When mentioning micro loans in the development field, it is assumed you are talking about all small loans given to those in poverty. Although the majority of microfinance institutions (MFIs) prescribes to similar dogmas and offers comparable loan programs to clients, there is a lot of variety and specificity in the field. Organizations like Village Enterprise Fund offer intensive training programs to help develop the skills needed in order to be successful as an entrepreneur before any monetary assistance is given (grants). Other organizations like the Grameen Foundation, offer minimal training and focus primarily on giving loans. A large portion of MFIs work with their clients in groups, like those utilizing the ASCA model. These organizations focus on utilizing the power of social consciousness and peer pressure to encourage high loan repayment and reinforce messaging. Other organizations, like Kiva, allow lenders to access clients on an individual basis through client profiles, creating a personal connection from donors in the state to those creating business and moving out of poverty around the world. There are MFIs that give zero interest loans and other MFIs that charge interest rates above market rate for access to credit, like Compartamos in Mexico, in order to be more profitable. These differences create a diverse field with a multitude of programs, each with their own goals and therefore different impact implications.

Most importantly, there are significant discrepancies concerning the definition of poverty and/or extreme poverty. There is a definition for both poverty concepts by the World Bank, but even this precise economic definition is confusing. It dictates that individuals living on less than USD 1.25 a day, adjusted to PPP, are in extreme poverty. But the majority of the extreme poor are farmers, meaning that their income is based on seasonal harvests. If they spend all that money in the first few months of the new season, then they might be living on nothing until the next crop comes in. Working under this assumption brings about a completely different approach to poverty and poverty reduction than based off the idea of a daily income, however low it might be. Without specifications concerning target clients too many generalizations can be made in the field that can lead to mission creep and inefficient programs due to an indefinable goal.

So let’s get specific. Nuru has a loan niche. We are not an MFI, but we do offer training, savings and loans to those in extreme poverty. Our definitions are as follows:

• We work specifically to fight extreme poverty. The extreme poor consist of people living on less than USD 1.25 (adjusted for PPP) a day, acknowledging that most of these individuals are farmers receiving windfall income seasonally.
• We work in remote, rural areas, so our focus is specifically on these farmers. This means are programs have a definable target population and we are able to then tailor our programs to meet the specific needs of this population.
• We focus on training first. Our training is given by local leaders that have come to work with Nuru and are able to deliver the training in the local language and relate the new concepts to ideas and stories the community is familiar with. Our training envelops both savings and loan topics.
• We focus on savings second. We believe that if you can’t manage the money you already have, than you will most likely struggle to manage more. Our goal is to provide the knowledge and resources so that individuals can raise themselves to the point where they can whether economic shocks without liquidating productive assets.  If they understand the value of saving before acknowledging the potential of a loan, than they will be able to provide for their family consistently and prepare for their future as a foundation, before utilizing loans to diversify their income.
• We charge interest on our loans. Our interest rates are below market rate because we understand we are working with the extreme poor and we don’t want to take advantage of this. However, we are firmly against handouts and don’t believe in free money. We aim to prepare our clients for semi-formal and formal financial institutions as they continue to move themselves out of poverty and interest is a part of that world.
• And most importantly, we are unwilling to raise our loan maximum on the basis of making profits. We are dedicated to helping the extreme poor and focusing our efforts there. If we offer larger loans in order to make more profit, than we are taking resources away from those who need the most attention as they start accessing financial services.

Nuru is different. We are able to define our unwavering goal, our target population, our loan cap and why our programs are on the way to making impact on eradicating extreme poverty.

Posted from Nyanza, Kenya.

I have two living grandparents, my family lives in New Hampshire, and I am a United States citizen; we are all freaking out about the U.S. debt crisis. It is a real and scary part of our lives right now. The U.S. government has provided its citizens with some level of financial security through social security, welfare and federal student loan programs. In light of the current situation, many people are worried that security might be fleeting. But imagine if you never had security and then things began to get worse? What if you weren’t ever able to depend on your government because its abundant corruption was making your life harder instead of giving you support? The U.S. debt crisis isn’t just the crisis of one country; it’s affecting the international financial markets, countries from Albania to Zambia, and one acre farmers in Kuria, Kenya.

Life before the debt crisis in Kuria – and before Nuru – was all about sustenance: scraping together enough bags of maize to feed your family for one more season.  As if this wasn’t already hard enough: the debt crisis and East African famine have worsened the situation for Nuru’s one acre farmers.

Because the U.S. Dollar is the international reserve currency, when the dollar drops so do other currencies. The Kenyan shilling hit a new low this month. In response the deepening debt crisis in the U.S. and Europe, Kenya has cut its growth forecast for horticulture earnings, further threatening a weakening currency. That means food price hikes, not to mention the ever-increasing gas prices that raise transportation costs of every commodity that finds its way through the back roads to rural Kenya. A few months ago in Kuria, a bunch of three onions used to cost 20 shillings (approximately 25 cents USD). Currently in Kuria, a single onion costs up to 30 Kenyan shillings (approximately 37.5 cents USD). Maize prices are increasing because of the drought; typically this would excited our one acre farmers since they would be able to get more for their crops, but because the drought is here in Kuria, Nuru’s one acre farmers don’t have as many (if any) bags of maize to sell as they did last season. Instead, they must keep their bags of maize to feed their families.

