Kenyan Crisis Shouldn’t Hide Importance of Ladders Out of Poverty

January 4, 2008

Kenyan Crisis Shouldn’t Hide Importance of Ladders Out of Poverty

January 2008 — Loud emergencies like the post-election violence in Kenya obscure the fact that in the very same slums, in times of relative calm, the quiet emergency of global poverty is being addressed with ladders to climb out of poverty, something that safety nets rarely provide. That’s a message World Bank President Robert Zoellick needs to hear when members of Congress meet with him in early 2008 and urge him to get more microloans to the very poor around the world.

Joyce Wairimu and Wilson Maina are just two of the millions of very poor people who have used microloans to climb out of poverty. Both are clients of Jamii Bora, a microfinance group in Kenya that started eight years ago with loans to 50 beggars in one of the worst slums of Nairobi and now reaches 170,000 savers and 60,000 borrowers. “We have fast climbers out of poverty and we have slow climbers,” says Jamii Bora’s founder, Ingrid Munro, “but everyone is a climber. Joyce Wairimu is one of our fast climbers; she was one of the original 50 beggars. Now she has six businesses and 62 employees. Wilson Maina is another of our fast climbers. Wilson was a thief, one of the most wanted criminals in the slum. His first loan was for $20. He has four businesses and has convinced hundreds of youth to get out of crime.”

Wairimu and Maina have probably faced setbacks because of the recent violence, but microfinance can again be their ladder. With new loans they can rebuild, just as clients did when facing the tsunami in Asia. One would think that Mr. Zoellick would have known about ground-breaking work like this when he met last October with 29 members of Congress who were pressing him for four changes at the World Bank: 1) increasing Bank spending on microcredit from less than one percent to two percent; 2) committing half of those funds to families living on less than $1 a day; 3) requiring the use of cost-effective poverty measurement tools to ensure compliance; and 4) reporting annually on results. But, with nearly one billion living on less than $1 a day, all Mr. Zoellick could promise was more meetings.

It shouldn’t be that much of a stretch for the Bank, an institution that touts itself as “seeking a world free from poverty,” to agree to these requests. Yet Mr. Zoellick and his colleagues persist in focusing Bank spending on safety nets, contending that the very poor require grants, employment and other services rather than microcredit. When asked whether she agreed with this analysis, Munro said:

I don’t agree with that at all, because in Jamii Bora we know that you can reach the very poor. Not just reach them, not just feel sorry for them, pat them on the head and say, we are going to help you to come above the poverty line. . . . Our experience is, first of all, the most desperate are the ones that need microfinance the most, and they can handle it, we have proven that . . . And they don’t need charity because charity is a way to keep people down. If we keep saying, “I feel very sorry for you because you can’t manage this yourself,” you start thinking [to yourself] “I should feel sorry for [myself] because I can’t manage [on my own].” But if we say to you, “You can make it. You have talents. God has given you talents like He has given everybody talents, and He wants you to use them.” And [if] you see some of your friends who were begging beside you on the same street now walk around in nice dresses, their children are in school, they eat three meals a day, they live in a better house-then you also dare to dream that that is possible for [you too].

In January 2008, new sign-on letters to Mr. Zoellick are being circulated in the House by Reps. Holt (D-NJ) and Carter (R-TX), and in the Senate by Sens. Bennett (R-UT), Durbin (D-IL), Enzi (R-WY) and Brown (D-OH). A follow-up meeting with Zoellick will take place in the first part of 2008. All of Congress should sign the letters to Mr. Zoellick and 100 should attend the upcoming meeting to make sure we offer ladders to many more potential climbers like Joyce Wairimu and Wilson Maina.

For more information: Sam Daley-Harris, Microcredit Summit Campaign (202) 390-0012

Background: Don’t Let the Loud Emergencies Hide the Need for Ladders Out of Poverty

The State of the Microcredit Summit Campaign Report 2007 released in December ends with two stories, one painting a picture of need and despair and the other of opportunity and breakthrough. Both point to how urgent it is that World Bank President Robert Zoellick agrees to requests from members of Congress that the Bank increase its spending on microloans and ensure that at least half go to families living on less than $1 a day.

In the first story, former Clinton administration chief economic advisor Gene Sperling recounts a visit to a Senegalese village after heading the administration’s delegation to the 2000 Education for All Conference in Dakar, Senegal. The conference was focused on enrolling by 2015, all of the world’s 113 million children who were not in primary school at the time. On a visit to a rural school that only had a first and second grade Sperling ignored advice of a U.S. embassy official who counseled against taking questions from the students for fear of an “inappropriate request.” As Sperling tells it:

We asked for questions and the first child puts his hand up, and it was a young boy, and he says ‘Do you think next year at our school we can have a third grade and a bathroom?’

