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Worldwide Locations

Capital Opportunities: Microcredit in Asia and the U.S.

Microfinance in India. (mikebitton/Flickr)

Microfinance in India. (mikebitton/Flickr)

Event Agenda
Screening of Sixteen Decisions, a film on Microcredit
Panel Discussion with Asian and American Entrepreneurs
Question and Answer Session

Welcome
Marshall Bouton, Executive Vice President, Asia Society

Panelists
Milton Balcacer, Credit Where Credit Is Due, U.S.A.
Valerie Davis, Project Enterprise, U.S. A.
I Gusti Made Oka., Bank Dagang Bali, Indonesia
Jayshree Vyas, Self Employed Women’s Association, India
Roshaneh Zafar, Kashf Foundation, Pakistan

Moderator
Nancy Barry, President, Women’s World Banking

Marshall Bouton

I’m Marshall Bouton, I’m Executive Vice President of the Asia Society and on behalf not only of the society but also our valued collaborators in this program: ASHOKA--Innovators for the Public, Women’s World Banking and Project Enterprise, I am delighted to welcome you to this discussion "Capital Opportunities: Microcredit in Asia and the United States." This program is part of a large and ambitious initiative the society has begun, with founding support from the Ford Foundation, called the Asian Social Issues Program. It is a program designed to enable us as an institution to bring more fully into our agenda the key social challenges that are faced not only by Asian societies but are increasingly shared challenges between Asia and the United States.

Of course, they include human rights, environmental degradation, status of women, migration, poverty and many others and, I must add, very importantly, an emphasis on what we do on the creative solutions that individuals and private organizations of various kinds in Asia and the United States are developing to address these issues. So I think it is timely and important that we address the microcredit phenomenon and I can only call it that. It has become emblematic of this larger phenomenon of individuals and organizations seeking such creative solutions to social problems. The examples of microcredit that are best known are those of the Grameen Bank in Bangladesh and the Self Employed Women’s Association in Ahmedabad, India with the latter being represented on our panel tonight. Those two organizations have provided very important models, which are being adapted equally creatively not only in other Asian Countries but in fact here in the United States and other first world countries. Tonight we have a two-part program. We have a film and we have a panel with representatives of five organizations.

The film is a short film called "Sixteen Decisions" produced by Gayle Ferraro and it tells the story of a young Bangladeshi woman whose life was transformed by a business she started with a mere $60. Following the film there will be a panel discussion moderated by Nancy Barry from Women’s World Banking. I’m very pleased that we’ve once again been able to collaborate with Women’s World Banking and with Nancy. We have five extraordinary panelists. They are: Roshaneh Zafar from Kashf Foundation, Pakistan; Jayshree Vyas, from SEWA, India; I Gusti Made Oka from Bank Dagang Bali, Indonesia; Valerie Davis from Project Enterprise and Milton Balcacer from Credit Where Credit is Due in the United States. I want to acknowledge with great appreciation the support of Lee Folger of Washington D.C.. Lee took an early interest in the Society’s Asian Social Issues Program but was very particular that we apply this program to entrepreneurship which also leads to improvements in the life of people in Asia and people elsewhere in the world. I also want to thank Aerial Productions for allowing us to screen the film and our co-sponsoring organizations. Also, our distinguished panelists, I want to acknowledge with great appreciation. Thank you for coming this evening. Please enjoy the film and we look forward to the panel.

Screening of Sixteen Decisions

Nancy Barry

It gives me great pleasure to introduce these panelists and to introduce the subject of microfinance in Asia and North America tonight. As Marshall mentioned, I had the honor last year of moderating the same panel. In that panel, we had Dr. Muhammad Yunus and Mr. Shafiqual Haque Choudhury who is the managing director of ASA, Bangladesh. Only in Bangladesh would you have the new kid on the block have 1.5 million clients. What was fascinating, was to hear the different experiences of Grameen which, as many of you know, has been a pioneer as well as many of the other people at this table in microfinance, and ASA which has learned from the success and the mistakes of Grameen to innovate reduced costs and achieve high repayment rates. So what I think is key, as we think about this incredible movement of microfinance, which now reaches over 20 million borrowers and twice that many savers, is that we are really talking about a tremendous richness in terms of methodology and types of institutional structures that are getting involved in this business and this movement and the importance of asset building for poor women and entrepreneurs through savings. And if you ask a poor woman, she is interested less in borrowing than in building income and assets for herself and her family and at this table we have some of the leaders in the asset building side of the microfinance business. We begin tonight with Roshaneh Zafar who is also a new kid on the block. The operations of Kashf in Pakistan began only a few years ago. Kashf is considered to be the best and certainly the most rapidly growing of microfinance institutions in Pakistan, which is not nearly as far as Bangladesh in the area of microfinance. And what I have observed in knowing something about Kashf is that Roshaneh and her organization have been extremely innovative in borrowing the best from Grameen, ASHA and really asking their clients what they need and what works best for them. The key is really home grown models that learn from the success and failures of others.

