Monthly Archives: May 2012

What Do I Think of World Travel?

On the summit of Mt. Nyiragongo, a volcano in the DRC

Over the last three years, I’ve visited nearly two dozen countries on five of the seven continents. I lived and worked in the Philippines for eight months, Ghana for another six, and Kenya for exactly one year. In addition, I spent around six months backpacking through various a dozen far-flung places like Burma, Uganda, the DRC, and, most recently, Thailand. In fact, as I write this, I am sitting at the beach bar at Ban’s Diving Resort in Koh Tao, where I will spend the next few days diving the reefs and wrecks around this tiny island in the Gulf of Thailand. In a few days, I head to Koh Phangan, which chewed me up and spit me out when I went two years ago. After crashing a motorbike, leaving me with the famous Koh Phangan tattoo on my left leg, I vowed never to return to that terrible place. And yet here I am, a mere six days away from the legendary Full Moon Party, which, with an estimated 10,000 people packed on the beach, I expect to be the wildest party of my life.

Visited 25 states (11.1%)

About a year ago, the Economist published an article about expatriates – people who live abroad. Using a bit of scientific research and the example of Ernest Hemingway, F. Scott Fitzgerald, Gertrude Stein, and others, they make the case that expats, as they are called, and former expats, tend to be more creative than their domestic counterparts. As with most of these things, it is difficult to separate correlation from causality, but, either way, on tests measuring creativity, people who have spent considerable time immersed in another culture score higher these tests.

From what I have seen, I think that is, by and large, mostly true. I am not sure whether living abroad makes you more creative or more creative people are more likely to live abroad. But there are logical explanations why this would be the case.

At a wedding in Ghana

For one thing, living abroad, by definition, broadens your perspective. It forces you outside of your comfort zone and makes you look at your own world from afar. You are exposed to a different way of thinking about life and an approach to living. What is important to you and the people you have been surrounded by your entire life may not matter to people raised in a different culture, and vice versa. Family and religion are paramount in the Philippines, while ethnicity is a critical, if sometimes destructive, element of African culture. But even differences between African cultures can be as stark as those between countries on different continents. In Ghana, the sense of what it means to be Ghanaian is clear, manifested in the traditional music, clothing, and food, while the Kenyan national identity is more closely tied to tribal affiliation. In each culture, the answer to the question “Who are my people?” is different. It is shaped by tradition, culture, history, and factors that you might not normally expect would shape the way that people see themselves in relation to others. And the more different ways you see this, the easier it becomes to understand how other cultures that you have not visited rationalize their own decisions.

Trekking in Burma

Through the people you live and work with, you learn first that there are different ways of looking at the world. And the more places you live and work, the more ways of looking at the world you come to understand. With greater exposure to different perspectives, you become more empathetic and understanding of differing viewpoints. Your views don’t necessarily change – they can become stronger as you see things from the other side. Having your perspective challenged is a goodthing.

Living abroad also leads you to try new things. You eat food you might not normally eat, and drink perhaps more or less than you are accustomed to. More often than not, you are introduced to something you like, which reinforces the notion that openness is a virtue. And when the essence of creativity is a willingness to break from the old way of doing things and try something different, the experience you get from living in a place where you are forced to do it every day is undoubtedly good practice.

Tomorrow, I will give a few more reasons why I think traveling makes you a more creative person.

Eating balut, a duck fetus, on the streets of Manila

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What Do I Think of Microfinance? Pt. 2

What Do I Think of Microfinance? Pt. 1

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This is part one of a two-part post on microfinance.

Through Kiva and Negros Women for Tomorrow Foundation, microfinance became my entrée into this world. I knew very little about microfinance prior to finding Kiva, other than what I had seen on an episode of Frontline highlighting the company’s early days. Over the subsequent nine months on the ground in the Philippines, I learned as much as I could, and became a bit of a microfinance apologist, believing it could do no wrong. I will do my best to step back with the benefit of hindsight and look at it objectively.

Microfinance is an umbrella term describing the provision of financial services to the unbanked. That includes, but is not limited to, credit, insurance, and savings products. The first one – micro-credit – is the most widely known, popularized by Muhammad Yunus and his Grameen Bank, founded in Bangladesh. According to the apocryphal tale, Yunus lent money to a group of furniture makers whose margins were tiny due to high upfront cost of buying materials. With a loan of only $40, Yunus was able to increase their profits by orders of magnitude and still get a return on his investment. The poor, it seemed, could be worth of credit after all.

