FINCA - Building tomorrow together

I recently had the pleasure of visiting Guernsey to meet with some business-leaders, money managers, and speak with the media about FINCA. I’ve not been to the Channel Islands before so I wasn’t sure what to expect. But the first things that hit me when I landed were how beautiful the island is, and how welcoming the people are. I made a point of telling BBC Guernsey Radio how jealous I am of the people who live there! I said it reminds me of Bermuda — just less pink!

Sadly, it was a very short visit. It was a particular pleasure to be on BBC Guernsey Radio and the interview was perhaps one of the most satisfying I have ever done. If you want to listen to it then you can do so HERE! (The interview starts at 1 hour 43!)

The interviewer was fantastic – we chatted about everything from corruption to the American election, as well as (of course), FINCA, microfinance and the progress that we’ve made all around the world, alleviating poverty and providing people with the resources they need to create sustainable sources of income for themselves.

The highlight of my trip though has to be a private breakfast I held about impact investment. Guernsey is a well-known financial centre, and I wanted to talk to some experts about what their experience was of impact investing. In particular, I was interested to hear about the growing number of their clients who were starting to think about using their money in socially responsible and positively impactful ways, such as microfinance.

I have to confess, I was at first a little anxious about the appetite for this type of discussion. But I came away feeling very positive. Many of the people who attended sent me very kind emails after, saying that, although they hadn’t thought about impact investing before, it was something that they now would. And some even said it was a topic they wanted to bring up with their clients!

I know this won’t be my last trip to Guernsey. It’s a place I definitely want to visit again. There’s so much more of the island to explore. Thank you Guernsey – I’ll be back!

RS

‘You can’t go home again’, so said American author Thomas Wolfe, but I did. Not back to Levittown, Long Island where I grew up, but to Blantyre, Malawi, which I consider one of my 23 other homes, where I founded FINCA subsidiaries over the past 32 years.

The occasion was the celebration of the day, 22 years ago, when we organized the first village banks in Blantyre, with $100,000 from Rotary Clubs in Colorado, led by an orthopedic surgeon named Dr. Richard Kemme, who had a prosperous practice built on the back of the many skiers that flew down the slopes of the Rockies and collided with trees, rocks and most often with each other, breaking limbs.  Dr. Kemme came to Malawi to work on polio victims, but when he learned of FINCA’s work in Latin America from other Rotarians he decided he needed to persuade us to bring our small loans to help the women of that country. It wasn’t difficult; we had founded FINCA Uganda just a few months before it and was running beautifully, so on one of my trips there I just hopped on a plane from Entebbe to Nairobi and from there down to Blantyre.

In those days, raising money for FINCA was easy, and on my maiden trip I came back with two other big grants, one from the World Bank and one from USAID.   In a week, with Dr. Kemme’s help., I recruited a board, hired a director and a credit officer, and organized four village banks.   On this trip, I carried with me the coveted “Silver Tree” award, to recognize FINCA Malawi for having reached 50,000 clients.

Man, it was so easy back then.  Today, microfinance is complicated, we do it through regulated banks and finance companies instead of NGOs, we have stiff competition from other banks, payments companies, telcos, retailers, even public utilities, in some cases.  Our managers mostly come from the banking sector, not the Peace Corps, like me.

I was only in Blantyre for two days, but we packed in the inauguration of our new branch, which is enabled to take savings, a celebration of our 20th anniversary, and, of course, a visit to a village bank.   The Deputy Governor of the Reserve Bank of Malawi was on hand to open the first savings account, which went off without a hitch, except that our core banking system failed to print his receipt.  The entertainment at our dinner was provided by a dancing troupe of convicts from the nearby prison farm.   (They were close to their release dates; that’s why they didn’t run after the show)  As they danced, you could feel the pent up energy from their years of confinement released into the room.

The village bank was located in a slum on the outskirts of Blantyre, a city which has grown up from the small burg I visited 22 years ago.   The roads through it are dirt and gouged with rivulets from past rains, and gansta rap blares from sound systems in the neighborhood shops.   The women are waiting on a large sheet of plastic so as to not soil their colorful red and maroon dresses emblazoned with the FINCA tree brand.   Considerate of their guest, they face into the sun while I have my back to it.  I ask them to tell their stories.   One woman is a serial entrepreneur; she buys maize at harvest time, stores it and then sells it during the “hungry season” six months later at three times the price.  She also as a general store, and she shows me a blouse that she has hand embroidered constituting her third source of income.   Another woman describes how, with the income from her dried fish business, she has been able to educate her three children, one of whom is now a doctor, another a teacher, and the third a mechanical engineer.   Looking at the humble dwellings with their brick walls and tin roofs, it is obvious what these women’s priorities are:  they invest in their children.

