Tag Archives: microfinance

Capstone Presentation

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Hello!

 

I made it home on Wednesday after an eight hour layover in London. Now that I have fast Internet, I can upload my capstone presentation about my experience at CRAN. So feel free to check it out by clicking on the link:

CRAN Capstone

 

Goodbye CRAN Microfinance!

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Yesterday was my last day at CRAN Microfinance.  It’s been an amazing and challenging four months and I’m sad to leave this group of amazing people. Everyone was so welcoming and kind at CRAN. They put up with my incessant questions and were always willing to help me with any issues.

Devotion!

Devotion!

During our daily devotion, the entire office surprised me with a party. Everyone went around the room and thanked me or offered me words of encouragement. It was so sweet! Then they presented with a gift and we had a toast. It was easily the nicest thing any employer has done for me.  The gift consisted of two dresses and a pair of sandals that I promptly changed into. One of my coworkers wrote a song about me, which he made everyone sing. I almost died laughing.

Here with Jomo, our driver, and Veronica

Here with Jomo, our driver, and Veronica

KC and I

KC and I

Earlier this week, I had to do a capstone presentation about my experience at CRAN. I’ll try and upload it when I have better Internet connection.

The toast!

The toast!

Overall, my experience working at CRAN has been fantastic, and I learned so much from everyone here. I’ve been able to witness so much change within the organization and have learned how to adapt. Mostly, I’ve learned about the inner workings of a MFI and the challenges that arise with clients and donors. I feel that my experience working here had better prepared me for working back home and I look forward to putting the skills I’ve gained here to good use.

Getting my present

Getting my present! Isn’t the wrapping adorable?

With my supervisor, Cecilia. I'm really going to miss her! This is also one of the dresses I was given.

With my supervisor, Cecilia. I’m really going to miss her! This is also one of the dresses I was given.

Getting serenading by my coworkers!

Getting serenading by my coworkers!

CRAN Microfinance

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I realized the other day that most of my posts have been about locations I’ve travelled to or about Ghanaian culture.  While I hope you find that interesting, one of my intentions for this blog was to discuss working for a microfinance institution. So I’ve finally taken the time to write about CRAN and what my daily schedule is like!

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Here’s a bit about Christian Rural Aid Network (CRAN):

  • CRAN is a rural development NGO established in 1993.
  • CRAN’s microfinance program was created in 1998, but only became a categorized as a MFI and a Financial NGO in 2008.
  • It is headquartered in Cape Coast in the Central Region of Ghana.
  • It operates throughout Ghana, but its main banks unit are in:Abura (where I live), Takoradi, Cape Coast, Elmina, Twifo Praso, and Hohoe.

I work in the microfinance department of CRAN, or Christian Rural Aid Network. In particular, I work in the Kiva office. According to CRAN, the organizational vision for the microfinance operations is “to achieve an improved and sustained quality of life for the majority of the productive rural and peripheral-urban poor in the Ghanaian society through the instrument of microfinance (in combination with other instruments), as a basis for attaining and sustaining social justice.” So how does my work fit into that vision? (For a refresher on microfinance, read this)

My office!

My office!

CRAN Microfinance has three main products: individual loans, group ‘susu’ loans, and its Credit with Education Program (CwE). The loans I work with usually fall under the CwE program, though I do occasionally file some individual loans. CwE is a village banking approach where CRAN enters into a community and introduces the service to the community members.  Those interested are asked to form solidarity group of 4 to 6 members, and several solidarity groups are put together to get a bigger group called credit association. CwE uses a mutual guarantee system that holds group members liable if a member defaults.

Hanging out at my desk. Note: I had a bad cold when this was taken.

Hanging out at my desk. Note: I had a bad cold when this was taken.

Generally, CwE is geared towards women in rural areas with little access to financial services. As the name suggests, financial education courses are given to members before their loans are disbursed. After disbursement, groups host weekly meetings to make their repayments and discuss any issues relating to their businesses.

Meet my coworker, Veronica!

Meet my coworker, Rosemary!