Yunus formed the Grameen Bank, which, while not the first, became one of the largest microfinance institutions (herein referred to as MFIs). The group-lending methodology utilized by Grameen and other large microfinance organizations, like Accion and FINCA, came to be replicated by other MFIs around the world. A while back, I wrote about the replication of the Grameen model, specifically.

The group-lending model was created to guarantee payment in lieu of collateral. Typically, women self-organize into groups of four or five, and, in the case of the MFI I worked with, Negros Women for Tomorrow Foundation (NWTF) in the Philippines, up to eight of these groups come together and work with a single loan officer. The money is distributed to each woman at the same time and none can receive another loan until each has paid back their own. The threat of hurting the entire group, which implicitly agrees to guarantee the loans of each member, creates pressure on individuals to pay back. Clients are predominantly women, since women are more likely to invest the money into the business or, at the very least, spend the money on the family rather than leisure activities. As keepers of the house, women are also less mobile and, therefore, less likely to run off with the money. Using this system, Grameen Bank and others consistently have repayment rates of 95-98% .

The wealth management Hawley Advisors says that because of the small loan sizes (generally less than $500 per loan), the cost of servicing the loan is high, necessitating what some might consider exorbitant rates. NWTF, for example, charges ~30% interest on a 6-month loan based on a non-declining balance, which adds up to more than70% annually. This seems high, except when compared with the alternative, which is commonly referred to as a “6-5” – receive $5 in the morning and pay $6 in the evening. This equates to a 20% daily interest rate. Annualized, it is several hundred percent.

This is just the cost of doing business in microfinance. Back in 2008 and 2009, a schism developed between two camps in microfinance. Some, led by Muhammad Yunus, saw microfinance as a mechanism for bringing financial services to the poorest members of society, and felt that making significant profit ran counter to the underlying philosophy. Others, led by Compartamos, a publicly-traded MFI in Mexico, and SKS, the largest MFI in India which also IPOed, saw a huge untapped market that could only be served if MFIs had the capital to invest in expansion. These MFIs charged even higher interest rates and expanded rapidly to reach the 90% of the poor that still lacked access to finance.

This schism reached a breaking point last year, when the Indian government placed new regulations on MFIs in response to a spate of suicides among microfinance clients who had become over-indebted to multiple MFIs. Aggressive tactics on the part of loan officers was blamed, and the entire microfinance industry in Andra Pradesh – a state in India – and the rest of country suffered significantly. Muhammad Yunus was then forced out as the head of Grameen Bank in what some people saw as punishment for his starting a political party in Bangladesh. All in all, 2011 was not a good year for microfinance in South Asia.

In my next post, I will talk about other criticisms and sum up my thoughts on microfinance.

How to Break Into Development, pt. 2

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Meeting cool people is important

This is part one of a two-part post on getting involved in international development work. Read part one here.

Trying to answer these questions – at first in vain, and, a few years later, more successfully – helped me so much that I have dispensed this same advice a dozen times since. But I would add a fourth question is to these questions as philosophy is to math. Ask yourself, “What do I want out of this experience?” Because figuring out that question will provide clarity in answering the other three. In retrospect, I wanted an interesting cross-cultural experience that would drive me outside of my comfort zone and give me the opportunity to give back. Choosing multiple, shorter-term gigs (defined here as less than a year) allowed me to go broad, but not deep.

I like being exposed to new things, and I wanted to learn as much as I could about as much as I could. This explains why I had three jobs in as many years – something that would otherwise be a question mark in the eyes of someone reading my resume. In the span of 30 months – roughly the same amount of time I spent at my previous job as a consultant – I lived in three countries (Philippines, Ghana, and Kenya) and worked in three different industries (microfinance, agriculture, and education). This stands in contrast to many people I know out here, who chose to specialize very early on and have no interest in deviating from that path. There are benefits to both, and you have to decide which is best.

I would also be lying if I said the opportunity to travel to exotic locales did not factor into the equation for me. In West Africa, there are fewer opportunities for independent travel. In Ghana, where you are surrounded by post-conflict, conflict, and sometimes pre-conflict countries, backpacking is not for the faint of heart. In contrast, in the Philippines, which as many people living below the poverty line as Ghana has people, you can easily fly to Thailand for a weekend for less than $100 roundtrip.

