Microfinance is growing in popularity both among donors and the aid world. If you’re uncertain about how microfinance works or what are its strengths and weaknesses, see my post What is Microfinance?
Before you donate, use these four questions to help you determine whether the charity is following best practices. These questions and all quotes are based upon CGAP‘s Good Practice Guidelines for Funders of Microfinance , which is well worth reading if you’re serious about funding microfinance programs.
Question # 1: What alternatives to loans are also available?
Microloans are not always the best choice, does the charity provide other financial services such as savings accounts or insurance policies? Savings accounts and insurance policies provide a safety net during the bad times and can build value over time. Another plus is that savings accounts pay interest rather than charging…
Posted on December 29, 2009 at 11:43 am
While most donors might not be familiar with the term Microfinance, they probably use a type of microfinance called – credit cards. Perhaps the biggest difference between credit cards and microfinance in developing countries is that credit cards are a rolling form of credit, whereas microloans have to be applied for individually each time they’re needed.
The realities of microfinance
There’s a lot of hype about the success and impact of microfinance, however much of it is not backed up with research or data – see GiveWell’s post. To see through this hype and evaluate the potential impact and problems of microfinance just think back to a couple of years ago when credit cards/microfinance were readily accessible. What was the impact?
Posted on December 28, 2009 at 9:40 am
In remembrance of the five year anniversary of the Southeast Asia Tsunami I am posting an article I wrote soon after arriving in Thailand to help with the recovery efforts.
It has been 100 days since the tsunami. It’s difficult to believe, it seems as though it just happened yesterday. We marked the occasion with our supervisor and volunteers at the big 100 day ceremony at Khao Lak. In Thai culture 100 days after a person’s death is a time for paying tribute and making merit. Similar ceremonies are being held throughout all six provinces struck by the tsunami.
Posted on December 26, 2009 at 10:17 am
What’s the worst present you ever received? A crazy colored sweater from your aunt Martha, questionable cookies from a neighbor, a tacky decoration from a coworker. We’ve all received those types of gifts, but have we given them as well?
The gift that doesn’t fit
We’ve all received that sweater, shirt, or tie that just doesn’t work. It’s too big, too small, too tight, too wide, or too something else that means we’ll never wear it.
From my own childhood it was the year that all of the cousins received little knit hats from our grandmother. They were so small that nobody could actually put them on, they would only fit on teddybears. Reflecting back they were probably baby hats that my grandma got on sale. But at that age few of us still had teddybears and none of us had babies, so the gifts were useless.
Posted on December 22, 2009 at 11:51 am
Interesting articles and post from the past week
Posted on December 20, 2009 at 4:15 am
During dinner with my brother last weekend our conversation turned to microfinance and the fact that it’s not living up to it’s original hype. In fact, rather than being a panacea to all problems, people receiving microloans face many of the same problems we face with credit cards. High interest rates, using one card to pay off another, using borrowed money to pay for things that are not actually necessities. It is starting to appear that it may be better to offer other financial services such as savings accounts and insurance instead of, or in conjunction with, loans. For more on this see David Roodman’s Blog, GiveWell’s series on microfinance, and the Good Practice Guidelines for Funders of Microfinance
My brother, a regular donor to local and international charities, is like so many other donors. He wants to ensure that his donation does the…
Posted on December 17, 2009 at 1:43 pm
I am also critical of this article. Given his audience Kristof could have provided practical advice to donors on how to see past aid agency advertising to make wise funding decisions. Instead his only advice to donors is in the final paragraph (added on later?) where he encourages them to develop their own sponsorship programs:
“…if you’re trekking in the Himalayas, come back not with stories of impoverished villages but rather ones about a particular 12-year-old girl who, if she received just $10 a month, could stay in school. Come back with photos of her—or, better, video that you put on a blog or Web site. Make people feel lucky that they have the opportunity to assist her, so that
Posted on December 15, 2009 at 11:08 am
Interesting posts and news articles from the past week
Posted on December 14, 2009 at 8:43 am
I’ve blogged on orphanages quite a bit, but it’s worth revisiting one more time with the recent articles in both the BBC and New York Times.
According to an article in the BBC:
“At least four out of five children in orphanages around the world have a living parent, a leading charity says.”
According to the article in the New York Times:
Experts and child advocates maintain that orphanages are expensive and often harm children’s development by separating them from their families. Most of the children living in institutions around the world have a surviving parent or close relative, and they most commonly entered orphanages because of poverty, according to new reports by Unicef and Save the Children.
In addition to the fact that most children in orphanages having living parents…
Posted on December 9, 2009 at 10:26 am
Laura Freschi from AidWatch sent me a great article over the weekend, Why Measure: Nonprofits use metrics to show that they Are efficient. But what if donors don’t care? from Stanford Social Innovation. This report discusses the findings a research project to determine which performance measurement data would be most meaningful to donors.
No Rewards Yet for High-Performing Nonprofits
They were surprised to find that not only were high-performing nonprofits not especially attractive to funders, but in fact:
“Only four of the 22 interviewees were strongly interested in getting better data on the performance of nonprofit organizations. Much to our surprise, the rest expressed skepticism – or even outright disapproval of the concept.”
Posted on December 7, 2009 at 4:49 pm