, spouses, or family to help them pay off their loans? Most of these programs are able to tout near 100% repayment rate but I would betcha that the percentage of clients that are actually able to pay off their loans with their own money that they’ve made from their own start up business is depressingly lower. But these groups don’t ever report that. As long as they get their money paid back they don’t measure success by how successful the person’s business is.

But accruing debt to others isn’t the only side effect of these microfinance programs. Often times, the inability to repay their loans goes much farther, causing the client to actually run away from the debt rather than having to repay it somehow. When this happens, the lending organization never realizes that it is to blame. They just assume that the relocation is for some other reason and report that they’ve lost a client, not that they’ve driven them away. But I’ve had students in my adult literacy class move away from the community leaving behind their homes and even family because they’re unable to repay debt to micro credit charities intended to help them. Also this year I had a child in our sponsorship programs uprooted and moved into the capitol city because his mother was unable to pay off her loan to a microfinance program. That boy had two siblings and had never lived outside of this rural community but now because his mother had signed up for a program that she wasn’t able to satisfy the requirements of, now he’s missing out on the chance to even go to school, as I assume are his siblings.

And the organization that provided her that loan based on these sacred microfinance principles has no clue why she moved. They just crossed her off of their list and still get to claim their near perfect “success” rate.

If these programs were managed the way they’re intended to, I wouldn’t have to be approached for loans or charity from their clients, their clients wouldn’t be moving away, and children wouldn’t not be missing out on the chance for an education. I’m not reporting on this as some journalist who has done all sorts of research on the issue, I am simply sharing from my personal experience. And since it has been repetitive negative experiences coming from multiple programs and organizations, I felt it was important to share in an attempt to encourage those who support these kinds of programs and maybe even those who manage these sorts of programs to try to look deeper in their analysis of the programs and to consider other ways to encourage success in their clients beyond just measuring repayment rates. I do think that there are many ways to utilize these proven models for the benefit of those we serve, but it demands that those who are administrating the programs take responsibility to look critically at all of the side effects of their efforts and not just lazily rest on the justification of doing good because the model they use has a Nobel prize behind it. Yunus deserves every ounce of his prize for his work developing the system, but unfortunately so many of the copycat attempts at doing what he did are an insult to his legacy. If you want to win a Nobel prize of your own someday, it’s never going to happen by haphazardly trying to imitate another.

Damned if You Give, Damned if You Don’t

I had written this post a while back but never published it. I came across it now again and decided that with the recent events in the Philippines that it would be a good time to share it. Actually about a week and a half ago would have been a good time to share it, but no one can really be surprised that I’m late at something. At the same time I want to be clear that I’m a bit hesitant at sharing this because I don’t want to be perceived to be making the dangerous assumption that the current situation in the Philippines is anything like the situation was in Haiti after the earthquake of 2010. Both are overwhelmingly tragic natural disasters causing widespread devastation and loss of life that have triggered the response of well-meaning people all over the world who want to help bring relief. However, the cultural, geographic, economic, and governmental differences between the two places make the situations and how the survivors will be affected by them completely unique to each location. Just as it is with any disaster that may ever strike in the world, and I think it is always important for us to acknowledge all of these varying factors that come into play.

Okay Green Mango Readers, time for a little quiz.

1. What’s the best thing you can do to try to help with the relief effort in a time of disaster?

A: Give money.

2. What’s the worst thing that you can do to try to help with the relief effort in a time of disaster?

A: Give money.

You may be thinking, “Seriously? Can we never do anything right for this guy? We mean well, we just want to help somehow.” I understand, and as a victim myself once of one of the greatest humanitarian disasters of all time and first-hand witness to many of the world’s relief efforts in such a situation, I want everyone to know that you can help, and it is greatly appreciated, but I want to encourage everyone to do it in a way that is as effective and dignified as possible. So let me explain.

When disaster strikes somewhere in the world and fellow human beings are victims, even though we may not be personally effected by it, we each are touched nonetheless and often want to help in some way. We see the images and the stories on the news of lives devastated, homes lost, and communities wiped out and our heartstrings are tugged when we realized that Mother Nature doesn’t discriminate and it could really happen to any of us. So when it didn’t happen to us and it did happen to another we are flooded with feelings of sympathy and even guilt and immediately start searching for ways to bring relief to those who inhabit this planet with us. But when those feelings are activated and we need to decide the next step in how to help, we need to take a moment to make sure that our resulting actions are not done based purely on emotions but are indeed thought out well enough that they will genuinely make a difference and not just assuage our pity.