Once you have figured out what you want, the key is to network. This industry, more than just about any other, is about connections. That is because the organizations you want to work with are often located many thousands of miles away across large oceans that you may or may not have crossed. And the quality that people are looking for more than just about any other in a candidate is a local address. You really need to create a list of each organization you would like to work with and being combing your network for introductions. It is possible to find interesting opportunities on job boards and listservs, but, as a rule of thumb, the easier a job is to find, the more competition it will have. Usually, the best ones and, more often than not, the easiest to get are the ones that are not advertised that you hear about from your friend.

Of course, the best way of all is to figure out where you want to be, book a flight, and just go. On May 18^th 2011, I remember sitting at a bar on the beach, drinking a beer, trying to mentally prepare myself for flying to Kenya in a few hours with a handful of job leads, a few former Kiva Fellows as my network, and a sublet in a city I’d visited once before. I had given this piece of advice before, but felt a bit hypocritical for having never taken it myself. So I decided to do it and see how it worked out.

I set up a few potential opportunities with companies that interested me – a solar lantern manufacturer, a BPO hybrid non-profit focused on the poor, and Bridge. I met with the CEO of Bridge the first day I arrived and proposed doing a pro-bono project, analyzing all of their payment data and trying to draw some conclusions about how parents in the communities where we worked actually paid their school fees. That work turned into a three-month consultancy, and continued for the next year. My last day was last Friday, and the longevity of the role validated the decision to make that leap of faith.

S o now, I can speak from experience when saying that the most direct way to find the job you want is to show up. And if it doesn’t work out, then find something else. But simply by being there, you will have a leg up over other candidates.

In the next few posts, I will discuss my thoughts on what works in development and, more importantly, why.

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How to Break Into Development, Pt. 1

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This is part one of a two-part post on getting involved in international development work. Read part two here.

One day back in May 2009, I was sitting at my desk at my office on Boylston Street in downtown Boston reading Next Billion. I had decided the week before that I would quit my job in September and leave the U.S. for an adventure. After a cursory review of the options, I decided backpacking and teaching English weren’t for me, and settled in development. At the end of the article I was reading about micropayments for solar energy in Brazil, Mike MacHarg, then a graduating MBA student at my alma mater, wrote a comment asking the author to get in touch with him, leaving his email address. I am not sure if that author ever did contact him, but I did, and the meeting we set up in a Starbucks in Boston set in motion a chain a series of small-world moments that culminated in someone coming up to me two weeks ago in Brew Bistro, a bar in Nairobi, and introducing himself as Erik Wurster, formerly of E+Co, otherwise known as the person Mike first put me in touch after our meeting three years ago. He is living in rural Rwanda now, working on a solar energy startup called UpEnergy, and happened to be in town for a clean cookstove conference visiting a friend of mine. It’s a small world indeed.

These stories aren’t unique – in the relatively small global international development community, everyone has a story extending six degrees on some direction before boomeranging back to them. And these stories are, to me, essential for explaining out to break into this work. From the beginning and right through until the end, guys like Erik and Mike have been connecting me to people from around the world, and through those connections, I have learned about different jobs, companies, roles, and honed in on what it is that I am trying to do.

But for people who are trying to break into this world and have no idea how to begin – in other words, myself three years ago – I will pass on some valuable advice given to me by my father’s partner’s son-in-law when I was a lost soul. After college, he had moved to Zimbabwe back when it was still called Rhodesia and taught science in a school outside Harare. When he asked what I wanted to do and I responded “work abroad in development”, he knew he would have to bring it back to square one with me. So he gave me some advice I have since passed on to many people once in my shoes (metaphorically speaking, not the shoes you get on shoe hero).

Entering the job search with “must work abroad in development” as the only criterion is both wrong and much more common than one would think. So, the son-in-law gave me some parameters to help me narrow down my own hunt. There are three questions to ask before starting to look:

Where do you want to go?
What do you want to do?
What kind of organization do you want to work for?

The first question – where do you want to go – is a big one. For some people, this is the easiest to answer. Wanting to learn a language (like Spanish) or already knowing one (like Kiswahili) are good reasons to work in Peru or Tanzania, respectively. For me, location did not matter. I wanted to go to South America, but didn’t really care either way. I was up for anything, and moving to a place I knew nothing about only added to the sense of adventure.

