Jeremy's Journeys

A bit of a programming note.  Over the next two weeks I will have some visitors, and will be traveling much, so it’s unlikely I will be able to post.  I would like to do another one of these question and answer type blogs, so I’d encourage you to, over the next two weeks, send me any questions you have about microfinance, Kiva, Guatemalan culture, how to make a tortilla, and the theory of relativity.  I’ll do my best to answer them upon my return.  On to your questions.

Sorry that wasn’t clearer. When loaners fund a loan on Kiva, the money goes to the MFI, in my case, it’s FAPE. FAPE in turn is giving the money to the entrepreneur funded on the website. When the entrepreneur pays back that money to FAPE, then FAPE in turn, gives the money to Kiva. Kiva, when lending the money to FAPE, does not ask for interest on the money, only that, if the entrepreneur pays back the FAPE, that FAPE return the money; however, FAPE still charges interest to the entrepreneur to make up for all of the costs of operation. Many studies can be done as to what the fairest interest rate is, but it has to be high so that the MFI can subsist.

Well, Kiva is kind of like a database for all MFI’s, except they do a lot of dirty work for MFI’s. There are many reasons why Kiva, or some sort of other lending website, must exist for to be able to loan to individual entrepreneurs. I will outline the two biggest ones that I see.

1. Sending money costs money. Unless you are Kiva. And you have the first ever free payment-processing capability through Paypal. Notice, if you have ever sold something on Ebay, Paypal takes a cut. Transfering money via Western Union? They eat some of your moolah. Even those of you who have donated to me directly to my paypal account, I lose about 3%, because paypal takes a that money (this excludes Kiva gift certificates, those do not have a percentage taken away). Kiva enables 100% off lender’s money to get to entrepreneurs. That is not something easily acheived. That is something that other “Save a Child Organizations” cannot promise. No overhead costs (besides the optional donation). And that is something that MFIs could not do on their own.

2. Building a website is hard work. Maintaining a website is hard work. Responding to lenders is hard work. This, Kiva does for MFIs. Have you ever noticed how easy to use Kiva is? This is because about half of Kiva’s staff is engineers, and they are dedicated to making helping others, easier for the non-tech savvy people. Many MFIs do not have the resources nor the knowledge to be able to carry out website processes, let alone to be able to respond in English to many of the lender’s queries. More than that, Kiva brings many MFIs together so that lenders can choose which ones they want to lend to. They don’t have 100 different websites to go to just to find someone they want to lend to.

Dovetailing off of that, you say it’s all an experiment for you, could you talk a bit more about whether you think KIVA itself makes sense for these communities (I understand they sponsor your blog…)?

Kiva doesn’t really sponsor my blog. I just believe in Kiva, so I have the banners up. They have, however, enabled me to have wonderful experiences here that allow me to write the blog. So in that sense, they sponsor it.

But does Kiva make sense? Is it worth it for the MFIs to go through the hard work of uploading borrower profiles, doing journals, dealing with slow web connections? The answer to that is probably. MFIs have many sources of funding. Kiva is one source. Other sources can be other philanthropic organizations or banks looking to make money. For sustainability purposes and if something should happen to Kiva, an MFI can recieve no more than 30% of its funds from Kiva. My MFI, FAPE, gets, on a quaterly basis, 10-15% of its funding from Kiva. And like I said above, Kiva gives the money at no interest to FAPE. Other sources of funding can require an interest of around 6 or 7%. I think that if you quantified the money and time it took to do everything an MFI does for Kiva, it would be less than 6 or 7%. So it that way, Kiva does make sense.

Does Kiva make sense for the individual borrower? I can only speak to FAPE’s case on this matter. But before FAPE was using Kiva as a funding source, they would only do small group loans. Kiva has enable FAPE to take on a little more risks with higher loans to individuals. These risks, help the entrepreneurs grow more.

However, interest rate on Kiva loans, and interst rate on loans from other sources of funding remain the same. So in this sense the borrower does not benefit. But when doing the journal updates, time and time again, I have heard borrowers say to me that they are so happy that other people care what they are doing. So I do think they get some sort of motivational boost from Kiva.