There are a lot of possible ways that we might consider getting involved and there have even recently been lots of writers address this issue and I don’t need to spend a lot of time repeating what they’ve already said. For instance, it is commonly understood and frequently stated that victims of disaster do not need our stuff. I hope that we can all agree on this. They don’t need our used clothes, they don’t need our medical supplies, they don’t need our canned goods, and they don’t need our blankets, our tarps, or our tents. This doesn’t mean that they don’t need these things at a time when they’ve lost everything, they just don’t need you to go to Wal-Mart and buy every last can of green beans that they have on the shelf to try to send to them. I understand that members of our churches or social groups feel more physically involved if they can donate items rather than just write out a check, but these donations usually end up costing the organizations that are in place to distribute such things more money and time to facilitate such distributions that they’re worth. And, because it’s not just as simple as giving things out on the other end, many of these donations end up going to waste completely because the logistics of getting them to the victims is not near as easy as the donors think. Nor does the local timeline of needing such items line up with the timeline of the donors giving them. So, in this case it is always better to simply find an organization that already provides those sorts of things and making a financial donation to them. They can much better coordinate when to give, what to give, where to get it from, and how to give it if they just have the funds to do it rather than boxes full of stuff in storage or even worse, stuck in customs. At the same time, if you donate your can of green beans or your t-shirt, it takes multiple people hours in their work day to make sure a victim receives those items, but the green beans and t-shirt can’t pay the salary of those people that made that donation possible for you. All of this is to say, giving money is always better than giving things.

But what if we feel like we are supposed to go to help hands-on with the relief? This one’s a little trickier to respond and the way I would answer is not near as clear cut as some other writers have recently suggested in popular articles. Many experts would say that unless you have highly specialized skills that are in high need at the time, just stay home and raise funds to send. But I’m still a bit conflicted on this issue because many people might see a disaster happen and see the images on the news and want to go simply to help out with the clean-up effort. They might not be surgeons or engineers, but they could certainly help clean up the debris and rubble and garbage in the streets, couldn’t they? And the experts would say that it’s better to send money to hire locals to do this untrained labor instead, then it provides them income that can help them help their families recover in the long run. And this is a convincing argument but the truth is even this is not that black and white. When the earthquake struck Haiti and left the streets strewn with rubble from collapsed houses, it’s true that there were plenty of strong, seemingly capable Haitian survivors who could physically do that work and greatly benefit from money that might be able to pay them to do so, but doing that sort of work also required a certain level of mental health that not one single survivor in the country possessed at that time. There were plenty of Haitians that could have done the work to clean up all of the rubble and debris, but not one of them would agree to do it because no one was going to volunteer to do a job where they could potentially lift up a chunk of cement to find the crushed body of a cousin of theirs, a friend of theirs, or a neighbor of theirs.

Whereas, if a Canadian, for example, swooped in after the quake and did the clearing of the rubble, it was still understandably, emotionally traumatizing to that person to uncover the victims, but they’re not near as connected to the trauma as those who were there themselves when the earth actually shook and who may even potentially know the victims personally. So, in that sense, I appreciated having some foreigners there to do that sort of work. However, it still holds true, whether you would come in to just clean up or if you have very specialized skills, for the money you’d be spending to travel and stay in the location, a locally operating organization could probably hire someone with the same skills from a neighboring country to come do the same work for a longer period of time and even have money left over for other interventions. So, even in this situation, I would still say that giving money is better than going. But, speak with the organization you’re supporting first to see if they need volunteers at that time and what for. Then, if you do decide to go, please do so with a lot of humility and very low expectations. Going into such a situation to help, things will never be as simple or as well organized as one might have hoped and you will never be doing what you actually expected to. Communicate thoroughly with the locally operating organization ahead of time to make sure that you’ll actually be needed and that they wouldn’t rather just have a donation. And make sure that you have a clear idea of what you will actually be doing but then still expect to be disappointed.