According to some outdated report, CRAN has given out loans to more than 20,000 clients. But where does the money come from? That’s where I come in! Our CwE funds come from Kiva, an organization based in San Francisco. It’s pretty much the microfinance version of crowd funding. People from all over the world can lend small amounts of money to borrowers in developing countries. Lenders don’t receive interest, but are rewarded with the satisfaction of helping another human being better their lives.

Waiting to begin journal interviews

Waiting to begin journal interviews

The first aspect of my internship is to create profiles of borrower to upload to the Kiva website. I receive a handwritten packet from loan officers detailing the personal and business information of person in a particular credit association. From there, I use a data program called Loan Performer to acquire an ID number for each client and other crucial information. I next craft a story about each borrower that explains why he/she needs the loan and his/her intentions for the profits. After that, it’s as simple as uploading all of the data I gathered, the story, and picture to the Kiva website. If Kiva administrators approve of the profile, the loan is now “open” and can start raising funds.

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So far, I’ve uploaded more than 300 loans to Kiva. While the work can be tedious, especially with the unreliable Internet and the frustratingly slow computers, it is absolutely crucial to CRAN’s operations. Without the funds from Kiva, CRAN Microfinance could not afford to give out loans.

One of our clients: Efua Nana

One of our clients: Efua Nana

The second aspect of my position is creating journals. Journals are updates that we upload to Kiva, so that lenders can track the progress of the borrowers. So I travel to the communities with my supervisor, Cecilia, as a translator. We then interview each borrower to see how their lives and businesses have been affected by the loan. This is easily my favorite part of my job. After uploading so many loans, I’ve become desensitized to the impact of these loans. Talking to these women (and a couple men) reminds me of how real their hopes and struggles are. I am able to see the real effects that a small amount of money can have on their lives. School fees can be paid, bellies can be filled, and housing can be acquired. Yes, I’ve talked to several women who have defaulted on their loan and are worse off. On the whole, I’ve been able to witness the beauty of microfinance.

A credit association

A credit association

In the near future, my job description is going to expand. Cecilia and I had a long chat the other day about other aspects of CRAN that I want to experience. I want to learn more about how finances are handled in Ghana, so I am going to be shadowing the CFO of CRAN. I also want to visit a community during the loan disbursements. Lastly, I want to experience the education side of CwE, so Cecilia is trying to arrange for me to get involved with the classes. Hopefully everything works out, and I’ll have a lot more information to share!

Palm, Pizza, & Progress

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Because the computer network at CRAN’s new office was still out of commission, it seemed that I would have a lot of free time on my hands last week. However, the fine folks at ProWorld decided to get me involved in a new project. Usually, ProWorld places students with partner organizations and acts as the mediator between them. The staff recently decided that they wanted to host an internal project with a local village that participants could work on. I was to be the guinea pig.

After receiving permission from CRAN to take most of the week off, project coordinator Isaac and I headed about an hour away from Cape Coast to a remote village near Kakum National Park. The village looks like a cliché still from a film. Clay huts with thatched roofs stand surrounding by children playing with sticks. Women in traditional dresses stand over fires stirring kettles of mysterious liquids. There’s no electricity. The only glimpses of the modern world appeared through a spattering of cell phones and a visit by a petrol truck.

Most of villagers work as farmers growing cocoa, cassava, and palm. Palm was the reason for our visit. While there several products that can be derived from palm trees, palm oil is often the lucrative. We had come to interview farmers about their use of palm oil processing equipment. The villagers pay a man to use his machines to process palm crops. However, the man doesn’t maintain the machines and inconsistently provides petrol to run them.  We were looking into the feasibility of helping the village take out a group loan to purchase their own machines. The community would then share the burden of repaying the loan as well as maintaining the machines. Ideally, this would be long-term way to increase the whole village’s profits.

Palm

Palm

Our visit to the village on Wednesday was brief. We interviewed three people and introduced ourselves to the village’s chief. I’m not sure what I was expecting a chief to look like, with the tiny man in polka-dotted pants was not it. Isaac told me to follow his lead as we bowed and talked to a spokesperson rather than directly at the chief. The chief gave us his blessing and promised to support us with our mission as best as he could.

