Microfinance... and the nine lives of a t-shirt
Idehen Aruede, WG'06
Issue date: 10/3/05 Section: News
This past summer I decided to do something really different. I (nervously!) accepted an internship opportunity to work in microfinance in Africa. The plan was to spend a month each in Zambia and Malawi and, honestly, at the time I wasn't even certain I could find them on a map! In retrospect, my trepidation was unnecessary and based mostly on a natural fear of the unknown. However, since uncertainty should never be an excuse for inaction, I jumped right in!
My employer was the Foundation for International Community Assistance (FINCA) based in Washington, DC. FINCA gives loans, at market rates of interest, to low-income entrepreneurs in 23 countries across Africa, Latin America, and the former Soviet republics with the lofty goal of stimulating private sector productivity and eliminating poverty. It is common knowledge that many micro-entrepreneurs remain desperately poor not because they are unwilling to work, but because they lack access to conventional sources of capital such as commercial banks. With no credit ratings and no assets to pledge as collateral, banks generally consider the "poor" an undesirable demographic.
Microfinance contends that even small loans (typically around $100) can exponentially increase income by allowing entrepreneurs to build assets and buy inventory at the best prices - all while generating positive returns for commercial and socially-conscious investors. My fun task would be to demonstrate that FINCA's country programs were actually increasing client incomes by quantifying the financial and social impact of loans. My report would be used to attract new investors while showing the mission compliance required to retain current stakeholders.
I arrived in Lusaka, Zambia raring to go and eager for the thrills the summer would bring. On a typical day, I would interview several FINCA clients about their businesses, expenses, costs of living, and access to social amenities. I immediately noticed the amusing irony of my situation. At Wharton, I'd often scramble into Huntsman G06 for lectures by entrepreneurs who've built successful businesses from nothing. Yet here I was in the middle of rural Africa, meeting literally hundreds of entrepreneurs who had built businesses and livelihoods, albeit on smaller but equally life-changing scales, from absolutely zilch! They sold fruits, vegetables, poultry, crafts, and most interestingly, used clothing from abroad. Yes, FYI that fancy shirt you're rockin' has nine lives - and this is only the first! I'd often see a local with a shirt that said 'University of Wisconsin' (sorry, no Wharton!) or 'Make It a Blockbuster Night!' Naturally, they had no idea what or where those places were, but they knew a good deal when they saw one - and fifty cents for an almost-new shirt is a good deal in any language!
My employer was the Foundation for International Community Assistance (FINCA) based in Washington, DC. FINCA gives loans, at market rates of interest, to low-income entrepreneurs in 23 countries across Africa, Latin America, and the former Soviet republics with the lofty goal of stimulating private sector productivity and eliminating poverty. It is common knowledge that many micro-entrepreneurs remain desperately poor not because they are unwilling to work, but because they lack access to conventional sources of capital such as commercial banks. With no credit ratings and no assets to pledge as collateral, banks generally consider the "poor" an undesirable demographic.
Microfinance contends that even small loans (typically around $100) can exponentially increase income by allowing entrepreneurs to build assets and buy inventory at the best prices - all while generating positive returns for commercial and socially-conscious investors. My fun task would be to demonstrate that FINCA's country programs were actually increasing client incomes by quantifying the financial and social impact of loans. My report would be used to attract new investors while showing the mission compliance required to retain current stakeholders.
I arrived in Lusaka, Zambia raring to go and eager for the thrills the summer would bring. On a typical day, I would interview several FINCA clients about their businesses, expenses, costs of living, and access to social amenities. I immediately noticed the amusing irony of my situation. At Wharton, I'd often scramble into Huntsman G06 for lectures by entrepreneurs who've built successful businesses from nothing. Yet here I was in the middle of rural Africa, meeting literally hundreds of entrepreneurs who had built businesses and livelihoods, albeit on smaller but equally life-changing scales, from absolutely zilch! They sold fruits, vegetables, poultry, crafts, and most interestingly, used clothing from abroad. Yes, FYI that fancy shirt you're rockin' has nine lives - and this is only the first! I'd often see a local with a shirt that said 'University of Wisconsin' (sorry, no Wharton!) or 'Make It a Blockbuster Night!' Naturally, they had no idea what or where those places were, but they knew a good deal when they saw one - and fifty cents for an almost-new shirt is a good deal in any language!