This is a tricky dynamic. I haven’t really noticed that there is a tension, but I honestly don’t think I have been in a position to view this sort of family dynamic. Guatemalans will hide problems from even from their closest friends. It’s an interesting culture. So I can’t really say for sure on this matter.

It is true what you say, that you can’t just ignore the men, but studies have shown women use their extra income to invest in their children, and healthcare. Such studies have not shown the same thing for men. Also, generally speaking, men have more property and more collateral in developing places. This gives them a better chance at getting a loan from a bank. Microfinance targets those who have been excluded from the finance sector, e.g. women without resources. But you will see microfinance loans to men and on a case by case basis, a man may be just as responsible as a women. It is just that, as a general rule, women are better to invest in than men if your goal is to alleviate poverty.  Here’s some good reading to start on this topic.

That’s all the questions for now folks.  Send more when you got em.  Have a safe and happy New Year.

At the office of FAPE, we had our Christmas party. Tents we set up outside, presents were put on the table. All in all, when looking at it, it reminded me of a graduation party. The weather was 60 and sunny, and spirits were high. And to put the icing on the cake (literally and figuratively) we had Bertha Carmelina– a Kiva entrepreneur who runs a restaurant–cooking our food for us. But before the food came out, there were all sorts of activities that reminded me a of a talent show.
First, came the amigo secreto (secret friend) gift exchange. One by one people were called up to the front to receive and give their gifts. I was called up by Josue, a young man who works in accounting. He gave me a cologne entitled Open In Case of Emergency.  I have yet to open it.   I had, with the help of a female loan officer, picked out a nice lamp for my secret friend.  So I called up Flor, gave her kiss on the cheek, and gave her the oddly wrapped lamp.

Next came the talent show portion.  First was a song by a group of seven loan officers from the Sacatepequez region.  They got up, stood together, and sang and smiled the entire time.  I was able to get a bit on video.

After that we saw a play.  It was about a woman at the airport, who had just bought a box of chocolates.  She sat down, and started eating them.  Strangely enough, the man next to her also started eating them, until their was one left.  Which the stranger then took, and split in half.  When the women got on the plane, realized that she had her box of chocolates fully unopened, and she had been eating his.  It was too late to apologize to the stranger whose chocolates she had just eaten.  The moral being that sometimes we often have misconceptions about the world, and the best we can do is learn from the past so that we don’t repeat our mistakes in the future.

Lastly came the meal.  Some sort of chicken, beef, corn, tomato stew.  It was delicious and a little spicy.  It’s typical of the food she cooks in her comedor for her customers.  Being from the capital city, a lot of people at FAPE had never tried this typical stew from the country.  Tje dessert was some sort of green squash-based sweet.  A little rare for my tastes, but everyone else seemed to like it.  The meal was great: Kiva lenders supporting the entrepreneur with a loan, who in turn cooked for FAPE, and FAPE further supporting the entrepreneur by paying her for her cooking.

Christmas eve is bigger than Christmas day in Guatemala.  Last night, we had dinner (tomales) at midnight.  But at midnight, everyone lights fireworks off for about 10 minutes.  I mean everyone.  It  was like everywhere I looked there were fireworks.  It felt like a wwar in the jungle.  Loud noises, flashes everywhere, and smoke billowing throughout.  And this was only on the porch of Manuel’s house.  It’s like that everywhere.  Next we exchanged gifts.  I got som marimba music.  It was very lovely.

Alright. So why do you believe in microfinance?

Well I believe in giving others the opportunity to do things for themselves. I believe that it is empowering not only in helping small business, but in helping the owners grow as active people. In this sense, loans are better than aid. They give the borrowers responsability and agency. It gives them the opportunity to prove to themselves that can do something in a way that free aid cannot. It’s more educational than giving them free classes on empowerment and business. As everyone knows experience is the best teacher.

How do you measure empowerment?

Okay, so maybe it does do some sort of good for the individual as a person, but really if it’s not helping them out of poverty as was said in the previous post, then how is it actually helping? Measurables?
Looking for measurables in microfinance is looking for something that’s hard to find in something that’s very disorganized (like a fifty needles in a bale of hay). How do you measure the self-worth that a person feels? I would argue that is improved by microfinance. How do you even measure poverty? I would argue that income is but a factor that goes into measuring poverty, and certainly not close to the whole story. Microfinance enables social mobility that comes from comunicating with microfinance institution (MFI) and other small business owners (if you have a group loan) also must be some sort factor that contributes to poverty. How can you measure this?