After leaving the village, Isaac asked me if I was interested in bees. I told him that I am afraid of bees, as I am highly allergic them. He laughed and delightedly told me that he could take me to the International Stingless Bee Centre where I could frolic with bees for the first time. I was a little hesitant. What if a stinging bee got mixed in? However, I figured that might as well embrace every new experience and asked him to take me.

The centre consisted of a flower garden and a couple of shanties supporting wooden boxes. A tour guide took me around to the different shanties and explained that each shanty held a different species of bees. The bees looked smaller than your typical honeybee. One variety even looked to be the size of an ant! The bees surrounded me and bounced off my face and neck. I had to resist swatting them away. The main event came when the guide opened up a large hive and invited me to put my hand in. I gingerly placed my hand in the box and listened to the comforting hums of the hive. There was a slight breeze from the beating of their tiny wings and felt a few crawl up my hand. It was a neat experience and I’m glad I went through with it.

Other than providing tours, the centre focuses on a few other activities. First, it specializes in research and training. Some of the research includes pollination services, hive development, and colony management. The centre also trains community members in bee cultivation so that they can support their own hives. The centre also develops medicinal hive products. I picked some honey at the office, which can either be used topically or ingested. I’m planning on bringing it home for my mom since she loves honey.

Feeling the stingless bees! It tickled.

Feeling the stingless bees! It tickled.

After the bee centre, Isaac and I returned home for a biweekly Fante lesson. Afterwards. Our coordinator Sarah took us to Sizzler one of the few pizza places in Ghana. We got four pizzas: margarita, chicken, veggie, and Hawaiian. By U.S. standards the pizza was pretty bad. However in Ghana, it was the tastiest thing I’d eaten in a long time. I binged on about seven pieces, which my intestines would regret the next morning.

On Thursday it was back to the village. I met Isaac there and we spent almost the entire day talking to community members. After realizing how limited my knowledge of palm was, a group of farmers gave me a tour of their palm farm and explained the entire process from the seed to the store. Palm takes about three years to grow before the fruit is ready to be harvested. After reaching maturation, the tree will produce fruit for about twenty years before it dies. The trees produce fruit all year long, but the largest crop is harvested March through June. Once the fruit is harvested, it sits in a barrel for about a week in order to make it easier to separate the seed. The seeds are extracted by hand before the pulp is roasted and left to sit for another week. Next, the palm is milled and then heated to melt the oil. The milled product is pressed to isolate the oil and voila, the oil is ready to sell.

Palm is a very efficient crop and the villagers make sure to use every part. The leaves are used to make brooms, the branches for baskets, and even the materials left from processing the oil are used as firewood. The kernels of the fruit are roasted and processed into palm kernel oil, which can be used for commercial cook and is frequently used in soaps. The palm is also made into palm wine and a type of spirits that has hefty 40% alcohol content. Nothing goes to waste in palm farming, and unlike in Asia, Ghana has not experienced the negative ecological impact. I do worry about the future of the palm oil industry in Ghana as large investment funds are purchasing palm plantations, shutting out the local farmers.

Barrels of palm about to be processed into oil

Barrels of palm about to be processed into oil

After my tour, we spent the rest of the day interview farmers about their current profits, costs, risks, and expectations of the project. I complied the information that evening and sent it to Isaac. The next step is to research the cost of machine, maintenance, and petrol so that we can give CRAN a budget. I really enjoy working this project because I can see the tangible impact that I am making in the community. I’m also excited to work so hands on. I feel like I am learning a lot about sustainable development in a very active way. It is times like these that I feel very grateful for my time here in Ghana.

One of the palm oil process machines. The oil comes out of the spout in the front.

One of the palm oil process machines. The oil comes out of the spout in the front.

