Boda-boda

A boda-boda ride with Dennis Ewalu


From The Guardian, here's a brief video showing the day in the life of a bicycle taxi driver in Uganda.

I've long wanted to follow a motorcycle or bicycle taxi to see what kind of money they make, what a day looks like. This is also a great example of someone who might want to join a savings and credit association. Small, somewhat irregular income ... could use some lump sums of capital, not really in the market for a microcredit loan.

Here's the summary:

Started with a loan from his brother to buy a bicycle frame only, worked hard for the rest.
Rides 45 minutes one-way, 3 days a week, to get to Soroti Town for the better business.
Best day yields about 10,000 Ugandan Shillings ($4.64 USD) from 10-12 customers.
Supports himself, a wife, his mother, and 6 children.
Pays for primary school, uniforms, books ... and he also saves.
One day hopes to buy a house with corrugated roofing and also some oxen.

Polly

My eulogy for the funeral yesterday, 6/9/09, 4pm.

Her obituary in the Pensacola News Journal:

MARY ALICE "POLLY" SHERRILL BARANCO
1923-2009
Polly Baranco died peacefully in her sleep surrounded by her family on June 5, 2009.
She was born in Pensacola, FL on October 28, 1923 to Mary Alice and John Hall Sherrill. She graduated from Pensacola High School, attended Randolph Macon Women's College her first two years and graduated from the University of Alabama. She was married to the late Dr. Paul F. Baranco. Polly was devoted to her family, friends and to her community and spent the majority of her life in volunteer endeavors. She was a charter member of the Junior League of Pensacola and a former president of the league as well as receiving one of its highest awards, the Joan B. Gonzalez Award for volunteer work at the Pensacola Public Library. Polly was an active member of the Friends of the Library, the Escambia County Medical Auxiliary, having served as president, and she and her late husband were Founding Board Members at Azalea Trace. Polly was a life-time member of the First Presbyterian Church and a loyal member of the Calvin Sunday School Class.
She is survived by her daughter Fran Hartley (Ted) and her son Paul Francis "Speed" Baranco, Jr. (Sian), four grandchildren, Thomas Bryan Hartley (Gina), Robert Paul Hartley (Danielle), Nicholas Paul Baranco, and Matthew Patrick Baranco, one great grandchild Taylor Ashlyn Hartley, a sister-in-law Joe Sherrill, and many nieces and nephews, great nieces and great nephews who loved her dearly.
She was preceded in death by her husband, her parents, her sister Peggy Bach, and her brothers Frontis W. Sherrill, John Hall Sherrill, Jr., and Alan Prather Sherrill.
A memorial service will be held at the First Presbyterian Church on Tuesday, June 9, 2009, at 4:00 PM followed by visitation in the church parlor.
Memorials, if desired, may be made to Friends of the Library; Covenant Hospice, 5041 N. 12th Ave. Pensacola, FL or to a charity of your choice.
Harper-Morris Memorial Chapel is in charge of arrangements. Published in the Pensacola News Journal on 6/9/2009

Kagame on aid and African prosperity

Africa Has to Find Its Own Road to Prosperity
Rwandan President Paul Kagame in Financial Times

Government activities should focus on supporting entrepreneurship not just to meet these new goals, but because it unlocks people’s minds, fosters innovation and enables people to exercise their talents.

This article popped up in a conversation about Moyo's Dead Aid (HT: Joe's friend Claire).

Save Paste

Haste makes waste. PASTE makes great music very readable. Paste Magazine. It's about music.

Anyway, a couple of years ago, PASTE Magazine offered new subscribers to pay whatever they wanted for a year's subscription. I paid $2.00 USD. For 12 months I received a steady flow of magazines, each containing a CD of select music, often containing artists I knew and liked (recognizable ones like Radiohead) and then artists I'd never heard of. Some was weird and awful, some was weird and great, and some just had to grow on me. The magazine was pretty good. My consumer surplus was great.

So, PASTE has fallen upon the fiscal woes of our times, and it is now asking readers for help. Many loyal readers had already offered. Many musical artists are falling in to help, too. The PASTE Campaign is trying to raise enough money to keep the magazine going. I contributed, maybe you'd like to, as well.