So, giving money is better than giving things and it’s better than going. So why is it also the worst thing that you can do in such a situation? Because if you only give money during a disaster than your money is never actually going to go to relief of that disaster. No matter the organization, it is logistically almost impossible to use donations directly towards the actual work of helping after a disaster. The organizations that are always the first responders to a disaster have to be prepared to get involved immediately when it happens so they need a source of funds on reserve ready for the moment that it does happen. They don’t have time to wait for your heartstrings to be pulled or for your favorite celebrity to jump on the bandwagon and make a plea for your funds or for your pastor to appeal to your sense of religious duty. Even then, by the time that your donations are able to be processed and transferred and administered so that they may be used, that organization has already moved on to the next phase of helping the population recover. This means that your funds will probably more likely be used for a longer term program for development or put back in the pot so that the organization can be prepared for when the next disaster hits. Which isn’t the worst thing, it’s just not what you expected for your money. Disaster relief has a very specific, and very accelerated timeline that usually doesn’t match up with the timelines of donors, banks, or even the victims. Sometimes, because of the emotional and mental trauma victims endure after a disaster, they’re not even ready for the intense intervention being offered right away by relief agencies. Disasters are often exploited by organizations to boost funding that they know they’ll need for their other operations, and sometimes entire agencies are even formed in the wake of disasters exclusively because of that promise of funding. But by the time your funds actually get to them in a usable fashion, their priorities and the priorities of the victims have already changed. Even with the modern technology that has streamlined the efficiency of receiving donations, technology hasn’t been able to bypass bureaucracies and politics. This exploitation of disasters for funding is what makes money the worst, but that’s not on you, the donor, that’s on the nonprofits that are receiving the money. You, the donor, just need to fully understand that this is the reality of NGO operations and don’t get offended if your $5 donation that you texted or tweeted or put in the offering plate didn’t go straight to buying a blanket for a cold baby. In some, sometimes very indirect way, it is still going to help victims of Disaster.

So, if you’re damned if you give, damned if you don’t, what’s the solution to satisfying our human need to wanting to help one another? Give. Please, give. But give regularly and give with awareness. Instead of waiting for that celebrity or that pastor or that sorry looking photo in the news, do your research, starting right now, and find an organization that you fully believe in and can feel good supporting and then do it on a regular basis. Decide an amount that you can give to that organization every month, and set up an automatic payment to them through your bank or your Paypal account. It’s easier than you think. Make sure that you sign up for their newsletter so that you can always catch updates from them and then if a disaster does strike and that organization will be involved in the relief, you’ll be one of the first to know specific ways that they would like you to be involved. Maybe it will mean just giving extra on your regular donation for that month, but if you’ve been supporting them already, then you’ll know that they were prepared to respond when the disaster struck. And then you’ll know that your continued donation long afterwards will still assure that they’re able to help the victims recover in the long term which is just as important.

My friends, we have created a world in which we can guarantee natural disasters will always be happening and they will always be devastating in some form or another. There are no easy answers as to the best way to help, but one thing that is easy is not waiting until another one strikes to show we care. Let’s make giving part of our lifestyle so that we know in all times that the organizations that we do care for are prepared to take care of our brothers and sisters in this world whenever the need may arise.

The Perfect Mission Opportunity 2

I had previously written a post about the perfect mission opportunity, addressing one of the greatest issues that I think exists in the mission-aid world of helping people, and that is how to base our cross cultural service on genuine relationships between human to human rather than just giver to takers. But one of the other clear hurdles we have to cross in order to make sure our service is as effective as possible is ensuring that our intervention is locally desired and invited without imposing foreign ideas just because we’re using foreign money to accomplish them. As one of my readers pointed out after the last post, our money has extreme power and we need to be very careful about the effect that power has when implanted into a different culture. Although I am very curious to see what can happen when our foreign money is just gifted to local people without conditions, there’s another method that I would be curious to see the results of that I wish could be implemented somehow (by someone other than myself. So again, if anyone wants to brainstorm and run with this idea, let me know).

I’ve always thought that it would be ideal for an organization to exist that took advantage of the good hearts of foreigners to build relationships and draw upon their varying experiences and expertise, but not having to depend upon their money at all. Because the truth is, if I take Haiti as an example as usual, there is money here. The myth that development is difficult in these places because of a lack of money only encourages local people to ignore the resources that they already have at their fingertips that could do great things. There is money here and some of the people with that money are even willing to donate it to causes that they find important. I’ve seen Haitians raise so much money for things like concerts, soccer tournaments, parties, festivals, and the like, but when it comes to development projects they’ve become accustomed to depending on foreign funds to get that work done for them.