Roshaneh Zafar

I’m going to begin my presentation first by thanking all the organizers of this wonderful gathering. I’ll begin by sharing with you a very astounding statistic that strikes you when you think about Pakistan and poverty. In 1987, there was 17% of Pakistan’s population that was living at or below the poverty line. In 1999, 30% of Pakistan population is living at or below the poverty line. This has been due to many economic shocks in Pakistan, which have been unprecedented over the past decade. I’ll quickly walk you through some of the reasons. This relates to higher debt servicing and to interface expenditures combined with a severe cut back in social investment projects. In some ways this can be viewed as an opportunity and today’s presentations are really looking at microfinance and opportunities in Asia. This is a market of 6.5 million economically active households that require poverty alleviation support. If you look at another very interesting statistic that the World Bank took out last year in its World Development report, it said 30% of Pakistan’s population right now lives at one dollar a day. And if you go to the second criteria for poverty, 83% of Pakistan’s population today lives at two dollars a day so we are talking about the majority of the population which can be a market for microfinance. In some ways these 6.5 million households that we are talking about are unemployable in the formal sector so they seek employment in the non-formal sector or the microenterprise sector. Within this, there is another underlying trend, which we term the "feminization of poverty." In simple terms, it means what you saw in the "Sixteen Decisions" video right now, that women bear the brunt of poverty. They are the ones that have to be creative and resourceful to feed their children. This reminds me of a quote that Professor Yunus once shared with me and it really is a reflective quotation that I’d like to share with you. Before I share that I like to you share a question with you. "Why has microfinance become a movement of women or that is by women and for women?"

In 1984, when the Grameen bank applied for a formal banking license within the negotiations, Professor Yunus received a letter from the Central Bank of Bangladesh which said, "Sir, can you tell us why the majority of your customers are female?" So he was very perturbed by this question. He spent a sleepless night. The next morning, when he got up, he got a pencil and paper and wrote down his response which said, "Dear Sir, can you tell me why the majority of your commercial bank customers are males?" You would be glad to know that to this day he has not received a response to his questions but he did receive a license for the Grameen Bank. I’d like to share with you that in developing countries women play a very strong role in the economy, the same is the case in Pakistan. But there are many contradictory statistics when people talk about women’s role in the economy in Pakistan and that is what the media will tell you and that is probably a myth that is in your minds as well. That is why I want to share this statistic. The official female participation rate is 28%. But when you look at research that was conducted in the microenterprise sector, 83% of females are involved in the microenterprise sector, which means that women are economic agents to alleviate poverty in their family. These sorts of statistics usually result in gender blind policy. Before we started Kashf we looked at how much of this microfinance was going to women and we discovered for every one dollar that was dispersed to men only 25 cents was going to women. And so Kashf was started in 1996 with the twin objectives of poverty alleviation and the economic empowerment of women. I’ll quickly share with you the poverty profile of the people we work with. Twenty percent of the people we work with earn less than a dollar day while 60% of them earn less than a dollar to a dollar and a half a day. In terms of monthly income these households earn 40 to 60 dollars a day and another statistic that might amaze you is that they have $8 to spend on every individual in the household per month, which means that they don’t have enough money to meet basic needs. These households may be landless and assetless but they have a wealth of personal courage. Every age, every epoch has its heroes. The heroes of the developing countries can be found in its villages and in its slums. When Alexander the Great was on the verge of conquering Asia, he began to dispense all the wealth that he had accumulated to his soldiers. One of his close companions came up to him and said, "Are you going crazy? Why are you dispensing all your wealth? We have so many battles to win; we have so many wars to fight. What are you going to be left with?" So he turned to his companion and said, "I will be left with hope, the hope of conquering Asia." Microfinance is the hope that sparks the courage of the poor in the slums of Asia or elsewhere.

I’ll quickly walk you through the approach we have adapted to help poor women. Economic empowerment as we see it is based on three parameters. The first is economic gain, which we generate through loan savings and life insurance services for poor women. The second is increased bargaining position. Obviously, in societies where women are not recognized economically or socially, it is very important to provide them a space. The center, which you saw in "Sixteen Decisions," becomes the convoy for social transformation. The last thing that is important in our paradigm is structural change. You cannot bring change in a women’s lives without providing them an institution that listens to them. In Kashf we do microfinance by women for women. One of the last things that I want to share with you is the impact that the program has. The microfinance program has two levels of impact. The first is if you look at economic impact. When we track the first hundred customers that took loans from us in 1996, 62% of them said that we have experienced economic gains. And they translated that in saying that we can now eat two solid meals a day. Thirty-eight percent felt that the overall economic condition of their houses had improved. They gave examples of being able to patch that leaking roof. They gave examples of building that extra wall they were planning to build or to extend their kitchen space. Forty-eight percent stated that they had increased their capacity to meet consumption needs. In terms of social impact, 46% felt their self-confidence had increased and interestingly enough 40% said domestic fights had gone down over money. Microfinance has often been critiqued for taking the responsibility away from men, for making men less responsible for the lives of their families. That’s not true. In our research, we saw that 54% of men were actually respecting their wives more.

And lastly, I would like to share a story with you of Kausar Baji, who lives in one of the largest slums in Lahore called Sukhnahir, literally translated means the "Canal of Peace". But life is hard for Kausar Baji. She has seven children and her husband is a rickshaw driver, with an irregular income. They earn about forty dollars per month but it doesn’t come regularly. Sometimes it’s twenty dollars. The inability to meet her family’s needs makes Kosar work. As a piece rate worker, she makes handbags for which she gets eight cents. When she heard of Kashf, she took a seventy-five dollar loan and today she can make eighteen cents per bag, which is actually her return, her profit. And, she shared an interesting quote with me. She said, "Now my husband says to me that he shouldn’t scold me since I earn more, and he is attaching more value to my work."

