Development Crossing

Corporate Social Responsibility (CSR) and Sustainability

The Myth of Microfinance: What I've learned so far in the field

From my blog, Wall Street Refugee at

A little more than a month ago, I officially resigned from J.P. Morgan to pursue my personal interest in microfinance. I left New York City for an unknown place called Nyendo, Uganda where I will be living until the end of August. Nyendo is a small town amidst a rural area of rolling green hills and rich, red earth, about half a degree south of the equator. Since mid-March, I have been working at Masaka Microfinance, where my projects entail expanding the youth savings program and writing a proposal for a new agricultural loan product. In the first project, I am developing a simple curriculum to teach high school students the importance of saving. We plan to launch our program at two new schools. In the second project, I am seeking to propose to the Board a new loan or savings product to fund the purchase of irrigation pumps and water tanks. Agriculture is the most important industry in our area and many of our clients are small-scale subsistence farmers who do not have basic irrigation equipment to increase farm productivity during the dry seasons.

My time in Uganda so far has provoked me to rethink the question, what is poverty? If you saw my town, Nyendo, you would most likely think it was poor. There are no streetlights at night and the narrow roads are pitted with dangerous potholes. The shops are crowded and dilapidated. Homes do not have running indoor water and roofs often leak during harsh storms. But people here live decent lives. Almost everyone here has a home, no matter how modest. There is usually enough food to eat – matooke, rice, potatoes and beans. Many children go to school. Families celebrate births, weddings, christenings, and other rites of passage.

Indeed, academic researchers constantly debate how to define poverty. A recent World Bank report cited 33 different measures of poverty to be used according to various situations or locations. One often-used measure of poverty is living on less than $1 USD per day. Most of the families in my town live on at least $3 per day. The single-mother families I’ve visited in the rural areas typically live on or below $1 per day. I’ve seen firsthand the difference between living on $1 per day and $3 per day are substantial. Importantly, those families in rural areas living on $1 per day have far fewer resources to help alleviate their poverty.

I have found that microfinance here in Uganda tends to benefit those who are at least lower-middle class or middle-middle class, i.e. those who live on at least $3 per day or more. However, microfinance has yet to make a powerful impact on the truly poor here, contrary to my expectations before coming to Uganda. Take Josephine for example. She lives with her three young sons in a tiny room that she rents from my host mom. Her small income consists of selling weaved mats and vegetables. She does not qualify for loans as she has no collateral to offer and the burden of being in debt frightens her. Interest rates are also high at 30% per annum. Josephine is left out of the microfinance movement.

Previously, like many people, my understanding of microfinance was mostly informed by what I had read about Muhammad Yunus and Grameen Bank. While Grameen Bank and its related organizations have done incredible work in Bangladesh and elsewhere, I have discovered that Grameen’s success is not the reality for microfinance in many parts of the world, particularly in Africa where rural living, low population density and dependence on subsistence farming pose particular challenges to the sustainability of microfinance.

At the Microcredit Summit Campaign in Nairobi two weeks ago, I heard Professor Yunus speak about social business as another way to help solve problems of poverty. Social business, unlike charity, is self-sustainable and does not require donor funding. He cited Grameen’s joint venture with Danone to create nutritious yogurt products at prices affordable to the poor in Bangladesh. I thoroughly support social businesses but from my experiences so far, I worry that the poorest of the poor will not benefit from them in the same way they have not been able to take advantage of microfinance. Take for example a social entrepreneur in my town whose company makes and distributes reusable sanitary pads to schoolgirls in our area. He conceded that charity is still necessary for the very poorest of the poor. Even though a subsidized sanitary kit costs 3,500 Ugandan shillings, or the equivalent of about $1.75 USD, there will be some girls who simply do not have the money, even if they saved over the course of a year.

In the aftermath of the microfinance and social entrepreneurship movement, I am concerned that charity or philanthropy will become dirty words, perceived as outdated modes that do not embrace market principles when in fact we need both microfinance, social business and philanthropy to work together in order to ensure that even the poorest of the poor are included in the process. Thus, my experience here so far has only reaffirmed my belief in the work of Trickle Up, an organization I volunteered with in New York. Trickle Up provides seed grants, rather than loans, in addition to business training to those living on $1.25 per day or less with the goal of eventually graduating its entrepreneurs into the mainstream microfinance process. I have found no organizations like Trickle Up in my area, organizations which would greatly benefit those like my neighbor Josephine. As a result, I have a renewed interest in raising awareness of Trickle Up’s work through the Young Professional Council I helped to found and lead last year. I am proud to say the Council is well on its way to reaching our fundraising goal of $10,000 in our first year of operation.