But the one I found most interesting is a younger mother the women of this village bank has adopted.  In a departure from our usual credit policy, this woman had no existing business when she joined the group and got her first loan; the President of the group convinced the others to guarantee her loan and told them not to worry; she would mentor her.   It worked, and now this young mother was on her third loan and had a thriving business selling used clothing.   As our SUV rocks back down the dirt road out of town, I find myself swaying to the music blaring the sound systems, Dr. Dre from the sound track from Straight Outta Compton.

This is FINCA:  Straight Outta Malawi.  Financing women micro entrepreneurs in poor neighborhoods around the world, helping them help themselves and their families.   The model is still dead simple, but it works.

Billions of people around the world remain financially excluded.

Without savings, they are unable to build up the money they need to pay for their children’s education; without loans, they are unable to open and grow their businesses; and without insurance, they are constantly at risk of losing everything.

New technology — from mobile to app-based banking — now provides us with the tools we need to provide more people in ever more remote locations with financial services.

But there are also risks. Without safeguards — such as credit checking facilities and providing these people with lessons about financial literacy — there is a real risk that we could leave a whole generation of people in the developing world in debt.

That’s why last week I co-authored a column for the Financial Times with Andree Simon, my Co-CEO at FINCA, on the promises and pitfalls of the next era of financial inclusion.

Read now

In August I had the opportunity to visit our subsidiary in Nicaragua, and I was thrilled to see what a difference we are making there.

It was great to be able to spend time with our team in Nicaragua, ably led by Klau Geyer, our CEO, and also visit some of FINCA’s clients to see and hear how our financial services are enabling the growth of their businesses.

As always, I came away inspired by the enthusiasm and dedication of our staff, and their committment to helping our clients build a better future for themselves and their families.

I was especially moved by a client named Julia Ramirez, who despite her own very modest circumstances chooses to help the children of less fortunate families in her community. Like so many of our clients, Julia has overcome adversity in her personal life and presents a brave and generous face to the world.

I wanted to share some of their stories with you, so I made a short video blog of my time in Nicaragua. I’d love if you spared a few minutes to watch it.

My PR guy called me up to nag me the other day.

“You’re not blogging enough. You’re supposed to be a ‘Thought Leader’. It’s difficult to position you as such if you aren’t having any thoughts. People will begin to think of you as – “

“A ‘Thoughtless Leader”?”

“At best.”

I tried to give my usual excuse. I’ve been really busy lately.

“That’s what they all say. Look, I can’t do my job if you don’t do yours.”

“That’s right, put it on me.”

“The buck stops there.”

“One more cliché and I’m hanging up.”

But he beat me to it. Leaving me no alternative but to come up with a thought.

I went to Kansas City for a fundraiser last week, and afterwards met with two local entrepreneurs, one in the financial sector and the other of the social variety. Contrary to what some think, a ‘Social Entrepreneur’ is not someone who spends little time working and most of his time partying. The social entrepreneur was Gary White, CEO of Water.org, with whom FINCA is considering partnering in a water and sanitation project in Uganda. The financial entrepreneur was Bob Regnier, President and CEO and Bank of Blue Valley and a FINCA supporter. Bob is a ‘playah’ in the Kansas City entrepreneur space, financing entrepreneurs through both his bank and promoting new entrepreneurs through the Regnier Institute for Entrepreneurship and Innovation at the University of Missouri-Kansas City. Also in attendance at the fundraiser were the Hatch brothers, Bob and John, who co-founded FINCA back in 1984. We talked about some of the exciting new things going on in our organizations, both in the heartland of the U.S. and internationally, where FINCA and Water.org work.

FINCA and Water.org got together a while back when we both realized that working together in Uganda made sense, given that Water.org has the engineering and technical know-how to connect more poor people in Uganda to clean water and sanitation, and FINCA has a client base of over 50,000 families who need these services. Add to that the fact that FINCA Uganda, a microfinance company, can bring financing to the table and you have the makings of an interesting partnership. We have undertaken a feasibility study and are working on developing a pilot project to see how this could work.

The Uganda collaboration is part of a wider effort to bring affordable products and services in the areas of renewable energy, education, healthcare, and agriculture to our clients called FINCA Plus. After 30 years of providing affordable financial services to low income families in 23 countries of Latin America, Africa, Eurasia, South Asia and the Middle East, we decided to leverage that experience in these other non-financial sectors. Since we aren’t experts in these areas, we have decided to partner with other social enterprises that have developed successful products and services and are looking for ways to scale them. In order to do that they need money, and that’s where FINCA can help. It helps that we also have a client base of 1.8 million potential customers.

Well, that’s my 500 words for today. You happy, Paul?

A couple of weeks ago I visited our FINCA project and its clients in Nicaragua. Traveling with me was Matthew Glynn, a fine UK journalist from The Independent. We met with a number of clients who had started and grown businesses with the help of FINCA microloans.

