On Friday we visited SMILE (Semam Microfinance Investment Literacy and Empowerment Ltd), the largest JLG-model MFI in Southern India. It was established in 1999 as Mahasemam Trust to target poor women offering microfinance services including savings, loans, and insurance to promote poverty alleviation and sustainable development in the Southern Indian state of Tamil Nadu. It currently has over 175 thousand active borrowers and a total loan portfolio of USD 16.4 million with total assets of USD 20 million, making it a very profitable MFI.
My impression was that the expansion of their MF arm has overridden their other operations, which makes their objectives as an NGO and as an MFI not necessarily aligned. When talking to the loan officers and the office managers they were not very well informed on the larger workings of the organization; and could only tell us very precise things about the JLG groups.
After visiting the branch office for Chennai we went to see a sector meeting (a sector is made up of about 8 groups of 5 women each) in a slum in the outskirts of the city. The houses give out to a small alley where community life takes place, so there were children playing, clothes drying, hens walking around, dogs, people coming and going by bicycle and sometimes scooter, and a lot of trash and flies.
This is the space where the meeting takes place since there is no other space where 40 women can get together. They all stand in rows with their group, some have a group saree (the most organized ones -also one of their entreprenurial activities is making sarees) and they are all different ages, from very young (maybe 20) to very old. They looked very serious during the whole meeting, it was only at the end that we were talking to them that they loosened up and were laughing and smiling and very excited to tell us stuff about their lives. I always find it moving how we will all take up any chance to have an interested listener. I guess we are all lonesome deep down. More so people who are marginalised for some reason, in this case because of poverty and lack of education. It is likely that no one has ever been interested in their personal story, so it is strange and touching for them.
The meeting starts with the women lined up and the loan officer playing SMILE's anthem on his cell-phone and a pair of portable speakers (I wish I had a picture, very surreal). The women listen intently (or at least pretend to do so). The reason for this is that in many cases the women identify with their loan officer but not with the MFI. That is, when asked who gives them the loan they will say Mr. such-and-such, not SMILE. After the anthem they make a pledge saluting with their right arm over their chest saying they will be responsible and pay on time and be cooperative to their group.
Watching this I couldn't help thinking about one of the lectures we had in the course (What is wrong with microfinance? by Amy Mowl, an ex-MPA/ID) where she made the point of reminding us that JLG models in microfinance are a way of solving the numerous market imperfections in offering credit to poor households, but that it is a second best solution none of us would take if given the option. The women have to go to these weekly meetings and spend their time on them and be subject to extremely harch social sanctions if they are not abel to repay. Watching them take this oath and listen to the anthem seemed a bit demeaning. Also the fact that all employees of SMILE are men, and given cultural practices in India, particularly in rural and low income areas, this creates or perpetuates power relations between the MFI and the borrowers that go beyond financial transactions.
After this they sit down and they take attendance. Each group hands their weekly repayment to the section leader, who counts it and gives it to the loan officer. If any one member of the group is unable to repay that week someone in the group pays for them, but none of that is discussed in the meeting. So in fact there are lenders and borrowers within each group, that sort their issues internally without SMILE knowing. They only see their 98.7% repayment rate.
When talking to women they told us that most of them make sarees, others prepare batter for dosas, others make flower garlands. All of them sell their products within their small slum community. When asked why they don't scale up they said that they do not have a place to increase production, since they all rent their houses and apparently the landlord does not allow them to use it for business purposes.
On a larger scale I also think growing their business and selling to other communities would imply a big change in their lifestyle and the way they deal with their daily activities which goes beyond having the fixed or working capital to do so. These type of issues are supposed to be addressed through financial literacy and training programs offered by the NGO, but many of the women did not receive the training previous to taking the loan.
So it seems they are using their loan to smooth consumption and not really for income-generating activities. Which is not a bad thing, but it will definitely not get them or their families out of poverty. They also did not seem to have a plan on a time to stop borrowing, they would stay in the group "as long as they would have them".
