This week should be the last week of catching up from Summer.  The first meeting of the week I led the class in a discussion of some basic micro finance theory, and after each section we went through the implications for La Ceiba, what we’re doing right and what we need to do better.  A few of the key points:

Timeliness!!  We had volunteers down with our customer base this summer talking about the program and having the women start their business plans and groups despite the fact that we’re not giving out loans until January!  There are some MFIs that process loans within a week, granted those are individual loans, and while that is quite a ways away if we ever get there we also impose extremely high costs on our customers by demanding time so far in advance.  Part of the dynamic of working with people in such extreme conditions is that nothing is certain; investing in the future with the -very- scarce resources of today is risky and not taken lightly.  Requiring so much work so far up front actually may start an adverse selection process - La Ceiba may be getting customers that are slightly worse because better customers may find another way.  This particular issue is minimized because of our previous ties with the community through Students Helping Honduras, but it is something we need to make sure we correct for as we look to the future and past the first round of loans.

Market driven targeting is best.  Coming from an economics background this makes sense, but everyone involved in this project is invested in the human aspect as well.  We want to make sure we reach those in the most need, and a few ways to do this is by lowering costs in using our services.  I don’t mean the obvious costs of application fees or interest rates, but rather the cost of taking a bus to get to a meeting and the time it takes to fill out paperwork.  This can include strategies like locating our organization in an area with many people in need so that transportation costs and time are cut down. 

Keeping with the idea of reducing these kinds of cost, we are looking into our business plan requirements.  This summer Dr. Humphrey worked on a business plan checklist, an extensive list of questions and point that needed to be addressed in each woman’s business plan.  While it is important to have some sort of basic business plan to prove the customers have considered what they are doing with the loan ahead of time, understand what they’re getting into, and have a basic idea of what will be required to succeed we have to face facts.  Not only is this detailed paperwork extra time required from each customer, but in most instances some of the loan is used for other purposes than strictly investment in the business.  A large part of what I love about La Ceiba is that we are there to help provide an opportunity for people to help themselves, we simply try to level the playing field some and see what happens.  While the loan may not all go to the stated purpose it goes towards what these people need.  It is a -loan-, something that is very clear to these women, but who is in a better position to know what they need better than the borrowers themselves?

And finally, the line that scares me: “An MFI is closely associated with the charity work of the parent NGO…increases the risk of defaults.”  There is no denying that we are currently very associated with SHH in the communities in which we’re working.  This has provided the necessary trust, willingness for cooperation, and patience from our customers.  However as our Fall long-term volunteer leaves we need to make sure she brings several messages with her including that we are partners with SHH, but we are not Riders download a charity.  Defaults are not tolerated and will have severe consequences.  A large part of having a low to non-existent default rate is doing preventative work including coming in with a strong reputation and having frequent interactions between customers and a loan officer.  This is especially important going into the first round of loans because if we do have any defaults then it becomes something that has been done and is doable, creating a much harder situation where defaulting becomes contagious. 

This week I also got in contact with my high school mentor, a woman who has worked in the non-profit arena for years and specifically development and funding.  She now owns her own non-profit consulting firm (I don’t know if we’re allowed to name companies on this yet, so I’m not…).  I will bring it up at the next meeting, but my hope is that we can put together the non-profit side and have her look over everything and make suggestions.  Naturally we can research and put together a Board of Directors and Advisers and departments and missions and visions, but having someone with her experience look over it and give open critique would help to ensure that La Ceiba has the ability to thrive in the long-run. 

And finally, I got the paperwork required to file for our 501c3 status.  One student put in a lot of time this summer collecting these resources and verifying with the IRS about the specifics of filling them out.  Unfortunately she is unable to dedicate enough time to this project to be a leader in developing La Ceiba, but she passed along her information so we can start the ball rolling immediately on that process.  I believe that was the last bit of outstanding work from the summer and we are now all caught up and ready to complete our progress reports for next week.

