Archive for the ‘Fonkoze’ Category

Lessons from Medicine for Poverty Alleviation

October 31, 2012

This post by Alex Counts was originally published on his blog, where he describes the process of writing a book on Haitian microfinance pioneer Fonkoze.

It has been a few weeks since I have posted on this blog, but I have continued to study and to work inside Fonkoze all along.  Now I feel like I finally have a juicy topic to write about and time to do so.

In response to my post on outcomes and impact (as opposed to inputs) in poverty reduction programs, Meredith Kimbell, a top-notch management consultant in the Washington, DC area whom I have known for years, mentioned the book Better by a physician named Atul Gawande, and in particular a chapter towards the end titled “The Bell Curve.”  I read the entire book, which is basically about how the practice of medicine has been and can be improved (with lessons for other disciplines).  I found that the book had some important lessons for the effort to end poverty through holistic approaches to microfinance such as those employed by Fonkoze
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David Roodman Does His “Due Diligence,” and Gets it Mostly Right

February 16, 2012

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

David Roodman, Senior Fellow at the Center for Global Development, the country’s leading think tank on overseas aid and international development, has written Due Diligence: An Impertinent Inquiry into Microfinance, a remarkable book about microfinance.  It is, quite simply, the best book I have ever read about microfinance among the many I have gone through.  He analyzes the history, track record, recent developments and future of microfinance, and though I do not agree with all of his judgments, I agree with the vast majority of them and admire how he went about deconstructing such a diverse arena of human endeavor.

Most impressive is how he carries the reader through his rigorous thought process.  He repeatedly poses important questions, weighs the evidence, assesses whether there is enough information to make a definitive judgment, presents alternative answers and their implications, admits to a degree of uncertainty, and then does his best to provide an answer – all in plain language.  The hallmarks of his writing are nuance, detail-based distillations of publicly available information, fairness and dispassionate analysis.  If I had to keep one book on my desk for easy access to guide my writings, conversations, analysis and decisions, it would be his.  (Due Diligence is the culmination of research and writing process that played out on his blog, which has evolved to become a leading online source for microfinance information and analysis over the past couple of years.)

Cover of David Roodman's "Due Diligence"

Alex Counts, Grameen Foundation's president and CEO, calls David Roodman's new publication "the best book I have ever read about microfinance."

After some introductory remarks, Roodman sets the modern microfinance movement in a historical context, and does this better than I have ever seen before.  His survey also provides some important lessons for those working to expand and improve microfinance today.

The bulk of the book addresses the question “Does microfinance work?” in distinct ways. Does microfinance reduce poverty, does it improve the control the poor have over their lives regardless of whether it leads them to a poverty-free life and, thirdly, has it become a vibrant new industry that strengthens societies by enhancing ecosystems (in the broadest sense) consistent with long-term socio-economic development?  I admire how he has given equal weight to the three dimensions of “working” – I strongly agree with him that all are important and the latter two (especially the third) have been comparatively neglected by microfinance advocates and critics alike.

Due Diligence deserves to be read by anyone involved in microfinance, including those who volunteer their time or contribute and/or invest their money.  Let me summarize how he answers the main questions he asks, as well as his recommendations, and then distill how I believe someone involved with Grameen Foundation – or any microfinance network or institution – should feel about their past and future involvements, given his judgments and recommendations.

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Progress In Haiti, Two Years Later

January 12, 2012

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

Two years ago today, a massive earthquake devastated Haiti.  Some 250,000 people perished among a population of about 9 million.  Not only did this disaster kill a greater proportion of a nation’s population than any other in history, but it toppled thousands of homes and buildings, destroyed cultural treasures such as the national cathedral and killed dozens of U.N. workers, including the commander of the mission.  A chaotic relief effort and weeks of nonstop media attention followed.

When reporters return to Haiti on this anniversary, expect hand-wringing about bungled aid efforts juxtaposed with heart-warming tales of grassroots groups working effectively, though on a tiny scale.  But those storylines tell only part of the story.

It’s important to remember that 2009 was actually one of Haiti’s best years in decades.  Law and order, even in the worst slums, had become the rule rather than the exception.  Major infrastructure projects were nearing completion.  Despite his flaws, President Rene Preval allowed a vibrant free press.

Since then, positive trends have quietly continued.  Travel times to the central plateau have been cut substantially.  A massive teaching hospital – a joint venture between Zanmi Lasante and the government – is nearing completion.  The cholera epidemic could have been much worse.  A new president emerged from a credible if messy democratic process, and is popular at home and abroad.

Though much post-disaster aid was used unproductively, some of it effectively built up Haitian institutions that predated the earthquake.  One of the most exciting of these local organizations is the country’s leading microfinance institution, Fonkoze (Creole for “shoulder-to-shoulder foundation”).