If you do contribute, you can help yourself to a vault of over 100 songs that artists have donated to the cause. Here's my favorite playlist at the moment from the 127 songs I downloaded:

Track, ARTIST

Once, ORTOLAN
sleep. when we die., anchor&Braille
Nothing Makes Me Cry, ROBYN HITCHCOCK
See the World, GOMEZ
Come Home Sam, LIAM FINN
Sucker Punch Town, DODD FERRELLE
Junkyard Julie, THE ROSEWOOD THIEVES
Better Go On Home, THE WATSON TWINS
Making the Move, ARI HEST
Morning Chrome, BLOODKIN
Sugar Tongue, INDIGO GIRLS
Great Ocean, DAN DYER
Deep in the Jungle, DAN ZIMMERMAN
Screaming Lobster, SOUL-JUNK
Dirty Dishes, DEER TICK
Elegant Chaos, PORTASTATIC
Wetlands Dance Hall, VENICE IS SINKING

Miracle of microfinance

I am excited about this new paper (May 2009) by Banerjee and Duflo, The Miracle of Microfinance: Evidence from a randomized evaluation. 2 months and 3 posts ago, I had just posted about these two star MIT development economists. This new paper is presented on the Poverty Action Lab (J-Pal) site, and J-Pal is about as good as it gets for economic research on poverty.

Here is a very short summary of this paper – a summary clipped from a summary by the Private Sector Development (PSD) Blog:

the first large-scale randomized trial of access to microfinance"

microcredit does have important effects on business outcomes and the composition of household expenditure

microcredit … appears to have no discernible effect on education, health, or women's empowerment … in the short term (within 15-18 months)

Here is my first reaction after only skimming the paper and reading the PSD review:

1. Microfinance is not a miracle.
   

   We don't need a scientific paper to say microfinance is no miracle. The fact that there are positive business outcomes after 15-18 months is great. The fact that people aren't smarter, healthier, and more egalitarian … normal. Maybe some people have been parading for some time as though microfinance were a miracle, there have been many such miracles in the past, disappointing panaceas for the developing world that have surged and failed. A point that Banerjee and Duflo would likely support is that there are also many development solutions that have come and gone untested by academic rigor. That is where I am very happy to read this new paper. But let's read it for the rigor, not for miracles dispelled. We're agreed on the miracle point.
   

2. PSD post: "The verdict is in on microfinance."
   

   The first large-scale randomized trial is in. I wouldn't say that's the verdict. The best part about this PSD post is that the first sentence after the "verdict is in" is: "And it's not pretty." What? Positive business outcomes, uncertain social effects after 15-18 months of opening a new microfinance branch in a slum. How pretty are we looking for? We've seen 50 years of development efforts leave much of Africa poorer, I think we can give microfinance a little more than 15-18 months to see sweeping social change.
   

Ok, microfinance is a tool to alleviate poverty in a way that is sustainable and respects human dignity and responsibility. It's not a miracle answer, and the verdict isn't exactly in regarding its overall effectiveness. That being said, I'm excited about this new paper. I guess I should read it now.

Lancaster for rent

2BR, 2BA, $550-$800/month, utilities included: W/S/T/H. Washer & dryer, dishwasher, 1st floor, hardwoods, good kitchen, living room + dining area, off-street parking, yard, pets OK. In-town, walk-able neighborhood. Move in July 1st!

Have you seen this ad above for Lancaster, PA? If so, let me know immediately, we'll take it! The above is our ideal, and we've seen this out there before so we know it exists, but I'm mainly posting it here so I can compare with what we actually do get in a month and a half from now …

Danielle gave a pretty good description of our search process so far.

Even after we confirmed our latest apartment love was a scam, Rob returned the scammers email asking for a picture of the back yard. It was a really beautiful apartment. Almost worth the scam.

Savings of the poor: Boston Globe article

From the Boston Globe:
Q and A with Daryl Collins Financial secrets of the world's poorest people.

A new book, "Portfolios of the Poor: How the World's Poor Live on $2 A Day" takes a detailed look at the daily income and expenses of 285 families in South Africa, India, and Bangladesh, studying how they pay doctors when their children get sick, put food on the table when they're out of work, and pull together money for weddings, funerals, and holidays.