And last but not least, I want to share something that happened with me a year ago when I started Kashf. I was going to a center meeting and I arrived there and the twenty-five women were sitting around collecting their money. One of my clients came up to me and placed a little baby girl in my lap. I looked at her, sort of surprised. Why is she placing the baby girl in my lap? I don’t look maternal. She brought the baby and I turned to her and she said, "Today Kashf has been born." And I looked at her and I still couldn’t understand what she meant and she said to me "I named my daughter Kashf because of the value Kashf has given to my life." And I can tell you, as a person who works in the field of microfinance, the society where the birth of girls is lamented; this is perhaps the greatest recognition that we could have received for our work. Thank you.

Nancy Barry

Thank you Roshaneh. We will now hear from Jayshree Vyas, Managing Director of SEWA Bank. Jayshree began with SEWA Bank fifteen years ago. SEWA Bank is twenty-five years old. SEWA Bank was started and is still governed by poor women entrepreneurs, street vendors, rag pickers, beedi operators. SEWA Bank has over a hundred and fifty thousand savers and borrowers but that grossly underestimates the impact that SEWA Bank has had in India and in the world. They have been very powerful in changing the policies for poor women, changing the policies of the banking system, including getting the interest rates liberalized for microfinance so that you could charge what it costs to make very small loans in a sustainable fashion. Jayshree is a tremendous leader and I am personally honored that she is both a member of the executive committee of Women’s World Banking. Ela Bhatt the founder of SEWA having been chair for the last ten years and is also one of the founding members of the Global Network for Banking Innovation which we are launching next Monday. SEWA Bank is joining organizations such as Deutsche Bank, Citigroup, and Bank Dagang Bali, and twenty other institutions, that together reach over ten million poor entrepreneurs.

Jayshree Vyas

Good evening. It is my pleasure to be here. I’ll start where she ended. I’ll start with some examples of women with whom we are working. A rag picker. She starts her day early in the morning at four o’clock. She goes from street to street. She collects the rags and she almost walks twelve to fifteen kilometers a day. She works for fifteen to sixteen hours a day and earns very little, ten to fifteen rupees a day. Similarly, a vegetable vendor starts her work at five o’clock in the morning. She also walks because she has to bring all the vegetables on her back from the wholesale market to the retail market. She also doesn’t have a capital so she has to borrow a hundred rupees in the morning and repay a hundred and ten rupees in the evening. They all live in slums but these are some examples but there are examples and examples of construction workers, beedi rollers, ready-made garment makers. There are many common features among these women that they work almost twelve to fifteen hours a day, sometimes even fifteen hours a day. They earn very little. They live in small houses or huts. They do not have water facilities. They do not have any drainage or other facilities in the house. They are very vulnerable and very miserable. The main reason, what we found in the early seventies, though these women are very economically active, they are not recognized as workers and because they are not recognized as workers they are poor. So in 1972, we decided, a group of women decided to form a group that was a trade union, that was registered as a trade union. I’m not going into the details of the trade union but the women members of this trade union, they found that the lack of the working capital was really a cause of exploitation by moneylenders and the lack of assets was also another reason why they were exploited. So with an objective of providing them credit for this, they decided: "We will form our own bank." Initially, nobody took these women seriously, they were saying how can there be a bank of poor illiterate women. I’m talking about early seventies, now of course there are many such banks. But then, the women were quite confident. The first step required to form a bank was to collect capital. Four thousand women, all the leaders, collected the capital and that is how we went for registering as a bank. The question again was asked that a woman who is illiterate and does not know how to operate her account, how will she be able to operate her account? But the answer that we had was that though these women do not know how to sign their names they are economically very active and they do need banking services. So finally, we got registration but even at the time of giving registration, the person who was in charge said that as a brother I’m giving you advice that this is a real suicidal attempt that you are making. These women will run away with money and you will have to commit suicide. That was the resistance that was there.

But the main objective of the SEWA Bank was after twenty-five years, we have capital and other things but I am not giving those statistics. But the main objective with which we have been working is to help women form capital at the individual level and at the micro level. The whole process of this capital formation is very long and it doesn’t start at the zero level but it starts at the negative level. So the first step that is required is to help them come out of the moneylenders’ debts. Then the second step is to build their own assets through savings, through equipment loans, buying equipment, through increasing their volume of business, through increasing their capital loans and also by improving their housing conditions by getting their housing loans and other infrastructure loans. But during this whole process what we have found is that they are not always going up and up and up, many times they are falling because of the sickness and when there are other contingencies like when there are rats, of course now the earthquake. But many contingencies they are falling sick and they are falling from this whole process of capital formation, so insurance.

So it’s a combination, but we have realized it’s a combination of all the three services, savings, credit and insurance, which is helping these women to come out of poverty and form capital. The second thing that we have realized as other microfinance institutions is that the mechanism that we need is completely different, that they need simple procedures; co- laterals lend, loans and others mechanisms that are completely different as those required for the higher class, educated people. And the last point that I would like to make is that the whole approach that we have been taking is the lifetime needs approach is that women or poor people need money for different purposes They need for the marriage of the children. They need for business. They need for old age. They need when they are sick. So there are different kinds of needs and we are trying to identify those life cycle needs and on the basis of that, those needs that cannot be planned, like sickness and others, insurance, and for those needs that can be planned like marriage and or education of children, old age, saving. And for those needs which are product due, like business and others, where we give you credit. So it’s a product of all three services, which is really helping them to come out of poverty. Thank you.

