20 March 2008

How to Choose a Microcredit Organization

Over the past few years an indisputably positive trend has been gaining strength in the United States and other rich nations as more and more people become aware of how powerful microcredit is as a poverty fighting tool. Support for microcredit initiatives carried out in poorer areas of the world through organizations like Kiva and Grameen Foundation has risen dramatically and in general everybody benefits from this.

There are, however, some things potential donors and loaners should consider before choosing the partner organization that will act as an intermediary between you and the direct recipient of the donation or loan.

In his book Creating a World Without Poverty, Professor Yunus feels the need to identify and describe various types of micro-credit programs that have sprung up. This variety has made the word micro-credit to mean a number of things, some of which are at odds with one another. To clear up any confusion caused by this, he states “Microcredit is supposed to describe loans offered with no collateral to support income-generating businesses aimed at lifting the poor out of poverty.” He goes on to describe programs called microcredit that offer loans to different target populations, with different purposes that require collateral and are used for consumption. Some programs even charge interest rates similar to those of the loan sharks, indicating their profit motive.

To provide further clarity, he proposes classifying microcredit programs into two categories which I transcribe here:

Type 1: Poverty-Focused Microcredit Programs

These are poverty-focused, collateral-free, low-interest microcredit programs. Grameen Bank was created to provide this type of microcredit. Type 1 programs charge interest rates that fit into one of two zones: the Green Zone, which equals the cost of funds at the market rate plus up to 10 percent, and the Yellow Zone, which equals the cost of funds at the market rate plus 10 to 15 percent.

Type 2: Profit-Maximizing Microcredit Programs

These are programs that charge an interest rate higher than the Yellow Zone. They operate in the Red Zone, which is moneylender’s territory. Because of the high interest rates they charge, these programs cannot be viewed as poverty-focused but rather are commercial enterprises whose main objective appears to be earning large profits for shareholders or other investors.

There are even microcredit programs here in Ecuador that use bullhorns to publicly shame a defaulting borrower into paying, often requiring her to sacrifice schooling or food for her children to do so. If that doesn’t produce the desired effect, they will take the roof off of her house, which is their collateral as they financed it. They then audaciously pronounce their payback rate to be over 98%!

Professor Yunus suggests that the Microcredit Summit Campaign, which maintains a database of all microcredit programs, should “include only Type 1 programs, since only these contribute to the campaign’s goal of using microcredit to help eliminate poverty.” Type 2 programs have their proper place targeting the lower middle class and above as they can provide effective capital-building support so important for this segment of the population. His message to these programs is clear: “Make all the profit you want from your middle-class customers! Feel free to take advantage of your financial position, if you can! But don’t apply the same thinking to the poor. If you lend to the poor, do it without concern for profit, so that they can have the maximum help in climbing out of poverty. Once they’ve completed the climb, then treat them like every other customer – but not till then.”

I work with a savings and loan Cooperative. We at the Cooperativa Detodas find this analysis quite enlightening and encouraging. We would like our borrowers, supporters, readers and friends to know that we clearly fit into the Type 1 category for the following reasons:

  • We charge Green Zone interest rates on all of our loans
  • We do not require collateral
  • We target the poorest segments of the population
  • The only objective for the program is to support our borrowers in their drive towards prosperity

We do not coerce our borrowers to pay back their loans. Rather, we support them by seeing that the group they belong to comes to their aid to help resolve the problem that caused the borrower to fall behind, and by renegotiating their loan in comfortable payments if need be.

All of this leads me to suggest to those of you who support microcredit organizations or are considering doing so, to do some digging in order to choose one that satisfies your social concerns. Specifically,

  • Find out what the cost of funds at market rate are in the country where the microcredit organization functions, and what interest rates it charges.
  • Ask if it requires collateral for loans.
  • Ask for a description of its target population. People who earn less than $1 a day are the primary target for microcredit organizations, although $2 is also common. Many organizations also consider living conditions, credit history and land ownership as indicators.
  • Inquire into its methodology just enough to understand how loans are disbursed and paid back.
  • Ask for basic health indicators such as number of borrowers and growth rates.
  • Finally, read its mission. If the mission is written clearly and truthfully, it should reflect the answers to the above questions. The degree to which the mission differs from the answers to the above questions should indicate if the organization focuses on a profit motive or works towards building capacity and prosperity.

17 March 2008

Call to Action: Compost for Life

It is beyond doubt that future historians will look back on our generation and the multiple water shortage and contamination problems we currently suffer from, and wonder how Western “civilization” could have advocated urinating and defecating into what little purified drinking water we have left. I apologize to the light-hearted among my readers for touching on such an apparently foul subject, but the growing global water and health crises stand in such stark contrast with current waste-management procedures, that it requires our urgent attention.

If you don’t already think that the world is nearly completely upside down and backwards, then imagine
a civilization that considers those who don’t deposit their feces into a bowl of drinking water on a regular basis as miscreants, uncivilized, dirty or poverty stricken. Of course this practice is convenient for taking such refuse to wastewater treatment plants where it is processed and eventually returned to the environment, albeit in some cases considerably more contaminated with “excessive levels of nitrates, chlorine, pharmaceutical drugs, industrial chemicals, detergents, and other pollutants” than before.

This would all be fine except for three factors: water shortages, diseases borne from water contamination and fertilizer needs for boosting agricultural production. Although these are all complex and important topics deserving much more in-depth analysis, I will only briefly outline each one.