The Economist article in the preceding post cites this same book, a book I am eager to see.

Savings of the poor: Economist article

Even those with very little money have a sophisticated approach to finance

PAYING interest on your savings will strike most people as odd. Yet some poor people in the developing world do just that. In West Africa, for example, some people pay roving susu collectors a fee amounting to a -40% annual interest rate for looking after their deposits.

From The Economist print edition, May 14th 2009

(You may be asking why I would provide a hyperlink to the print edition … and that's a good question. As a disclaimer, the article is from the print edition, but the hyperlink will not deliver you that print edition, merely an electronic reproduction from that print edition. Too much explanation?)

MIT development economists

Esther Duflo and Abhijit Banerjee are two star development economists from MIT. While the merits of microfinance are highly hyped, these two prefer rigorous science, particularly randomized experiments, before placing so much hope on the hype. Not that there's anything wrong with microfinance, but development fads come and go, sometimes before we even know if they were effective. Practitioners try one thing and move on without testing and knowing – that may be a paraphrase from one of the two, so I'll just give you their actual comments on microfinance from a recent interview at Poverty Action Lab:

ED: Look at microfinance. There is no evaluation yet of the impact of a microfinance loan – we have the first preliminary results ever of the impact of a plain vanilla, group lending microfinance model. That's it. It is not as if there have been mixed results before now. The studies don't exist. And that is microfinance, where there are already a hundred economists studying it.

AB: So, if microfinance suddenly doesn't make all babies do calculus by the age of five, it is deemed a failure. I think if we just accept that in the end a few things work and somehow that gives people the spirit or the enthusiasm or the hope to act a bit more and enable those things to accumulate on their own.

Why Christian microfinance shouldn’t go away

Why should a nonprofit (or a Christian organization) use a business model like a bank instead of letting businesses do that? One of the trends in microfinance these days is big banks seeing the profitability of making big profits on small loans to the world's poor. Nonprofit microfinance institutions are in some places struggling to compete and stay in the market. Mexico is a great case study for big bank profits in an industry that has largely been nonprofit:

NY Times - Microfinance's Success Sets Off a Debate in Mexico

microLINKS - Mexican Microfinance: How Big Banks are Making Astronomical Profits

Why do nonprofits do microfinance? Easy. The world's poor are undercapitalized to grow their businesses and improve their welfare. Commercial banks do not make accessible loans to these poor entrepreneurs. Well, commercial banks used to not make those loans, but in some places they are beginning to see the profitability. There are a lot of poor consumers; it's a very big market. So now nonprofits are struggling to compete in some of these places where commercial banks are entering. The point is to bring in capital to stimulate the working economy of the world's poor, why does it matter if a nonprofit does it or a business does it? It still improves the lives of the poor.

Why should nonprofits compete to stay in the microfinance industry?

For one, and this is really my only one point, nonprofits can take risks that commercial banks cannot. Commercial banks enter and compete when the risks and rewards give them a green light, but when the light turns yellow, commercial banks turn back, when the light turns red, forget it. The poor are on their own. What happened to the banking industry that served poor business owners after civil war tore through Liberia? What happened to the banking industry that served poor business owners when a typhoon devastated Thailand?

It's a good thing that private sector industries bring services to the world's poor. But we cannot depend on the private sector when disaster happens. Nonprofit microfinance goes to the hard places, and it stays. If nonprofit institutions get competed out of the market, where will be the capacity when it is needed again?

What can I do for you?

The Prime Minister of Rwanda visited a small village near Kibungo. A true politician of the people, while visiting Kibungo the PM asked the people, sincerely:

"What can I do for you?"

Nothing, thank you. The group addressed by the PM was an active savings and credit association trained by our champions. They didn't need anything. Well, one thing … the group requested that the PM just keep police on the streets and they'd be happy.

This savings group was already doing for themselves. They are particularly disciplined in working each other's fields, they have saved consistently, and if one of them gets sick, there is another one assigned to take care of them. They are extremely well organized. This group works together so well and so diligently that they have earned themselves one full month of vacation each year! Do you take one full month of vacation? Nearby is the Akagera National Park and a beautiful lake with the President's vacation house (I am typing right now from across that very lake). I can clearly imagine group members taking a travel day to fish or lay out by the lake. They are meeting their own needs with time to spare, time to enjoy. They told the PM no thanks.