I’ll tell you, if there was a moment I became committed to [this] issue, it was just that simplicity. Here we were looking at a school for just first and second graders and the reality [is], here’s a kid who’s finishing second grade and all he wants to do is go to third grade and it’s just not in the cards…and then a bathroom. It never crossed my mind there wasn’t a bathroom at [this] school. And all I could think in light of this guy from the embassy’s line was, that was hardly an inappropriate request, for a child to want to go to third grade, or fourth grade, or fifth grade and the idea that essentially the answer was no. Nobody cares enough to make sure this school has a third, fourth, fifth, sixth, seventh, [or] eighth grade. It’s just so heartbreaking and so wrong.

The Microcredit Summit report ends with another story involving a conversation more than a decade ago between a microfinance client in South Asia and a visitor from North America.

“She wants me to tell you that her son is starting college next year,” the translator said.

“My son is starting college next year too,” the visitor replied.

The conversation continued and a few minutes later the translator interrupted again and said, “She wants me to tell you her son is starting college next year.”

“I know,” the visitor replied, “my son is starting college next year too.”

They talked a little bit more and then the translator interrupted a third time, “She wants me to tell you her son is starting college next year.”

The visitor, finally getting the picture, asked, “Can you or your husband read or write?”

“No, we can’t read or write,” the client replied.

“Could your mother or father read or write?” the visitor asked.

“No, my mother and father couldn’t read or write,” the client replied.

“Could your husband’s mother or father read or write,” the visitor continued.

“No, his mother and father could not read or write,” the client replied.

“Oh!” the visitor said, finally getting the profundity of the information, “Your son is starting college next year. I finally understand. You must be very, very proud.”

In the first story we have the second grader asking if his school can have a third grade and a bathroom next year. In the second story we have a son going to college from a family whose ancestors have probably never been able to read or write, much less attend college. This is the potential of microfinance for the very poor — the potential to break the bonds of intergenerational illiteracy and intergenerational poverty. But global institutions such as the World Bank block this opportunity with a wrongheaded analysis that argues that the very poor cannot benefit from microfinance, they need safety nets instead.

The Gap between the Revolutionaries and the System

The Microcredit Summit report outlines the yawning gap between the microfinance rule-breakers like Nobel Peace Prize laureate Muhammad Yunus and Ingrid Munro of Jamii Bora in Kenya, and institutions like the World Bank. In 1999 Munro gave loans to 50 beggars in one of the worst slums in Nairobi. By the end of 2007, Jamii Bora, which means “good families,” had grown to 170,000 savers and 60,000 borrowers.

Munro makes a mockery of four years of resistance by three different World Bank presidents to getting more Bank microfinance funds to the very poor, a request made by more than 1,300 parliamentarians from around the world. In response to congressional meeting requests on this topic, two Bank presidents, James Wolfensohn and Paul Wolfowitz, wouldn’t even meet with the members of Congress, spurred by aides that couldn’t see the efficacy of such lending. At least Mr. Zoellick made the journey to Capitol Hill last October to meet for over an hour with 29 representatives and senators.

Munro understands why Zoellick’s staff thinks it is impossible to reach the very poor with microloans. Munro agrees that some who have tried to reach the very poor have gotten their hands burned, but goes on to explain the principles needed to make it work.

You have to be very close. You see, the beggar is a professional, it is a profession in itself. So, if you come and give a beggar $100, and say, “You go and start a business,” they will run away with that money. You have to prepare everybody for what it is, and we think you have to start by getting them to save, because then they are in that habit of setting aside a bit of money every day. That makes it easy for them to pay back the loan.

You also have to be there and encourage them when the problems come. The city authorities chase you away from where you are doing your business. A police officer might even take your goods, or thieves break in to your little kiosk, or you have a fire that [burns] down everything. You can’t be like a normal bank and say, “Okay, we will still hunt you. You have to bring the money back.” [Instead] you come together and say, “Now how do we solve this situation?” And you help them get on their feet so they are helped to pay back the old loan, but also a new loan. It’s a matter of being there all the time and understanding.

If you are naïve and you just go up to somebody who you haven’t spoken to about a loan, who doesn’t know [your] group, who doesn’t trust you . . . and you say, “Here’s $100, go start a business,” then you will lose that money. And there are naïve people who do that and I think those are the ones who are spreading this dangerous message that you can’t reach the very poor, because they’ve done it the wrong way themselves, not because you can’t reach the very poor. I invite anyone who doubts to come visit us.

