Marketing and Fundraising Team Log # 1

By: Berenice Bryant

The meeting with Scott VanDeusen was very insightful. He was able to give us some inside knowledge on what techniques work within St. John’s and which ones are not as successful. This is important because this way we can avoid putting in so much time and energy into an ineffective campaign. Additionally, he had some good recommendations about turning the raffle offered into a 50/50 type raffle. This would eliminate the struggle of finding prize donations or raising additional funds in order to have prizes. Even more importantly, everyone will be happy with the money prize whereas a male receiving jewelry or a scarf is not as enticing.

Within the team we have not yet mastered communication. Although we have several platforms we can communicate through such as email and texting, not all the members are active in these discussions. I would like to discuss this today with the group because miscommunications and not having everyone on the same page can slow us down. Hopefully, we will be able to resolve this issue to increase our productivity. Otherwise, our team has been working together well in order to accomplish assigned tasks, brainstorm ideas, and set goals that are aggressive yet obtainable. It is important to set the bar high so that even if you do not accomplish your exact goal, you have made it close, which amounts to the best you could have done. We will be busy in the upcoming weeks; in order to set up the semester’s events and promotions, we need to plan them early to account for shipping, delays, venues filling up, and ensure we do not miss opportunities.

One thing I found to be interesting that we discussed in class previously was the idea that microfinance is not a new phenomenon. Eighteenth Century England had a similar system. Ireland also had loans in order to deal with the potato famine; they were even free. Microfinance was much less formal but still, the concept had been done before. In our texts, when referring to the development of microfinance, they are quick to reference Muhammad Yunus and Grameen Bank as well as other popular MFIs.

Another interesting concept we discussed was what being poor means. One thing mentioned by Dr. Sama was a discussion she had with an individual living in what we would consider to be a ‘poor’ area. This individual mentioned how she had never considered herself to be poor; she rich with culture, family and spirit. This just stressed the importance of not judging individuals based off of preconceived notions and to be conscious when discussing these matters as to not offend any groups. The ‘poor’ are resourceful and have just as much potential as anyone else, just no opportunity to use it. Referring to them more scientifically (i.e. those “below the line of poverty) is much more tactful and better explains whom you are referring to.

Technology and Communications Team: Log # 8 by Arianna Vargas

We are all super excited about the upcoming events. The time has come to prove our true commitment to GLOBE.  The semester is coming to an end so we are all starting to feel the burden of all the work accumulating, but we still manage to give it our all.  Preparing for these events have been a major part of our semester but all of the important dates are right around the corner.  It is too late to give up now; our class has to finish with the same enthusiasm and focus we started with.  Dr. Sama has done a great job at keeping us intrigued and keeping the spark going.  Not once has there been a dull moment in the class.  There is always so much to learn and get done.  Things were slightly switched up today because we had to bring in article instead of presenting our weekly readings.  Everyone acquired important information that can maybe even help GLOBE in the future.
 
Today our first draft of the research paper was due.   While writing my part of the research paper I came across common difficulties that have come with technology.  One of them being that at times people underestimate time and cost.  With underestimating time comes the postponing of a project.  By underestimating cost, the budget might not cover the project.  Both circumstances are detrimental to the process of helping a developing country.  It is vital for managers to be realistic about upfront and on-going costs because the conditions under which people in under-developed countries are living in have to be worked upon without delay. Systems that will support an MFI over the long term can be expensive. The purchase price of hardware and software usually accounts for only fifteen percent of the total cost of implementation. The majority of information system expenses are incurred in staff time, training, and adapting operations to the new system. Technology will also be an on-going expense as an MFI’s operations respond to changing client needs and regulatory and economic environments. An annual budget for information technology maintenance should not exceed 12−15 percent of an MFI’s revenues.