Nancy Barry

Thank you Jayshree and thank you to all the panelists. It is very difficult to fit into ten minutes all these stories. We will now turn to Mr. Oka. In introducing Mr. Oka, I would like to say that if Mrs. Oka spoke English we would have an even more female dominated panel this evening. Bank Dagang Bali was founded by Mr. and Mrs. Oka. Mrs. Oka is in the back of the room. They themselves were informal-sector entrepreneurs, completely self-taught and a couple of decades ago they formed Bank Dagang Bali, which is now a very successful and profitable commercial bank in Bali where the core of their client base, three hundred thousand of their clients, are low income women entrepreneurs. When Mr. Oka joined us for one of the first meetings of the Global Network for Bank Innovation and Microfinance, which is comprised of regulated financial institutions that see microfinance as a profitable business opportunity and as a way of changing the way the world works. He said to this group of bankers from Asia and the entire world, "In my entire life I have learned that there are only five important things. The first is to work hard. The second is to keep learning. The third is to pray. The fourth is to save and the fifth is to serve poor women." And I found that so powerful that a successful commercial banker had those words come out of his mouth and if we get a handful of leading CEOs of commercial banks to think that way, we can in fact change the way the world works. Mr. Oka.

Mr. I Gusti Oka

Distinguished guests, I am honored to be invited to the Asia Society to tell you how my wife, Mrs. Oka, and I started Bank Dagang thirty years ago in Indonesia.

We are simple people. I began my career as a tailor and my wife as a secretary. Neither of us had attended school beyond the age of 11, but we both attended night school, which is where we met. We were married when I was 23 and my wife, 19.

Even though we were young, we did have a little experience with banks. I had taken out a loan from BRI, which had a branch near to where we lived, to buy a sewing machine. We had also kept our savings there. One day my wife said to me "How much interest are we making in our savings?" I answered, "about 5%," and she said, "we can make more money than that if I lend our money to our friends." And so my wife began an informal business of lending money in our community while she continued her secretarial work.

Gradually people got to know her, and more and more people came to see her. She knew everybody and was an excellent judge of character. Over time the demand for her services grew so much that she had to borrow money from her friends to supplement her own savings, which she was lending to other people. In effect, she was intermediating -she was taking other people’s savings, paying interest on them and lending them out. Our costs were low. Mrs. Oka visited clients on bicycle. My job was to keep accounts.

In 1956, I needed to borrow more money and the rule of the bank I was approaching was that you needed to become a shareholder in order to be a borrower. This was an eye-opening experience for me. At a shareholders meeting, I was able to see how the bank worked, and all I could think of was how to obtain a bank license for our own lending activity.

In 1968, we incorporated a market bank with US$350 in capital under new legislation that had been passed in Indonesia. Our bank was a small room in a market place with two desks and a bicycle. By 1970, we had made profits of US$40,000. With these profits and a loan of US$15,000 we started Bank Dagang Bali in 1970. It was the second private bank in Bali.

Over the years, we have become known for our savings services. Our skill in this area is based on the fact that we have watched our clients carefully and have worked out the best ways to help them save. We realize that first they value personal and direct service, and so we have developed mobile units of two people who go to our clients to collect savings by foot, by bicycle or by car. We noticed that clients in Bali are attached to lottery schemes and so we have linked our savings to opportunities to win various things from watches to cars. We also found that earning interest is an incentive for clients, and so we have ensured that the interest we pay is higher than the inflation rate even for very small accounts of under US$100.

BDB is now a full service commercial bank offering a wide range of bank services. Today, Bank Dagang Bali has 10, 417 borrowers and 401,909 savers; over half of our clients are low-income women with small businesses. We have an outstanding loan portfolio of about US$51 million, an outstanding savings portfolio of US $111 million, and total assets of US$137 million. Over 50% of our combined lending and savings portfolio is in microfinance.

Through collaborations built in the GNSI, Bank Dagang Bali is now sharing its experiences with other financial institutions around the world. We hope this work will help poor women in places that are far away from Bali, and will be counted among those who worked to make the financial system accessible to the poor.

Nancy Barry

Thank you Mr. Oka. I think that it is worth mentioning that many people see Bank Dagang Bali as having invented microsavings and even in Indonesia, the largest commercial bank, the largest microfinance institution on earth, is an institution called BRI, Bank Rakyat Indonesia. They have over two million borrowers and over twenty-three million savers and during the financial crisis, the last several years, they, Bank Rakyat Indonesia, had to write off hundred percent of its corporate portfolio, fifty percent of its middle market portfolio and their microfinance portfolio went from 99% on time payment to 97.5% and they picked up six million savers during the crisis. And we love to tell those stories and similar stories to really demonstrate that these poor women that we saw in the video and that you have heard form various speakers are in fact the world's best customers. They repay their loans and they do very well in good times but they do much better than the Donald Trumps of this world in bad times. And the other thing that I think is worth mentioning is the amount of sharing that is taking place in this movement and industry. Jayshree Vyas running SEWA bank, which is visited often by heads of state, heads of the World Bank, and is really seen as a model for the entire world in savings, insurance and lending with and for poor women, just got back from Bank Dagang Bali. And I think Jayshree went out of curiosity and I think surprised herself at just how much she had to learn from Bank Dagang Bali. So it is constantly ASHA teaching Bank Dagang Bali how to lend, Bank Dagang Bali teaching ASHA how to save. And the bottom line of this is that none of it is invented here.

And now we turn to the US and I think that we will hear some very compelling stories of two outstanding entrepreneurs and clients. But let us keep in mind as we hear these compelling anecdotes that no one has figured out how to do it in the US or Western Europe in a way that reaches significant members and is sustainable. So as we learn from what happens in Bangladesh or Bolivia or India or Indonesia, let us be very aware that each of these institutions had to learn the principles from successful institutions but had to create models that were really based on asking the customers what they needed, what they valued, and what fit the local economy. So let’s hear from the customers. Valerie is an outstanding entrepreneur who will tell us about her business and the help that she has received from Project Enterprise.

