Keep it small, do it right

It took me a while to pull all these thoughts together but here is my tardy second blog post, I think it also leads into the next nicely.

Datar hits on both La Ceiba’s greatest advantage over other MFI’s and I think the largest flaw in microfinance logic in his final thoughts:

“MFI’s must remember that their clients are often in business by necessity, rather than by choice.  Most microfinance clients have no training, education or role models in business, and therefore are unlikely to cultivate successful microenterprises on their own.  They are not entrepreneurs in the traditional sense. If their communities had jobs and if their family situations permitted it, they would be employed.  Yet the large-scale, labor-intensive  enterprises that generate stable employment will not arrive in the most developing countries any time soon.  To make microfinance work for more people, more often, in more places, MFI’s need to think clearly about how their practices will bring about the changes they seek.  This may mean making fewer microfinance loans and incurring more costs to support the loans they’ve already made.  The benefit, of course, is the building of sustainable businesses.  The challenge is finding ways to provide these additional services efficiently.”

Datar pinpoints what I believe to be the main reason why the simple process of give out loans -> start businesses -> improve economy -> decrease poverty, is much more difficult to execute in the real world.  Most MFI clients are people striving to survive and put food on the table for their families.  A few may have brilliant business ideas, knowledge, luck, passion and commitment to start a successful business and have only been held back by their extreme poverty and limited access to resources.  Those are the stories that people in the developed world want to read.  However, true entrepreneurs that possess those characteristics are not the typical client.  Is La Ceiba’s goal to find those rare clients and by doing so hope to improve the community economy?  Or is that only a piece in our broader goal to reduce poverty?

This train of thought leads me to think that this is a fundamental problem in our objective: are we trying to help people start successful businesses or are we looking to aid the most impoverished and increase their quality of life in any way we can?  In the long term if enough businesses flourish then more jobs will be available to the poorest of the poor, however it may not be the most impoverished that are most likely to start successful businesses.  These objectives certainly overlap but it seems we are looking for a focused mission in which our different programs are all working towards and I think we need to find a specific target for our work to have the most positive impact.  Anyway, the point is we need to realize that most of our clients are not typical entrepreneurs and we need to recognize that their motivations may not be close to our goals at all.

Finally, Datar essentially lays out La Ceiba’s advantages over other MFI’s and why more should be working in our direction.  By using students we are able to sustain very high costs per loan and work on a very small-scale client-centered approach.  However, if our program becomes sustainably successful and we are able to package it up and send it to motivated students at other Universities… suddenly that small impact is not so small anymore.

We want to focus on the relationships and connections (ie. client-centered micro finance) in our aim to reduce poverty.  However, it seems we want to not only look at income but take other factors, both qualitative and quantitative, into our assessment of poverty.  We want to do real good that feels good.  All of these things only seem possible on a small scale, with clients not exceeding ten times (or even two times) the number of team members. In the end, I think it comes down to doing it right and the only way to do that is to keep it small.  Our advantages deteriorate if we grow too large but by spreading our model to others, our small group that figured out how to do it right, can someday have a large positive impact in Honduras or anywhere!

One Response to “Keep it small, do it right

  • You make a compelling case for La Ceiba’s model as opposed to that of other MFIs, turning what could be perceived as our weaknesses into our strengths. But I’d like to comment on something early on in your post– “are we trying to help people start successful businesses or are we looking to aid the most impoverished and increase their quality of life in any way we can?” Though you point out that these two goals are not mutually exclusive in the long-term, precisely because we are so small with such limited immediate impact, we need to pick one. We can’t afford to spread our efforts between the two, especially because I at least see these as two ways of approaching the same problem. This is going to be a semester of hard decisions for La Ceiba, but we need to make those decisions so that we can get on to the business of implementing them and actually making a difference in the lives of our clients.

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