The 1010 Project Social Network
Paradigm Shift: Microfinance - Recognizing the Rights of the Poor
Something I wrote a few years back... but still relevant I believe...
--
Paradigm Shift: Microfinance - Recognizing the Rights of the Poor
By: Adam Delp
When the word “poor” is spoken or read, what word(s) come to mind?
Some people think "needy", "lazy", "dependent", and "third world".
What if words such as "trustworthy", "dependable", "innovative", or "value-conscious" came to mind instead?
Even among development professionals, words like charity and philanthropy are characteristically used when discussing work with the world’s global poor.
However, recent developments in the private, public and social sectors suggest that a new approach or attitude towards working alongside the poor is on the horizon. Words like sound investment, profit margin, and friendships are now being used in private and public circles regarding the economically disadvantaged.
Would a shift in the connotative understanding of the global poor have any real impact on preserving human rights and improving standards of living for ever member of humanity?
Today, according to World Development reports by the United Nations approximately 4 billion people live on $2 dollars or less. Each and every day, 4 billion people acquire food, education, healthcare, housing and other basic living expenses with $2 dollars.
Looking back, much of development in the past 50 or so years has been a top-down approach, with both international governmental organizations (IGOs) and non-governmental agencies (NGOs) dominating the discussion. The evaluation of need and enactment of policies have been based upon the interests and perceptions of the elite, wealthy and powerful. The economically disadvantaged have not had a legitimate voice.
In spite of this setback, the world’s marginalized are beginning to find avenues for their voice, or at the very least advocates on their behalf. This is confirmed in a project undertaken by the World Bank called Voices of the Poor, which is a collection of 78 participatory poverty assessment (PPA) reports conducted in 47 countries around the world during the 1990s. The Voices of the Poor report sought to “understand poverty from the perspective of the poor and explore the interlocked barriers poor women and men have to overcome, many of which have to do with social norms, values and institutional roles and rules beyond their individual control”. The PPA reports identified the following underlying themes experienced by the global poor:
Hunger
Deprivation
Powerlessness
Violation of dignity
Social isolation
Resilience
Resourcefulness
Solidarity
State corruption
Rudeness of service providers
Gender inequity
Furthermore, this report powerfully illustrates that universally the poor feel inferior and vulnerable as they interact with service providers from both IGOs and NGOs. According to those surveyed, service providers from both IGOs and NGOs often times expressed a tendency to not listen.
In light of this report, an attitude adjustment on all fronts of the development field is long overdue. If poverty is to be eradicated in the 21st century and the Millennium Development Goals accomplished by the year 2015, then governments, corporations and civil society organizations must listen to the poor and treat them with the same dignity and respect given to wealthy individuals.
A professor at the University of Michigan, C. K. Prahalad, wrote a book entitled The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Prahalad advocates strongly and effectively for this change of viewpoint stating that “If we stop thinking of the poor as victims, or as a burden, and start recognizing them as resilient and creative entrepreneurs, and value-conscious consumers, a whole new world of opportunity will open up.” Prahalad’s “inclusive-capitalism” seeks to integrate the Bottom of the Pyramid (BOP) into the global marketplace.
The BOP is the 4 billion individuals in the world today living off of $2 dollars or less. Prahalad’s contention is that market development at the BOP will create millions of new entrepreneurs at the grass roots level, thus expanding the benefits of globalization and modernization to more of the earth’s inhabitants.
One example of this paradigm shift congruent with the BOP strategy is the micro-finance movement. According to the Consultative Group to Assist the Poor [CGAP], the term microfinance is defined as “providing very poor families with very small loans to help them engage in productive activities or grow their tiny businesses”. As noted in the Voices of the Poor, the global poor typically operate in the informal sector, trusting in community networks and social groups for financial services. Microfinance institutions serve to transition those informal networks to formal, lower-risk, networks.
Muhammad Yunus, the recent recipient of the coveted Nobel Peace Prize and founder of the Grameen Bank in Bangladesh, serves as the spokesman for this movement. The Grameen Bank is a microfinance institution (MFI) that has grown from having 42 women recipients to nearly 7 million beneficiaries. The Grameen Bank sought to embrace and listen to the poorest of the poor. Mr. Yunus began his work in 1976 in the hopes of reaching out to people shunned by conventional banking systems. Recently, Mr. Yunus told the British Broadcasting Corporation that “Micro-credit is something which is not going to disappear… because this is a need of the people. Whatever name you give it, you have to have those financial facilities coming to them because it is totally unfair… to deny half the population of the world financial services.” The Grameen Bank’s success is undeniable and the world is beginning to take notice.
Investment banks, such as CitiGroup and HSBC, are taking notice and beginning to view the microfinance sector as a serious growth area. It is estimated that the potential market for microfinance could be up to 3 billion of the worlds poor, with only about one-sixth of those who could make use of formal financial services presently being served. The trend is clear: microfinance is looking less like a charity and more like a wise investment.