Valerie Davis

Good Evening. My name is Valerie Davis and the name of my business is Valor Gifts. Valor Gifts was born out of my desire to make a little more money to feed my family. I am a single parent of two young children. I had very little self-esteem or education and I came to Project Enterprise almost a year ago, July. Our group was born July the tenth 2001. I am currently part of a group called "Group Success". It is GH 3, the Brooklyn…excuse me if I seem very nervous, I am. This is my first time being in front of an audience of people from different walks of life. That has been one of obstacles in the past. I am learning to overcome it and to feel a little bit more comfortable with myself and with others. Being as you’ve seen in the movie, there are not only financial and economic barriers, there are social barriers. There are emotional barriers, because you are poor you feel a certain way about yourself. Business is a need. There is a desperation that sort of pushes me to do what I do. I haven’t made it yet. I’m just really starting. There is very little know-how. I am getting free education at Project Enterprise -I call it and also sisterhood and brotherhood. The Grameen Bank or the way the Grameen microlending works, I don’t exactly know how it works but for me it is like a life-line being thrown out where you can get a loan without credit, without them actually knowing you, without any expertise. I wanted to start a business, I didn’t know how. I went to the bank, they laughed at me. I don’t know how to approach it. Project Enterprise allowed me to take a step towards entrepreneurship, towards an independent step maybe one day I will see.

Right now, I am currently four months just behind my first disbursement of a loan of fifteen hundred dollars. My business at first came on during the holiday season, which you know in New York the holiday season is a big deal to retailers. My business is actually a gift shop in a catalog. That is how I describe it. Valor gifts started out as a thing I did with friends, family and church organizations that I belong to. I would sell my product by showing a catalog and people would order things from me. Sometimes, which I’m trying to start right now, is doing street vending. A lot of my peers that do street vending are in retailing. I don’t exactly know what you are looking for me to say. I’m going to talk about myself and I am going to talk about my group. We are a group, originally there were eight of us, now there are seven of us. Business is ranging from the street vendor retailer to computers, childcare workers. We have a few housing specialists because that is a great need here in New York…a bake shop, a business that is also needed. I just…to talk about my group. We together learn how to become entrepreneurs but together the unity is there. We bond together not just for economic reasons but also for support. There are some that are more expertise in business then I am. I learn from them. We learn from each other. It’s been an amazing year. We…I am grateful for the opportunity that I am getting at Project Enterprise. Just like I have been hearing tonight as a woman, minority, we make more than fifty percent of the borrowers of microloans, the women. We do it out of our need, not so much to become rich or whatever, that is one of my dreams but right now I am just struggling to survive. I am a product of the slums or whatever neighborhood. I live in Brownsville, Brooklyn. I grew up here in Brooklyn. I travel to the South Carolina where my parents are from. I think I could say a whole more. I just don’t know how to go around. I am overwhelmed at the moment. I am very appreciative of even being considered to sit at this table right now and that is all I have to say for right now.

Nancy Barry

Actually Valerie, it is people like you around the world that make these microfinance programs a success. It really is built on that courage and that optimism in the streets of New York or the slums of Colombia or rural areas of India or Bangladesh. And sometimes in moving the money people forget who has made these programs such a success. We will now turn to your male counterpart, Milton Balcacer, who is from the Dominican Republic. He is an engineer? I think I will let Milton introduce himself and the impact of "Credit Where Credit is Due" on his enterprise and his life. Milton.

Milton Balcacer

Good evening everybody. I just want to thank you and I would like to give tonight a very presentation in Spanish. She can translate it so that you can understand more clear because I want you to catch the message that I want to give. My name is Milton Balcacer. I came thirty years ago from the Dominican Republic as all immigrants do, to have a dream and to realize that dream in search of money and better opportunities. During the thirty years I was looking for one thing and I could not obtain it because of one obstacle, and that was the lack of credit. When you don’t have money you don’t have credit. I say this because of my own experience. I went to several banks. No one would lend the money because I didn’t have any collateral, any credit basically. Once I had the idea of having a grocery store and I did everything possible to borrow the money. I was able to obtain five thousand dollars paying two hundred and fifty percent interest, a thousand dollars of interest monthly. I wasn’t able to maintain the business or survive because most of the profits of the business went to the interest and I lost my business.

Like most immigrants I continued on that search and then after lots traveling around I finally found "Credit Where Credit is Due". There, I was able to obtain a course on entrepreneurial training on how to manage a business and because I didn’t have much faith in banks I didn’t know how to manage my money too well. After the course work, I was able to start another business and I was able to open an account, and I opened that account with only sixty dollars. Today I manage a capital of two hundred thousand dollars that are mine. Thanks to a small business loan of thirty five hundred dollars that I was able to borrow from "Credit Where Credit is Due". I continued to invest that money without buying any new shoes. Basically, I continued to invest that money because my father once told me that if you plant a bean that seed will give you bean trees. So, basically the concept is to put your money to grow. Because money brings money. Right now I have my own corporation that is Milton Corporation. I have another business that is Milton Commercial. Thank God and thank "Credit Where Credit is Due" my dream come true. I invite to everybody here that can cooperate with that kind of business to help them because they help people like me. Today I am very happy because my dream come true. Thank you.

Question and Answer Session

Nancy Barry

Thank you Milton. I don’t know where Shyama is but I assume we have time for a few comments, questions, discussions so I would like to open it up.

