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Rwanda:
From Hand Out to Hand Up
Three Arkansas (United States) entrepreneurs are helping build Rwanda's largest
bank for the poorest of the poor.
Isaac Phiri | posted 11/01/2007 09:10AM
Christianity Today (Magazine)
Their accents put the sound of Arkansas into the air. But Christian businessmen Dale
Dawson, Dabbs Cavin, and Todd Brogdon are half a world away from Little Rock. They
are in the garden of Des Milles Collines, better known as Hotel Rwanda and featured in
the film by that name. These three are here on a life-changing mission: to help build
Rwanda's largest bank for the poorest of the poor.
How these men got from Arkansas to Rwanda is a story they eagerly retold to Christianity
Today during their recent trip to this East African nation—one still recovering from the
1994 war and genocide.
Economics of transformation
Dawson spent the first half of his life in investment banking and later went into the truck-
parts business. By the time Dawson sold his firm to the AutoZone retail chain, it was the
largest in the U.S. He was 46 and well-off beyond his dreams. He went back into
investment banking, but sensed that something was missing. "I had lost the passion," he
said. "I was in the wilderness." Dawson envied friends who could "surrender everything
and go to serve God in Africa." Finally, it clicked. "I needed to make myself available to
God."
Dawson prayerfully did so, and things began to happen. He found himself at an event
hosted by Opportunity International, the Chicago-area ministry that specializes in
microenterprise development.
Microenterprise makes small loans to organized groups of entrepreneurs, helping them
build sustainable local businesses such as dressmaking or selling produce. Last year,
this poverty-fighting strategy grabbed global headlines when Muhammad Yunus and
Grameen Bank from Bangladesh won the 2006 Nobel Peace Prize. Microenterprise is
designed to reach the chronically poor. In many nations, 90 percent of clients are women.
More than 3,100 programs operate worldwide. Major faith-based groups, including World
Vision, are involved as well as major banks, such as Citigroup.
Having come from big business, Dawson thought microfinance sounded strange. At the OI
conference, he watched a video of a Filipino woman who got up at 3 A.M. each day to sell
vegetables. It gripped him because years ago his father had sold milk, eggs, and ice. The
impact was piercing. "I just began to cry. I knew I had found my calling," he said. He
worked up a personal vision statement—"To build a bridge between the rich and the poor
and to transform both"—and then waited to see where God would lead him next.
In the meantime, Dabbs Cavin was being stirred. Instead of truck parts, Cavin had made
his money in community banks. In 2002, Cavin and his partners sold their bank in Little
Rock to a larger bank. Cavin had always wanted to serve God in Africa. Now he was free
and financially able to do so. But where? In Little Rock, Cavin was part of a small
breakaway congregation, whose members had split from the local, left-leaning Episcopal
parish. Their church, St. Andrew's, turned to Rwandan Bishop John Rucyahana for
pastoral oversight.
Soon Cavin found himself in northern Rwanda helping out at Sonrise, the bishop's top-
ranked Christian school. Returning to Arkansas, he raised $1 million to support the
school, seeking the help of a longtime friend: Dale Dawson.
After helping raise the funds, Dawson asked Bishop Rucyahana what else he could do.
"He quickly told me that, while his school for orphans could provide superior education
and business training, unless Rwanda had a better economy to provide career
opportunities, his students would leave after graduation for America or Europe."
That's when everything came into focus. OI had told him it would take millions of dollars to
meet the government's equity requirements to set up a fully licensed microbank for poor
Rwandans. Dawson took it as a personal challenge. Through his personal network, he
and OI raised millions of dollars to make the bank a reality—all in 90 days.
The money was in position but not the manpower or the know-how. That's when Cavin
confronted a fateful question: Should he uproot his family and move to Kigali? Though
not many friends encouraged him, he felt, as he told CT, "If God is calling you to
something, just respond." So he did.
Experience told Cavin he needed a strong team, so on a Friday afternoon, he picked up
the phone and called a close colleague, venture capitalist Todd Brogdon. The call was
such a shocker that Brogdon has it committed to memory. Cavin said to him, "Todd, this
will sound strange to you, but God keeps your name in front of me." He asked Brogdon to
join him in creating a microfinance bank in Rwanda.
Brogdon, then enjoying a promising career, was stunned. "I had never thought of coming
to Africa," he said. He had grown up in poor Eastern Arkansas and saw no need to
globetrot to help the poor. "We have the poor here!" he said. And while Dawson and
Cavin were more financially stable, he was not. "I do not have a big checkbook at home."
