FINCA - Small loans, big changes
I Walk the Line

I Walk the Line

I spent two days each in Uganda and Tanzania, meeting with clients and staff to get a sense of how the landscape for microfinance and business in general is changing in Africa and FINCA’s ability to stay ahead of it. We arrived at Entebbe airport in the dead of night, and, to our chagrin, encountered a police roadblock on the outskirts of Kampala that added another two hours to our journey. The cops were checking for drunken drivers, and, in the process, netted dozens of frustrated drivers who tried to circumvent the checkpoint by driving on the wrong side of the road. They ripped the licenses off the perpetrators’ cars just in case they tried to make a run for it.
The next day we plunged into Kampala’s teeming urban market to talk to some of our clients who had lost their businesses in a fire that swept through the crowded forest of wooden stalls back in December of 2013. Fortunately, FINCA Uganda provides disaster insurance and our clients’ outstanding loans were paid off by the insurance company. Unfortunately, many of our clients have been unable to rebuild their businesses as a shopping center is being built on a piece of land adjacent to the market, and rumors are the prime land now occupied by our clients and the other vendors will be turned into a parking lot. Everywhere in Kampala you see new buildings going up, and the streets and markets teeming with micro entrepreneurs. Every other shop is also an agent for the mobile phone and money transfer companies. Hard to believe that when I first saw Kampala back in 1985, when it was recovering from years of bad governance by Amin and Obote, it was a virtual ghost town.
After Kampala, we traveled to Masaka, a three hour drive that takes you across the Equator and through a landscape filled with lush farms and pastures rendered green by the recent – and very welcome – rains. Uganda has been suffering from a severe drought which destroyed much of the agriculture last year. Masaka, once a sleepy little town in Southwestern Uganda near the Tanzania border, is today, like Kampala, bursting with commerce. At the entrance, signs great and small climb up the walls of the shops and buildings, competing for your attention. The FINCA clients we spoke to were doing well. Several had grown their businesses by a factor of four or even ten, riding the overall growth of the local economy.
Even in the remote rural areas we visited, the progress was impressive. Our clients in one village, where FINCA Uganda has worked for the past 12 years, had been to build two-room brick houses from the proceeds of their farms and businesses, also fueled with FINCA loans. But the most transformative thing we saw was the change in our clients standard of living powered by the solar energy systems they have acquired with FINCA loans. Photovoltaic cells the size of iPads provide enough energy to power two lighting units for twelve hours and recharge a mobile phone in a half hour. But the real benefit comes from the replacement of the kerosene and paraffin lamps that used to light the clients’ homes. At a cost of $50, a solar unit saves the clients $90 in kerosene or paraffin the first year. But more important, it eliminates the risk of fire which is an ever present threat from these traditional fuels. One of our party met a mother whose three year-old daughter’s face had been horribly burned when a paraffin lamp accidentally tipped over onto her dress.

I suppose it was inevitable that, since I have my own TV channel, I would one day have my own radio show. That day has arrived! Check it out, check it out, yo.

Gujumal, FINCA Kyrgyzstan Client and Makhmud, our CEO

Gujumal, FINCA Kyrgyzstan Client and Makhmud, our CEO

FINCA Kyrgyzstan is one of our 23 programs that I personally had the pleasure of opening, back in 1995. Former President Roza Otunbaeva, then Kygyzstan’s Ambassdador to the U.S., had heard about FINCA’s work in Latin America and Africa and asked the State Department to bring FINCA to Kyrgyzstan. “You don’t need micro credit, you need macro credit,” they told her. No, she insisted, I want FINCA. She helped us to get a $4 million AID grant to start our microfinance program there. I flew into Almaty, Kazahkstan, in the dead of night with two colleagues (Kyrgyzstan had no Int’l airport), drove in a taxi across the steppes until it broke down, hired another to finish the trip to Bishkek. Looking out at the unpopulated countryside I thought to myself “What are we going to DO here? There’s no people, there are no businesses.” But once we got to working, the very industrious, entrepreneurial Kyrgyz people — and especially the women — made it all work.

Gujumal pictured above, is a good example of a FINCA client who has been able to take maximum advantage of FINCA’s loans. 26 years ago, her husband died, living her to care for their five children. She started a small shop “with a pack of Marlboro cigarettes and bottle of vodka”. She gradually built her inventory, but it wasn’t until ten years ago that she took her first FINCA loan of $600 and her business started to take off. Today, she has a two-story store, with groceries on the bottom floor and clothing on the second floor, which she built and stocked with a $12,000 FINCA loan. With the profits from her micro enterprise, she educated all her kids, who are now doctors, lawyers and businessmen in their own right. Gujumal’s grandchildren help her out at the store.

Next year we are celebrating our 20th anniversary in Kyrgyzstan. Leveraging that original $4 million AID grant, we have made over a million loans totaling $750 million, and have built up equity of $24 million. Our current 128,000 clients and their families represent 1 in every 7 families in Kyrgyzstan. It must be the most successful AID project ever. Our next plan is to transform our microfinance company into a full service commercial bank. Our application sits with the Governor of the Central Bank as we speak, who has pledged to support us.

I don’t know who impresses me more, our clients, or our brilliant employees who made this economic and financial miracle happen.

Buy Me While I Last!

Buy Me While I Last!

I had lunch with Jonathan Lewis the other day, and it was fun to catch up. Jonathan is a serial social entrepreneur who founded, among other things, Opportunity Collaboration, an annual gathering of about 300 social entrepreneurs down in Ixtapa, Mexico. He’s also belongs to my club of “favorite people” owing not only to his sharp mind but his irreverent sense of humor. Our laughter rocked the walls of D.C. Coast restaurant long after the lunch crowd had gone back to work.

