About Bob Bob serves as President and CEO of GuideStar and serves on the boards of Vision TV, Grameen Foundation USA, and the AAFRC Trust for Philanthropy. More...
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Posted By Bob Ottenhoff on April 20th, 2010, in these categories: GeneralBefore my board meeting in Kenya, we visited a number of small-scale entrepreneurs supported by the Kenya Entrepreneurship Empowerment Foundation (KEEF), a microfinance institution funded in part by Grameen. One day we drove into the hills north and west of Kiambu, a small village north of Nairobi. Our first stop was a small hut where a woman had taken out a microfinance loan (about 10,000 Kenyan shillings or less than $150 U.S.) to buy a small wood-fired oven to bake small cakes that she sells to nearby schools and in local markets.
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Our second visit was to a farm where a woman (almost all Grameen borrowers are women) had taken out a loan in order to purchase a cow. The cow was now producing more than six liters of milk twice a day. She sold most of it to a nearby milk co-op while keeping some for her family. The cow now also acts as collateral she uses to obtain necessities such as flour and cooking oil. We also visited two group meetings, where we observed more than 20 borrowers make their weekly loan and savings payments, listen to the progress of their fellow borrowers, and deal with any defaults or problem borrowers (which are rare).
Several things struck me about the visits.
Mohammed Yunis, the founder of Grameen, underscores the importance of providing loans rather than grants. There is the obvious advantage that a loan means the money is eventually returned and can be recycled to be reused for other borrowers. Sustainability for both the lender and the lendee are achieved. More important, it provides dignity to the borrower. I could sense the pride and responsibility among the borrowers. They took their loans and their businesses seriously. They were responsible to themselves and also responsible to their communities for successfully operating their businesses. I’m not sure all of the philanthropic grant programs we’re involved in institutionally and individually truly end up empowering and enabling the people we want to help.
Second, having a chance to actually speak with the woman who was able to buy a cow as a result of her microcredit loan was a very moving moment. I can better understand the trend by many organizations to make their giving sites as personal and tangible as possible—think of such organizations as Global Giving, Kiva, Heifer International, etc. This is both an opportunity for nonprofits to get specific about clarifying benefits, something many donors are expecting, but it will also be a challenge for many organizations that deal in general activities or intermediary roles.
Posted By Bob Ottenhoff on April 15th, 2010, in these categories: Nonprofit PracticeI’m just back from a week in Kenya, where the largest Microcredit Summit ever held in Africa took place. I serve on the board of Grameen Foundation USA, a supporter of microfinance institutions worldwide, and we decided to hold our semi-annual board meeting adjacent to the Summit.
I have always been impressed with how ambitious are the goals of the microcredit leaders. Among two of the most important being addressed now are 1) ensuring that 175 million of the world’s poorest families, especially the women of those families, are receiving credit for self-employment and other financial and business services by the end of 2015 and 2) ensuring that 100 million families rise above the U.S. $1 a day threshold, adjusted for purchasing power parity (PPP), between 1990 and 2015. Those are bold and ambitious, wouldn’t you say! But bold goals require bold actions, which these leaders are doing, and it is a lesson for all of us to take to heart in our own work.
The Summit brought together microcredit practitioners, advocates, educational institutions, donor agencies, international financial institutions, non-governmental organizations, and others involved with microcredit to promote best practices in the field, to stimulate the interchanging of knowledge, and to work toward reaching these goals.
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Microfinance is very popular these days, and that has turned out to be both a blessing and a curse for nonprofit microfinance organizations targeting the poorest of the poor. The concept of providing a small sum of money to a poor person that leads to breaking the cycle of poverty and becoming self-sufficient is very powerful. As a result, over the last 10 years we’ve seen lots of organizations entering the field, from huge commercial banks to nonprofit organizations to government agencies to online giving sites. Like most things in life, it is becoming difficult to separate the good from the bad, with a growing number of stories about high interest rates and enormous profits. The New York Times had a big story yesterday on microfinance detailing some of the challenges and problems.
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It is a cautionary tale for all of us in the nonprofit sector. Blurring lines between for-profit and nonprofit activities make it all the more important that we clearly understand our mission, stay true to it despite the pressures, and understand what makes us different in a crowded and confusing marketplace. In the case of microfinance, most of the new commercial operators are targeting lucrative and profitable markets. Serving the poorest of the poor—those earning under a dollar a day—is still likely to require philanthropic subsidies and a mission-driven commitment.