It had been such a long time since I had gone to the field and interacted with people in the beginning I was overwhelmed, but I really enjoyed it; talking to them and seeing them interact with each other, as well as the children who want to shake your hand and be in the picture. But mostly starting to understand how MFIs work and what joint liability groups look like.
viernes, 12 de junio de 2009
And the H stands for...
The Theosophical Society was founded by Madame H.P. Blavatsky and Colonel Olcott in New York in 1875 with the purpose of investigating, studying and explaining mediumistic phenomena, which was very popular at that time. After a few years Olcott and Blavatsky moved to India and established the International Headquarters at Adyar, Madras (Chennai). There, they also became interested in studying Eastern religions, and these were included in the Society's agenda. In addition to the stated objectives, as early as 1889 Blavatsky told a group of students that the real purpose of establishing the Society was to prepare humanity for the reception of the World Teacher when he appeared again on earth (!) in approximately a hundred years' time. Among other groups the Theosophical Society is linked to the Order of the Temple of the Rosy Cross.
Madame Blavatsky was born in Russia and was married at 17 to a 40 year old man. She ran away back to her grandfather's house, but missed her ship, so she started traveling the world. She is said to have visited Egypt, France, Canada, England, South America, Germany, Mexico, India, Greece, and Tibet where she studied for two years with the men she called Brothers and was initiated.
After this trip she went to the US and based her career on her psychic abilities and mediumship. Throughout her career she claimed to have demonstrated physical and mental psychic feats which included levitation, clairvoyance, out-of-body projection, and telepathy. Her most famous book is Isis Unveiled, where she states that humanity descends from a series of non-human "root races" that evolution over time, until the 7th one. The fourth one, where we come from, originally came from Atlantis.
After her death in 1891, the Society split. The original organisation led by Olcott and Annie Besant* remains today based in India and is known as the Theosophical Society - Adyar. The other group further split into a faction led by Katherine Tingley, and another associated with Ernest Temple Hargrove. While Hargrove's faction no longer survives, the faction led by Tingley is today known simply as the Theosophical Society, but often with the clarifying statement, "international headquarters, Pasadena, California".
And the old banyan tree that I visited grows in the garden of the original society next to Madame Blavatsky's bungalow.
And yes, the H in H.P. Blavatsky stands for Helena... (freaky freaky)
*As an aside, Francisco I. Madero, Mexico's first president and one of the starters of the Mexican Revolution is said to have been very much into occult phenomena, specifically spiritism. He was deeply influenced by the theosophical ideas of Annie Besant, Madame Blavatskys succesor as leader of the Society. In his diaries he tells of a spirit "José" who told him he would embark on a democratic crusade for the bettering of Mexico. This is why he wrote La sucesión presidencial en 1910 (The Presidential Succession of 1910) that would lead to the Mexican Revolution. (For more on this: http://www.letraslibres.com/index.php?art=5664)
(NOTE: This whole story made me think of Foucault's Pendulum by Umberto Eco, a very entertaining book if you haven't read it...)
Madame Blavatsky was born in Russia and was married at 17 to a 40 year old man. She ran away back to her grandfather's house, but missed her ship, so she started traveling the world. She is said to have visited Egypt, France, Canada, England, South America, Germany, Mexico, India, Greece, and Tibet where she studied for two years with the men she called Brothers and was initiated.
After this trip she went to the US and based her career on her psychic abilities and mediumship. Throughout her career she claimed to have demonstrated physical and mental psychic feats which included levitation, clairvoyance, out-of-body projection, and telepathy. Her most famous book is Isis Unveiled, where she states that humanity descends from a series of non-human "root races" that evolution over time, until the 7th one. The fourth one, where we come from, originally came from Atlantis.
After her death in 1891, the Society split. The original organisation led by Olcott and Annie Besant* remains today based in India and is known as the Theosophical Society - Adyar. The other group further split into a faction led by Katherine Tingley, and another associated with Ernest Temple Hargrove. While Hargrove's faction no longer survives, the faction led by Tingley is today known simply as the Theosophical Society, but often with the clarifying statement, "international headquarters, Pasadena, California".