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This past week has been fairly productive. The undergraduate research grant is almost done, and I’ve gotten a lot of the research done for the progress report we’re all turning in next week. I’ve been working on researching savings plans. It’s been kind of a bummer because I’d been hoping we’d be able to help the women save, but right now that doesn’t seem to be particularly feasible, and it’s debatable if it’s even a good idea in the long run. There are  a lot of regulations to contend with. We’ve briefly discussed helping them save through  the formal banking system themselves, but we’ll have to see if there’s a way to do that given the lack of proper identification and the concerns about bank fees etc…

I’m glad that the undergraduate research grant came together well. I think it should serve the required purpose. Tomorrow I’ll have to hang out in front of the department chair’s office to get his signature for the form, but then we can hand it in. Now I’ll have to get going on a couple of the other grants that we want to submit. I’m also looking forward to meeting with the administration to go over some of our plans for La Ceiba and the $2 Challenge. I really hope they’re receptive. I can’t imagine why they wouldn’t be though. They would benefit from the positive publicity, not to mention that they’d only have to participate in the most limited way since we’d be organizing and running most of it. I’m a little worried now that the president’s office denied to meet with us and handed our meeting off to another member of the administrative staff, but at least it’s the person who’s in charge of finances so they’ll be able to talk with us about numbers and the like. Wish us luck!

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Here are most of the statements which we came up with during our meeting.  Keep in mind what we’ve read in the social entrepreneur book, this is a statement that should summarize the -why- of our organization.  Why are you putting in your time every week, what brings you to the 8am class and takes your time on the weekends, what is our goal?  Now try to fit that on a t-shirt.  Please give your input of your favorite parts by commenting on this entry.

~Erin

La Ceiba aims to facilitate long term individual and economic growth in its Honduran partner-communities through holistic and client-driven program that provides access to essential financial and social resources, empowering the impoverished to realize their innate potential and capitalize on unique opportunities for advancement.

By partnering with Honduran communities, La Ceiba will offer a feasible, hopeful and client-driven escape from poverty.  In particular, micofinance loans will allow individuals to increase their incomes and hence gain access to greater purchasing power in society, power that is ultimately needed in order to acquire a better standard of living.

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La Cieba is partnering with Honduran communities by

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primarily granting micro finance loans to empower individuals to

increase their standard of living.

To create a partnership with Honduran communities in which we increase income in order to allow themselves to increase their standard of living and over all well being.

La Ceiba’s mission is to establish partnerships with struggling Honduran communities, creating opportunities for increasing individual and community income through microfinance loans and other projects. La Ceiba aims to aid these communities in gaining access to the credit and resources necessary to fufill their goals - and our ultimate goal of eliminating the indignity of poverty through economic development.

Partnering with Honduran communities to create sustainable economic growth and personal success by providing appropriate financial, social, and educational opportunities.

To provide Honduran communities with opportunities for self-advancement through a client-driven, holistic approach to economic development.

To give those in Honduran communities economic and self advancement opportunities through a holistic partnership.

To restore dignity and provide more equal opportunities by encouraging long term economic development to Honduran communities.

I recently began to tackle the question: How do can we measure the success/impact of a microfinance.  The only reocurring answer I have come across is that a standard measure does not exist yet!  That is not to say that measures do not exist though.  Larger microfinance organizations plaster statistics of loan repayment rates, the average size of loans, the ratio of operation costs to how many loans are distributed etc. While certainly important pieces of information, do high repayment rates indicate progress or status quo?  How are these people repaying the loans–via other loans or business sucesses?

Academia has also tackled this problem of how to measure the success of MFIs.  Some suggest the most simplistic approach; that is, has an individuals income increased?  Others suggest a more holistic approach, involving financial capital, human capital and social capital.  A few even go as far to question if MFIs have been successful at all.  While microfinance may be considered a breakthrough in the fight against poverty, where is the evidence that poverty has decreased?

The research in this area is undeveloped and convoluted, but all the more reason for us to make sure we develop a good measure so we can contribute to the larger research of MFIs.The Basketball Diaries dvd

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Our business plan does not look the same. This past spring, policies were researched, formulated, articulated, and nicely worded within the clean, precise confines of the classroom. Then Megan and Rachel got on the ground. Some of those policies simply did not meet the needs of our customers. They desired a revision.

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And, if we wanted to succeed, it was our responsibility, regardless of the amount of time and effort sunk into their original formulation, to re-frame certain policies. It is worth reiterating that our objective is to supply a financial service that our customers find valuable. At the end of the day it is our customers who are in control. Their willingness to participate in our programs will determine our success. Indeed, this loss of control is part of the educational experience. This class is meant to bridge the gap between theory and practice – bridge the gap between the abstract customers of the classroom and actual customers. Like our SHH IAP Initiative, La Ceiba will be a success. However, it may not unfold and/or resemble our original plan. Yet, that is life in general.