Nonetheless, he called his wife. Their conclusion: "This could be God."
Finally the core of a new team was in position: the visionary Dawson, the banker Cavin,
and the venture capitalist Brogdon.
Empowering families
Since the 1994 genocide when 1 million or more Rwandans were slaughtered, the nation
of 9.1 million has become a showcase for economic reform. But even though its economy
is growing at a rate of near 6 percent, Rwanda remains one of Africa's poorest nations,
heavily dependent on agriculture and a cash economy.
Ephraim Kabaija, presidential adviser on rural development, explained that most families
grow cash crops and earn about $225 annually. It's difficult to save anything with such low
incomes.
He said, "Do you know how many children die in our country every year because their
mothers cannot afford the $2 to $10 needed to buy medicines to treat diarrhea, fever,
malaria, and other common illnesses? Do you appreciate how much angst, misery, and
despair we could eliminate from our country if every family had $50 in a savings account?"
As part of the remedy, business and government leaders set out a bold objective to
transform Rwanda from a cash-based to a savings-based economy. Kabaija said, "We
have studied new industrial economies in Southeast Asia—South Korea, Taiwan,
Singapore, and Hong Kong. Early in their development, they moved to a savings-led
economy, and today they have some of the highest individual savings rates in the world.
"Transforming Rwanda to a savings culture will not only provide a cushion for families and
communities, but it will mobilize the capital of our people so it can be reinvested in
businesses and municipal works and make us less dependent on the outside capital of
others."
Back in 1997, three years after the genocide, the evangelical agency World Relief began
a nationwide microloan program called Urwego Community Banking, loaning out as little
as $20 in Rwandan currency to villagers willing to learn how to start and run a small
business. Meeting regularly, the clients would discuss business problems, repay loans,
and borrow additional funds as their businesses grew.
By 2006, Urwego had thousands of clients, an enviably high loan repayment rate (over 95
percent), and the largest microfinance operation in the country. World Relief Canada and
Hope International joined World Relief as financial partners. Sammy Mah, World Relief
president, said, "While others focused on relief work, we led with microfinance activities,
believing that was the best way to overcome poverty, instability, and conflict in Rwanda."
But Faustin Zihiga, then managing director of Urwego, realized his organization had
nearly maxed out its ability to grow. In order for his staff to deliver even more and better
services, they needed more capital investment. "We were upscaling and needed
significant resources."
That's when Dawson and Opportunity International came on the scene. Until recently, OI
was not active in Rwanda. After Dawson raised enough capital to start a microbank,
though, the organization recruited Ross Nathan, an Indian expert, to head operations.
They began the process of registering the bank, finding a location, and setting up
systems. They landed a 10-year lease on prime property in the central business district of
Kigali.
In the meantime, Dawson was in Washington D.C. to attend the annual National Prayer
Breakfast. By happenstance, he met Peter Greer, president of Hope International. That
unexpected encounter led to other meetings and eventually, in 2007, Urwego and OI
agreed to merge their banking, savings, and loan operations.
This first-ever bank merger in Rwanda created a new entity: Urwego Opportunity
Microfinance Bank (UOMB). The combined enterprise has offices in 27 of 30 districts
nationwide, 28,000 loan clients, and 3,000 savings clients. The bank has $4.5 million in
equity capital, including a loan portfolio of $1.7 million. A few months ago, Rwandan bank
regulators signed off on the merger. The parties describe it as a 50/50 partnership. Each
of the major players has a presence on the bank board.
The new board of UOMB named Zihiga as vice president for marketing, administration,
and rural operations. Urwego staff were assured job security and training in the
operations of the new bank. World Relief's William Toannon said, "Opportunity brings
extensive cutting-edge biometric technology to build the savings side of the business and
offers additional technical capacity."
Around the world, as microenterprise programs have grown quickly, scholars have
questioned whether they actually cut poverty rates significantly. There isn't a consensus
on that yet. This summer, Aneel Karnani, a business professor at the University of
Michigan, published the essay "Microfinance Misses Its Mark."
He wrote, "The critical issue is whether microcredit helps eradicate poverty. And on that
front, it falls short." He noted that China, Vietnam, and South Korea have all reduced
poverty but have not used microcredit programs extensively. They have created factory
jobs and invested in infrastructure. He said Bolivia, Bangladesh, and Indonesia have used
microcredit programs a lot but have not reduced poverty much at all.
