Monthly Archives: January 2010

Mass Weddings for the Poor

The following was written for the Kiva Fellows blog.  Read the original here.

This job is unique, in that it offers an endless supply of intellectual satisfaction.  Every day, I learn something new about something interesting.  For the time being, what interests me most is microfinance.  My knowledge of microfinance prior to Kiva could be described as purely academic.  Experiencing it firsthand has been rewarding.  In particular, I like understanding the details of execution, the challenges faced by the institution, and generally how a microfinance institution works.  The amount of information to digest is enormous, so I try to focus on understanding a few NWTF (Negros Women for Tomorrow) programs that I think are in my wheelhouse.  The downside is that I end up overlooking many fascinating and unambiguously positive programs.  The other day my coworkers were telling me about the upcoming Foundation day at one of the branches.  Every year, each branch that meets a certain threshold of repayment and performance can have a Foundation Day party with upwards of 2,000 attendees.  I was supposed to go to one in Cauyaun on Saturday, but I got food poisoning the day before and was bedridden.  At some of the Foundation Day celebrations, NWTF holds a mass wedding.  This is one of those programs that I find really interesting for different reasons.  Let me explain why. Continue reading


Here in the Philippines, the most common use for a microloan is a sari-sari store – otherwise known as a general or convenience store.  There are an estimated 700,000 of them here, and you can find one on just about every block in the country.  In 2007, an organization called Microventures Incorporated introduced its Hapinoy program, which is a coop of sari sari stores across the country.  By joining together, these stores can get leverage economies of scale to get volume discounts, competitive pricing, and more favorable terms for microloans.  The organization purchases products in bulk from Procter & Gamble and other large manufacturers, and distributes them to each Hapinoy store via a community store.  It is a hub-and-spoke model with a wholesale store serving different regions.  Here is a program that operates within the existing framework of the country, improving what exists, rather than trying to change it altogether. Continue reading

Baudelaire and the Red Horse

It is the greatest art of the devil to convince us he does not exist. Charles Baudelaire, 1821-1867

Here in the Philippines, the brewery is called San Miguel.  Founded in 1890, the company employs 26,000 people and holds 90% of the Philippine market.  The largest brewery in the country is right here in Bacolod, so there is a lot of San Miguel pride.  There are three main brands – the San Mig Light, the Pale Pilsen, and the Red Horse.   The first two are perfectly acceptable choices in any situation, particularly for the health-conscious traveler that wants to mitigate the fried pork’s feet.  In fact, as long as a food is small enough to fit in the pan, Filipinos will fry it.  If it is too big, they will cut it into two pieces and fry both.  But this is besides the point.   The third beer, Red Horse, is affectionately known as the Water of the Devil.  It is truly a horse of a different color – a poisonous, deadly color.  It is the color of blood and fire.  Brewed deep in the pits of hell by the lost souls cast down after being bucked from the stallion, the Horse boasts a beastly 7% alcohol content.  Few among the living have entered the ring with the horse and left with their dignity intact. Continue reading

Community Loans: Part II

The following was written for the Kiva Fellows blog.  See the original here.

I spent all last week touring a province in the Philippines with a 7-person team in an effort to gather market intelligence about the region.  The purpose is to determine whether or not NWTF should open a branch here.  Much of our day is spent driving around a town (one in the morning and one in the afternoon) looking for the poorest neighborhoods.  The Dilapidated Housing Index is a means of making a snap judgment about whether a community is sufficiently poor for microfinance to be beneficial.  If most of the houses on the street are made of bamboo, corrugated aluminum, and bamboo leaves, we know we are looking in the right place.

A fishing village in the Philippines

On Thursday morning, we were driving through a coastal town when the paved road turned to dirt.  According to the driver and director of the research department at NWTF, when the road turns to dirt, you know you are headed in the right direction.  Sure enough, within a few minutes we reached a squatter community bustling with people.  (In the Philippines, the government protects squatters, and large communities spring up on other peoples’ lands.)  The road was just wide enough to fit the van and lined with nipa huts and sari sari stores.  We passed by two makeshift basketball courts before coming to the end of the road.  We parked the van and split up to walk around and talk to the people.  Unfortunately, the interviews are all in Illonggo, so I chose to follow the director down to the shore.  He began talking to a group of women on the beach holding their infant children.  If they could have a loan to spend on anything in their community, what would it be?  Their response: diesel fuel or an icemaker.  I’ll explain why this is important, but first some background. Continue reading

Community Loans: Part I

Microfinance is a term to describe the broad umbrella of financial services to people without access to a traditional banking system.  Microfinance institutions (MFIs) provide these types of services, which include microcredit, insurance (health, life, crop), savings accounts, remittances, and others.  Most MFIs rely on social collateral for repayment, which, in turn, is dependent on the strength of the community.  The community is at the center of the mission of microfinance, and some of the most interesting services offered by MFIs are aimed at making the community better as a whole.

