Why Should Microfinance Institutions Serve Rural Clients?

One of the things I enjoyed most about my Kiva Fellowship was reading other fellows’ experiences with microfinance in other countries and identifying the overlapping similarities. Nadia Anggraini had shared that there are practical reasons for why her MFI prefers to serve rural clients as opposed to urban clients. As it turned out, the staff at my host MFI in the Philippines had also told me about the challenges of working in urban areas and why they prefer working in rural areas. Similar reasons, similar stories.

Before my chat with HSPFI Executive Director, Sir Vicente “Vic” Geducos, I had always assumed that MFIs serve rural clients mainly for the social good – to offer people in rural areas access to capital that they may not have otherwise. However, Sir Vic explained that HSPFI chose to focus on their rural portfolio because rural borrowers are less likely to move around as much as their urban counterparts (who sometimes employ what HSPFI project officers refer to as “hide and seek” – not showing up to center meetings and not staying at home on days when repayments are due). Rural clients are easier to find, or in short, they are better payers. Needless to say, MFIs need to keep a steady stream of repayments coming in order to operate, and this consideration outweighs the additional risks that MFIs face in operating in remote rural areas – long, arduous travel for the staff being one, and threats to loan officers’ personal safety being another.

That’s not to say that HSPFI doesn’t serve any urban clients at all – I had visited quite a few clients working in or around cities. But the realities of dealing with urban clients mean that HSPFI employs different operational strategies in certain areas. For example, one of HSPFI’s project officers shared that he doesn’t practice the Grameen group lending and joint liability methodology (where group members are responsible for paying for a defaulting member), simply because it’s not as effective. Also, having lots of other MFI competitors in HSPFI’s operational area means that clients who don’t like being held responsible for each others’ debt can leave HSPFI and easily find another MFI that doesn’t have the same borrowing requirements. So even though HSPFI borrowers are grouped into centers, that project officer chose to focus on individual loans. He also added that he denies additional loans to any borrowers who had previously defaulted.

What amazed me most when I first learned about this was how well microfinance marries practical concerns with the social good. There has been a lot written about how microfinance benefits and empowers poor women by offering them access to capital, and those women in turn responsibly invest their business profits to improve their families’ welfare and children’s education. But at the end of the day, why do most MFIs cater primarily to women borrowers? Because they are more responsible payers than men. Similarly, MFIs benefits rural clients by offering valuable services – not just giving the poor access to capital, but also through offering a variety of services like insurance, savings, and business/leadership trainings to those clients.* But the main reason why MFIs choose to serve rural clients is because they also tend to be more responsible payers.

And this is why microfinance has been so successful. Because it serves a social purpose, while being driven by practical considerations.

* Check out Suzy Marinkovich’s moving post for another perspective on rural lending.


John Wood on Room to Read

Yesterday I attended a presentation by John Wood: former Microsoft executive, author of Leaving Microsoft to Change the World, and charismatic founder of Room to Read. Room to Read has been a phenomenon success in the social enterprise sphere – I actually first learned about Room to Read in a class at Brown University, but it was still extremely inspirational to hear the story firsthand from John. Thanks to Volunteering Qld/Business Roundtable for organizing this inspirational event!

A distilled three minute version of John’s hour-long presentation can be found on Youtube.

You can also catch a different hour-long talk by John on FORA.tv, which was delivered on August 2006 and included additional anecdotes about John’s literary/publishing experience.

Contextualizing the Pakistan Floods, Closer to Home

Several reports have come out recently about why the victims of the Pakistan floods have not received as much attention or aid as other natural disasters of a similar or even lesser scale. The Sydney Morning Herald reported that “Australians have charity blind spot on Pakistan“, and NPR also published a similar story about why Americans have given less to Pakistan’s flood victims. Apart from the general perception that floods are less destructive or “urgent” in comparison to other natural disasters that can incur larger death tolls, NPR cited relative lack of news coverage on the floods as another factor in low donations to flood relief.

The general lack of attention and compassion given to the Pakistan floods came up in discussion at Crisis Camp Sydney, as we sifted through and geocoded SMS detailing damage done to villages across the country. One agreed-upon reason for the public apathy was the general lack of news and knowledge about the flooding. Maps showing the extent of the damage would, we thought, go a long way in raising awareness about the floods. Luckily some smart folks had beaten us to the thought, as a fellow Crisis Camper pulled up two mapping sites (IfItWereMyHome.com and BBC Dimensions) which showed that IF the Pakistan floods had occurred in Australia, a good half of the Australian west coast would’ve been devastated – a sobering thought.

Pakistan Floods Over Australia (from IfItWereMyHome.com)

Want to help? UNICEF, Oxfam, and World Vision provide ongoing news coverage from Pakistan and are raising funds to support ongoing water, sanitation, and other initiatives on the ground. You can also donate time by processing flood assessment SMS from Pakistan through Crowdflower – detailed how-to instructions can be found at PakReport.

Snapshots of Manila

Reading Mary’s awesome “closing” post on the Kiva Fellows Blog reminded me that I still had a bunch of pictures from our Manila get-together last November that I meant to put up, but never did. Here are some of my favorite photos from this bustling metropolis of contrasts (and contradictions?)

Snapshot of Manila - Mural

Continue reading

Of Sari-Sari (Variety) Stores and Permits

A HSPFI Lending Team Update.

Sari-sari (variety) stores are really common amongst HSPFI borrowers in the Philippines; they come in all sorts of different shapes and sizes, from a small window display in the back of a home to neat standalone buildings on the side of a street.

Sari-Sari Store (Camiguin)

One of the things that I was really surprised to learn as a Kiva Fellow is that sari-sari store owners need to obtain a permit in order to operate. One of the last Kiva borrowers who I interviewed in Valencia City happened to be a sari-sari store owner herself, so I asked her to go into more detail about the process of obtaining a sari-sari store permit.

Continue reading

Obscura Day 2010 – William Ricketts Sanctuary

This past Saturday my boyfriend and I joined Wayne and two of his friends at William Ricketts Sanctuary for the Melbourne Obscura Day tour. Getting to the Sanctuary took about 1.5 hours by train and car from the center of Melbourne, and it actually would’ve taken even longer if Wayne hadn’t generously responded to my last minute cry for carpooling (thanks Wayne!) – but seeing the Sanctuary definitely made up for every minute of travel time. When I first read about William Ricketts Sanctuary on Atlas Obscura, I knew immediately that I wanted to go there for Obscura Day because it looked so beautiful. And the Sanctuary was not only enchanting and serene, but almost mystical as well. William Ricketts, the artistic mastermind behind the Sanctuary, had a profound respect for nature, aboriginal culture, and the divine – and the Sanctuary was the embodiment of his philosophy.

William Ricketts Sanctuary - "Atirantuka Winged Figure"

Continue reading

Snapshots of Cebu – Day Two

Continued from Day One… after grabbing a quick breakfast, Ed and I hopped into a taxi and headed to Mactan Island. I was determined to get in the water and do some snorkling on this trip, having been thoroughly tempted by all the shiny brochures about the beautiful reefs around Cebu. We hadn’t done any planning beforehand, so we picked out a dive shop on our tourist map of Mactan and hoped for the best.

Snapshot of Cebu - Snorkeling!

Continue reading