Fonkoze borrowers like the women above join "solidarity groups" that enable them to support each other.

Fonkoze borrowers like the women above join "solidarity groups" that enable them to support each other.

The earthquake devastated many of Fonkoze’s 50,000 loan clients (and their micro-businesses), as well as its 200,000 depositors and 800 staff.  The headquarters were destroyed and one-quarter of its 41 branches were badly damaged.  With the banking system shut down, within days Fonkoze was running short of cash to pay out remittances.  (Fonkoze’s national network of branches was more extensive than any of the country’s financial institutions, so it was a key player in enabling people to receive money sent from relatives working abroad.)

Did this organization collapse under the weight of the quake and its aftershocks?  Far from it.  In fact, today it is probably stronger than at any time in its history.

Fonkoze did not stand idly by in the hours after the temblor.  When funds began to run dry, a daring airlift of $2 million in cash from Fonkoze’s bank in Miami to 10 locations throughout Haiti – accomplished with the support of the U.S. military and the Multilateral Investment Fund – succeeded in record time and without the loss of a single dollar.  Fonkoze went on to pay out $95 million in remittances during 2010, earning a tiny commission on each transaction.

A few enlightened donors saw the potential of leveraging Fonkoze’s human and physical infrastructure and relationships with tens of thousands of small business owners (mostly women).  Initially it was proposed that the entrepreneurs pre-earthquake loans be forgiven and new ones dispersed, in an effort to quickly jumpstart the rural economy.  Fonkoze’s management had a slightly different idea – one that the American Red Cross, Whole Planet Foundation, Fonkoze USA and others agreed to support.

The plan?  All loan clients would be treated as if they had taken out a catastrophic insurance policy that was weeks away from being launched when the earthquake hit.  This would not only get the clients fresh capital quickly, but it would also teach them to benefits of buying insurance.  Nearly 20,000 micro-businesses were recapitalized in a matter of a few months.

When the micro-insurance program was formally launched in January 2011, clients embraced it, gladly paying 3% of their loan amount as a premium.  When floods hit southern Haiti nine months ago, Fonkoze received a payment from its insurance partners of more than $1 million, enabling it to quickly get 4,000 clients back on their feet without a single dollar of “aid.”

As the international community considers its next steps in supporting Haiti, or in responding to other disasters, I hope that the transition from the “search, rescue, shelter and feed” phase to one focused on strengthening local institutions will be faster.  Defaulting to doing business with “Beltway bandits” must stop.  Organizations like Zanmi Lasante and Fonkoze, which have “sandals on the ground” long before a disaster strikes, can be powerful and cost-effective engines of reconstruction and innovation.

Prof. Yunus Visits Haiti – an Update from Alex Counts

October 16, 2011

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

I am about to leave Haiti after four exciting days, and head to Dubai.  I am here in connection with Professor Muhammad Yunus’s first trip to Haiti.  Highlights abound – it is hard to know where to start.

I arrived a day early to do some interviews related to my book on Fonkoze, the country’s leading microfinance institution (MFI). Prof. Yunus’s first stop was a meeting with Haitian President Michel Martelly, who was inaugurated earlier this year.  By coincidence, the long process of forming a government (i.e., naming all the ministers who serve under him) had just been completed, so Prof. Yunus was able to meet all the new cabinet members just before they were to be introduced to the country.  President Martelly expressed sincere interest in helping create a positive environment for social business – Prof. Yunus’s main passion now – as well as microfinance.

From there, Prof. Yunus went to the first part of a two-day conference on social business.  His opening speech – delivered, as always, without notes – covered the theory of social business, as well as practical examples of how it has worked in Bangladesh, especially his joint ventures with the Danone Group and Veolia.  (He mentioned a study of the nutritional impact of Grameen-Danone, which is coming out in a month and shows that the impact of the program – in which poor women sell nutritious, inexpensive yogurt to other poor mothers and their children – was much greater than even he expected!)

Prof. Muhammad Yunus talks to a group of borrowers involved in Fonkoze's “Ti Kredi” program.

Prof. Muhammad Yunus talks to a group of borrowers involved in Fonkoze's “Ti Kredi” program.

He also talked about how he was afraid that the aid coming to Haiti after the earthquake would be wasted unless it was used to build up independence, rather than greater dependence on charity.  Finally, he told some stories about Grameen Bank and its history, and marveled at how microfinance has grown globally to almost every country, mentioning Fonkoze and its status as the leading MFI there (eliciting spontaneous applause) and celebrating Grameen Foundation’s important role in supporting Fonkoze.