And the old banyan tree that I visited grows in the garden of the original society next to Madame Blavatsky's bungalow.
And yes, the H in H.P. Blavatsky stands for Helena... (freaky freaky)
*As an aside, Francisco I. Madero, Mexico's first president and one of the starters of the Mexican Revolution is said to have been very much into occult phenomena, specifically spiritism. He was deeply influenced by the theosophical ideas of Annie Besant, Madame Blavatskys succesor as leader of the Society. In his diaries he tells of a spirit "José" who told him he would embark on a democratic crusade for the bettering of Mexico. This is why he wrote La sucesión presidencial en 1910 (The Presidential Succession of 1910) that would lead to the Mexican Revolution. (For more on this: http://www.letraslibres.com/index.php?art=5664)
(NOTE: This whole story made me think of Foucault's Pendulum by Umberto Eco, a very entertaining book if you haven't read it...)
Banyan Tree
This morning, before going on our field visit to SMILE, a local MFI where we would see an urban JLG (joint liability group) meet, we decided to try our luck and go see the famous Banyan Tree.
I guess you might be wondering why I wanted to see a tree in some weird garden in Chennai. So, for one thing, I really like trees, especially old ones, and this one is supposed to be the oldest banyan tree on the planet (450 years old! Imagine, since 1660's it's been growing in the same place. Makes you think). Second, I had heard a lot about banyan trees but never seen one. And third, there's just not that much to do in Chennai... So, why not? It should be worth a 45 min rickshaw drive in traffic and car fumes, no?
For those who have never heard of a banyan tree before, here are some facts: It grows to a height of more than 21 meters and lives for many years. Its branches spread out and send trunk like roots to the ground in order to support itself. These type of trees are very typical in Southeast Asia and have an important place in eastern religions and mythology. In hinduism the banyan tree is considered sacred, Shiva in one of his incarnations is nearly always depicted sitting in silence under the banyan with rishis at His feet. It is thought of as perfectly symbolizing eternal life due to its seemingly unending expansion. It is also it thought to be a wish-giving tree. In contemporary India, the banyan is the national tree. Its interlinked roots and branches are often used as a symbol to describe the country's unity within its diversity.The word banyan comes from 'banyans' or 'banians', hindu traders seen resting or carrying out their business under the tree by portuguese sailors; the term spread and came to signify the tree itself.
The banyan tree is also famous from Robinson Crusoe, who built his house on one; from the series Lost (apparently the characters take shelter in a banyan tree when the monster is chasing them? -not a big fan of the show, sorry); and from other things like the Australian "Banyan Rig", casual (and often traditionally tasteless) clothes worn for BBQs on deserted beaches (!); or The Economist's weekly column on Asian affairs.
We got to the place after various detours to find it closed (again), but this time we convinced the guard to let us in (a smile and teary eye can take you very far). The tree is in the garden of the Teosophical Society (which deserves a complete post), a very large estate that has many prayer halls (among them parsi, liberal catholic and others) amidst plants and birds. It is a very serene place; you could actually think it is uninhabited if not for the casual person every now and then.
After following the signs "To the big banyan tree", we found it in the middle of a small field. The way the branches have grown and the roots have developed it looks as if there were many trees in a circle, but in reality it is only one. Underneath it lie dried leaves where the light that filters from above forms shapes that constantly change. You cannot hear anything except the cicadas and the cries of birds. It is a beautiful place.
PS All of what you see in the picture is the banyan tree, it is a mini-forest
I guess you might be wondering why I wanted to see a tree in some weird garden in Chennai. So, for one thing, I really like trees, especially old ones, and this one is supposed to be the oldest banyan tree on the planet (450 years old! Imagine, since 1660's it's been growing in the same place. Makes you think). Second, I had heard a lot about banyan trees but never seen one. And third, there's just not that much to do in Chennai... So, why not? It should be worth a 45 min rickshaw drive in traffic and car fumes, no?