When asked why the jump in private sector involvement [into MFIs] Peter Johnson, CEO of Developing World Markets replied “The first time around, it was a social responsibility thing. Now, it’s viewed as a good investment.”
The winds of change are influencing not only the private sector, but also civil society organizations. As more and more corporations are finding their heart for humanity within profit-driven strategies, more and more civil society organizations are operating like efficient and successful businesses. Valuing profit and people are no longer conflicting objectives.
For example, The 1010 Project, an international development and advocacy organization currently partnering with indigenous projects in Sub-Saharan Africa and raising awareness in the United States on behalf of the global poor, has included as a key part of its strategy an emic research mindset that prioritizes listening to the economically disadvantaged. The 1010 Project embraces grassroots development tools like microfinance.
A friend and partner of the 1010 Project is Michael Nyangi, a CPA who runs Lomoro Self-Help Community Center located in the Kibera slum just west of Nairobi, Kenya. Kibera is one of the largest slums in the world. Lomoro has 50 members and is currently funding 20 businesses by providing $30-50 loans at 10% interest for a period of 6-months. As of June 2006, all loans given out by Lomoro have been paid back in full. Mr. Nyangi and his staff are breaking the cycle of poverty in their community because they refuse to think of their fellow impoverished neighbors as victims or needy. Rather, similar to the BOP approach, they see their neighbors as dignified, trustworthy, dependable, and economically viable people deserving of the human rights and privileges that wealthy individuals benefit from.
Mr. Yanus and Mr. Nyangi are solid examples of why more and more businesses, governments, and NGOs are adopting this new approach as they work alongside creative and innovative people, who happen to be economically disadvanted. Interestingly enough, this new approach is actually an old lesson that the world at large has failed to adopt, yet. Franklin D. Roosevelt gave these words in a radio address entitled The Forgotten Man to an audience in the midst of the Great Depression nearly 75 years ago. He said, “These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power… that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.”
Viewing the poorest of the poor as the “indispensable units of economic power” enabled a nation to overcome approximately 25% unemployment. The recognition of the impoverished as dignified, dependable, resilient, creative entrepreneurs helped alleviate the Great Depression in our country and it can end extreme poverty worldwide in the 21st century.
--
Update: Currently reading The Forgotten Man: A New History of the Great Depression by Amity Shlaes and hope to revitalize this little polemic (above) that was written in 2006.
--
Paradigm Shift: Microfinance - Recognizing the Rights of the Poor
By: Adam Delp
When the word “poor” is spoken or read, what word(s) come to mind?
Some people think "needy", "lazy", "dependent", and "third world".
What if words such as "trustworthy", "dependable", "innovative", or "value-conscious" came to mind instead?
Even among development professionals, words like charity and philanthropy are characteristically used when discussing work with the world’s global poor.
However, recent developments in the private, public and social sectors suggest that a new approach or attitude towards working alongside the poor is on the horizon. Words like sound investment, profit margin, and friendships are now being used in private and public circles regarding the economically disadvantaged.
Would a shift in the connotative understanding of the global poor have any real impact on preserving human rights and improving standards of living for ever member of humanity?
Today, according to World Development reports by the United Nations approximately 4 billion people live on $2 dollars or less. Each and every day, 4 billion people acquire food, education, healthcare, housing and other basic living expenses with $2 dollars.
Looking back, much of development in the past 50 or so years has been a top-down approach, with both international governmental organizations (IGOs) and non-governmental agencies (NGOs) dominating the discussion. The evaluation of need and enactment of policies have been based upon the interests and perceptions of the elite, wealthy and powerful. The economically disadvantaged have not had a legitimate voice.
In spite of this setback, the world’s marginalized are beginning to find avenues for their voice, or at the very least advocates on their behalf. This is confirmed in a project undertaken by the World Bank called Voices of the Poor, which is a collection of 78 participatory poverty assessment (PPA) reports conducted in 47 countries around the world during the 1990s. The Voices of the Poor report sought to “understand poverty from the perspective of the poor and explore the interlocked barriers poor women and men have to overcome, many of which have to do with social norms, values and institutional roles and rules beyond their individual control”. The PPA reports identified the following underlying themes experienced by the global poor:
Hunger
Deprivation
Powerlessness
Violation of dignity
Social isolation
Resilience
Resourcefulness
Solidarity
State corruption
Rudeness of service providers
Gender inequity
Furthermore, this report powerfully illustrates that universally the poor feel inferior and vulnerable as they interact with service providers from both IGOs and NGOs. According to those surveyed, service providers from both IGOs and NGOs often times expressed a tendency to not listen.
In light of this report, an attitude adjustment on all fronts of the development field is long overdue. If poverty is to be eradicated in the 21st century and the Millennium Development Goals accomplished by the year 2015, then governments, corporations and civil society organizations must listen to the poor and treat them with the same dignity and respect given to wealthy individuals.