Villages served by NWTF frequently support a single industry.  A community on the water might derive its livelihood from fishing or oyster farming.  Similarly, a community in the middle of a rice field s likely to revolve around rice farming.  The NWTF members in the community either have businesses in the industry (i.e. operating a fishing boat or renting crab nets) or supporting the industry (sari-sari store, buy-and-sell, used clothing).  In these cases, the health of the community is directly tied to the strength of the industry.  This is where community-based loans are useful. Continue reading

Primer on Mobile Banking

The Philippines is called the “texting capitol of the world.”  Everyone has a phone, mostly because they are a) inexpensive (starting at $20 USD), b) offer flexible plans (everything is prepaid), and c) texting makes life easier.  SMS messaging is the predominant mode of communication not only here, but in other parts of Southeast Asia.  Even business inquiries and scheduling a meeting might be done via text.   The mobile infrastructure of the Philippines is far more robust and pervasive than landlines or Internet.  In the context of development, the mobile landscape offers great opportunities.  Like anything, it is better to improve and leverage the existing system than to try to create a new one altogether.  The question becomes, how do you harness this existing infrastructure to improve delivery of microfinance services?  The answer is mobile banking. Continue reading

Deal or No Deal

Anyone who has been to Southeast Asia (or anywhere outside the United States and Europe) knows that the price you are given by a vendor is not the price you are going to pay.  That is because we Westerners are an easy mark, perceived as a walking ATM machine that doesn’t know any better than to pay what they ask.  I’ve become a spendthrift since I arrived here, becoming agitated when I find a restaurant down the block that serves rice for a dollar or two cheaper than the one I just patronized.  When the proverbial spigot is turned off, you become acutely sensitive to the thickness of your wallet.  All this is a way of saying I try to bargain as often and as hard as I can.   I now have experience negotiating with people in three countries, all of which have a different profile.  But first, the rules.

You are not supposed to enter into a negotiation unless you have the intention of buying something, as it is considered bad etiquette.  Only start the bargaining process if you actually have some interest in buying the product.  I learned this the hard way in Vietnam, where I got some dagger-esque stares after walking away from a potential Brazilian football (soccer) jersey deal.  Also, remember the context of the situation.  You are representing your country, and probably make more in a day than the people you are bargaining with make in a month.  I am the exception, of course, since I have a steady income of $0.00 per month.  Still, while it is fine to bargain, it’s not always important to get the product for just over cost.  You don’t want to rake them over the coals and, in the process, reinforce a stereotype about your country being cheap.  Remember to smile and keep it reasonably lighthearted.  You will probably get a better deal that way anyways.  I started to read about Rational Choice Theory, Pareto optimality, and Nash bargaining solutions in preparation for this section of the article, but the opportunity cost of teaching myself game theory is too high.  As much as I’d like to learn about the mathematical theories behind bargaining, it’s going to have to take it’s place at the back of the line.  Now to the differences. Continue reading

Another Approach: Investing in SMEs

This is the first in a three-part series about small- and medium-sized enterprises

The wikipedia picture for the "Small and Medium Enterprise" entry.

In March of 2008, James Surowiecki wrote an article for the New Yorker, titled “What Microloans Miss,” that suggests that the disproportionate amount of attention given to microfinance has steered funding away from other avenues for development.  A year and a half later, the Boston Globe included a piece on two recent studies on microfinance questioning its efficacy,  titled “Small Change.” Both articles revolve around the same central premise: microfinance, while effective at relieving some of the burdens of day-to-day living, does not create jobs.  It is rare that a microbusiness receiving a loan has paid employees.  In other words, microloans allow women to start a business, but more independent businesses do not help to alleviate poverty on a macro (national) scale.  Small- and medium-sized enterprises (SMEs), according to Surowiecki, are the engines of development.  Here he discusses what considers to be the problem of the cult of microfinance:

Both socially and economically, microloans do a lot of good, working what Boudreaux and Cowen call “Micromagic.” But the overselling of their promise has made us neglect the enterprises that could be real engines of macromagic. The cult of the entrepreneur that the microfinance boom has helped foster is understandably appealing. But thinking that everyone is, and should be, an entrepreneur leads us to underrate the virtues of larger businesses and of the income that a steady job can provide. To be sure, for some people the best route out of poverty will be a bank loan. But for most it’s going to be something much simpler: a regular paycheck.

The benefits of increasing support for SMEs in a country are real and quantifiable.  Consolidation into the formal sector provides more people with steady jobs and offers workers better health and wage benefits, disability, pensions, etc.  These businesses help to reduce the size of black markets and generate taxable income.  What’s more, a majority of microentrepreneurs would prefer a steady paycheck with job security to their current situation.  I don’t disagree with the idea that vehicles of mass production – a factory, or a plant, or a farm – create strong upward momentum for poorer people without employment.  But every country has a different profile, and the success of the development approach depends on the different strategies of development.

Continue reading