From my blog, Wall Street Refugee at http://wallstreetrefugee.wordpress.com
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: http://www.thegatesnyc.com/charity.asp?eveid=235&proid=991
. To learn more about Trickle Up, please visit http://www.trickleup.org
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.