A professor at the University of Michigan, C. K. Prahalad, wrote a book entitled The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Prahalad advocates strongly and effectively for this change of viewpoint stating that “If we stop thinking of the poor as victims, or as a burden, and start recognizing them as resilient and creative entrepreneurs, and value-conscious consumers, a whole new world of opportunity will open up.” Prahalad’s “inclusive-capitalism” seeks to integrate the Bottom of the Pyramid (BOP) into the global marketplace.
The BOP is the 4 billion individuals in the world today living off of $2 dollars or less. Prahalad’s contention is that market development at the BOP will create millions of new entrepreneurs at the grass roots level, thus expanding the benefits of globalization and modernization to more of the earth’s inhabitants.
One example of this paradigm shift congruent with the BOP strategy is the micro-finance movement. According to the Consultative Group to Assist the Poor [CGAP], the term microfinance is defined as “providing very poor families with very small loans to help them engage in productive activities or grow their tiny businesses”. As noted in the Voices of the Poor, the global poor typically operate in the informal sector, trusting in community networks and social groups for financial services. Microfinance institutions serve to transition those informal networks to formal, lower-risk, networks.
Muhammad Yunus, the recent recipient of the coveted Nobel Peace Prize and founder of the Grameen Bank in Bangladesh, serves as the spokesman for this movement. The Grameen Bank is a microfinance institution (MFI) that has grown from having 42 women recipients to nearly 7 million beneficiaries. The Grameen Bank sought to embrace and listen to the poorest of the poor. Mr. Yunus began his work in 1976 in the hopes of reaching out to people shunned by conventional banking systems. Recently, Mr. Yunus told the British Broadcasting Corporation that “Micro-credit is something which is not going to disappear… because this is a need of the people. Whatever name you give it, you have to have those financial facilities coming to them because it is totally unfair… to deny half the population of the world financial services.” The Grameen Bank’s success is undeniable and the world is beginning to take notice.
Investment banks, such as CitiGroup and HSBC, are taking notice and beginning to view the microfinance sector as a serious growth area. It is estimated that the potential market for microfinance could be up to 3 billion of the worlds poor, with only about one-sixth of those who could make use of formal financial services presently being served. The trend is clear: microfinance is looking less like a charity and more like a wise investment.
When asked why the jump in private sector involvement [into MFIs] Peter Johnson, CEO of Developing World Markets replied “The first time around, it was a social responsibility thing. Now, it’s viewed as a good investment.”
The winds of change are influencing not only the private sector, but also civil society organizations. As more and more corporations are finding their heart for humanity within profit-driven strategies, more and more civil society organizations are operating like efficient and successful businesses. Valuing profit and people are no longer conflicting objectives.
For example, The 1010 Project, an international development and advocacy organization currently partnering with indigenous projects in Sub-Saharan Africa and raising awareness in the United States on behalf of the global poor, has included as a key part of its strategy an emic research mindset that prioritizes listening to the economically disadvantaged. The 1010 Project embraces grassroots development tools like microfinance.
A friend and partner of the 1010 Project is Michael Nyangi, a CPA who runs Lomoro Self-Help Community Center located in the Kibera slum just west of Nairobi, Kenya. Kibera is one of the largest slums in the world. Lomoro has 50 members and is currently funding 20 businesses by providing $30-50 loans at 10% interest for a period of 6-months. As of June 2006, all loans given out by Lomoro have been paid back in full. Mr. Nyangi and his staff are breaking the cycle of poverty in their community because they refuse to think of their fellow impoverished neighbors as victims or needy. Rather, similar to the BOP approach, they see their neighbors as dignified, trustworthy, dependable, and economically viable people deserving of the human rights and privileges that wealthy individuals benefit from.
Mr. Yanus and Mr. Nyangi are solid examples of why more and more businesses, governments, and NGOs are adopting this new approach as they work alongside creative and innovative people, who happen to be economically disadvanted. Interestingly enough, this new approach is actually an old lesson that the world at large has failed to adopt, yet. Franklin D. Roosevelt gave these words in a radio address entitled The Forgotten Man to an audience in the midst of the Great Depression nearly 75 years ago. He said, “These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power… that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.”
Viewing the poorest of the poor as the “indispensable units of economic power” enabled a nation to overcome approximately 25% unemployment. The recognition of the impoverished as dignified, dependable, resilient, creative entrepreneurs helped alleviate the Great Depression in our country and it can end extreme poverty worldwide in the 21st century.
--
Update: Currently reading The Forgotten Man: A New History of the Great Depression by Amity Shlaes and hope to revitalize this little polemic (above) that was written in 2006.
Add a Comment
About
© 2009 Created by Mark Mann on Ning. Create Your Own Social Network
You need to be a member of Join the Story to add comments!
Join this social network