In a Web-published rebuttal to Karnani, World Relief leader Gareth Evans said programs
today provide a wide range of financial services to poor families, not just loans. These
may include mortgages, housing loans, leasing services, savings, and insurance. He
noted that it's inappropriate to compare the economies of huge nations like China and
India to small, rural countries that may not have a single industrialized city.
"Microfinance benefits and empowers every family it touches," he said.
Another common criticism of micro- finance programs is that the interest rates on the
loans are too high. Typically, the annualized rates are between 30 to 50 percent. But
program leaders say you can't compare a microloan with the rate you might get in the
wealthy West. Rates for microloans may need to take into account high inflation rates, the
lack of credit availability and collateral, and shorter repayment schedules.
Dignity works
At the grassroots level in Rwanda, microfinance looks like a lifeline. At 11:30 on a sunny
morning in Kigali, CT traveled along with loans supervisor Speciose Mukakamazi to meet
with her clients.
She walked out of one of the bank's branch offices with a brown bag, as if taking an early
lunch. She jumped into a roughed-up Toyota pickup truck and headed for Muhima, a
residential area of 1,200 extremely poor households. Her distance was short but hilly. The
destination was a local government office where two groups of women—about 60 in
each—had been waiting since early morning. This was a big day. The brown bag was full
of cash—new or bigger loans and some returns on savings.
While Mukakamazi's boss, Orren Niyongabo, fixed a flat tire on the Toyota, several
women explained to CT how microfinance loans have changed their lives. "I can dress
and feed my children and pay school fees," said Madalena Mukaseku. These were not
rags-to-riches stories (many were still in humble outfits), but stories about changing from
extreme down-and-out poverty to viable and dignified living.
Later, at a different site, CT visited more than a dozen UOMB clients at one of their "trust
group" meetings, where they come together for discussion, training, and loan services.
Client Josiane Nyinawabasinga told CT that she would rather get a $30 microfinance loan
than line up for handouts. "A loan will not only help me buy food, but also make money to
buy soap."
Group members are expected to make regular loan payments and commit to covering
loans for members who fail to pay. Most loans are used for small businesses. But
recently, other loans were introduced for bicycle purchases, home improvements, and
school fees. Larger loans are available to successful borrowers.
As Nyinawabasinga spoke, her loan officer, Erick Kaitare, scooted from one to the next of
the 50 gathered women, collecting loan payments. He ended up with the local equivalent
of $400. "Not bad," his smile said.
A major factor in the rapid growth of microfinance has been grants from U.S. taxpayers
through USAID and deep-pocket donors—from billionaires Bill and Melinda Gates and
eBay founder Pierre Omidyar on down. At one group meeting, Linda Lair and Gail
Bradley, board members of the Weberg Foundation in Arizona, came to hear about the
results of their foundation's grant of $2.7 million.
"Our goal is to help the poor in the developing world with a hand up rather than a hand
out," explained Lair. Her parents, John and Jacque Weberg, created the foundation after
selling their business. "Dad, being an entrepreneur himself, wants to help others start
businesses so that they can support their families," she said. The foundation will give $50
million over the next 10 years to microfinance programs operated by Opportunity
International, World Vision, and World Relief.
Bradley, a vice president with the Northern Trust Bank in Scottsdale, Arizona, was
impressed with Urwego's operations. "They are very professional," she said. "Urwego
meets the definition of a bank." She was moved by the professional treatment extended to
Urwego clients. "It is important for people to have dignity."
While traveling with Lair and Bradley, OI's marketing executive Mark Lutz said, "Serving
the poor is an act of worship. Every time you serve the poor, you express your love for
Jesus. If Jesus came today, he would be a microfinance banker."
In the field, local program officers are the biggest champions of microenterprise. Celestin
Gatera, World Relief's Kigali-based regional technical advisor for the Great Lakes,
minced no words about who microfinance programs are designed for. "They are [for] the
unbankable," he said. Several stints in microfinance work in Africa, including Nigeria, have
refined his understanding. He said, "Microfinance is a system through which people
excluded from formal financial services can access finance within their proximity. Micro-
finance is the frontier of a new approach. It is a blend of missions and ministry."