Sorry, data for this kind of stuff is hard to measure. If you want measureables, then maybe you won’t be terribly happy with microfinace. There are a couple of forms being develop to measure MFIs like FAPE: CERISE and PPI are two that Kiva is experimenting with right now to tell its users of how effective a particular MFI is. But these are quite experimental at the moment, and not proven measurement tools.  You can also check the link to the left that says FAPE on MIX Market, which is a general assessment of MFIs.

Big Picture?
Again, little to no measurables here. But theoretically, the microfinance is helping individuals a little. And you ask these individuals (mostly women) what their hopes and dreams are and 95% of them say to have a better life for my child than I have for myself. So my children don’t have to do what I do. So they can be educated and get a job using their minds, instead of the struggles that I endure. MICROFINANCE IS FOR THE KIDS.
Okay, well maybe that’s not proven, but if the extra income that is earned from microfinance is spent towards the kids education (with loans given to women, this is generally true), or makes it so the kids can stay in school, then, IN THEORY, the kids of the future will be better off than their parents. Hence why FAPE gives over 90% of it’s loans to women entrepreneurs. Quite simply, they know what do with the money, invest it in their kids, in education, in the future.

There are no clear answers in microfinance. And it’s important to remember that, although centered around money, microfinance is not about the money. It’s about what happens as a result of the money. This has a strong parallel with life, which often not about money, is often what happens as a result of money.
Also this gets one thinking: Why do I do what I do? For my kids? For the future of others? For the money? For reasons that cannot and should not be measured?

Sorry this got a little angsty again. I hope to get a post up on XMAS about our christmas party in which I gave and received a gift, saw a play, and heard many songs about Jesús Christ

What would your borrower profile look like?

So sorry for the philosophical-angsty post of the past. I guess I just needed to vent a little. Part two of that will come, but probably not until later this week.

This morning, I went to do some borrower profiles. The things that you see on Kiva’s website when you want to make a loan, those are borrower profiles. The picture, the description of the person and his or her business are really the meat of the profile (especially if they are selling animal products). Well, from people far away from the scenes, it might be simple enough what you want to see: a smiling person, with his or her business in the background, a description of family life, of business history, of what use the loan will be, and of hopes and dreams. All this in three paragraphs. What would your profile look like? I made one for myself, and it’s at the bottom of this post.

So as you maybe are starting to see, writing the profiles are not as simple as they may seem on the website. First, the person writing the profile is the usually the loan officer, and they have never been a Kiva lender. They are not exactly sure what lenders are looking for, even if I have done training sessions with them. Secondly, the entrepreneurs are not sure what we are looking for either. They just want to answer the questions as succinctly as possible so that it pleases the loan officer. Imagine going into THE BANK for a loan. Most of us would not give long winded answers to the bank’s questions so that they could really get to know us; We would give them short answers that we thought they wanted to hear.

The challenge is to give the loan officers as much understanding about profiles as possible, while also providing them with open-ended questions to ask the entrepreneurs. For this, I have created somewhat of a formula sheet for writing profiles. There are three boxes: family history, business history, future hopes. And beside each box is a list of questions for the loan officers to ask. This morning, things seemed to go smoothly, as I did 3 borrower profiles with a loan officer.

During an interview, I usually tell the borrowers about myself (I’m 22, I don’t have kids, or even a wife etc.) This helps them ease into things, and be a little more open. Well, as the loan officer and I were completing the interview, I asked the entrepreneurs if they had any questions about me. All three responded by saying, “No, only to say thanks for giving me this opportunity.” I sighed after each one. No matter what my efforts may be, Kiva is still THE BANK.

Jeremy is a twenty-two-year-old young man. He has come down with a case of wanderlust. He has grown up all his life in Ann Arbor, MI, and is now soliciting a loan to invest into his business of traveling the world and getting smarter.

He first got started traveling the world in 2008, by going to Argentina. But this was only the beginning, he has grown to travel to Bolivia, Peru, Israel and Guatemala. His new plan is to invest this money back into his travels, and return to Peru. He hopes this will be a fruitful experience.