In their book The Economics of Microfinance, Harvard and New York University professors Beatriz Armendáriz de Aghion and Jonathan Morduch challenge the false argument promulgated by the World Bank and others that the very poor cannot benefit from microfinance:

Debate arises, though, with the relatively new (and wrongheaded in our belief) argument that in fact the poorest customers need savings facilities only – that making loans to the poorest is a bad bet. The argument has been made in a variety of CGAP documents, but the most nuanced articulation can be found in [Marguerite S.] Robinson 2001, in her discussion of “financial services in the poverty alleviation toolbox.” Robinson argues that neither credit nor savings accounts are appropriate for “extremely poor” households (instead, she argues for job creation, skills training, relocation, and provision of adequate water, medicine, and nutrition). Providing savings accounts and credit makes sense only for the “economically active” poor (and richer groups), she continues. But, Robinson argues, only savings is right for the poorest among the economically active population. While we strongly agree that access to financial services will not be the answer for everyone, we see neither systemic evidence nor theory that allows us to conclude that savings is more appropriate than credit for the poorest who seek financial services.

The 2006 Results

The State of the Microcredit Summit Campaign Report 2007 outlines the number of clients reached around the world in 2006. It provides further evidence that the very poor are being reached with microloans by the tens of millions, especially in Asia. In 2006, more than 3,300 microcredit institutions reached 133 million clients, 93 million of whom were among the poorest when they took their first loan. Of these poorest clients, 85.1 percent, or 79 million, are women. Institutional Action Plans (IAPs) were submitted by 873 microfinance institutions (MFIs) in 2007. Together these 873 institutions account for 92.4 percent of the poorest clients reported. The Campaign was able to verify data from 327 institutions, representing 79 million poorest families or 85.2 percent of the total poorest reported.

Assuming five persons per family, the 93 million poorest clients reached by the end of 2006 affected some 464 million family members including both clients and their family members. The 464 million people affected nearly equal the combined population of the 27 countries of European Union.

Table 1:

Data Point


Number of MFIs Reporting (1997-2006):


Number of MFIs Reporting in 2007 only


% Poorest Clients Represented by 873 MFIs Reporting in 2007


Total Number of Clients (as of 12/31/06):


Total Number of Poorest Clients (as of 12/31/06):


Total Number of Poorest Women (as of 12/31/06):


Number of Poorest Family Members Affected (as of 12/31/06):


While considerably more than 100 million clients were reached with a microloan in 2005 and even more were included in 2006, the goal of reaching 100 million poorest had not yet been achieved by the end of 2006. The Campaign surpassed this goal by the time the report was released at the end of 2007; however, official reporting on that result will not be released until data is collected, verified, and reported at the end of 2008.

Reaching the goal, even 18-24 months late, is an astonishing accomplishment. A paper written by Vinod Khosla and Susan M. Davis for the 2006 Global Microcredit Summit in Halifax, Canada, was reprinted in the Massachusetts Institute of Technology’s Journal Innovations: Technology, Governance, Globalization (Winter/Spring 2007). The Journal titled the piece: “The Architecture of Audacity: Assessing the Impact of the Microcredit Summit Campaign.” It was truly audacious for a civil society effort to set such a bold, poverty-focused, global goal, which in effect, said to the nations of the world, “You missed a critical intervention — microfinance — in the goals that were set at the UN Summits of the 1990s and at the Millennium Summit in 2000.” Through this Campaign, thousands of institutions have committed to correcting this omission.

Convincing World Bank President Robert Zoellick to Act

It is time for World Bank President Robert Zoellick to commit to the requests from Congress, requests made of his two predecessors by more than 1,300 parliamentarians around the world:

  1. Increase World Bank spending for microfinance;
  2. Ensure that half of World Bank spending on microfinance reaches the very poor, those living below US$1 a day;
  3. Require the use of cost-effective poverty measurement tools to ensure compliance;
  4. Report annually on results.

On October 3, 2007, 29 members of the U.S. House and Senate met with Mr. Zoellick for over an hour to persuade him to commit half of Bank microfinance funds to families living on less than US$1 a day. Zoellick’s main promise to the members of Congress was to meet regularly for more discussion. But while the World Bank talks, 26,500 children die each day from largely preventable malnutrition and disease and some 77 million children of primary school age are not in school, according to the United Nations estimates.

The World Bank’s own website declares it to be “Working for a world free of poverty.” In January 2008, new sign-on letters to Mr. Zoellick are being circulated in the House by Reps. Rush Holt (D-NJ) and John Carter (R-TX) and in the Senate by Sens. Robert Bennett (R-UT), Richard Durbin (D-IL), Mike Enzi (R-WY), and Sherrod Brown (D-OH). A follow-up meeting with Zoellick will take place in early 2008. Each state’s congressional delegation should sign the letters to Mr. Zoellick and should join with other members of Congress in the meeting with Mr. Zoellick in early 2008. They should focus on making sure we offer ladders to many more potential climbers like Joyce Wairimu and Wilson Maina.

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