For those who have never heard of a banyan tree before, here are some facts: It grows to a height of more than 21 meters and lives for many years. Its branches spread out and send trunk like roots to the ground in order to support itself. These type of trees are very typical in Southeast Asia and have an important place in eastern religions and mythology. In hinduism the banyan tree is considered sacred, Shiva in one of his incarnations is nearly always depicted sitting in silence under the banyan with rishis at His feet. It is thought of as perfectly symbolizing eternal life due to its seemingly unending expansion. It is also it thought to be a wish-giving tree. In contemporary India, the banyan is the national tree. Its interlinked roots and branches are often used as a symbol to describe the country's unity within its diversity.The word banyan comes from 'banyans' or 'banians', hindu traders seen resting or carrying out their business under the tree by portuguese sailors; the term spread and came to signify the tree itself.
The banyan tree is also famous from Robinson Crusoe, who built his house on one; from the series Lost (apparently the characters take shelter in a banyan tree when the monster is chasing them? -not a big fan of the show, sorry); and from other things like the Australian "Banyan Rig", casual (and often traditionally tasteless) clothes worn for BBQs on deserted beaches (!); or The Economist's weekly column on Asian affairs.
We got to the place after various detours to find it closed (again), but this time we convinced the guard to let us in (a smile and teary eye can take you very far). The tree is in the garden of the Teosophical Society (which deserves a complete post), a very large estate that has many prayer halls (among them parsi, liberal catholic and others) amidst plants and birds. It is a very serene place; you could actually think it is uninhabited if not for the casual person every now and then.
After following the signs "To the big banyan tree", we found it in the middle of a small field. The way the branches have grown and the roots have developed it looks as if there were many trees in a circle, but in reality it is only one. Underneath it lie dried leaves where the light that filters from above forms shapes that constantly change. You cannot hear anything except the cicadas and the cries of birds. It is a beautiful place.
PS All of what you see in the picture is the banyan tree, it is a mini-forest
Microfinance or on Why I'm in India So Far Away in The Heat for Such a Long Time
The reason I'm in India is, as I've mentioned before, to work in a micro health insurance project with the Center for Microfinance (CMF). Before starting my work on this project I'm attending a 10 day intensive course on microfinance in Chennai, where CMF is based. CMF is a non-profit organization focused on improving accessibility and quality of financial services for the poor through rigorous research, knowledge dissemination and evidence-based policy for Microfinance Institutions (MFIs).
For those of you unacquainted with microfinance, the basic setup is as follows: Credit markets by definition have information problems. The lender faces two types of information asymmetries: adverse selection, that is, not knowing the type of the borrower, if he will repay or not, and moral hazard, if once he gets the money he will not use it adequately to be able to repay.
Collateral solves these problems since the lender can tell the type from collateral and no matter what the borrower does he will at least get that. Poor households do not have collateral in the form of assets that can be valuable to a formal lender (a bank, for example), so credit markets are either non-existent or very costly. The high cost comes from the fact that the local moneylender has to invest in gathering information and monitoring his clients to know their type and their actions. Also the opportunity cost of those resources is high for the moneylender, so interest rates are very high.
Microfinance solves the collateral problem through joint liability. Borrowers form a group and are screened for a period of time, either by requiring them to save some amount before they get a loan or by lending them increasing amounts and seeing their repayment rate. Once the group members get loans they are all responsible for the payment of the total amount, so they bear the full risk of one member defaulting. The joint liability setup is further reinforced by the presence of social sanctions among group members. By making group members be women (and married women most of the time) the risk of migration/fleeing decreases, so the market can exist or theoretically be less costly than moneylenders.
Most microfinance schemes in India operate as self-help groups (SHG), that is, the group of women is pursuing some other development goal than just getting loans and are usually sponsored by an NGO. In this type of scheme the NGO only acts as an organizer and supporter of the group and as the link between the group and a formal bank. But in the past years there has been a tremendous increase in MFIs that use a JLG model, since it can be scaled up very quickly and is sustainable (moreover, highly profitable).
This past week we have been discussing many of these issues and listening to very good speakers on the subject. To round off things today we went on a field visit to SMILE to actually see an MFI in operation. Tomorrow we will visit a local NGO, Hand-in-Hand to see their work. I'm excited.