Microfinance: The Basics

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In my last post, I promised to go into depth about what microfinance is and how it helps combat poverty. But to start with, here’s a short video from Kiva for those of you who prefer a quick version:

Microfinance is a broad term describing financial services for low-income individuals such as credit, saving, insurance, money transfers, and other basic services. The “micro” part of the phase obviously refers to amount of money involved in these services. Someone who is poor is unlikely to take out a loan for $25,000, and having a separate term helps to distinguish these institutions from regular commercial banks.

While credit unions and lending cooperatives have been used for hundreds of years, microfinance wasn’t explored until the 1970s. Dr. Muhammad Yunus is often credited as being the primary pioneer of this field (As well as being a hero of mine). He experimented with giving small loans and financial education to women in Bangladesh. In 1983, Yunus founded the independent Grameen Bank. The Grameen Bank and Yunas jointly won the Noble Peace Prize in 2006. The success of Grameen Bank has inspired similar projects in over 40 countries, effectively spreading the ideas of microfinance throughout the developing world.[i] For more information on Yunus, I highly recommend his memoir Banker to the Poor: The Story of the Grameen Bank.[ii]

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Let’s get back to the definitions. People often confuse the term microfinance with microcredit. Like I stated earlier, microfinance is an umbrella term referring to all of the financial services offered to the poor. Microcredit is a subset of the term as it includes only one type of service. Microcredit refers to the practice of issuing small loans to low-income borrowers with little to no collateral, instable incomes, and unverifiable credit histories. These loans are often given to entrepreneurs, particularly women, to invest in their small businesses.

Microcredit and other services are provided by microfinance institutions (Creative name, I know). Why don’t regular banks handle these services? Well, some do.  However, microfinance isn’t attractive to most commercial banks because its lack of profitability.  It is much less lucrative to handle the small amounts of money found in microfinance rather than larger accounts. MFIs first emerged as non-profit organizations, such as NGOs or credit unions. In order for an entity to get a license to offer savings services, it must have a for-profit status. Thus an increasing amount of MFIs are now for-profit and categorized as non-banks financial institutions.[iii]

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Source: givewhatwecan.org

Now that we all know what microfinance and microcredit are, why is it such a big deal? Well, traditional financial institutions are designed to support people who already have money. So what do poor people do? The poor save informally by buying gold, jewelry, domestic animals, or other liquid assets. The first benefit of MFIs is that they provide a secure and accessible means of savings, which can be essential for managing crises, investing in opportunities, or paying for large expenses such as schooling.[iv]

Next, microfinance is important because people in developing countries rarely have access to credit. Often the only credit available is through pawnbrokers or moneylenders who charge staggeringly high interest rates or use violence against borrowers when they default on payments. Access to ethical credit options helps the poor to smooth cash flows and helps to ensure continuous access to food, clothing, housing, and education. Credit can help with economic shocks or with building up assets, such as land. Lastly microcredit, unlike other credit options, is inclusive to women and has encouraged empowerment and financial independence.[v]

So far all the information I’ve included has been positive. I truly believe that microfinance is important strategy in eliminating poverty. However, it’s naive to think that it is the only strategy. Microfinance has its problems.  As MFIs moved from non-profits to for-profit organizations, some lenders starting focusing on making a profit by charging high interest rates rather than providing services for the poor. As Muhammad Yunus stated in a 2011 op-ed piece, “Commercialization has been a terrible wrong turn for microfinance, and it indicates a worrying ‘mission drift’ in the motivation of those lending to the poor. Poverty should be eradicated, not seen as a money-making opportunity.”[vi]

The other main critique of microfinance is that the lack of financial education provided by some MFIs.  Clients of MFIs are often have limited education, particularly when it comes to money. Financial education helps the poor effectively understand their financial circumstances, choose among financial options and manage the financial resources they have. MFIs that do not help provide this education are generally are less successful and in some cases, harmful.

Overall, the point of microfinance is to provide financial services to the poor, who are often ignored by traditional institutions. While some MFIs suffer from high interest rate and other flaws, I believe that they have done more good than harm by empowering the poor to take control over their financial situations.

More information: For a good overview of microfinance that discusses the positive and negative effects, read this article by YES! Magazine.[vii]