Question

I am one of the founders of Project Enterprise. I just want to say that one of the things you said was that the United States really hasn’t been able to make an impact. My comment to that is that we started Project Enterprise four years ago and we now finally have over a hundred something borrowers. But together with the Grameen USA, we have created almost microlending in a box where we have been able to franchise…in different places and it is amazing how quickly they have grown. So even though the impact in the United States doesn’t have the hundred of thousands that we do in other countries, I will say that there is finally systems in place that are starting to seed throughout the country and take off and really make a difference.

Nancy Barry

Thank You.

Question

Both the film and Oka mentioned getting money at one point in their careers from moneylenders. So I was wondering if there was ever any problem with the microlending institutions basically cutting on their turf.

Nancy Barry

Jayshree do you want to respond that? Have there been issues where the moneylenders have these as their traditional clients all of a sudden SEWA bank comes in at lower interest rates and breaks up the traditional money lender relationship?

Jayshree Vyas

Well, moneylenders definitely see us as their competitors and they see their business losing, so many times they indirectly hinder our work. For example in India, in the early seventies, the government had declared write offs of loans but that was the rural loans. So at that time, moneylenders took that opportunity and they told to all our loanees that you don’t have to repay the SEWA bank loans. So we were really in trouble. So they were indirectly trying to create problems for you.

Question

One obstacle that the film mentioned to progress of the lower class seems to be the perception and attitude of the upper class with financial aid where a lot of people are unwilling to lend to lower income classes. Is that changing because of advancements that they are making through the microloans? Are the perceptions and attitudes of the middle and upper class towards the lower class changing?

Jayshree Vyas

Yes, definitely. Now they have started understanding that the experiences have shown that the poor are repaying so they are credit worthy and they are also saving. Now even the mainstream banks are excepting them.

Nancy Barry

Do others have a comment on that in terms of seeing the impact of this changing the attitudes of traditional bankers and also the middle and upper class on poor people as good entrepreneurs. I think something like the Global Network for Banking Innovation in Microfinance could not have happened ten years ago, maybe even five years ago. What we are seeing is that the multiple models that are working at significant scale and showing that this is not a risky business but it is a high transaction cost business and the innovations that are occurring are on how to lower these transaction costs. All of a sudden banks, a handful of banks, it is not yet a critical mass, are seeing the future of world in small transactions. And we are talking about five hundred million potential customers that actually repay their loans. I see globally attitudes changing.

Question

Are you building any kind of data bank on this just on the computer so that at least somebody who is beginning to be successful, like Milton, is in the data bank and who knows what other businesses he might want to go into?… Or this young lady that there is a way to check it out, an easy way, a winner’s circle.

Nancy Barry

I am not aware of global data banks on entrepreneurs in terms of what businesses they are in and where they are moving. But we are much more successful now at really looking at the financial institutions, whether they be cooperative banks, like SEWA bank, or commercial banks, like Bank Dagang Bali, or NGO’s, like Kashf, and really look at looking at who is performing well in terms of reaching large numbers, in terms of doing it efficiently, and who is really innovating so there is more and more lateral sharing using the internet and communication technology in having people be able to learn from each other.

Question

I was interested in the film that Selina used her money to buy tools. Can you explain how that is affecting family dynamics in that kind of situation?

Nancy Barry

So you are referring particularly when the women happens to be the borrower but the end-user is her husband?

Question

Yes.

Nancy Barry

Does that really count as a women’s business or how do you see that? Roshaneh.

Roshaneh Zafar

Actually you can’t really separate a women from her household. Poverty is something that the entire household suffers from. So the way we view it, we give the entire loan to the household. It is a rational economic choice that they make where their money will earn the most. So here is an opportunity which the household can leverage. So it’s really not about who uses the money initially but as time goes on and women grow more confident they tend to use the money themselves. This is where asset building comes in. This is where the income building gets diversified. The first loan may be used by the man the second loan is usually used by the woman. We did some very interesting research on this because this is a critique that microfinance faces when money is used by the men. We wanted to see whether the labor supply in the household was changing and what were the dimensions of the labor supply as a result of the loans that we were making out to these poor households. We discovered that in ninety-six percent of the cases the men were working as hard as they were working before. So there was no change and it wasn’t as if women were working and men were sitting home and not working. So you really can’t separate the household, you can’t separate the woman from the household. And if a program thinks like that it’s actually not going to have the impact that it wants to on poverty.

Nancy Barry

There also can be a real power shift when the woman happens to be borrowing the money. So even if the economic by another member, including her husband, it is different if he is the borrower and the dynamics that Roshaneh mentions can happen over time.

Question

You mentioned the Internet as having potential to help people share knowledge and transfer learning, Internet, cell phones and other wireless technology. Do you have a sense on what these technologies can do to help them grow the entire industry…?

Roshaneh Zafar

I think that IT can really help in reducing transactional cost. For example there is a very good program in Hydrabad, India which is doing smart cuts. What it does is that it is really reducing the labor intensity of microfinance. A lot of the work that we do is labor intensive. You need bank workers to go out there to collect transactions. You are talking about millions of little transactions that need to be recorded. One of our biggest concerns in this field is not only managing default but also managing fraud because you are talking about a lot of cash exchange. IT can help you do that. It can help you leverage on a lot of information issues so it will help you cut down. That’s where it goes back to the issue of whether commercial banks will find this viable. One of the reasons why commercial banks don’t find this viable is because the average costs of making a loan is very, very high because your talking about seventy five dollars rather than seven million dollars or whatever.