His hopes are to find what his looking for in exploring new cultures, and being exposed to the infinite knowledge that exists outside of his brain. He far of hopes are to go to graduate and connect everything that he has ever learned together.

Who does microfinace help? Well, the requirements to get a loan are that you need to already have your own business, and it should be a profitable business. Why is that a requirement? If we gave loans to people who couldn’t afford to pay them back, we’d be doing them, and their community a disservice. They would just get into greater debt. Now a business can be very loosely defined, as nothing more than a place in the market where you sell beans that you buy from farmers, but it has to be a profitable business. For example, my institution will no longer give loans to people who are raising pigs to sell, because that market is not very strong these days. Instead, they encouraging these people to raise chickens, which is a good market in Guatemala.

So that person who I see every day on the street, begging for change in the morning, is not getting helped my microfinace. Neither is the alcoholic without a home. Nor the child who is taken to places called “Auto Hotels” where they put a curtain over your car and you pay by the hour. They are not getting loans anytime soon.Okay, so microfinance is not reaching the poorest of the poor. But what happens with them? Well maybe that’s wait aid is for.

But it is helping to alleviate poverty, right? Well, the person selling tamales on the street who gets a loan to buy her supplies more in bulk is not suddenly going to be able to move out of her current house with a curtains being the only things separating the rooms to a house with walls. She might be able to increase in income a little. Enough to keep her kids in school so that they don’t have to help her work in order to survive. And that’s something.

Okay, so now I’m somewhat deflated, care to add more? Sure. Even though Kiva lends at zero interest rate, my institution, and every other microfinace institution (MFI) charge interest rates. High interest rates. As high as 50% in Africa, and around 30% is the average in Latin America. Why are these institutions so evil? Well, they are not. Driving 2 hours away to give someone a loan, and collect repayments costs lots of time and money. What’s more, they need to cover the risk that clients do not pay back, which is naturally higher in loans to these types of people. So really, interest rates, for most MFIs, are just necessity to survive.

So microfinace is far from perfect. In my next post, I’ll address the larger picture aspects of microfinance, which maybe is a little more uplifting. Maybe.  In the mean time, here are some links to keep your thinking going:

Hans rosling gives a cool Ted talk on poverty.

The new york times talks about Vittana. Somewhat like Kiva, but they give education loans, instead of business loans. It’s pretty neat.

The Econmist evaluates two studies on microfinance. A little more in depth than I presented here.

So I guess having committed three months to something that I’m not convinced works might seem, on the surface, a little stupid; however, I’m am convinced that it’s unlikely that I’ll find something that I’m 100% sure is the best (for me, for helping others…for everything, for life). Uncertainty is no excuse for inaction. I’ll always be uncertain, but the process of discovering what works well about an organization, or an idea, is in itself a useful. And the only way to do this is through actively trying things out. It’s really all just an experiment.

So this is somewhat of a varied post, but these are just somethings that I have been up to.  As most of you probably know, channukah has started, and last night, I had a channukah dinner with Manuel and his family.  I could not have my annual Jeremy’s Mom’s latke party, so I had to do my best here.  I made latkes and applesauce (much like the brunch) and we lit candles, and it was all very lovely.

Our Channukah

Again, we talked about the story of channukah, and then the difference between cultural judaism and religious judaism.  Well, I don’t really know how to explain that very well in English, so I did my best in Spanish.  It basically boiled down to in cultural judaism, friends and family are more the reason for identifying with the religion than the actual religious practices.  Of course, there is some mix of cultural and religous judaism in everyone’s practice, but I couldn’t dole out the small details in Spanish.

I have started making a list of things people have asked me to do because I am tall, or things that happen because I am tall.  This is only what I can remember, but my height gets brought up/joked about, at least once a day:

Finally, FAPE currently has four fundraising loans on Kiva I uploaded this people’s to the website myself.  If you wanted to lend to them, that’d be cool. I could tell you about them.  Also, Kiva gift certificates make great channukah/christmas/verdukianism presents.  The entire staff at FAPE will be having a christmas party (no, holiday party is not correct, it’s a christmas party), and there we will be making a Kiva loan.  Felicitaciones.

Borrower Verification is a process that is exactly what it sounds like: an informal audit that Kiva Fellows do to make sure the people are real, and are using the loans for what they say they are using them.  I knew this was my task today; I knew I had to find two borrowers; but I did not know that I would be participating a small version of secret santa.