The Community Economic Development program at Nuru focuses on self-sufficiency and money management. There is a lesson to learn here for the people of Kuria – which is a lesson that should be the foundation of larger economies: we don’t give loans without building a deep understanding of when you should use a loan and when you should depend on savings. Our Msingi wa KAPESA program teaches that even if your income is tight, there is always room to put away a few shillings every month in preparation for an unpredictable future. The age old financial mantra of “you shouldn’t spend more than you have” is growing roots in rural Kenya. We can’t prevent a drought, but we can prepare for what we can’t prevent. While there may not be accessible welfare programs for the farmers to worry about losing, they are learning practical skills to help them prepare for hardships. Their life experience has taught them that when you can’t depend on your government, you have to depend on yourself. Even for the extreme poor, when there is a way to prepare, there is hope.

If Nuru’s Community Economic Development (CED) Program isn’t an MFI, doesn’t expect everyone to be an entrepreneur, and has a relatively low cap for its maximum loan amount…what exactly is the program’s “big idea”?

We recently held an International Summit at Nuru International so that all teams could collaborate and work through the DIF (Design Iteration Format). This tool helped us simplify each of Nuru’s five program models into scalable, sustainable units using common language. The mission of the CED program has been the same since the beginning, but it was time to “take out our ruler” and see if our program’s mission measured up to the organization’s goal of scalability and sustainability. Through this process we were able to better define our big idea and mission and prune away some of the questions hanging at the edges of our model, such as “Would we be willing to raise the cap? Was it necessary to put so much emphasis on training?” etc.

So what is the “big idea” of CED that we are so passionate about? We want to help “the rural extreme poor access Nuru CED training and basic financial services as a pathway to semi-formal and formal financial markets.” By doing this we will “enable rural households in extreme poverty to cope with economic shock and build on income opportunities.” But how does that translate into actions?

We are reaching a gap population. According to the NGO community, there are a lot of “gap” populations. The CED program’s definition of the gap population we reach is “rural extreme poor who are without access to any financial services or the knowledge and resources to use them to their benefit; individuals who live off of sustenance farming and are disastrously affected by economic shocks.” Reaching the extreme poor means we are not targeting business men or microenterprise; we are targeting the one acre farmer who hasn’t learned how to save or prepare for the future against unstable weather conditions that affect crops, “stupid” illnesses like diarrhea and malaria that are a common cause of death here and even against illiteracy in the next generation by preparing ahead of time to pay for school fees.  We are willing to spend time developing programs that make an impact instead of focusing on portfolio development because our mission is our top priority; because we see people, not profits.

This also means we value having a skill set in order to make the most of an opportunity. We’ve designed our programs to focus heavily on training, and then the programs advance from habit forming practices to initial use of basic financial services. Our programs work in tiers that slowly transition members to more intensive savings and loan services as they apply money management skills in their daily lives. We start with Msingi wa KAPESA which is six months of savings training and minimal savings requirements focused on forming the habit of regular saving. Members can continue on and are offered small capital loans that provide a chance to learn how to pay back a loan without stretching income too far. If they choose to advance further, they can access our KAPESA Core program which increases both the amount and frequency members save and offers three month of more intensive savings and loans training. After the three months, they are able to access slightly larger loans focused on stimulating income generating activities; these include small businesses, as well as activities like renting a plough ox in order to diversify and further stabilize income. Finally, members can participate in our JDF program which expects members to continue saving outside of a group while accessing the highest capital loans Nuru offers. After further learning how to diversify income opportunities and use loans effectively, we hope that the JDF program will be able to transition members to semi-formal and formal financial markets where they can continue raising their families out of poverty with the money management skills to help prevent them from slipping back into extreme poverty.

We can’t do everything, nor do we want to. Our mission is to help the extreme poor raise themselves from a place where economic shocks put them at risk of death. We go deeply with what we do, rather than going than wide and losing our focus. We prefer to utilize the services and projects already being offered around the world, rather than offer the same programs and neglect the gap population that many have deemed too risky and unable to save. We aren’t just claiming to do something different: we are. Other missions are also necessary; for us, we have chosen to extend opportunities and resources to reach those in extreme rural poverty.

The CED program has had a busy long rain season. I mentioned when I first came on how excited I was to be here in such a wonderful season of growth, and I didn’t even understand how true that really was. We’ve launched four new initiatives, have added close to 530 new savers and will hire 10 new staff members in August as we prepare to scale. People are being to understanding the value and importance of savings and working towards taking wise loans. Continue Reading…

Posted from Nyanza, Kenya.

The news is never lacking in articles and commentary on the next popular development model. There are a plethora of models out and about these days, but only a few ever reach the lime light. The focus for the past few years has been on microfinance and in particular, funding microenterprise through small loans. There’s endless chatter about the small loan revolution, about how cash resources that were previously unavailable can turn everyone into an entrepreneur. But what about the models that are not in the lime light at the moment. What about models with a spin on microfinance or a different solution altogether? And what about all the questions that no one addresses? Is microfinance the silver bullet for the long term, just part of the puzzle, or a short term answer masquerading as a long term solution? What’s the real goal and will that fix the brokenness in this world? Continue Reading…

Posted from Nyanza, Kenya.