Nancy Barry

What we are seeing is that the bankers are learning a lot from the microfinance institutions on how to establish relationships for trust based banking and how to increase the efficiency of a relatively labor intensive technology where you now see in some countries, particularly in Latin America but also in Africa and Asia, that a loan officer is managing over six hundred loans. So the efficiency is improving. So, only once establishing that one on one relationship, do things like smart cards, credit cards, automatic lending, e-banking, all of a sudden those things can be folded in. But you cannot begin by passing out credit cards in a bar ale or you won’t repaid.

Question

It seems to me that you are encouraging an incredible change in the social fabric. Ultimately I think that…you spoke of the medicine man for example and the moneylender. I even forgot that we used those terms anymore. Ultimately we must come face to face with those changes that have been applied to fabric of that particular country or that particular nation for many years. It seems to me that you are in effect advocating change of major sorts, really. You can’t help it.

Nancy Barry

And we are not apologizing either. I think that you are really on to something very important because this is way more than about dispensing fifty-dollar loans. This is turning the entire world on its head. The whole set at the bottom of the economically active pyramid that has been considered unbankable is being looked at in a new way that will shake up traditional economic and social dynamics. Comments by any of my colleagues.

Jayshree Vyas

Actually we want that because this is not accepted the exploitation for the women and those that are working so hard and contributing to the economy, not getting their proper share. So we really want to change it. So we are really quite happy that it is happening.

Nancy Barry

And it is at all levels. It is at the level that you are talking about of that strong arm, money lender relationship, but it is also at the level…I met with the central bank governor of Kenya about a year ago and he said, "the entire banking system of my country is built as if the economy looked like the US or England, when in fact the lion share of the economically active population are street vendors, informal sector industrialists, peasant farmers, and I’m going to spend the rest of my life getting the banking system to fit the reality of my country." So if we get leaders that are also shifting their thinking that way, and things are working on the ground, I think that there is hope for social capital and social capitalism.

Question

What percentage of microcredit institutions or borrowers are in Asia versus Africa versus Latin America as opposed to what you said not in the more developed world and then what theories do you have about why it hasn’t taken hold in the developed world?

Nancy Barry

And then comes the surprise, thirty percent in Africa and ten percent in Latin America. The Africans are the most underestimated segment of the microfinance field. You tend to hear about models banks like Grameen but in fact in Africa there are several institutions that have over five hundred thousand member savers and borrowers and there are a significant number that have over a hundred thousand. So they tend to be credit union type models rather than NGO type models and serious grassroot type of organizations but in the Africa microfinance network, which we have catalyzed with the African microfinance leaders of thirteen countries, in those thirteen countries they are reaching over two million borrowers. In all of Latin America, the total is not one million. So it is interesting.

In terms of why it hasn’t worked in Western Europe or the United States and I add a significant scale and I think there are things that are beginning to take off and it is by groups that are really seeing not as replicating something the worked elsewhere but as using the existing banking system and infrastructure. It is a combination of …there are millions of goods and services that poor people can make for poor people in India but if you are a poor person living in the slums of New York, you buy from Kmart, which means you buy from Korea or China. So the markets are much more developed. I understand that to have a hot dog stand on the street corner of New York you have to pay the Mafia thirty seven thousand dollars for a license. Though there are not so many very small activities that low income, not so educated person can do as a start up enterprise. And then the cost to deliver the services, given the salary structure in the United States relative to the size of the loan, end up making it not very economic. While in developing countries it has got to reach poor people and it has got to be sustainable, in the US people have not really bought into it has got to be sustainable.

Question

This may be a related question. The women in the film mentioned how they one day hoped to take larger and larger loans and then no longer need loans. Do women eventually emerge from borrowing? Its seems in Milton’s case, for example, he has done that but it may be in context of the formal economy verses the informal economy. So I was wondering if people are actually able to emerge as they plan to from taking out their loans.

Jayshree Vyas

Well, we don’t have a single client who has stopped taking loans. There are fifteen loans, twenty loans, that one client has taken. It ranges from repaying the old debts. Then slowly it’s building up the business. Then it’s buying business equipment. But then entering from the retail business to the wholesale business. So we have always seen that they have always been going ahead and taking loans but at the same time they also have savings like for the marriage of children instead of taking loans they have savings. So it’s a combination of all but that doesn’t mean that they stop borrowing.

Roshaneh Zafar

I think, if I may add to that, it’s also got to do with vulnerability and the life cycles of the poor. So things may be good for two years and then there will be a crisis, and then you go back track again. So the access to loans becomes a lifeline to manage to vulnerabilities; it actually reduces variations in income.

Nancy Barry

How about you Valerie? Do you see yourself continuing to borrow as you get rich or do you see getting out and stopping borrowing.

Valerie Davis

I see getting out of poverty and stopping. Even though as she said there are cycles, things come up, I think here it will be easier to stop borrowing. I just need a break. That’s it.

Question

In the movie about the rickshaw driver, I was curious, what would be the logic of making the loan to the women, to the wife rather than the husband? I would think, in a case where the man is already earning cash …where the women is not earning cash income, there would be two loans in the family. This would be expensive. But here it is the man that is utilizing the money. Why would he not be obvious one? I know, I heard some people talk about the credit history of women apparently is much better than men. I am just curious to why that is the case because I look back to my childhood in India and I remember men moving all over India just to get jobs and then they would work and send money back regularly to their families, their parents and their wives and if you look now in the Middle East, God knows how many men from India, from Pakistan, from Bangladesh are working there by themselves and regularly sending money back to their families and I am curious as to why having a male…has not caught on.