The Kigali slum Matimba serves as one example of this missions-ministry blend. Nathan
Gasatura, a World Vision team leader, said this slum was infamous for crime, prostitution,
and drug and alcohol abuse. He said, "Even the government failed to penetrate this part
of the city." Then World Vision made a risky decision: "We decided to use microfinance to
empower the women." A $100,000 fund was established to train women in microbusiness
ventures such as vegetable growing and tailoring.
One year later, most women had abandoned prostitution, had repaid their loans, and
were sending their children to school. "That is one microfinance miracle we have seen,"
said Gasatura.
Explosive growth
Thirty-one years ago, Mohammad Yunus, the Nobel Peace Prize winner, started Grameen
Bank with $27 out of his own pocket. Today, that bank and the Grameen Foundation (its
international associate) handle 2 million clients in 23 countries, loaning millions of dollars
each year.
In Africa, Opportunity International is experiencing huge growth of its own. Its startup in
Kenya increased its number of clients by 400 percent in six months. And Opportunity
staffers are quick to talk about Opportunity International Bank of Malawi (OIMB). The
government issued the start-up with a banking license in March 2002, but it was not until
May 2003 that the first branch opened in Lilongwe. Though the beginnings were humble,
the vision—"helping those living in poverty transform their lives"—was big, because
Malawi is one of the poorest countries in Africa.
By the beginning of 2007, OIMB had six branches, 150 staff, over $5 million in loans, and
53,000 savings accounts totaling $6.4 million. The bank offers more than 10 products—
everything from small loans to foreign currency services—and utilizes up-to-date
innovations such as biometric fingerprint identification technology, smart cards, and
mobile ATMs.
Eric Thurman, coauthor of the new book A Billion Bootstraps, probably has more
experience thinking about and implementing microfinance programs than any other
evangelical leader. Thurman has served as CEO of Opportunity International, Hope
International, and Geneva Global.
"There are only about 100 million families currently using microcredit, and the truth is that
somewhere between 10 and 20 times that many people could improve their lives if
microcredit were available," Thurman said in a recent interview with Kiplinger.com.
But Opportunity has found that microfinance doesn't work in every nation. South Africa's
relatively affluent economy, where people have greater access to resources, has posed a
unique challenge. Opportunity clients number only 389, with a paltry loan portfolio of
under $125,000. The ongoing political crisis in Zimbabwe has severely crippled OI's work
there. And in Zambia, alleged local leadership infighting led to the closure of the
Opportunity initiative in the country. Elsewhere in Africa, OI has acquired nonprofit
microfinance operations, which have a hard time raising significant capital and sustaining
operations long-term.
Despite these challenges, Opportunity is growing its programs in Africa. In 2005, the
organization launched the Lending Hope to Africa campaign aimed at raising $25 million
to fund 10,000 trust groups. By the spring of this year, 7,562 groups had been created.
OI president Chris Crane said, "We are working toward the day when all poor Africans
who need a loan to grow their businesses, a safe place to deposit their savings, or an
insurance policy to protect their families' health and assets [will] have access from an
organization that is dedicated to their needs and well-being."
After 16 intense months in Rwanda, Dabbs Cavin and his family returned to Little Rock in
mid-August to catch the start of the academic year for their school-age kids. Urwego's
acting CEO is Todd Brogdon, who will remain in place until a permanent replacement is
hired. The combined operations of Urwego now include 170 employees. Dawson serves
on Urwego's board.
For all three Arkansans, the experience has been a defining moment in their lives. Cavin
sums it all up with the convicting question: "What is our duty in the world when we live with
so much abundance?"
Isaac Phiri is a journalist based in Lusaka, Zambia.
Copyright © 2007 Christianity Today.
Related Elsewhere:
Opportunity International has more on OI Bank in Rwanda.
Christianity Today's "Small Loans, Big Goals" explained how Muhammad Yunus' Nobel Prize boosts
growing microfinance ventures.
"Lessons from the Poor" explains why giving the award to an organization that encourages
entrepreneurship is significant.
PBS has a transcript of an interview with Muhammad Yunus
A preview of "A Hand Up is Not Always a Handout" by Yunus is available at the Wall Street Journal.
PBS has an article on the history of microfinancing
The Economist writes on the pros and cons of microlending in "The Hidden Wealth of the Poor."
The Association of Evangelical Relief and Development Organizations has a paper on Microenterprise
Development and links to Christian development organizations that implement MED.