I think that it is possible to create a system in which those local financial resources can be exploited for the common good while still encouraging foreign travelers to get involved in the good that’s being implemented and bringing the world just a little closer together for all. Ideally, I think that every community that is interested in recruiting the services of foreign visitors should have a committee assigned with the responsibility of prioritizing possible projects for those visitors to get involved in and generating local support for those projects before ever accepting anyone from outside their community to enter on pretexts of service and aid. This would be something beyond the leadership structures of local organizations because those are always polluted with politics and self-interests. This would have to be an objective collection of community leaders that could legitimately determine the needs and priorities of their population. Which, I know groups such as this already exist within certain areas, but because of the nonprofit structures that overrule their authority, foreigners are able to volunteer however they want whenever they want, as long as they have the money to bribe locals into buying into their unneeded ideals which they call “help”.

The really important and unique part of this new proposed committee would be the local fundraising that they would have to do to render the prioritized projects possible. They would have to have a platform (a website) in which they could publicize the projects that they have determined they need in the community and then request the types of external professionals that they need to help them accomplish the projects. Based on their expected fundraising potential, they would publish what they can offer for someone who can come to help. Since it is their own decision on the level of importance of the need, they too should be able to provide the support that’s needed to bring someone or a group of someones in to address that need. That’s when those who are traveling to the site know for sure that what they are bringing into the community, whether it’s knowledge, physical skills, or certain social coordination, is something that is truly desired and welcome by those receiving it. This seldom happens when visitors come into a community for service or mission because they are the ones offering their skills into a place that they want to travel to so they find a way to force their skills, knowledge, or ideas, into the community. And the nonprofits that they facilitate their travels through encourage them because they know that they will benefit financially off of these visitors regardless of whether what they are offering is really needed or not. Whether they are really helpful to the community or not, the organizational leaders will make them feel like saviors because they know the visitors’ money will still go to help them whether personally or for the organization. But it’s still all politics and those who really need the help remain in the shadows of everyone else’s exploitation of one another across cultures that make the truth always evasive.

“But if there’s money available and local leaders who are able to raise funds, then why should we donate at all or fund projects during our trips?” This is a very valid question, but the answer lies in the timing of the question. At this point, many “developing” communities have become laboratories for aid experimentation to such an extent that the dependency that has been formed on both sides can’t be cut off cold turkey. These communities are not ready to take on the responsibility of funding projects on their own immediately because they’ve spent too much time being told that they are nothing more than a demographic for a charity. Yet, the scales must begin to tip at some point and the power for local development needs to start changing hands. I think that this sort of committee proposal providing project priorities and potential funding could be a good first step towards that eventual end. It could even become a source of regulation for the international nonprofits that are already active within a community. Because there is and always will be a role for these groups to continue being involved in such places, but as long as the money is coming from overseas, the priorities for what that money should do will also be imported.

This might sound even a little bit contradictory to my earlier post with other ideas on how mission moneys should be used and mission groups should be involved, but don’t worry, there’s actually a hybrid of these ideas that I think could be possible and actually extremely effective. It would require a lot of people on both sides willing to let go of all of the traditional models and taking a risk with something that would take some serious time to grow and thrive. But I think that we’ve reached a point in international service, where, at least within my generation of expats living abroad, it is agreed that the old ways of doing things is a big waste of time, money, and integrity. And if we don’t take steps to keep up with the progressive visions of our international peers who are looking for new ways of developing their communities and making lives better for themselves and the future, we will eventually be made fools of and be sent back to our home countries with our tails between our legs. This already takes place with those who enter a new culture without opening their minds to evolve and accept new perspectives on development, and when it happens it has a negative impact on both sides. And one of the hardest ideas to always let go of is that our money alone is what can make a difference and just because we worked so hard to earn our money, if we donate it, then we get to decide how it should be used. And then we get pissed off when we think it gets wasted. But the essence of these two proposals are 1) That undesignated money leads to local solutions and gives local people the power and dignity to decide for themselves, and 2) That using local funds from the start, but still encouraging cross cultural service involves us all within those local solutions. I think that is where we need to start.

Again, all of this may never come to fruition, it’s just a lot of brainstorming and thoughts based on my experience. Before we know it the cultural tides will change once more and even these ideas may become obsolete. But we need to keep thinking on what may be next if we want the future to be different for ourselves and the world that we live in.