One of the things we talked about was the proliferation of “gadgets” that have been designed by social entrepreneurs seeking to solve health, housing, clean drinking water, type problems or otherwise improve the lives of poor people in developing countries. Jonathan is one of a number of people who have noted how difficult it is in practice to get poor people to actually purchase these consumer products that are “good for people”, not only because of the absence of purchasing power in this segment of the population, but also because poor people — like all of us – often have other priorities or preferences as to where they will direct their limited resources. (see his article) Jonathan recently launched a Nairobi-based start up, copiaglobal, that is taking a catalogue-based approach to marketing not only products that are good for people, but also products they want.

I really appreciated Jonathan’s advice, as FINCA is entering the scale up (we hope) phase of a renewable energy “gadget” next door, in Uganda. Our Sunking solar-powered lantern has a seemingly killer value proposition for an off-the-grid poor family in rural Uganda, delivering several different benefits: 1) it illuminates the home so the kids can do their homework after dark (education), 2) it reduces or eliminates need for kerosene lamps, whose fumes are harmful in confined quarters (health benefit plus savings on kerosene expenditures – and shall we throw in the environment? Why not) 3) it can recharge a mobile phone (communication plus micro business opportunity). So it can’t miss, right?

“It’s 20% the product and 80% the distribution,” Jonathan warns.

Personally, I think I have the distribution down. I was explaining to two people from Microvest, one of our funders on the debt side, at a breakfast this morning and they both put in orders. I’m two for two on my pitch/sale ratio.

I recently became aware of another interesting start up: Crowdmission. This company has operationalized a concept I have been thinking about for a long time, an offshoot of microfinance which I call “micro equity”. As it’s name denotes, it works with a “crowd funding” model– like Kiva or Kick Starter – but invests in social enterprises that offer a real return to the micro investor, versus merely a psychic one. I’m going to watch that one closely.

A pair of doves appear outside my window.   Peace in Ukraine?

A pair of doves appear outside my window. Peace in Ukraine?


I went to Kiev for the first time in 1992, only a year after Ukraine became independent of the Soviet Union. I was invited by a member of a Rotary Club from Seattle, Washington, a Ukrainian-born American who knew of our work in Latin America and thought FINCA could play a role in moving the country off the command-and-control model and towards a market-based economy. In the end, we never established a program there (long story), but I will always remember my impressions of what turned out to be my first visit behind the (now fallen) “iron curtain”.

I made the trip in the dead of winter, January or February, I think. Part of our Western propaganda was that all Soviet women were fearsome apparatchiks , but when we disembarked from the plane we were met by what I still think of as probably The Most Beautiful Woman in the World, a stunning blonde in a mink coat and hat who cheerfully escorted us to the baggage claim. Outside immigration, I was met by my Rotarian contact, Konstantine, and my interpreter, Nataliya, another stunning Ukrainian woman. There were no tourist class hotels in Kiev at the time, so they put me on a cruise ship docked on the Dnieper River. The room was minute, the food bland, but the crew friendly. I thought it was also deader than tomb at night, but this proved not to be the case.

The next day, Konstantine took me on a tour of Kiev, and then to a meeting of the Kiev Rotary Club in one of the many drab buildings that had housed the Soviet bureaucracy and grew like urban blight around the beautiful Ukrainian Orthodox Churches in the center of the city. There was a huge in the room, and the Rotarians were so immersed in their own bilateral conversations the brief speech I had prepared at Konstantine’s urging went entirely unnoticed. Afterwards, I asked my guide to introduce me to people who already had a small business or were trying to start one and might need credit. The economy of the Ukraine was in terrible shape, like that of the rest of the former Soviet republics. Unemployment was high as the government agencies laid people off and State-run enterprises shut down altogether. Many former professionals — doctors, scientists, lawyers, etc. — had established kiosks and were selling cigarettes, vodka and canned goods. The markets were actually pretty active, with people selling fruits and vegetables from the small plots there were permitted to cultivate. One small farmer greeted me enthusiastically, asking me to send his best wishes to Bill Clinton. What Kiev lacked completely at that time were retailers of any size or with any inventory other than garments left over from the Soviet era. My guide seemed embarrassed to have to show me this. “What a bunch of junk!” she exclaimed, picking through a rack of drab-looking dresses. “Who would want to buy this rubbish?”

That night, I went poking about the small cruise ship, in search of a way to pass the time. For a while, I stood on the bow, watching the black waters of the Dnieper rushing by, carrying large chunks of ice. So far, my impression of Kiev was that it was a pretty gloomy place, populated by people who seemed not to have got the news that their Soviet masters were no longer in charge. On my way back to my room, I saw a door with a cocktail glass on it, and pushed it open. Music exploded out into the cold Kiev night. Before my eyes, about fifty people, men in jackets and ties and women in evening dresses, were staggering about a dance floor, all in advances stages of inebriation. So this was where the party was! It changed my view of Kiev and Ukrainians completely. In fact, as I went to other former Soviet satellites over the ensuring years — Hungary, the Central Asian Republics — I found this to be a common theme: the secret, inner life of the cities and towns. Beneath the ugly, outer skin of the Soviet infrastructure was a vibrant core where people exercised their love of music, dancing, and life itself.

Today, Ukraine is one of a number of countries, struggling to shape its new destiny. Syria, Egypt, and Libya are others where opposing groups are rushing to fill the vacuum left by fallen despots. A decade from now, will they have found a way to live together in more tolerant, pluralistic societies? It seems a question no amount of well-intentioned — or not – intervention by outsiders can answer.

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