From Hand Out to Hand Up
Three Arkansas (United States) entrepreneurs are helping build Rwanda's largest
bank for the poorest of the poor.
Isaac Phiri | posted 11/01/2007 09:10AM
Christianity Today (Magazine)
Their accents put the sound of Arkansas into the air. But Christian businessmen Dale
Dawson, Dabbs Cavin, and Todd Brogdon are half a world away from Little Rock. They
are in the garden of Des Milles Collines, better known as Hotel Rwanda and featured in
the film by that name. These three are here on a life-changing mission: to help build
Rwanda's largest bank for the poorest of the poor.
How these men got from Arkansas to Rwanda is a story they eagerly retold to Christianity
Today during their recent trip to this East African nation—one still recovering from the
1994 war and genocide.
Economics of transformation
Dawson spent the first half of his life in investment banking and later went into the truck-
parts business. By the time Dawson sold his firm to the AutoZone retail chain, it was the
largest in the U.S. He was 46 and well-off beyond his dreams. He went back into
investment banking, but sensed that something was missing. "I had lost the passion," he
said. "I was in the wilderness." Dawson envied friends who could "surrender everything
and go to serve God in Africa." Finally, it clicked. "I needed to make myself available to
God."
Dawson prayerfully did so, and things began to happen. He found himself at an event
hosted by Opportunity International, the Chicago-area ministry that specializes in
microenterprise development.
Microenterprise makes small loans to organized groups of entrepreneurs, helping them
build sustainable local businesses such as dressmaking or selling produce. Last year,
this poverty-fighting strategy grabbed global headlines when Muhammad Yunus and
Grameen Bank from Bangladesh won the 2006 Nobel Peace Prize. Microenterprise is
designed to reach the chronically poor. In many nations, 90 percent of clients are women.
More than 3,100 programs operate worldwide. Major faith-based groups, including World
Vision, are involved as well as major banks, such as Citigroup.
Having come from big business, Dawson thought microfinance sounded strange. At the OI
conference, he watched a video of a Filipino woman who got up at 3 A.M. each day to sell
vegetables. It gripped him because years ago his father had sold milk, eggs, and ice. The
impact was piercing. "I just began to cry. I knew I had found my calling," he said. He
worked up a personal vision statement—"To build a bridge between the rich and the poor
and to transform both"—and then waited to see where God would lead him next.
In the meantime, Dabbs Cavin was being stirred. Instead of truck parts, Cavin had made
his money in community banks. In 2002, Cavin and his partners sold their bank in Little
Rock to a larger bank. Cavin had always wanted to serve God in Africa. Now he was free
and financially able to do so. But where? In Little Rock, Cavin was part of a small
breakaway congregation, whose members had split from the local, left-leaning Episcopal
parish. Their church, St. Andrew's, turned to Rwandan Bishop John Rucyahana for
pastoral oversight.
Soon Cavin found himself in northern Rwanda helping out at Sonrise, the bishop's top-
ranked Christian school. Returning to Arkansas, he raised $1 million to support the
school, seeking the help of a longtime friend: Dale Dawson.
After helping raise the funds, Dawson asked Bishop Rucyahana what else he could do.
"He quickly told me that, while his school for orphans could provide superior education
and business training, unless Rwanda had a better economy to provide career
opportunities, his students would leave after graduation for America or Europe."
That's when everything came into focus. OI had told him it would take millions of dollars to
meet the government's equity requirements to set up a fully licensed microbank for poor
Rwandans. Dawson took it as a personal challenge. Through his personal network, he
and OI raised millions of dollars to make the bank a reality—all in 90 days.
The money was in position but not the manpower or the know-how. That's when Cavin
confronted a fateful question: Should he uproot his family and move to Kigali? Though
not many friends encouraged him, he felt, as he told CT, "If God is calling you to
something, just respond." So he did.
Experience told Cavin he needed a strong team, so on a Friday afternoon, he picked up
the phone and called a close colleague, venture capitalist Todd Brogdon. The call was
such a shocker that Brogdon has it committed to memory. Cavin said to him, "Todd, this
will sound strange to you, but God keeps your name in front of me." He asked Brogdon to
join him in creating a microfinance bank in Rwanda.
Brogdon, then enjoying a promising career, was stunned. "I had never thought of coming
to Africa," he said. He had grown up in poor Eastern Arkansas and saw no need to
globetrot to help the poor. "We have the poor here!" he said. And while Dawson and
Cavin were more financially stable, he was not. "I do not have a big checkbook at home."
