This is Not a Pipe


Picture Unrelated, but whatever it is its NOT a pipe.

Anyhow…

When I was reading the first article, Fisher’s “Real Good not Feel Good,” I was comparing La Ceiba to its Four Question-Ideals.

The first of them being:

1. Does the Project have Measurable and proven impacts?
This is qualified though, because we have to be able to say what exactly we’re trying to achieve. I think its safe to say that our Grand-Scheme objective is to Eliminate poverty in Honduras. Povercide, so to speak. Hopefully thats not an actual word that means something else more horrible than how i intended it.

So yes. we have clearly defined what our objective is. Can it be measured? Again, the answer is yes. This must be measured by an overall increase in income. It says that in one of those articles.

So does La Ceiba have proven impacts? I think we can say yes, quite safely. Our loans are going to people, they are helping free up a bit of cash for other things, with enough left over to pay us back. Thats proven impact right there.

Measurable? I’m not sure. Since the Business Plan Competition (or at least my understanding of it) is still pretty embryonic, we wont have any serious effect on income for a while. Personal Loans are all well and good, but right now the system resembles more an intricate money laundering scheme than an method of increasing income. We’re shuffling money around Honduras, but their income seems to me to be remaining about the same. I’m not saying these personal loans are a bad thing, but it will be slow going if we want to see measurable results.

2. Cost Effective Impacts?
This ones easy peasy. Our impacts are cost effective. We give them a loan, they pay it back, they are a little better off and we have a little more money to loan out. As I said in my previous post, its mutually beneficial.

3. Sustainable Impacts?
Again, my understanding of things as they exist right now is that no, our impacts are not sustainable. If La Ceiba stopped giving loans today, poverty would resume, the income level would still be only marginally affected. We’re not there yet, but everyone has it in mind to get there. We have a plan, we’re implementing. Growth is taking place. Progress is better than Congress.

and Lastly…

4. A Scalable and Replicable Model?
D’oh! Not yet. Thats something Dr. Humphrey emphasized to Shawn and I when we came aboard the Performance Team though: we want to make a system that can be packed up and shipped out and opened up just as easy to use on day one as day 365. Thats definitely a work in progress.

So we score a 1.5 out of 4 on the Fisher “Real Good not Feel Good” scale. Sure, what we’re doing has SOME effect, and gosh it does feel pretty nice to be involved in something like this, but it is going to take tremendous effort, lots of man hours, and a bit of gumption to get to that point. I have MAX confidence that La Ceiba can get there, its just a matter of time.

As for the second article, i’m going to stick on one thing they said and beat as much response out of it as possible.

“Leaving Poverty does not depend on repaying one’s loans. Leaving poverty depends on creating a successful business.” <= Page 5, last paragraph in the first Column, for those of you that are interested in fact-checking.

This is the key, right here. We need to find existing businesses, we need to help make new businesses. In my humble opinion, we need to make this our number one priority. Because until this happens, we can’t say yes to many of those questions. But once we start generating businesses, helping them grow, then before you know it people will have jobs, money will start flowing, our loans will go toward advancing a business and increasing the salaries of many, rather than temporarily benefiting the few.

So what i’m taking away from all this is two fold.

1- Microfinance’s goal must be to generate and expand businesses, in order to make the desired impact.
2- Thats probably just a painting of a pipe.

7 Responses to “This is Not a Pipe

  • salvarez2012
    7 years ago

    First of all I’m not sure I understand the pipe reference, but it made me chuckle either way; so thanks!
    I agree our grand scheme goal as microfinance is eliminating poverty however, unfortunately, I don’t think the grand scheme goal is enough to qualify as an objective in and of itself. I believe it is the incremental objectives in between now and the future that will define our success and truly measure the impact of our actions. With that being said, I see the point you’re getting at; but I venture to guess, you too, are wondering what specifically our said objectives entail.
    Measuring our impact is something I’ve, abstractly, been giving a lot of thought to. I’m not sure I agree in entirety with the idea that increased income is the only measure of an objective’s success (perhaps you don’t either); I think the social welfare aspect of our service in La Ceiba is pretty important too. Of course increased income, as the article suggests, is a nominal way of quantifying impact; but I would consider increased confidence, personal security, and happiness as other ways of measuring our impact in the community.
    Another thought on impact. Because we don’t paternal-ize our actions in La Ceiba and have no right, per say, to investigate the track or use of our loans it’s hard to tell whether they’re being used for what we would consider productive means. Then again, from our clients’ perspective productivity may lie in the minutia of their lives that we’re not privy to even understanding.
    I like the optimism in “progress is better than congress”, it’s a bit more cynical than something I would think of, but I agree none the less. The fact that we’re able to even say we have a plan, or that we understand the importance of sustainability is a step toward realizing a “conclusion” without really capping the potential of our client’s ambitions.