One of the most significant findings in the last 50 years is that a large share of economic growth, more than one-third, is driven by technological advance.  Capital and labor accounted for less than two-thirds of growth. The remainder was technology. The reason computers and software had such a powerful influence was that their effect was not limited to a single industry. Information technology (IT) could generate substantial spillover effects into other sectors. Examples include local area networks, computer-aided design (CAD-CAM), electronic banking, Internet retailing, statistical quality control, computerized inventory control, and faster communication of ideas. Industrial firms could use computers to reduce cycle times, achieve fewer defects, control inventory, and do specialized production runs tailoring manufacturing to demand.

The relationship between technology and microfinance evolves continuously. Throughout the years, the new devices do basically the same things; these are: capturing and analyzing data. This means that the actual technologies are not a major innovation, but what is innovative is what these technologies have done in the underdeveloped world.  For example, smart cards, credit cards and debit cards are popular now in the microfinance world.   Some institutions are even using them to process microloans.  The networking of branches is quickly becoming a requirement in the industry. The difficulty with this delivery channel is the cash part of the operation and being able to get beyond simple financial transactions.

Marketing and Fundraising Team: Log # 7 by Jessica Avenia-Gamba

GLOBE may not be at the level of success we would like it to be, but that does not mean it is not making progress. Although our repayment rate is not as great as it could be and our borrowers are difficult to keep track of, I sincerely believe the organization is making an impact, both locally and globally. We are raising awareness in our community, recognizing our mistakes, and proposing solutions just as social entrepreneurs should be doing. 

Our discussion in class made me realize that we cannot expect people who have never had the responsibility or capacity to build credit to know the meaning of repayment. We are aware that they are a major risk, but as a social action-driven organization, we are willing to take that chance. We fail to understand that our borrowers also know they are a risk for us and as a result they lack the confidence to manage their own business successfully. For this reason I suggested that it is crucial for GLOBE to focus on finding a way to educate the people we seek and provide them with the proper tools to succeed in their businesses and educate them on the importance of credit.

The article on social entrepreneurship was also very helpful in understanding the world of microfinance and microloans. It is essential that we differentiate the work we are doing with GLOBE from the work of other social action organizations that do not promote entrepreneurship. For example, although social activists are motivated by change, their methods are less direct. These types of groups are working with social systems already in place and pushing for modifications to improve them. Social entrepreneurs are innovative thinkers seeking to create an entirely new system that will change society as a whole. This does not mean that social entrepreneurs sometimes do not use the same tactics as social activists and traditional nonprofit organizations. It simply means that we set boundaries and understand differences; otherwise, it gives the public the opportunity to find flaws in the organization and ultimately ignore the cause altogether.

Finance and Risk Assessment Team: Log # 6 by Felipe Juan

When the class was taking the assessment last week, I think we all could have written books and turned them in if we were allowed to. Tonight, class lecture let out early, but you know what? The majority of the class stayed. What was beautiful about this was that everyone wanted to stay. Even before our class ended, during our break, all of this remained on my mind as I discussed with Catherine the idea of participatory mapping. Mapping has always been something that has fascinated me. It’s a way for someone to find a place, a thing, and a person. Maps allow for connection and connections allow for interactions, for communication, and for knowledge. However, it’s a bit surprising that these maps haven’t been used but hey! It’s never too late to get started.

Whenever I’m doing extensive work or some kind of project, nothing ever seems to be in place. Maybe because of the hectic nature and sophistication of what is really going on (especially if it’s more than one person working on the project). It’s an interesting puzzle, where everyone holds their piece, looks at it and initially thinks: “What am I supposed to do with this?” I have to admit however; I’ve been through too many group activities to think this way, and each time I’m blown away by how wonderful the end result is. But again, we can’t just rush and be overconfident, thinking that everything will magically get done. This really makes me think back to a video I watched about a sustainability project in Los Angeles, where the person who started a garden was asking people why they were ashamed of asking for the veggies, and instead just stealing them. The contribution we make is to one another and not to be hidden!

We all must be aware of where we stand amongst our peers in terms of dedication and passion about this class.  GLOBE really does bring out the best in you because this is a class where one must be the subject. You participate in this system and accomplishing goals is much easier if everyone is close, without borders that can inhibit progress. Despite the magnitude of work, this seems like fun rather than work. Everyone has a long day on Tuesdays and I recall spending this class smiling at the interactions we have because not only are they entertaining, but they are actual progress. Finance is really coming together with Enterprise Development to create a comprehensive analysis of certain areas of the world and it seems like Marketing and IT are also with the same concept of aiding one another. I honestly can’t wait until everything sizzles together.