Nonetheless, he called his wife. Their conclusion: "This could be God."
Finally the core of a new team was in position: the visionary Dawson, the banker Cavin,
and the venture capitalist Brogdon.
Empowering families
Since the 1994 genocide when 1 million or more Rwandans were slaughtered, the nation
of 9.1 million has become a showcase for economic reform. But even though its economy
is growing at a rate of near 6 percent, Rwanda remains one of Africa's poorest nations,
heavily dependent on agriculture and a cash economy.
Ephraim Kabaija, presidential adviser on rural development, explained that most families
grow cash crops and earn about $225 annually. It's difficult to save anything with such low
incomes.
He said, "Do you know how many children die in our country every year because their
mothers cannot afford the $2 to $10 needed to buy medicines to treat diarrhea, fever,
malaria, and other common illnesses? Do you appreciate how much angst, misery, and
despair we could eliminate from our country if every family had $50 in a savings account?"
As part of the remedy, business and government leaders set out a bold objective to
transform Rwanda from a cash-based to a savings-based economy. Kabaija said, "We
have studied new industrial economies in Southeast Asia—South Korea, Taiwan,
Singapore, and Hong Kong. Early in their development, they moved to a savings-led
economy, and today they have some of the highest individual savings rates in the world.
"Transforming Rwanda to a savings culture will not only provide a cushion for families and
communities, but it will mobilize the capital of our people so it can be reinvested in
businesses and municipal works and make us less dependent on the outside capital of
others."
Back in 1997, three years after the genocide, the evangelical agency World Relief began
a nationwide microloan program called Urwego Community Banking, loaning out as little
as $20 in Rwandan currency to villagers willing to learn how to start and run a small
business. Meeting regularly, the clients would discuss business problems, repay loans,
and borrow additional funds as their businesses grew.
By 2006, Urwego had thousands of clients, an enviably high loan repayment rate (over 95
percent), and the largest microfinance operation in the country. World Relief Canada and
Hope International joined World Relief as financial partners. Sammy Mah, World Relief
president, said, "While others focused on relief work, we led with microfinance activities,
believing that was the best way to overcome poverty, instability, and conflict in Rwanda."
But Faustin Zihiga, then managing director of Urwego, realized his organization had
nearly maxed out its ability to grow. In order for his staff to deliver even more and better
services, they needed more capital investment. "We were upscaling and needed
significant resources."
That's when Dawson and Opportunity International came on the scene. Until recently, OI
was not active in Rwanda. After Dawson raised enough capital to start a microbank,
though, the organization recruited Ross Nathan, an Indian expert, to head operations.
They began the process of registering the bank, finding a location, and setting up
systems. They landed a 10-year lease on prime property in the central business district of
Kigali.
In the meantime, Dawson was in Washington D.C. to attend the annual National Prayer
Breakfast. By happenstance, he met Peter Greer, president of Hope International. That
unexpected encounter led to other meetings and eventually, in 2007, Urwego and OI
agreed to merge their banking, savings, and loan operations.
This first-ever bank merger in Rwanda created a new entity: Urwego Opportunity
Microfinance Bank (UOMB). The combined enterprise has offices in 27 of 30 districts
nationwide, 28,000 loan clients, and 3,000 savings clients. The bank has $4.5 million in
equity capital, including a loan portfolio of $1.7 million. A few months ago, Rwandan bank
regulators signed off on the merger. The parties describe it as a 50/50 partnership. Each
of the major players has a presence on the bank board.
The new board of UOMB named Zihiga as vice president for marketing, administration,
and rural operations. Urwego staff were assured job security and training in the
operations of the new bank. World Relief's William Toannon said, "Opportunity brings
extensive cutting-edge biometric technology to build the savings side of the business and
offers additional technical capacity."
Around the world, as microenterprise programs have grown quickly, scholars have
questioned whether they actually cut poverty rates significantly. There isn't a consensus
on that yet. This summer, Aneel Karnani, a business professor at the University of
Michigan, published the essay "Microfinance Misses Its Mark."
He wrote, "The critical issue is whether microcredit helps eradicate poverty. And on that
front, it falls short." He noted that China, Vietnam, and South Korea have all reduced
poverty but have not used microcredit programs extensively. They have created factory
jobs and invested in infrastructure. He said Bolivia, Bangladesh, and Indonesia have used
microcredit programs a lot but have not reduced poverty much at all.
