"The experience of working with three microfinance institutions in Peru during the summer of 2011 left me with a greater interest in the planning component of program design and strategic implementation of development initiatives that ostensibly seek to improve social and economic justice rather than simply assist in poverty alleviation.
In Peru, a country that as of 2009 was home to over 220 regulated and unregulated microfinance lenders this is particularly striking. In recounting my experience from working abroad, I’d like to highlight the intermediary role institutions like Freedom From and consultants like myself play, using the case of just two of the microfinance institutions: FINCA Peru and Financiera Confianza, for they reflect the nuanced difficulties of adapting a social and economic equity program, such the Credit with Education Program, to different geographic and social circumstances.
For interventions to be effective their design must account for the various social, political and economic conditions of the targeted regions, both the particularities and confluence thereof, as these elements must be evaluated in the context of adapting project parameters to most appropriately address the needs and requirements of the targeted communities. Unfortunately, this step is too often left out.
This all settled in for me during my last week of work with FINCA in the highlands of Ayacucho, and I really began to examine the aspects of their program that contributed to the efficacy of FINCA Peru’s capacity building workshops that contrasted with other programs.
In the workshops, the themes and principles covered are simple, for example: the net present value of resources, how choices made today impact the future, and how basic accounting can benefit small businesses and individuals to better inform those decisions.
In one activity, participants are broken into two teams whose job is to fabricate paper boxes. With a loan each team buys the raw materials from a vender, constructs the boxes with masking tape, and sells to a seller. And throughout the activity, the price at which they buy and sell fluctuates.
The activity is then followed up with a discussion of how the process relates to the lives of the clients as small business owners or agricultural producers.
Eventually, what is revealed is a circle whose elements combine to form the overall commercial process and interworking of a market.
The take home message is that decisions made in each phase influence the next stage, and that the capital generated must ultimately be reinvested for the process to sustain itself. If the cycle breaks, fracaso, it all fails.
What makes the workshops both successful and applicable to the participants is the manner in which the information is presented. It is not a monologue, it is engaging and participative, relying on the group to generate responses and advance the discussion.
By the end, foundational business principles are covered in such a way that reorients the participants thinking towards pay greater attention to considerations they have been making all along.
This was my impression of Finca Peru, a microfinance institution, manages and invests in 926 village banks.
From there, our team first travelled back to Lima and then on to JunÃn, where I devoted the majority of my work to working with Financiera Confianza in both the highlands and Amazon basin, and thus revealed very different operating conditions.
Whereas Finca Peru has ever been operating as a NGO that promotes village banking, Confianza has developed in a different way.
Though its origins trace back to Separ, a Huancayo based NGO that, similar to Finca, began offering microcredit to women in extreme poverty, it was only in 2006 that they adopted the Village Banking Methodology in addition to the provision of individual loans.
Until 2009, it was a non-bank regulated institution specialized in the lending to micro and small business, today, however, it boasts the title of Financiera, which means that it is a regulated institution authorized to offer most universal banking services, such as checkings accounts.
In my work there, two aspects stood out: the geographical heterogeneity of the region, and relative novelty of the village banking methodology.
I saw a difference in how these two institutions were implementing the credit with education program, and having worked with both, am now capable of offering recommendations that may improve the client outcome of services provided.
While in the field, these recommendations were along the lines of topics covered in workshops, scheduling of workshops, accountability of loan-officers, and formation of solidarity groups.
Overall, the experience has generated a greater interest the behavior change component of development initiatives, both the pedagogy and praxis. I know have a better grasp of what my role was, and should be moving forward, and that is to make sure that those organizations seeking to affect positive social change at the grass roots are in the best position to do so. And that is achieved by increasing their awareness of existing best practices that have already demonstrated successful outcomes, and can focus on the more difficult task of anticipating and assessing program viability under specific circumstances, rather than reinventing the wheel."
Byron Hoy, International Agriculture Development graduate student, 2011 PASS grant recipient
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