P.S. I dedicate this title to C.Schubert
For those of you unacquainted with microfinance, the basic setup is as follows: Credit markets by definition have information problems. The lender faces two types of information asymmetries: adverse selection, that is, not knowing the type of the borrower, if he will repay or not, and moral hazard, if once he gets the money he will not use it adequately to be able to repay.
Collateral solves these problems since the lender can tell the type from collateral and no matter what the borrower does he will at least get that. Poor households do not have collateral in the form of assets that can be valuable to a formal lender (a bank, for example), so credit markets are either non-existent or very costly. The high cost comes from the fact that the local moneylender has to invest in gathering information and monitoring his clients to know their type and their actions. Also the opportunity cost of those resources is high for the moneylender, so interest rates are very high.
Microfinance solves the collateral problem through joint liability. Borrowers form a group and are screened for a period of time, either by requiring them to save some amount before they get a loan or by lending them increasing amounts and seeing their repayment rate. Once the group members get loans they are all responsible for the payment of the total amount, so they bear the full risk of one member defaulting. The joint liability setup is further reinforced by the presence of social sanctions among group members. By making group members be women (and married women most of the time) the risk of migration/fleeing decreases, so the market can exist or theoretically be less costly than moneylenders.
Most microfinance schemes in India operate as self-help groups (SHG), that is, the group of women is pursuing some other development goal than just getting loans and are usually sponsored by an NGO. In this type of scheme the NGO only acts as an organizer and supporter of the group and as the link between the group and a formal bank. But in the past years there has been a tremendous increase in MFIs that use a JLG model, since it can be scaled up very quickly and is sustainable (moreover, highly profitable).
This past week we have been discussing many of these issues and listening to very good speakers on the subject. To round off things today we went on a field visit to SMILE to actually see an MFI in operation. Tomorrow we will visit a local NGO, Hand-in-Hand to see their work. I'm excited.
P.S. I dedicate this title to C.Schubert
miércoles, 10 de junio de 2009
Too good to last
So yesterday I finally got sick. I was feeling quite proud of myself that my stomach was holding up so well. Believe me, ten days of new food without a problem is a record. Even though as a Mexican I should be more resistant, I'm not. Since I was little any new thing would be costly. But today I'm feeling fine, so I guess the first step of the initiation rite is complete.
lunes, 8 de junio de 2009
Monsoon birthday
On Monday I got my first impression of the monsoon, the summer rains that last from June to September. We decided to go out to dinner to celebrate Caroline's birthday (one of the interns). We started walking and were just commenting on how the weather was so nice, when the first heavy raindrops began to fall. In five minutes it was raining very hard and we were absolutely soaked. We were also lost and did not know how to get back to the house. But, maybe because it was the first time, it didn't really matter. After all the heat of the previous days the rain comes to cool everything down and is very enjoyable. Not so much the puddles and the state of the roads afterwards. Oh well.
Sunday at the beach or Indian Asnières
After trying to see the sights in Chennai with little success we went to Marina Beach to see the sunset. It was full of people. If there are 80 lakh* people in Chennai, at least 10 lakh were there, enjoying a Sunday afternoon.It was so nice to see families, children, friends, couples walking around, buying sweets and food, getting their fortunes read (either by a parrot or by stones), riding the merry-go-round, getting their pictures taken next to cardboard images of their favorite Bollywood actors, buying jasmine garlands for their hair, shooting darts at balloons, getting their feet wet in the surf, or just strolling the length of the beach.
No matter where in the world you are I think all popular Sunday afternoons have the same feeling. It is a moment in time where all is well, the work week is starting in a few hours, but it is still far away and there is time to enjoy that little free time with no obligations. The beach or the plaza become the central public space that re-enforces social ties, that allows people to come in contact with each other once again in ways that the city does not allow. People become a little less alienated from each other and laugh and are something else than just their weekly activities.
Then Monday comes and work starts again.
*a lakh is a unit in the Indian numbering system: 1 lakh=10,000; 1 crore=100 lakh=10,000,000
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