On that note, please support Trickle Up by attending the Young Professional Council’s First Annual Gala in New York City on Thursday, May 6 from 8-11pm at The Gates. Tickets are only $40 online and include premium open bar from 8-10pm, courtesy of Svedka Vodka. Due to the generosity of our sponsors, The Gates and Svedka Vodka, 100% of your ticket price goes to Trickle Up. We will also have live DJ, door prizes, raffles and more! For more information and to purchase your ticket, please visit: To learn more about Trickle Up, please visit

I’ll write more this week about what transpired at the Microcredit Summit in Nairobi, particularly the debate about social business we had in the workshop with Professor Yunus.

Till then,


Views: 76

Comment by Scott Andrews on April 28, 2010 at 12:29pm
Great post! I lived in Nyendo last year for 6 months. If you are bored and there aren't many Muzungus around I could drop you a line with some people to meet up with for drinks. I trust you have dined at Ten Tables, Danced at Ambiance and hit the pool at the Tropical Inn Hotel ;-p.

I will be following your adventures 4 sure!

Scott Andrews
Comment by Jennifer on April 28, 2010 at 12:33pm
Thank you Fennie, for shedding light on these issues and that part of the world. Great read.
Comment by Surya Prakash Loonker on April 28, 2010 at 4:34pm
Fennie, i like your commitment and approach of putting your money where your mouth is. I am impressed with your analysis. I work with a NGO here in India called Family of Disabled (FOD) who has been funded by TrickleUp in the past and it has exactly helped the kind of poor you are talking about, ones living below $1/day. I agree with your approach that seed grant need to be given to absolute poor and then micro-credit and social business/enterprise can help. I have spread the word about your fundraiser to my brother in NJ and several others. Hopefully, you will be able to raise $100,000. What I will like to know is that now that you have taken the first step of leaving the job and joining the world of world changers and on way of completing the second step of getting on the ground experience, what is your future path/strategy? How do you plan to change the world's poverty? Pl do let me know if i can be of any assistance in ur pursuits. and
Comment by manilaman on April 28, 2010 at 4:58pm
Congratulations! Not many in the Money World see poor people in the eye - as you do with your ongoing African Experience. Should you wish to have a World View of the Rural Poor, I ask you to take time to visit the Far East - particularly, the Philippines. Perhaps, we could collaborate somehow. Take care. God bless.
Comment by Tadatoshi Takahashi on April 28, 2010 at 11:04pm
Thank you for the post, Fennie.

It's been several years since I read "The End of Poverty" by Jeffery D. Sachs. And I have been leaning more toward microfinance than what he was proposing in the book.

But your post has changed my view with regard to the situation of the very poorest of the poor.
Comment by SRINIVASAN SANTHANAM on April 30, 2010 at 9:00am
nice feeling to go to a village and get a hands on experience of poverty and do micro-finance activities. you have mentioned that among variouis ways of measuring poverty identifying people living at 1$/day. But, the world bank has abandoned the 1$/day criteria and made it 2$/day. Please visit the CGAP site of WB group for more information. In fact, acronym CGAP stood for Consultative Group to Assis the Poorest. Now, it calls itself Consultative Group to Assist the Poor. So, in their view, the poorest will have to be taken care of by the State and not through MF. It is a pity. With this the UN's MDG 1 is also abandoned. People like you should mobilse people's support to stand against psydo poverty measures. Dr S Santhanam, Consultant-Development Finance, Pune, India.
Comment by Kathleen Selvaggio on May 2, 2010 at 6:53am
Thank you for this important post. It is distressing that your experience (and that of others) finds that many development solutions -- even those touted to reach the bottom rungs of those living in poverty -- in reality do not reach the poorest people. As you point out in the case of Josephine, it is female-headed households that are often the poorest, and most vulnerable to very risky actions (prostitution and potential HIV infection, trafficking children, selling off households which might be income-earning). I also wonder if microfinance, even given the limitations your describe, is really a way out of poverty. As colleagues have said "Microfinance leads to microsolutions."
Comment by Solarlife on May 7, 2010 at 1:18pm
Hi, Fennie Wang
Microfinance moves Africa's family entrepreneurs, thanks for the effort in Uganda,
your experience may find a way in our break-away post industrial communities
Where are you now? Do you write from a Cyber-cafe or how do you manange
Internet at your local place in Africa ?


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