Teach a man to fish

Neal Baker introduced me to this modified saying:

Give a man a fish, he'll eat for a day. Teach a man to fish, he'll drink beer all day.

That's why it's better to teach a woman to fish, she'll feed her whole family.

In reality, our savings training teaches men and women to fish in terms of managing money and making it grow. We don't give out any fish, or money, but we teach to fish, or to manage money. Within the local church, our savings groups have also empowered men and women to become fishers of men and women. The church is drawing in community members who recognize the groups as more than pools of money. As a matter of fact, many community members might otherwise avoid a church scheme involving money/savings, but that's not what's happening, they are being drawn in because of how these groups are working.

Our groups' members are working in each other's fields, paying for each other's emergency needs, building houses and building relationships. That kind of success is visible, the fruits are good, the success inspiring.

It's hard to say that we just teach the very poor to save their own money, that we don't give them any food or money. But what we are teaching is how to manage their own resources. One day when we are gone, they will still be managing their own resources and making their money grow. Not only that, it's making their communities and families grow because it involves groups and it involves women.

Development theater

Bill Gates opened a jar of mosquitoes at a TED gathering and said, "Why should the poor be the only ones to get malaria?"

Foreign Policy: "misguided and somewhat tasteless attempt to make wealthy donors experience the realities of Third World poverty"

The World Economic Forum at Davos featured a "Refugee Run" so that millionaires can experience the horrors of fleeing violence and oppression.

Bill Easterly, NYU Economist: "Did the words 'insensitive,' 'dehumanizing,' or 'disrespectful' (not to mention 'ludicrous') ever come up in discussing the plans for 'Refugee Run'?"

It's difficult to respond to poverty and injustice. Give money, raise awareness … these are the approaches generally available to the concerned public. For those desperate for change, there is also desperation to tell the story in such a way to motivate much more money and much more awareness. I respect the need to do something that motivates change. When we know the pain in the world we must mourn it and strive to be peacemakers. But when our attempts become theatrical or consumerist, and the results are indeterminate, does our response respect the dignity of those who suffer?

Paycheck to paycheck

Part of spreading savings and credit associations is convincing beggars and widows and prostitutes and street youth to save amounts near $0.25 per week … Convincing subsistence farmers that they can subsist on a little less right now so that they can invest in better crops some four months later. It's hard sometimes to cast this vision to the very poor, that they can live with more purpose and greater insurance and brighter future by saving now. The very poor, however, are not the only ones who lack the vision to save.

Consider these numbers from Harper's Index, December 2008:

Percentage of Americans who say they live "paycheck to paycheck": 47

Percentage of those making over $100,000 per year who say this: 21

HOPE Haiti on YouTube

Microfinance From Below

The Fletcher School (a Tufts international affairs graduate program) is hosting a microfinance conference this March 26-28: Microfinance From Below: The Power of Savings & Savings Groups in Frontier Economies.

Here are a few conference papers related to savings and credit associations:

Start-Up Hiccups: Overcoming Challenges During the Formation of Savings Groups

From self-help groups to village financial institutions in Bali: How culture determines finance, and finance determines culture

Teacups and hand-hoes: Home-grown self-help groups in East Africa

New friends, new house

15 gathered together every week for 2 years. On Fridays, they rotated to each member's home to work on that farm. Sharing work on farms is a very common trend added onto these savings groups. And we know the efficiency of having more hands to share the work, not to mention the encouragement. After they work on that member's farm, each free laborer then pays the recipient of the labor with their weekly savings. Wow. We all work on your farm this Friday, and then we pay you our savings for the week.

They save a total of 1,100 RWF ($2.00 USD) per week, 1,000 rotates to the host farmer, and 100 goes into the accumulating fund. They make loans at 10%, and right now the group has a total of 40,000 RWF ($72.73 USD) on account and 24,000 ($43.64) out on loan. Marita uses her rotating lump sum to buy paraffin and soap, Susanne was able to purchase a phone. Francis took a 5,000 loan plus his own 2,000 and purchased a goat for 7,000 RWF ($12.73 USD). Ngendahayo has bigger plans.