Jayshree Vyas

Well in general that has been the experience that women are more sincere and when they take a loan they use it for the family, they use it for the children, they use it for the welfare of the family and the well being of the family. Whereas men, many times, they spend it on consumption. That is generally…maybe that it is the wrong answer and that is how it is generally spent.

Nancy Barry

Valerie agrees.

Roshaneh Zafar

I think also it has to do with the history of the Grameen Bank. The Grameen Bank was a poverty-focused bank it was not a gender-focused bank at all. It was not looking women. Initially it was sixty-forty, sixty percent were males and forty percent were women. But with time women felt a greater ownership of the process. The social transformation process that you saw in the film that is something that women tend to own. It becomes a women’s space. It becomes time they can take out their families; they can leave their husbands. It is the first time that they can say that I am doing something that is for me. So it becomes an ownership, it really becomes a process; it really becomes a revelation of themselves. That’s why they take that movement on. Now I think it is ninety five percent of the borrowers in Grameen are actually women.

Question

I think that is wonderful and …It seems there is no reason not to continue to expand the initiative as rapidly as possible. At the same time, it would seem to me that men exist also and if there was not a model that did not work for men, there are plenty of conscientious men out there, maybe the problem is not with the men but maybe the problem is with the model. And maybe there could be another model, keep on deploying model you have for women, but maybe it makes sense to develop a separate model that applies more to men.

Roshaneh Zafar

But it’s also about the value of time in the household. The value of time, if you look at the opportunity cost of men and women doing different tasks, that’s another reason why, logically speaking, women become more involved in taking over the transactional side of microfinance. The loans themselves are used by men as well, so you have to see what decisions the household makes. And then another very important thing is the social value; the social capital that you create by having women more involved in this. The video was called sixteen decisions. When you are trying to change society you begin with the women because they are stronger, they take on things.

Nancy Barry

As the president of Women’s World Banking I would like to say that I agree with you and it also is important to note that in different regions there are different distributions. If you look at the pattern in Latin America, it is much more similar to what you mentioned about Project Enterprise in the United States. It’s about sixty five - thirty five, including for the affiliates of Women’s World Banking. What I think is probably true is that men are much less likely to want to get involved in group meetings and sitting down once a week to repay their loans. The individual lending methodologies seem to make more sense and over time that is also true of poor women. What we are seeing in Bangladesh, in Uganda, is that after your third or fourth loan, if you are a poor women, you will go through process, and you probably will be empowered through the group process. But then if you are moving on to slightly bigger loans, you have a strong preference for individual credit. So the microfinance movement, what we like to say is that, "think about a poor women and chances you will also be able to reach a poor man". But if the mindset of this movement was "how do you reach a poor men," you can be sure that the social fabric that we are emphasizing tonight would not have been created. That really may be the most important dimension of the whole thing.

Jayshree Vyas

Well we strongly believe that credit is a good input but only credit cannot really help. You need other services like marketing, training, capacity building, health services, childcare, and when it is a combination of all the services, which really help poor come out of poverty. There are some examples. If a vegetable vendor is given a loan but if she is not allowed to sit in the market and vend vegetables then the loan is not going to come back, so you need also legal aid for those…or proper legal structure for those workers. Similarly if a woman has taken a loan and she is not keeping good health, then how will she be able to work and repay? So there is definitely a need for credit plus services.

Nancy Barry

I think what is key, is that if you look at SEWA and SEWA bank, they have been extremely skillful at not mixing it all up. You find many NGO’s that do a little bit of credit, a little bit of health, a little bit of education, and they do it all poorly. Whereas SEWA bank is SEWA bank. It is run by poor women, it is run by professional women. And it is surrounded, as Ela likes to say, with the cup of "SEWA", which is a combination of producer cooperatives, legal aids organization, and a real economic and social empowerment fabric. But the bank is one of the most profitable banks in India. So the idea that all these things are important, it is also important how to figure out how to do them well.

Jayshree Vyas

Well initially they are definitely funded from outside but eventually women do pay for …Insurance is also partly financed by outside funds but similarly, women are also paying premiums so it’s a combination of both.

Nancy Barry

I’m going to take one more question from the gentleman in the black and Shyama is giving me the time out and I’m thrilled that there is so much interest. It is clear that this could go on for a while.

Question

I have two questions. One, has there been any initiatives in China and the second question, what is the overall number of men and women who are working with microcredit?

Nancy Barry

The answer to the question is that there really have not been major breakthroughs in China. It is illegal to run a non-government, not for profit, autonomous, microfinance institution. There is one project, which has about fifteen thousand clients, that is considered to be the leader and they actually informally are part of our global network for banking innovation, even though they not a regulated institution. But in talking about their program they are very embarrassed because they realize how tiny that is relative to the need and the size of the population. So that is a market yet to be developed. And if you look globally, the number of borrowers under all these different models, coming out of very different kinds of inspirations and roots is just over twenty million borrower and there as least twice, maybe 2.5 times that in terms of microsavers. So there is clearly a strong appetite by poor people to be able to have a safe place for the savings as well as using loans to help them build income and assets. And if you looked at that number in 1980, it was zero. There have always been credit unions, which may have reached some of these poor clients; there have always been moneylenders. But this movement is really about twenty years old. So that is pretty impressive but it is still twenty million relative to five hundred million that need more access to financial services. It will take a range of institutions, a range of methodology, and many leaders like the people sitting at this table. With that, I would really like to congratulate the leaders at this table, both the entrepreneurs and the innovative bankers and to say how pleased that we are that the audience for this has been so great. And also pleased to see how many innovative bankers there are in this room, including Deutsche Bank and Goldman Sachs. So things are changing in this market as well. Thank you very much.