Water shortage

  • Currently, United Nations estimates that 1.2 billion in a world of just over 6 billion people do not have access to safe drinking water. More specifically, in developing countries, 21% of all people do not have access to safe drinking water, and in rural areas the figure jumps to 30%.
  • 67% of the world’s households must fetch water from outside their homes.
  • Between 1990 and 1995, global water consumption rose sixfold, which is more than double the rate of population growth.
  • Increasing industrialization is creating a lion’s share of the problem: it takes 300 litres of water to produce 1 kilogram of paper, and 215,000 litres to produce 1 metric ton of steel. Changes in our diet are also driving water consumption; it takes 15,000 tons of water to produce a ton of beef, while it only requires 1,000 tons of water for a ton of grain.
  • China has approximately 21 per cent of the global population, but access to only 7 per cent of the planet’s freshwater.

Water borne diseases

  • 42% of the world’s population does not have access to a latrine or other proper means of sanitation.
  • “In the developing countries, 80 per cent of illnesses are water-related. Due to the shortage of safe drinking water in much of the world, there are 3.3 million deaths every year from diarrheal diseases caused by E. coli, salmonella and cholera bacterial infections, and from parasites like giardia and cryptosporidium, as well as viral pathogens like rotavirus. In fact, between 1990 and 2000, more children died of diarrhea than all the people killed in armed conflicts since the Second World War.”
  • Those of us who are considered to have access to safe drinking water should consider that approximately 10 million people in the US have access to water that is not in compliance with federal standards for removal of microorganisms, and approximately 7 million Americans get sick annually from contaminated drinking water.

Waste Management and topsoil

  • Sending human excrements to waste management plants infers that they are in fact waste. Waste is any material with no inherent value that is discarded and has no further use, a completely inaccurate description of human refuse which only becomes waste upon being discarded.
  • Byproducts of our digestive system, or any other digestive system for that matter, are in fact a valuable organic resource material rich in soil nutrients. It comes from the soil in the form of vegetables, fruit, nuts, or grains (and even meat), is naturally processed in the body, and then can be returned to the soil in the form of humus after careful composting to provide the highest quality soil additive.
  • Returning all organic residues resulting from crop production to the soil, including animal and human residues, should be axiomatic to organic agriculture, although it is not. The profound ignorance that surrounds this topic is causing major agricultural and health problems throughout the world.
  • For example, not having enough natural fertilizers has given rise to a gigantic synthetic fertilizer industry. These petro-chemical products deplete non-renewable fossil fuels, cause crop dependence, promote dangerous single crop practices, and once in the human body “interfere with the body’s normal functioning, … damage human chromosomes and cause cancer and numerous other diseases. … For example, human mother’s milk has consistently shown contamination from synthetic organic chemicals since 1951, and the incidence of human breast cancer has risen dramatically since then.”

2005 – 2015 has been denominated the International Decade for Action: Water for Life. At its launch, the UN issued a useful document entitled Water for Life: Making it Happen. In it, they dramatically emphasize the importance of improved water and sanitation services:

“Improved water and sanitation will speed the achievement of all eight MDGs, helping to:

· eradicate extreme poverty and hunger;

· achieve universal primary education;

· promote gender equality and empower women;

· reduce child mortality; improve maternal health;

· combat HIV/AIDS, malaria and other diseases;

· ensure environmental sustainability; and

· develop a global partnership for development.”

Given this emerging reality, it is little wonder that water has been described as “the oil of the twenty-first century”, a scarce commodity that will be a source of conflict between peoples and nations. This is fine but oil shortages can be resolved by developing alternative energy sources, while the water supply cannot be increased other than by desalinization, a costly and complex process.

The United Nations proposes a complex set of interrelated actions to combat this crisis. A major limitation in advocating flush toilet systems for everybody, besides those mentioned above, is their prohibitive cost for nearly every country around the globe. Because of this, and because this is considered the only civilized solution, governments simply leave the problem unresolved, leaving 90 per cent of sewage and 70 per cent of industrial wastes in developing countries to be discharged into water courses without treatment.

However, in his insightful book “The Humanure Handbook”, Joseph Jenkins clearly demonstrates that composting humanure as he denominates it, is the most accessible, viable and expeditious option for resolving the sanitation quandary and its host of accompanying problems. His many years of personal experience and research indicate that although raw humanure “carries with it a significant potential for danger in the form of disease pathogens,” … they are completely destroyed by composting when the retention time is adequate or when the composting process generates enough internal, biological heat. Both of these conditions are easily met when the compost heap is properly managed.

Spreading the resulting humus over his garden for 25 years has also proven that the product is an effective source of fertilizer for agriculture destined to human consumption. In fact, it may be useful to provide just a short list of the benefits of the humus that results from compost: enriches soil, prevents pollution, fights existing pollution, restores land, destroys pathogens and saves money. I am an avid composter (although admittedly not of my humanure) and would like to add here that perhaps the most beneficial aspect of compost is the sense of self worth and satisfaction one feels when helping organic elements complete their natural cycle and become dirt again.

Of course setting up composting systems that can meet sanitation needs for the 1.2 billion excluded human beings (and eventually the rest of the entire human population), especially in urban settings, would be a daunting task to say the least. However, the progress made towards providing safe water supplies and sanitation services for the world’s poor over the past decade or two (according to the UN, 83 per cent of the world's population used improved drinking water sources in 2002, up from an estimated 79 per cent in 1990) pales shamelessly with the overwhelming and ever increasing need.

All true change comes hard. Changes of this magnitude, requiring rethinking such deeply entrenched ideas about civilization, come even harder than normal. However, we can resist our intuition and permit nearly half of the world’s population to live in conditions that anybody reading this would consider horrifying, or we can explore thorny but promising paths towards true sustainability and dignity. If doing this single action well helps us make huge strides towards attaining all eight Millennium Development Goals, and thus bringing prosperity to the world’s people, I suggest we explore that path without further adieu.


Jenkins, Joseph. The Humanure Handbook. Jenkins Publishing, PO Box 607, Grove City, PA 16127.