The second question – what do you want to do (more specifically, what sector interests you) – is more difficult to answer when you don’t know anything about the subject matter. For people with prior knowledge and experience – academic, professional, or otherwise – it is possible to narrow down your options. Broadly, there are a few key areas of international development work: public health, water and sanitation, education, economic / livelihood development, financial services, agriculture, and a few others. You could further split each of these into emergency relief efforts and ongoing systemic programs. It is admittedly difficult to narrow this one down when you barely know the difference between public health and clean energy in this specific context. But, if you are not like me, then perhaps you can pick a couple that interest you and learn as much as you can before honing in on one or two.

The third question – what kind of organization do you want to work for – was actually the easiest for me to answer (actually, the only one I could answer). With three years of practical experience under my belt, I felt strongly about working for a company that knew how to leverage my skills. This last question helped me narrow my search down to a few organizations that had not only a reputation for innovation, but also a fellowship or consultancy program that provided immersion without long-term commitment. Ultimately, the decision came down to the volunteer consultant program with TechnoServe and the Kiva fellowship. Kiva got back to me first, so I signed up with them. The following years, I decided to give TechnoServe a shot and moved to Ghana.

The reason it is so important to answer this question is because there are so many organizations out there are incredibly different. I have personally run the gamut, from technology-based non-profit to USAID to what some people refer to as the “McDonald’s of education,” without any of the negative connotations. Some non-profits and NGOs are poorly-run and unprofessional, with a questionable impact on the poor. Others are led by visionaries with a wealth of experience, providing opportunities for mentorship. Some, like Engineers Without Borders Canada, are based in the field, while others, like Planet Finance or Grameen Foundation, spend more time in the office. Choosing the right organization can easily be the most important of the key variables.

In the next post, I will add a fourth question, and discuss other issues.

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The End of an Era: Leaving Nairobi

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On Sunday, I leave Nairobi for Thailand, where I will spend a month visiting various beaches and diving various reefs. Of the many transitions I have documented on this blog, this one is most significant, as it is the most final. After Southeast Asia, I return to the United States for the foreseeable future, embarking on the next phase of my career as an MBA student at MIT. Right now, from the Flamingo Cafeteria in the Julius Nyerere International Airport in Dar es Salaam, Tanzania, waiting for the second leg of my flight to Nairobi from Zanzibar, where I spent the last four days SCUBA diving and lounging on the beach with a new group of multicultural friends, I will begin the long process of trying to make sense of my three years working abroad in international development.

By way of background for those who do not know the history of Develop Economies, I left my job as a strategy consultant in Boston three years ago to work with Kiva, a microfinance funder, in the Philippines. After the better part of a year, I moved to Ghana to work with Technoserve, a non-profit focused on market-driven economic development. Six month later and one year ago to the date, I moved to Nairobi and found employment as a business analyst with Bridge International Academies, a chain of low-cost private primary schools serving slums in Nairobi. When I arrived, we had 15 schools in Nairobi. Today, we have 73 throughout Kenya. Next year, Bridge will have hundreds more around the world.

In addition to working, I have found time to travel here and there, squeezing in six months of independent travel in six countries Asia and another seven in East and West Africa. I have met thousands of interesting people from all over the world. To illustrate the point, I spent the last three days with a group of Dutch medical students, a Moroccan working in Paris, an Austrian on working at the embassy in Nairobi, two Germans living with nuns in rural Uganda and Tanzania, and an Australian physiotherapist on loan from the International Olympic Committee to the government of Zambia, tasked with preparing their athletes for the 2012 games. More substantively, I have forged strong relationships with friends and colleagues during my time living in the Philippines, Ghana, and Kenya. To write a series of posts summarizing the lessons of the last three years without discussing the people would be incomplete.

Before I arrived, I understood very little about the theory of international development and even less than the practice. Fortunately, I have found valuable mentors to provide advice and guidance in navigating this complex world. The validity of the business adage that it is not what you know but who you know that matters can be debated, but, in my case, knowing people has helped tremendously in not only finding jobs, but adjusting to new environments, making friends, and learning about new things.

Today, I understand much more about development, in part from my work, research, and writing, but also because of the conversations I have in my living room, or on a bus in Rwanda, or a train to Mombasa on the coast of Kenya, or in an email I received from someone I met a few times about what they are studying and reading. The entire experience has made me smarter and more knowledgeable. And trying to parse the source of it all is challenging.

While I may not be able to completely break down my experience and pinpoint the source of this professional and, more importantly, personal growth, I can begin to catalog the lessons from the experience. And with that in mind, I will be writing a series of posts to wrap things up. In the next two posts, I will talk about how I got into this work and give some advice for anyone thinking of doing it themselves.

Should You Pay a Bribe?