Enterprise Development, Program Impact Audits and Budgeting Team: Log #5 by: Najwa Sobti

Last week was very interesting in terms of my relationship with microfinance. Unfortunately, I had to defend it to many individuals critiquing it and its impact. After listening to the Half the Sky lecture with Sheryl WuDunn and Nicholas Kristof on campus, many of my professors were frustrated by the message the book was expressing. Many of the critiques pertained to the hindrances of microfinance. Not only was that an issue, but also the fact that many people wanted more of an international pressure than a grassroots relief effort. What I had to express was that though these were issues worth considering, the grassroots approach was alleviating poverty in some of the various forgotten villages. Then I was asked to write a paper choosing one of the grassroots projects noted in Half the Sky. I chose The Grameen Bank, in hopes of not only writing the paper, but also reinforcing the information I learned in GLOBE. One thing I found for certain is that microfinance, unlike many grassroots projects, is a system in which needs to be studied extensively. That’s what I think makes it so different and so important.  One issue that really stumped me and I feel needs to be addressed is the concern of domestic violence between spouses and the group-lending model. I also wanted to find out if any of our borrowers have had to experience such a situation. These questions are extremely vital and necessary if we aim to accomplish growth in this field. Women who fear such violence would not want to borrow and would not leave their husband. After these discoveries it became knowledgeable that microfinance is webbed into systems of knots and tangles and we have to make sure we don’t just place the loan in such a web but actually aim at untangling it.

Then I realized that money might not be the best form of loan. This was something I did not think of right away. Our visitor Dr. Caroljean Willie and her presentation “A Bishop, A Cow and a Way Out of Poverty” left a lasting impression on me. What that program did was create a systematic and extremely thought out way out of poverty. I was surprised at what a flawless program it was. What I found very profound was the statement: “People have the right, the will, and the capacity to direct their own future.” I also thought that the donation system was beautiful. Giving people solid choices and something to correlate with their donation, such as a $10 ear, is something we should think about; this donation may not be literal but on Microdonation Day we could have cards that state: $5 –Pride, $10- Hope, and so on. I think this model can definitely express what we are aiming at accomplishing while also displaying important messages. Donors feel better when they can match their donation with something relevant to the cause.

I began thinking in terms of expansion to the Middle East and how this system is probably the best for some of the agricultural areas. I also found that the Moroccan government proposed microfinance in one area of Morocco. All of this information is necessary and expansion is a very complicated task; being the best informed rather than thinking in terms of execution of tasks is essential. I began to discuss this with a family friend who works with an exchange program in conjunction with Iona College, which is also a Catholic university. Finding that Morocco has invested very much in microfinance, I felt the need to ask if my friend who organizes the program knew about microfinance. Surprisingly enough, he had never heard of it. We determined that we would speak about it more thoroughly at a later time. But out of this brief conversation, I learned there is not a saturated “market” in terms of the presence of microfinance institutions. I also learned that the objective of expanding to the Middle East is probably the most difficult for us to address, but with diligence and hard work, it is quite achievable. Microfinance and the work we accomplish in GLOBE is not something we can do over-night. With a clear head and the right goals in mind, while also staying academically informed, we can accomplish these large tasks.

Still an Elusive Goal: Measuring the Impact and Success of Microfinance

Check out this article posted on GLOBE's facebook page.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=3235

Still an Elusive Goal: Measuring the Impact and Success of Microfinance

Published: April 24, 2013 in Knowledge@Wharton

Is microfinance an effective tool for bringing people out of poverty? Many people with little first-hand experience of that sector assumed that it was after Muhammad Yunus, founder of the Bangladesh-based Grameen Bank, was awarded the Nobel Peace Prize in 2006. More recently, however, microfinance institutions have been criticized by many for not delivering on their earlier promise.