On his return, Matthew wrote a feature piece for the Independent and a shorter piece for the London Evening Standard. In the Independent he quoted me giving my views on the role of microfinance in tackling terrorism:

“I heard someone say the other day, ‘Let’s be clear, we’re not going to fight terrorism by helping poor people with microfinance’. Well, guess what, we are, and it’s the only way we’re going to do it.

“We ignore at our peril the social ills of countries like Pakistan and Afghanistan where there is high youth unemployment and people may give their kids to a madrassa and a radical imam otherwise they might starve to death. … So how can we combat that? We have to give the family an alternative, maybe an opportunity to access microfinance – the ability to start and run their own business.

“It’s not going to be the only solution… but business, done in a responsible way and done as a social enterprise, is the solution to many of the major ills in the world, including poverty and terrorism.”

This is an accurate quote and I stand by it. I’d also like to take this opportunity to add that this is a truth that stands for any country: young people and parents must have economic opportunity or the risk of social unrest rises. In its extreme, unrest can spill into terrorism when the plight of the hopeless is used by those who would purposely do harm to others.

The first two responses I received in the wake of Matt’s two articles were, first, someone desiring to partner with FINCA for microinsurance, and second, a tweet from a former FINCA intern (El Salvador, circa 1995)-turned-microfinance-sceptic Dean Karlan, a professor at Yale, asking: “Does this really capture your view? Microcredit to fight terrorism?” We went back and forth a few times; me defending my position, he his. But this got me thinking. Perhaps it’s time I put my views on this issue right out there. So that’s what I’m doing now. I want to emphasize these are my personal views, not those of my organization.

I absolutely believe that business, done in a responsible way, is a credible alternative to delivering up your kids to being radicalized. And, for the record, I don’t accept the wide-spread premise that almost all terrorists are middle class and college educated. I’ve spent more than 40 years with people in some of the world’s poorest and most volatile places on earth and I can tell you, all the academics in the world won’t convince me to ignore what I’ve seen with my own eyes.

Many suicide bombers are brain-washed as children in madrassas by radical Imams who source poor, uneducated kids delivered to them by their impoverished parents because they can’t feed them. This is a fact. So, no, I don’t agree with author Alan Krueger et al that most terrorists are well-educated.

My albeit-short exchange with Dean on Twitter reminded me of a meeting a number of us from international NGOs had with a representative of the Bush State Department in the wake of 9/11. “Don’t think that this event had anything to do with the fact that the majority of the people of Afghanistan live in poverty, or that this means we will be ramping up spending on economic development in poor countries as a result,” he lectured us. The implication was the only way to fight Al Qaeda was with military force.

I remember thinking, groan, what a totally foolish and ignorant view! Well, we all know how that worked out. After billions spent in Afghanistan, the Taliban has regrouped and reconquered huge swaths of the country. The security situation has made much of the economic development work totally impossible. FINCA has managed to hang on there, where 90% of our clients are women supporting their families through small business efforts.

I also remembered working in Somalia with my FINCA partner, John Hatch, on a credit program for rice farmers in the Shebelle River Valley. The last trip John and I took there was just before the Barre regime collapsed, plunging the country into chaos and setting the stage for the country’s takeover by Al Shabaab, an Al Qaeda affiliate. To me, the absence of economic opportunities resulting from Somalia’s descent into ‘Failed State’ status was definitely a factor in the rise of terrorism.

I am not alone in this line of thinking. Here is a video of a very powerful TED talk by a courageous young Somali social entrepreneur named Mohamed Ali. He describes how terrorist groups seek out and recruit small-town, uneducated, unemployed young people with no prospects and no opportunities – and turns them into suicide bombers. And discusses entrepreneurship as a viable solution.

Mohamed is the Executive Director of the Iftiin Foundation, an organization that builds and supports young entrepreneurs to encourage a culture of change and innovation in Somalia and other post-conflict countries. He has a law degree from Boston College Law School. Mohamed works and lives in Somalia. He was born there, so he knows the country and the people. So if you can’t take my word for it, then take his instead.

Perhaps in the West we have a desire to overcomplicate things because we don’t have a reference point. Most of us have never experienced real hunger, real fear, real hopelessness. Most of us have never even seen people who are suffering from these things because we’ve never visited their countries – they’re ‘too dangerous’. That means, in order to make sense of the senseless, we resort to statistical and academic gymnastics.

Perhaps, if we tried harder to listen, learn and put a human face on the young suicide bomber, we’d begin to accept that the need to survive with dignity can drive people to embrace even the most senseless of options: terrorism.

If we could bring ourselves to accept that alleviating hunger, fear and hopelessness play a major role in the terrorism recruitment advertising package then we could start to see the enormous value of offering opportunity, support, hope and yes, microfinance, as part of the solution.

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