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Around the world, money talks. In some places, it speaks in a whisper; in others, it is like your humble correspondent at a party after one too many dark and stoney’s – loud and obnoxious. And in Kenya, many, if not all, businesses, will at some point find themselves deciding whether or makes financial sense to pay a bribe.

Corruption is not a third world vice. There are enough Swiss bank accounts and shell companies in the Cayman Islands to provide evidence for first-world malfeasance. This corruption, while destructive, is difficult to identify, because it is built into the infrastructure of the system. It is a tax code that makes no sense except to people who understand how to take advantage of it. But in some places – Kenya being one of them – corruption is in-your-face. At every turn, you might be asked for a bribe. Police set up roadblocks simply to collect “something small” from drivers. Ministers exact rent from anyone seeking to do business in their districts. From the lowest traffic cop to the highest levels of government, corruption is rife.

For companies, dealing with corruption is a very real part of doing business. The system – particularly within the government – moves slowly, and sometimes not at all. A work visa could take two weeks or two years to process, depending on who you know and, more importantly, who you pay. If you are a vendor trying to buy a storefront, obtaining a construction permit means putting 2,000 Kenyan shillings in an envelope to “expedite the process.” To be sure, greasing the gears of the system leads them to move more quickly.

But doing so exacerbates the problem, providing positive reinforcement to those collecting bribes. And once a company is identified as one that pays bribes, there is no end to the gravy train. Once they have paid a bribe somewhere, companies operating in multiple cities or provinces will have to pay the same tax everywhere. The question then becomes, is it worth paying a bribe to make doing business easier?

Transparency International's Corruption Perceptions Index.

There are some, including Develop Economies, who have made that claim in the past. Why not? After all, civil servants are underpaid. Their superiors extract money from them, and on up the chain. Not to mention, placing restrictions on American companies through the Foreign Corrupt Practices Act (FCPA) only puts the U.S. at a disadvantage when competing against companies from nations with no such regulations.

But that, unfortunately, is not the truth. Corruption is a parasite, feeding on society, preventing it from making forward progress. Businesses that are bled dry from corrupt entities will cease to make investments in growth and expansion, as they are increasingly less rewarded for risks. Roads and bridges that allow commerce are rarely built. When they are eventually constructed, they work is so shoddy that it falls apart during the next heavy rainfall. This, of course, is good for the contractor, who also happens to be the minister who commissioned the road to be built in the first place.

For multinational businesses, paying bribes is part of the expansion process. And with the BRIC countries – three of which (India, China, and Russia) happen to be among the most corrupt in the world – accounting for much of the growth in this post-Western global economy, gaining access to the billions of people in these fledgling economies means paying bribes. Among the guilty are some of the world’s largest corporations.

Wal-Mart, for example, just came under scrutiny for paying over $24 million in bribes to obtain construction permits in Mexico. The stock market responded to the company’s unscrupulous business practices, driving the stock price down 7.5% and causing $17 billion to evaporate into thin air. But Rana Faroohar of Time magazine explains the conundrum:

The scandal tells you that doing business in the world’s fastest-growing markets can be fraught with peril. Emerging markets now account for the bulk of the world’s economic growth, as well as about 30% to 60% of the revenues at many U.S. multinational firms. Indeed, one of the reasons that the stock market has done relatively well throughout the downturn is that it was buoyed by U.S. multinationals earning more and more of their money in these still relatively fast-growing economies. This is particularly true of packaged-goods and retail firms like Walmart.

Many of these markets are rife with corruption–but graft is not necessarily perceived as a serious crime in some places. It’s more a way of doing business. In Mexico, “the bulk of retailers pay bribes,” says one veteran Mexican fund manager for a large U.S. financial institution. Indeed, Mexican firms are the third most likely to have to pay bribes, right after Russian and Chinese ones, according to Transparency International, an anticorruption NGO.

If that is the case, then how can these multi-national firms enter these markets without playing (or not playing, depending on whose side you are on) by the rules? Dealing with governments where corruption is endemic pose a fundamental challenge to doing business in developing countries. But the truth is that buying into that system – stock price aside – will only make it worse. Once a company has established itself as one that is willing to play the game, there is no end. It is difficult, but abstaining and refusing to pay will be better for the business in the long-run.

There are ways around the system. The courts, as corrupt as they may be, can be an avenue for justice. But unfortunately, when time is money, patience can be a financial burden on the business. Still, paying a bribe will be only cause more problems for a business in the future.

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