In recent years, David Roodman, keynote speaker at the2013 Penn Microfinance Conference, has put that proposition through a series of rigorous mathematical tests, only to conclude that the yardsticks for measuring the success of the microfinance sector are more complex, subtle and elusive than people realize. 

Roodman, author of the book, Due Diligence: An Impertinent Inquiry into Microfinance, studied theoretical mathematics at Harvard before joining the Center for Global Development, where he is now a senior fellow.

"I dispute the original conclusion" of research that solidly linked microfinance to poverty alleviation, Roodman told his audience at Wharton. "I don't believe you will be shocked by my conclusions, but I do feel that I put the emerging consensus about microfinance on a firmer foundation." What kinds of useful roles can microfinance play, beyond the alleviation of poverty? Why is it so hard to measure the multiple impacts of microfinance? And what advice does Roodman offer microfinance institutions that are eager to provide social benefits to the poor?

Gaining Control over Their Lives

"I look at microfinance through more perspectives than, I think, has ever been done," not just from the point of view of clients, but from the point of view of history and academic research, Roodman stated. The idea of helping clients by offering microfinance services is something "quite old," he added, noting that the "family tree" of microfinance history goes back long before Yunus and Grameen Bank to such earlier innovators as Anglo-Irish satirist Jonathan Swift (around 1720), English educational writer Priscilla Wakefield (around 1800), German credit-union pioneer Friedrich Raiffeisen (1860s), Canadian credit-union pioneer Alphonse Desjardins (1900) and U.S. lawyer Arthur Morris (1910).

Roodman's favorite figure in this long history is Wakefield, a Quaker living outside of London who devised the notion of creating a savings bank for indigent people in her area. Her goal was to help people develop the habit of thrift, "so they wouldn't spend all of their money on gin." The savings banks that exist on the planet today "descend from her original work," he noted.

Much more recently, he said, the lengthy academic controversy about the impact of microfinance on poverty was sparked by a study by professors Mark Pitt and Shahidur Khandker in The Journal of Political Economy. The study concluded that micro-loans did, indeed, reduce poverty, especially when they were made to women. Although that conclusion supported the common consensus in the microfinance community at the time, NYU economist Jonathan Morduch applied the same data to his own study and concluded, on the contrary, that microfinance was not reducing poverty. While Morduch questioned some of the original foundations of the underlying analysis, he never submitted his study to a referred journal, according to Roodman. "There are as many academic points of view as there are academics. They come with a lot of questions about whether microfinance is good or bad -- and they have a lot of influence on the global conversation about microfinance."

Until recently, various academics were using "different statistical methods that were really complicated and hard to understand," Roodman said. For outsiders, it was a lot like listening to atomic scientists talk about unfamiliar, highly complex issues. "You just didn't know what was going on." Rather than rely on the conclusions of others, however, Roodman studied the original data in the Pitt-Khandker study, replicated all of the original mathematical methods and wrote his own software code for analyzing the data. The turning point came when he digested his results. "Eventually, I got to the point where I did not believe the study."

However, just as Roodman was "in the weeds" of grappling with the complex mathematics involved in drawing a firm conclusion, he visited some clients of microfinance programs to see what those initiatives looked and felt like on the ground. At that point, Roodman's instincts -- as much as his mathematical training -- began to have an impact on his assessment of the situation.

In Cairo, Egypt, Roodman saw a crowd of women waiting to get their loans, their line overflowing beyond the lobby. With the aid of an interpreter, he asked those women what they were doing with their micro-loans. Although many of the women talked about how they planned to use their loan money to buy such necessities as bed sheets, clothing, make-up and scarves -- rather than fund micro-enterprises -- Roodman was impressed by what he saw. "It felt to me like something good was going on here. These women were using this service to gain a modicum of control over their highly constrained lives. Who was I, based on all of my number crunching, to tell them how to lead their lives?"