The conference continued through midday Friday.  Anne Hastings, the director of Fonkoze Financial Services (Fonkoze’s for-profit arm), and I were on a panel with Prof. Yunus, where – alongside two Haitian economists – we responded to questions posed by the moderator and the audience.  In response to a question about my upcoming book on Fonkoze, I said that it was critical features for microfinance and social business to rigorously track social-impact outcomes.  In that context, I explained how the Progress out of Poverty Index® was based on Grameen Bank’s 10 Indicators of Poverty and had been incorporated into Fonkoze’s own social-impact monitoring tool.  In response to another question, I said that there were potentially powerful alliances between MFIs and their most successful clients on the one hand, and the social business movement in Haiti on the other.  Anne added some excellent points that built on those made by Prof. Yunus.

On Saturday, we took a field trip together.  The highlight was the first stop – visiting a Fonkoze “Ti Kredi” center of about 50 women who 10 days earlier had just gotten their first loan of $25.  (They are to make their first payments next Wednesday.)  After long-time Fonkoze employee Gautier Dieudonne introduced him, Prof. Yunus spoke to the group about Grameen Bank, Bangladesh, microfinance, mangos and much else, and asked the women a lot of questions. There was much laughter during some of the lighthearted exchanges, while serious topics were also explored, related to how microfinance can go off course at the village level and nationally – and what can be done about it.  He asked how much local moneylenders charge – the answer was 20% per month – and the women praised Fonkoze for offering a much lower rate.

After the center meeting we had a nice afternoon with representatives from Zanmi Lasante/Partners in Health, the organizations founded by Paul Farmer.

I think the most poignant moment came when Prof. Yunus asked whether the women thought they were going to be able to improve their lives with such small loans.  An older woman named Clenie Brisfor stood up and said, “It is not easy, but what else are we going to do?  We can make progress!  Even if we have only 1 gourd [about 5 cents], we can buy a packet of clean water and re-sell it for a small profit, and start the process of changing our lives.  So 1,000 gourdes [$25] is a lot!”

Fonkoze borrower Clenie Brisfor tells Prof. Yunus that, with access to small loans through Fonkoze, "We can make progress!"

Fonkoze borrower Clenie Brisfor tells Prof. Yunus that, with access to small loans through Fonkoze, "We can make progress!"

I wonder how many Americans understand what $25 – or even 5 cents – can do to change someone’s life, as well as their sense of what is possible? As we’ve seen again and again, access to financial services can provide the poor with an opportunity to empower themselves, live up to their potential and realize the human dignity that we all deserve.

Working Together to Improve the Microfinance Sector

September 8, 2011

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

One of the most familiar critiques of the social (or not-for-profit) sector by those outside of it – those in business or academia, for example – is that we are a very fragmented community of organizations that don’t talk to each other, much less collaborate as often as we should.  This results in duplication of effort and capacity, as well as unnecessary and unhealthy competition.  While often exaggerated, this criticism has some merit, and the socially-motivated international microfinance networks (as well as the microfinance sector generally) are hardly immune.  (We have our own criticisms of business and academia, but we’ll leave those for another day.)

For microfinance, 2010 was a year of upheaval and taking stock.  When it began, crises of various origins were still being felt in Morocco, Pakistan and Nicaragua.  Twelve days into the year, a massive earthquake hit Haiti, negatively affecting many microfinance institutions (MFIs) there.  Fortunately, Haitian MFIs, including Grameen Foundation’s long-time partner Fonkoze, have bounced back faster than anyone expected, as I have written in a separate blog.

A few months later, a controversial initial public offering by SKS Microfinance, a leading MFI in India, led to a backlash among the media, political leaders and civil society in general – especially in the Indian state of Andhra Pradesh.  (In the early days of that crisis I debated the founder of SKS, which was quite interesting to say the least!) As the year ended, the Bangladeshi government began to harshly criticize and harass Grameen Bank, the country’s flagship MFI, which led to violence against the bank’s employees and, ultimately, to the forced and premature retirement of its founder, microfinance pioneer Professor Muhammad Yunus.  (For more on the Bangladesh crisis, click here.)

Debate moderator Niki Armacost, co-founder of Arc Finance, with Alex Counts, at his October 2010 debate with Vikram Akula, chair and founder of SKS, at the Asia Society.

Debate moderator Niki Armacost, co-founder of Arc Finance, with Alex Counts, at his October 2010 debate with Vikram Akula, chair and founder of SKS, at the Asia Society.

This was a far cry from the celebrations of microfinance in 2005, the U.N.’s “International Year of Microcredit,” and 2006, when Grameen Bank and its founder, Prof. Yunus, unexpectedly – and in my mind deservedly – shared the Nobel Peace Prize.  The fact that microfinance in most countries (and even in most states in India, the world’s largest market for microfinance) remained largely unaffected, and in fact continued to grow and contribute to poverty reduction, was rarely noted in the media or even at industry conferences.  There was a lot of soul-searching and hand-wringing, and perhaps a bit of panic.