  • russellscott
    7 years ago

    The reason I suggested “eliminating poverty” as the Grand Scheme objective is because it was suggested in the article(s?) and because its the only thing we can measure objectively. for THAT objective, income IS the only measure of success. And while the social welfare aspect is important, that is tied together with income, and we cannot make a sustainable or replicable difference if that was our only objective. Plus, from an accounting perspective, its not a sound business plan. La Ceiba cannot get a return on its investment and provide sustainable loans if we do not focus on the business aspect–this is already visible in the out-of-pocket expenses required to help take us from year to year. The point of my post was that we want to minimize external funding while maximizing impact on poverty, which we are not accomplishing YET.

  • Perhaps this is a product of my non-economics background, but I completely disagree about your definition of eliminating poverty. Income is not the only indicator of poverty, and if you look at the work of many development professionals who are not economists (and even many economists for that matter), they point to many other factors as key to defining poverty. For example, one of the things I’ve been reading a lot about recently in research on impact analysis is vulnerability. It’s not an individual or household’s income that matters as much as their ability to withstand shocks. The two probably are related, but a simple number like income cannot begin to encapsulate the complexity that is an individual’s life, especially a life in poverty. I wouldn’t want my life to be summed up by my (or my parents’, as the case may be) income, and I think our clients and their families deserve the same respect.

    • russellscott
      7 years ago

      The simple fact of the matter is that if Income is increasing, shock-resistance is increasing, and poverty is decreasing. I’m sure there are many other aspects, but poverty in its most basic level is a lack of money, and income is how people acquire money, so increasing income means that total money supply of an individual is increasing and poverty is being alleviated. You can argue details, or societal things, but if you try and classify poverty based on anything OTHER than quantity of money then you could conceivably put bill gates, steve jobs, and warren buffet in the “poverty” category.

      • Even if we are looking at solely financial affairs (which I am by no means advocating, but it’s a useful limitation for the point I am trying to make), income is not the best measure of poverty. The majority of the poor do not have a job that provides a steady stream of income the way we conceptualize it. It is much more useful to look at expenditures, or even consumption, which takes into account the informal economy, which much of the poor’s activities fall under. Assets are also a key factor to look at in assessing poverty: they provide a safety net and can be used to enhance productivity more than income can.

        In thinking about how to respond to your post, I was trying to formulate a definition of poverty. I don’t think I can do that right now, so thank you for forcing me to confront this extremely crucial issue. If La Ceiba is to come up with a way to reduce poverty, we first need a comprehensive definition of poverty. But I don’t believe that income represents more than one small part of the picture, and I don’t think that we should move forward on the assumption that income can even be an accurate substitute for the plethora of factors that go into “poverty,” even if it does make our jobs easier. We’re here to try to make a difference, and that is not going to be easy, so we have to just accept that complexity at the beginning and work with it throughout.

  • This debate really falls back on what you think our goal as La Ceiba is. If it is to only help individuals increase their income, then we should focus on businesses succeeding and increasing incomes. But I have to argue that even still you cannot just measure impact by incomes. In that case why don’t we just give our clients the money and not have a loan service. Then their incomes would substantially increase and our job will be done according to this kind of impact analysis. We need to have an impact study that uses both quantitative and qualitative measurements to asses our clients’ poverty.

  • russellscott
    7 years ago

    Re: Laurad
    People without an income have an income of zero, which is still consistent with my measure of poverty. without a renewable source of income, expenditures HAVE to drop, consumption HAS to drop, even if trade takes place, you cannot barter your way to wealth in a modern financial environment.

    However, to make things a little easier to discuss, here is how dictionary.com defines poverty:

    “the state or condition of having little or no money, goods, or means of support; condition of being poor; indigence.”

    There are other definitions, but the common trait is a defficiency of something–namely money. the key factor though is “goods, or means of support”. goods are generally acquired with money, and when money runs out goods are not far behind. Means of support is the kicker, though. In the united states, that would be the Welfare System. Im not sure that Honduras has a comparable system, which is presumably the source of the issue La Ceiba is working to resolve. Either way, if the people don’t have income, there is then no income TAX, which means the Government’s money supply decreases as well.

    In other words, money makes the world go round, and while i acknowledge that poverty means multiple things, money is ultimately the problem, and in order to gain money I am asserting that people need income.

    Re: beccap

    I agree with you in that increasing income should not be our ONLY goal, but from an accounting perspective it should be the primary one. If our loan program is not sustainable, then the net effect on the incomes in honduras is zero, if not worse. But giving people money in a lump sum as you suggest does not qualify as income, as it is not renewable. La Ceiba’s goal SHOULD be (again, financially speaking) to provide loans that go toward increasing the overall income within La Ceiba, who then pay back the loan + interest, which provides us with more money to loan out again and the system repeats. While I agree that we need to have quantitative and qualitative measures for impact, no matter how you slice it income is going to be VERY important.

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