Mountains of Debt

Despite numerous success stories, Roodman acknowledges that there are many true tales about poor people who have used micro-loans to build up mountains of debt they could not repay. Even worse, they face the challenge of interest rates that are shockingly high by conventional standards. Why are those rates so high? "It is not easy to make loans to lots and lots of poor people without going bankrupt. You can easily spend more than $100 collecting on a $100 loan. That basic business reality strongly shapes how business is done," Roodman said.

What defines success in the world of microfinance? Even that question has multiple, complex answers. Digging deep into the phenomenon of microfinance, Roodman identified three definitions of success, each of which matches up with a different definition of "development." First, there is the proposition that microfinance gets people out of poverty, which correlates with the concept of economic development as an escape from poverty. While everyone acknowledges that this happens, the thornier question is: How frequently does this happen? How common is this process?

A second definition of success is that microfinance leads to greater fulfillment or "greater agency," including civil rights and more control over borrowers' lives. A third definition is the notion that microfinance leads to the development of industry. Roodman noted that this theory is connected with Austrian economist Joseph Schumpeter's famous model of "'creative destruction," the concept that successful economic development is a process of constant "churning" that, while very destructive, does reduce poverty. But does microfinance really do that? How often? This impact is also hard to measure.

At its best, "microfinance contributes to development when it is linked to the host economy in many ways," said Roodman, thus providing the economy with "not just capital from abroad, or not just loans to locals," but loans to a wide variety of borrowers. Microfinance then provides not just credit, but also savings.

To properly assess the impact of microfinance, Roodman suggests that researchers need to understand "reality as it is" as well as "reality as it would be without microfinance," and then "distill the complex variety of differences" between the two. All kinds of outcomes happen when people borrow from microfinance institutions, but the promotional brochures of these institutions tend to focus on a limited range of positive outcomes. If, for example, you are told about one woman who took a loan and is doing well -- and then about another woman who did not take a loan and is not doing well -- the inference is that the loan is the key variable that increased the first woman's wealth. In actuality, however, "There are a lot of stories that can explain why that [result] happened," Roodman said.

He identified several hidden sources of bias that make it "very hard to tell what caused what" when evaluating the impacts of microfinance. One hidden bias may be a significant difference in the financial status of the borrowers. The woman who achieved more success may actually be better off to begin with, Roodman suggested. Or perhaps the more successful woman might have succeeded without a micro-loan because she had more "gumption," he said. That unquantifiable variable is omitted from mathematical formulas used for assessing the impact of micro-loans on financial success.

A third source of bias is that more microfinance offices tend to be opened in those geographical areas that are better off economically. In some regions, success rates are higher because borrowers have more resources -- or possibly more education or financial knowledge. Finally, a fourth source of bias is that struggling people often drop out of their micro-loan programs, raising success rates among the survivors in those programs, but actually proving nothing about the effectiveness of those programs in reducing poverty, Roodman noted.

Recommendations for Microfinance Institutions

In conclusion, Roodman recommended that microfinance institutions:

• Play to their broad array of strengths by "building dynamic institutions to mass-produce useful services for the poor," rather than simply focus on trying to alleviate poverty. In that regard, he cited such success stories as Bolivia's BancoSol, which has split into two different institutions; one that focuses on microcredits -- which has 169,000 borrowers -- and another institution that focuses on savings, which had 485,000 customers as of 2012.
• Discourage efforts to lend to the very poorest people in the community, since they may be unable to repay their loans.
• Deemphasize credit and move toward savings deposits, insurance and money transfer services for the poor.
• Look to new technologies, such as the mobile web, to reduce inefficiencies and to expand access to a wider range of services in a wider range of communities.

Roodman cautioned that "credit markets are inherently unstable, particularly when your clients are poor. It is easy to overestimate how many people want loans." Indeed, he estimates that "only 10% of people want microcredit loans, while more want savings accounts."

Finally, he concluded, even if MFIs and their stakeholders ultimately judge microfinance to be a success, "It is not going to reach every [poor] person. But we should try to build resilient institutions, reliable institutions that will be there tomorrow."

GLOBE is working to break the vicious cycle.

GLOBE is working to break the vicious cycle.