In a Web-published rebuttal to Karnani, World Relief leader Gareth Evans said programs
today provide a wide range of financial services to poor families, not just loans. These
may include mortgages, housing loans, leasing services, savings, and insurance. He
noted that it's inappropriate to compare the economies of huge nations like China and
India to small, rural countries that may not have a single industrialized city.
"Microfinance benefits and empowers every family it touches," he said.
Another common criticism of micro- finance programs is that the interest rates on the
loans are too high. Typically, the annualized rates are between 30 to 50 percent. But
program leaders say you can't compare a microloan with the rate you might get in the
wealthy West. Rates for microloans may need to take into account high inflation rates, the
lack of credit availability and collateral, and shorter repayment schedules.
Dignity works
At the grassroots level in Rwanda, microfinance looks like a lifeline. At 11:30 on a sunny
morning in Kigali, CT traveled along with loans supervisor Speciose Mukakamazi to meet
with her clients.
She walked out of one of the bank's branch offices with a brown bag, as if taking an early
lunch. She jumped into a roughed-up Toyota pickup truck and headed for Muhima, a
residential area of 1,200 extremely poor households. Her distance was short but hilly. The
destination was a local government office where two groups of women—about 60 in
each—had been waiting since early morning. This was a big day. The brown bag was full
of cash—new or bigger loans and some returns on savings.
While Mukakamazi's boss, Orren Niyongabo, fixed a flat tire on the Toyota, several
women explained to CT how microfinance loans have changed their lives. "I can dress
and feed my children and pay school fees," said Madalena Mukaseku. These were not
rags-to-riches stories (many were still in humble outfits), but stories about changing from
extreme down-and-out poverty to viable and dignified living.
Later, at a different site, CT visited more than a dozen UOMB clients at one of their "trust
group" meetings, where they come together for discussion, training, and loan services.
Client Josiane Nyinawabasinga told CT that she would rather get a $30 microfinance loan
than line up for handouts. "A loan will not only help me buy food, but also make money to
buy soap."
Group members are expected to make regular loan payments and commit to covering
loans for members who fail to pay. Most loans are used for small businesses. But
recently, other loans were introduced for bicycle purchases, home improvements, and
school fees. Larger loans are available to successful borrowers.
As Nyinawabasinga spoke, her loan officer, Erick Kaitare, scooted from one to the next of
the 50 gathered women, collecting loan payments. He ended up with the local equivalent
of $400. "Not bad," his smile said.
A major factor in the rapid growth of microfinance has been grants from U.S. taxpayers
through USAID and deep-pocket donors—from billionaires Bill and Melinda Gates and
eBay founder Pierre Omidyar on down. At one group meeting, Linda Lair and Gail
Bradley, board members of the Weberg Foundation in Arizona, came to hear about the
results of their foundation's grant of $2.7 million.
"Our goal is to help the poor in the developing world with a hand up rather than a hand
out," explained Lair. Her parents, John and Jacque Weberg, created the foundation after
selling their business. "Dad, being an entrepreneur himself, wants to help others start
businesses so that they can support their families," she said. The foundation will give $50
million over the next 10 years to microfinance programs operated by Opportunity
International, World Vision, and World Relief.
Bradley, a vice president with the Northern Trust Bank in Scottsdale, Arizona, was
impressed with Urwego's operations. "They are very professional," she said. "Urwego
meets the definition of a bank." She was moved by the professional treatment extended to
Urwego clients. "It is important for people to have dignity."
While traveling with Lair and Bradley, OI's marketing executive Mark Lutz said, "Serving
the poor is an act of worship. Every time you serve the poor, you express your love for
Jesus. If Jesus came today, he would be a microfinance banker."
In the field, local program officers are the biggest champions of microenterprise. Celestin
Gatera, World Relief's Kigali-based regional technical advisor for the Great Lakes,
minced no words about who microfinance programs are designed for. "They are [for] the
unbankable," he said. Several stints in microfinance work in Africa, including Nigeria, have
refined his understanding. He said, "Microfinance is a system through which people
excluded from formal financial services can access finance within their proximity. Micro-
finance is the frontier of a new approach. It is a blend of missions and ministry."