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Examining the Potential of Microfinance through a Haitian MFI

July 8, 2011

Alex Counts is president, CEO and founder of Grameen Foundation, and author of several books, including Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

Grameen Foundation has been working for 14 years to advance a certain approach to microfinance – one that is rooted in the experiences, achievements and philosophy of Grameen Bank.  Though we do not promote any particular methodology (i.e., a certain means of providing financial or human development services to the poor), we do focus on and try to advance a set of principles and standards.  Methodologies are very context-specific, while principles endure and standards are universal.  (We approach our technology-for-development work similarly, but that is beyond the scope of this short post.)

Some of the principles are not particularly controversial or microfinance-specific – things like a commitment to transparency, innovation, being client-centered, investing in the human capital of employees, promoting gender equality and so on.  Others are specific to microfinance, such as bundling financial and human development services wherever possible, measuring and managing social performance on par with financial performance, mobilizing loan capital locally (through savings or local currency borrowings), and local (or indigenous) ownership and governance.  Among the latter, there are some thoughtful people in our movement (or industry, as some prefer to call it) who would disagree with the wisdom of these principles. I say that to emphasize that these are not meaningless slogans that everyone agrees on.

Talking about principles and standards, and about our work to champion innovation that spreads them throughout the microfinance sector, can seem abstract at times, even though we are clearer than ever that this is how Grameen Foundation can have the greatest impact.  Sometimes we find it helpful to focus on individual organizations that embody these principles and meet these standards, however imperfectly, to deepen our own understanding of how microfinance can evolve, and also further the understanding of people who support our organization in various ways.  With microfinance coming under increasing scrutiny by regulators, the media and politicians, holding up pace-setting institutions is an important part of educating stakeholders about what microfinance can be, and arguably should be.

During his recent trip to Haiti, Alex met extensively with the borrowers and staff of Fonkoze, including founder Father Joseph Philippe (left).

During his recent trip to Haiti, Alex met extensively with the borrowers and staff of Fonkoze, including founder Father Joseph Philippe (left).

With my second sabbatical approaching (at Grameen Foundation we get one every seven years), I decided to pick one such organization and write a book about it for a general audience.  It was not that hard to decide which one – I chose Fonkoze, Haiti’s largest MFI.  It is a dynamic, innovative, risk-taking organization led by fascinating people – mostly Haitians and Haitian-Americans, but also a few Americans and Europeans – in a country that has been in the news in recently (for all the wrong reasons, unfortunately).  It has also been a beneficiary of Grameen Foundation’s products and services for more than a decade.

I began my sabbatical on June 16 and a few days later was down in Haiti – my fifth and longest trip yet to that sad and surprising country.  Shortly before going, I began a blog that would chronicle the process of researching and writing the book, and invited people around the world to participate in the creative process.  I have been posting short written reflections, photos and videos (most under two minutes) ever since.

My goals for this project are aggressive. I want it to be a New York Times best-seller!  (Why the heck not?)  I also want it to generate significant new partners and funders for Grameen Foundation, Fonkoze and organizations that operate along similar lines.  (All the royalties from the book will go to Grameen Foundation.)  And I want it to change the narrative in the mainstream media from simplistic answers to the “what’s wrong with microfinance” question to more interesting analyses of how it is evolving in some places to be an even more potent poverty-fighting strategy than earlier models.  I plan to have the book in stores by the third anniversary of the Haiti earthquake (January 12, 2013).

Ambitious?  Yes!  But with new “friends” of this project coming forward every day – consider yourself invited! – it just might be achievable.

New Blog — and Book — on Microfinance in Haiti, by Alex Counts

June 22, 2011

Grameen Foundation founder, President and CEO Alex Counts is in the beginning phase of working on a new book on microfinance in Haiti, focusing in particular on the country’s best-known microfinance institution, Fonkoze.

Alex is in Haiti now, conducting research and working closely with Fonkoze staff and meeting with borrowers to find out more about what’s working, what’s not, and the organization’s overall impact on the poor. You can follow along with Alex’s progress at his blog, where he is posting updates on his activities, including videos and drafts from his book.  As Alex says, “I hope lots of people will take interest in this project, check out the postings and comment on them, so I can improve my thinking and writing, and even repost/circulate what I post to draw in others.”

Alex Counts (right) with Fonkoze borrowers in Haiti.

Alex Counts (right) with Fonkoze borrowers in Haiti.

All proceeds from the book, which Alex expects to publish in early 2013, will benefit Grameen Foundation and our efforts to empower the poor through access to small loans, valuable information and unique business opportunities.  Alex has also set up a Facebook page for the book, which we encourage you to “like” and follow!