As I’m waiting to board my plane at Dar es Salaam airport I contemplate my last day at work.
What do you call it when you receive a warm welcome, get support throughout your assignment and appreciation in the end? In his farewell speech earlier today CEO Ed Greenwood talked about the FINCA family. And true, it feels like I have joined a family. I have gained many brothers and sisters in Tanzania (although age-wise some could be my kids).
Continue reading Farewell from FINCA Microfinance Bank
FINCA’s loan officers apparently get a lot of complaints about high perceived interest rates in Tanzania. Their credits starts at 2.5% interest per month, and depend on loan amount and borrower risk. One of FINCA’s competitors advertises loans with a yearly interest rate of 25%. Short of discussing usury and setting aside culturally influenced notions that an interest should not be paid but rather received (the Swiss national bank is still imposing negative interest rates on large amounts at the time of writing) we may just ask ourselves: What is better for the client? Continue reading The Complaints about High Interest Rates
Half of my assignment with FINCA Microfinance Bank Tanzania has almost passed – time to write about what I’m actually doing, as the objective was not entirely clear at the beginning.
FINCA Tanzania is embracing a methodology to improve processes called Six Sigma. We currently use it to analyze account opening and other back-office processes. After visiting two branches in Dar es Salaam it became clear that we should be focusing on Continue reading I’m Working in Six Sigma – Six what?
I grew up with a piggy bank. My generation was told by parents that it is important to save “for bad times”. When bad times never came and I grew up I started to get a different idea of saving and the value of money. Yet I never considered credit except for buying a home. This one belief is hard to change: “Don’t spend what you don’t have.”
Yet the business model of microfinance institutions (MFIs) is based on the wish Continue reading Why Do They Spend What They Don’t Have?
Let me make a proper introduction first. This is Tanzanian style. Always ask “How are you?” first, follow suite and get to the point only after having heard “Welcome!” If you can’t wait to read how my day was, kindly jump to the bottom.
FINCA stands for the Foundation for International Community Assistance. John Hatch conceived “Village Banking” in 1984. His plan enabled poor Bolivian farmers with no collateral to access loans through a collective guarantee. In 1985 Hatch established FINCA. Continue reading How was my First Day with FINCA Tanzania?
Old people in rural Tanzania face a difficult life. While health and strength deteriorate they can not hope to be supported by one of their many children, who are either unwilling or unable to help or have been consumed by AIDS.
In addition to being less and less able to provide an income they sometimes become primary caretakers of their orphaned grandchildren. Continue reading Salt, Soap and Shoes for Tanzania’s Elders – A Success Story
TEHIP was a Tanzanian initiative to improve medical service in some of the poorest areas of the country.
Some 2 $ per person were set aside to tackle the largest health burdens in the community. Initially it was not even known what would help people the most. Then a survey was conducted. Malaria turned out to be the most neglected burden. It accounted for 30% of Continue reading A Fabulously Successful Health Project in Tanzania
FINCA is Credits Suisse’s microfinance partner. It’s considered to be one of the most influential microfinance organizations in the world by Time Magazine. FINCA celebrated its 30-year anniversary in October 2014. Country CEOs, guests and partners joined global CEO Rupert Scofield in London. He summarized the last 30 years with British humour
“We came, we made a lot of loans and we got most of them back”
- Operational in 22 countries, Nigeria coming up next
- 1.8 million clients being served
- $65 million raised in local currency notes through partner Credit Suisse
- Daily experience of changing lives through 200-dollar loans
Microfinance promises a lot to many people. It depends on which promise we’re looking at: fight poverty, generate profits, provide financial services to the poorest, empower women, support entrepreneurs and create jobs. Each has its own merits and each only provides a sliver of the “truth”.
Take “fight poverty”. Only 50% of the loans are productive to start with. The other half don’t generate revenues and are used to buy food, pay school fees or medical bills. Obviously a non-productive loan is not considered a success in the narrow sense. But looking at the broader picture it might make sense to provide financial means to smoothen the income of the poor. And from an entirely different angle it is somewhat surprising that the poor repay their debts more easily than they save money beforehand.
Then there is the question of whom you ask: practitioners tend to have a more positive view based on anecdotes while quantitative researchers have a hard time proving positive impact and usually have to slice and dice the data to find impact, e.g. among rural female users of productive loans.
The existence of strong competition, market entry of traditional banks, new technologies and favorable regulatory environment all point to a potential success story, where efficient companies produce profits and operate in a sustainable manner.
To summarize: Microfinance services are helping, just not in the way microfinance’s foundational belief system says it does. If few clients actually use microfinance services in the way the original designers of microfinance programs expected them to, that doesn’t mean it is a failure. Microfinance does address the problem of income unpredictability. A stable, reliable source of credit, combined with savings, allows clients to meet their spending needs even as income ebbs and flows.
Hat tip to jaysupetran from Access Advisory for an in depth commentary oft the situation: Microfinance reality check.
(photo by Jovan J on Flickr)