The Kigali slum Matimba serves as one example of this missions-ministry blend. Nathan
Gasatura, a World Vision team leader, said this slum was infamous for crime, prostitution,
and drug and alcohol abuse. He said, "Even the government failed to penetrate this part
of the city." Then World Vision made a risky decision: "We decided to use microfinance to
empower the women." A $100,000 fund was established to train women in microbusiness
ventures such as vegetable growing and tailoring.
One year later, most women had abandoned prostitution, had repaid their loans, and
were sending their children to school. "That is one microfinance miracle we have seen,"
said Gasatura.
Explosive growth
Thirty-one years ago, Mohammad Yunus, the Nobel Peace Prize winner, started Grameen
Bank with $27 out of his own pocket. Today, that bank and the Grameen Foundation (its
international associate) handle 2 million clients in 23 countries, loaning millions of dollars
each year.
In Africa, Opportunity International is experiencing huge growth of its own. Its startup in
Kenya increased its number of clients by 400 percent in six months. And Opportunity
staffers are quick to talk about Opportunity International Bank of Malawi (OIMB). The
government issued the start-up with a banking license in March 2002, but it was not until
May 2003 that the first branch opened in Lilongwe. Though the beginnings were humble,
the vision—"helping those living in poverty transform their lives"—was big, because
Malawi is one of the poorest countries in Africa.
By the beginning of 2007, OIMB had six branches, 150 staff, over $5 million in loans, and
53,000 savings accounts totaling $6.4 million. The bank offers more than 10 products—
everything from small loans to foreign currency services—and utilizes up-to-date
innovations such as biometric fingerprint identification technology, smart cards, and
mobile ATMs.
Eric Thurman, coauthor of the new book A Billion Bootstraps, probably has more
experience thinking about and implementing microfinance programs than any other
evangelical leader. Thurman has served as CEO of Opportunity International, Hope
International, and Geneva Global.
"There are only about 100 million families currently using microcredit, and the truth is that
somewhere between 10 and 20 times that many people could improve their lives if
microcredit were available," Thurman said in a recent interview with Kiplinger.com.
But Opportunity has found that microfinance doesn't work in every nation. South Africa's
relatively affluent economy, where people have greater access to resources, has posed a
unique challenge. Opportunity clients number only 389, with a paltry loan portfolio of
under $125,000. The ongoing political crisis in Zimbabwe has severely crippled OI's work
there. And in Zambia, alleged local leadership infighting led to the closure of the
Opportunity initiative in the country. Elsewhere in Africa, OI has acquired nonprofit
microfinance operations, which have a hard time raising significant capital and sustaining
operations long-term.
Despite these challenges, Opportunity is growing its programs in Africa. In 2005, the
organization launched the Lending Hope to Africa campaign aimed at raising $25 million
to fund 10,000 trust groups. By the spring of this year, 7,562 groups had been created.
OI president Chris Crane said, "We are working toward the day when all poor Africans
who need a loan to grow their businesses, a safe place to deposit their savings, or an
insurance policy to protect their families' health and assets [will] have access from an
organization that is dedicated to their needs and well-being."
After 16 intense months in Rwanda, Dabbs Cavin and his family returned to Little Rock in
mid-August to catch the start of the academic year for their school-age kids. Urwego's
acting CEO is Todd Brogdon, who will remain in place until a permanent replacement is
hired. The combined operations of Urwego now include 170 employees. Dawson serves
on Urwego's board.
For all three Arkansans, the experience has been a defining moment in their lives. Cavin
sums it all up with the convicting question: "What is our duty in the world when we live with
so much abundance?"
Isaac Phiri is a journalist based in Lusaka, Zambia.
Copyright © 2007 Christianity Today.
Related Elsewhere:
Opportunity International has more on OI Bank in Rwanda.
Christianity Today's "Small Loans, Big Goals" explained how Muhammad Yunus' Nobel Prize boosts
growing microfinance ventures.
"Lessons from the Poor" explains why giving the award to an organization that encourages
entrepreneurship is significant.
PBS has a transcript of an interview with Muhammad Yunus
A preview of "A Hand Up is Not Always a Handout" by Yunus is available at the Wall Street Journal.
PBS has an article on the history of microfinancing
The Economist writes on the pros and cons of microlending in "The Hidden Wealth of the Poor."
The Association of Evangelical Relief and Development Organizations has a paper on Microenterprise
Development and links to Christian development organizations that implement MED.
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