Ngendahayo is quite a young man who seemingly spends much time on the farm by himself. Before this savings group, he was isolated. Isolation is a common theme for many in poverty, but here is this young man, hard working, plenty of promise, and his future is soil and toil. His future is poor and alone. Recently, his future changed. Ngendahayo has joined a savings group where he thrives, and he says that he now feels free to meet others. In fact, he is just energized about life. With a supportive social network and 16,500 ($30.00) on loan for materials and nails, he is now building a house … and plans to marry soon.

Mothers Union

The 12 members of the Mothers Union in Butare meet on the 3rd Friday of each month. Each contributes 600 RWF ($1.09 USD) monthly; 500 rotates to one member each month, 100 accumulates on account. The group has a total savings of 12,000 RWF ($21.82 USD) and they make loans at 10% to group members.

An interesting addition to this Mothers Union group is their extra monthly activity. On that 3rd Friday after they pool their savings, they contribute some equal share of expenses for purchasing materials to make mats. With their mat materials, these mothers make as many mats as possible. For any mats made on that Friday and sold later, they contribute 100% of the sales into their accumulating savings account. That's a pretty crafty way that these mothers value their savings.

Mats sell for 1,500 RWF ($2.73 USD). I'll have to take some pictures and then you can place your orders.

Example of a farming/savings setup

Here's a quick example of a farming-based SCA.

The group meets weekly to farm and save. When they meet each week, they rotate to another member's farm to work together there. Each week, 100 RWF from each member goes to the one member whose farm they're all working on. Another 50 RWF goes into an accumulating account just for emergencies.

Once a month, the group gives another savings contribution of 750 RWF each into an accumulating account just for savings and loans. They currently have 26,000 RWF on account.

Farmers do not have the most consistent cash flow; a lot depends on weather, land, workers, and then sales. Monthly is better for regular saving. At the same time, weekly is better for small contributions towards seeds or manure fertilizer. The emergency fund is useful if someone gets robbed or maybe an animal dies or there's just no farm production and one family needs food.

Our groups are given much guidance on how to set up consistent, transparent, and understandable pay-ins and pay-outs, and also how to handle different group situations. Within that training, groups still have a wide variety of ways of making the savings group fit their lifestyles and needs.

Reactions to savings groups

As we collect stories about our savings groups, members and their purchases, we also collect reactions to our programs within their communities. Here is a sampling of reactions so far:

• Our training in record keeping and policy guidance has restored some of the trust and faith that were lacking in some traditional savings groups. Before people feared pooling their savings because some won't pay back loans, others leave the group early, and still others argue about pay-ins or pay-outs. The structure we give in training frees them to get the benefits of community saving and lending while also drawing people together in healthy relationships. It's all about the trust.
  
• Some churches report that their cell groups had no objective. They meet, pray, and go home. Groups thrive on having purpose, and we have heard that saving together and participating in their personal and community-level economic development has given groups vision. Moreover, many have said they are encouraged by hearing testimonies and principles like starting small and growing big, and they are realizing the importance this has in their lives. Giving vision is giving hope.
  
• One trainer said that our savings program has been different from all the other trainings he's been to. "Many go start something but don't go back to see what's happening at the grass roots level." The groups we visit really appreciate and feel encouraged that we go to see what they have done.
  
• As we assess programs, our group leaders and trainers in the field are realizing that they too can go assess their programs. They have commented on the benefits of sharing stories and discovering groups' challenges, and our monitoring and evaluation trips are becoming a model for trainers to monitor and evaluate the groups they have created. That's an exciting by-product for the health of our programs!
  
• Unfortunately, we have also learned that people have been burned before with savings and credit. Some MFIs (not us) have moved into the area, taken savings and given unsound loans, and then they have folded up shop and gone home without reimbursing people's money. Of course, SCAs are different in that we do not hold people's money, they do. Still, we deal with the repercussions of doubt left by unsound agencies in the past.
  
• Some (in one particular area) have been reluctant to join savings groups because they are active in trading business in town. The ones who find savings more attractive are women, mainly widows. This system of savings is somewhat new in this area, so the advantages are not readily apparent to everyone, even though those same traders may be able to make better purchases and better profits with improved access to informal credit and social networking.