I left this morning for the town of Tecpan, roughly an hour and a half drive from Guatemala City.  Upon arriving, I went to visit my first borrower, Raul.  He was in his house with his wife and two kids, waiting for me to arrive.  Everything was lovely:  He told me about a sickness he had just gotten over.  He showed me some name-brand-knock-off cloths that he was silk screening.  I chatted with his wife about her business selling  jewelery.  Everything checked out great.  And man things were going smoothly.

Upon leaving, the loan officer who I was with then informed me that we needed to go buy some gifts, because at our next meeting, a gift exchange

Emiliana in the big field where we ate lunch and exchanged gifts

was taking place.  Like secret santa? Here? In Tecpan? We went to a small giftshop store.  He bought some nice cups, I bought a three bowls we floral designs for about a dollar, and we were good to go.  No wait, apparently we need to stop at this store up ahead. We walk into the store, and get our presents wrapped for fifty cents each. Now we are on our way to the group meeting.

Group loans are loans given to many women, who are all responsible for the payments of one another.  If one fails, the others must cover for her.  The social pressure usually is enough to make sure things go smoothly. There were twelve in the group wer were about to go see.   When we arrived at the group meeting, in the middle of a huge field, I spotted the borrower I need to verify, Emiliana.  But she was busy cooking lunch for all.  It was the celebration for the aniversary of the group being together.  Okay, now this makes sense.  Man, I’m pretty lucky to have stumbled upon this celebration.  Hooray large avocados!

After using my hands to eat cow meat cooked over a portable grill with wood coals, and enjoying the biggest avocado I have ever seen, I was hoping to sneak away with Emiliana to do the verification process. I had forgotten about the secret santa process.  We drew names from a hat, and gave our presents to the selected person.  Every gift was a bowl, a plate, or a cup.  And what I received? Three bowls, with different floral patterns than were on the ones that I gave.  I was happy to receive them.

Finally, after all this, I was able to complete the borrower verification with Emiliana.  I gave all the women a ride  to their houses in the back of my pick-up truck, and then drove an hour and a half back to Guatemala City.

The burning of the devil, downtown Guatemala City

La quema del diablo is celebrated by burning trash on the streets all over the country, symbolizing the death of everything unpure.  This happens at 6pm, even though it has been outlawed in Guatemala, they really just can’t enforce this law, and you get pictures like the one to the left.  There is a huge rush to get home before 6, so that you don’t have to deal with the smell of burning trash all over the place.  But once we were home, we went outside to see the piles that were burning and the fireworks that were going off.  Even though many Guatemalans know it’s bad for the environment, they still like the spectacle and the tradition.  I don’t see this ending anytime soon.

So this week upon returning from Costa Rica, I did not go into the field like I thought I was going to.  But I did do two things which I have never done before.

I painted FAPE’s office.  Okay, so I have painted before, but never an office.  FAPE’s office had not been painted in 20 years.  How many places where you work  have not been painted in 20 years?  How many places where you work, do you have to paint it yourself?  With everyone working, that took all day, and we were still not finished.  But man, painting is hard work.  This is what my face looked like. It was a fun bonding experience for all involved.

The second thing of note that I did was translate a legal agreement from English to Spanish.  Yeah, I needed to figure out how to describe “unto” in spanish and other such technical jargon.  The agreement was between an orgaization called Gems of Hope.  They are an organization that focuses on providing health services and education to women in microfinance.  The Canadian government has decided to give them 514,000 Canadian dollars for a three-year project with FAPE. They will integrate health services into FAPE’s already existing microcredit institution.  That’s pretty cool.  Not only does it help FAPE’s entrepreneurs with health care and health prevention, but it also gives FAPE a competitive advantage in the microcredit world.  Not many other microfinance institutions can offer health services along with their loan.  I’d love to see how this progresses over three years.  It should be super interesting and super cool.  As I said with the Namaste post, FAPE is working with some pretty cool partners, and doing  three things I believe are necessary to alleviate poverty: Increase income, free education, and free health care.  Now they won’t alleviate poverty in all of Guatemala, but I bet they make a huge difference with their entrepreneurs.