Posted By Bob Ottenhoff on February 22nd, 2010, in these categories: Disaster ReliefIt has been over a month since the earthquake in Haiti. Now that the story is pretty much off the TV screens, most Americans are paying less attention to this crisis, and contributions have declined dramatically. I spoke to many reporters in the first weeks after the disaster and tried to get them—with only limited success—to include in their reports the fact that Haiti was in crisis before the earthquake and will need our help and contributions for many years to come. I hope you and your friends will be thinking about that as you plan your own individual giving.
In my personal life, one of my volunteer activities is serving on the board of the Grameen Foundation USA. One of the organizations we support is Fonkoze, the Haitian branch of the Grameen Bank. There were many acts of personal heroism and extraordinary effort after the earthquake. Here is an excerpt from an amazing story reported by Peggy Simpson that tells one of them, this one involving Fonkoze. Read the full blog here >
At a time when Haitian commercial banks remain closed, Fonkoze, the Haitian branch of the Grameen Bank of Bangladesh, mobilized over the weekend to get funds to its members in rural towns as well as Port-au-Prince.
Between 2 a.m. and 2 p.m. last Saturday [January 23, 2010], Fonkoze brought in $2 million in cash from their U.S. bank and distributed it by helicopters to regional offices in the most remote parts of the country. That got money flowing again. The cash came from Haitians working abroad who had sent funds—remittances—to their relatives.
Also known as Haiti’s Alternative Bank for the Organized Poor, Fonkoze found a way to get money to its members through the 34 of its 41 branch offices still open after the earthquake. It had a lot of help in high places: the U.S. secretary of state, top Treasury and Defense Department officials, the Federal Reserve, the Agency for International Development, the United Nations, the Inter-American Development Bank and more.
The actual operation read like a cloak-and-dagger saga.
Anne Hastings, the CEO of Fonkoze Financial Services, was point person on shaping the unorthodox solution. It involved many conference calls to Washington, New York and Miami, as well as intricate strategies with managers on the ground in Haiti who would get the money to the women.
By last Friday, the plan was ready. Remittances from U.S.-based Haitians deposited in Fonkoze’s accounts at City National Bank of New Jersey were sent to JP Morgan Chase in Miami, converted into cash—and packed in office supply boxes. An armored vehicle transferred the boxes to Homestead Air Force Base.
A C-17 plane, diverted from Langley Air Force Base, landed at Homestead at 3 a.m. Saturday, took on the camouflaged cargo of cash, and flew to Haiti, where the major airport at Port-au-Prince has been under U.S. military control since the earthquake.
There, Hastings and two other Fonkoze executives inspected the cash cargo—and called the Pentagon to say so far, so good. Under a military escort, the Fonkoze vehicle loaded with the boxes of cash awaited the two helicopters that could fly the money to 10 designated drop-off locations.
Fonkoze’s Jean-Guy Noel rode with the helicopters as they began deliveries before dawn. Seven hours later, all the cash had been delivered and the helicopters were back in Port-au-Prince. By early afternoon, the cash had been distributed to the 34 Fonkoze branches. Almost immediately, the Fonkoze managers began giving Fonkoze members cash from their relatives, a financial lifeline at a time when the formal banking system is in shambles and remittances sent through it from overseas Haitians remain locked up.
… In 2007, 79 percent of Haitians lived on less than $2 a day and 55 percent lived on half that.
Fonkoze’s micro-lending program has four different levels. The first step is for the poorest of the poor and may involve home repairs and health care, as well as building the confidence of the women as they plan to start a micro-enterprise. Next the women may qualify for small loans—perhaps only $25—with a short repayment period, while they enroll in literacy classes. In Haiti, more than 50 percent of people are illiterate.
The third level is the core: a "solidarity" group in which friends take out loans together, then morph into credit centers of 30 to 40 women. These women can start out borrowing $75 but if they prosper, they can borrow up to $1,300 for six months.
The fourth level focuses on business development. Some women in this group borrow up to $25,000 and are being nurtured to become part of the formal economy, creating jobs in rural areas where there are few employment opportunities.
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