Re:No silver bullet !

[Jerome Peloquin-2]

Hello!

A WARNING - This is intended to be humorous NOT offinsive.

With due respect, the fundamentals are not part of your query.  Lean
focuses upon cost reduction and not service delivery improvement.  TQM
(total quality management) would seem a better model for the MFI.  Why?
because it is no just loan production that needs improvement.  It is
customer service and support.  Remember we are not loaning money to just
anyone.  The MFI's customers are the poorest people in the world (or,
they should be) The first fundamental question is:  What are your costs?
 The second question is:  How much is your profit?  So, don't tell me
MFI"s have high costs because no one believes the data that gets
published!  That's one reason why MFTransparency exists!  In accounting
there is a term called:  Normal Profit!  Just cosider:  If the SEC in
America could not understand the financial dealings of US banks ...
pray, how will we ever learn the truth bout the MFI's operating issues?

What is "normal profit" for an MFI?  Is there such a thing as, "... too
much profit?"  How much is that?  So, before you tell me that operating
costs are too high, let's gat a bit of objectivity in the game.  Let me
know exactly what you pay your loan officers and staff ... let me know
just how much your effective interest rate is?  Naahhhh, on second
thought ... forget it!  I don't believe the data anyway.
******************************

Jerome J. Peloquin
VP Professional Services
MicroVenture Support, Inc.
717 Lawrence St. NE
Washington, DC 20017 USA
Skype: agidigm
Phone:   [phone]
Mobile:  [phone]
web:     www.microventuresupport.org
email:   jpeloquin@...

See my editorial in Microfinance Focus Magazine
www.microfinancefocus.com
******************************

The New York Times carried an article yesterday about the Kiva
controversy that was triggered by my October blog post
(http://bit.ly/1yAS6n). (If you read the post, you'll see I claim no
originality for the key point.) The NYT article is at

http://www.nytimes.com/2009/11/09/business/global/09kiva.html

The more I think about it, the more I feel that the headline, "Confusion
on Where Money Lent via Kiva Goes," is unfortunate because it makes it
seem like Kiva is embezzling money into bank accounts on the Cayman
Islands. That's not what's been suggested.
--David

[Pierre-83]

Thank you Jerome. I totally agree with your points about optimizing just not only costs. Edward Demings, one of the father of lean once said that if you focus on cost reduction, they soon tend to rise ...

If you look a bit closer to lean management though, you'll see that it is not about optimizing costs, but a method to continuously improve your results, in all their dimensions : social impact, inclusion, affordability, staff empowerment ..
You can use lean to continuously diminish your costs, but it would be somehow narrow minded. Let me take an example : in a ritual workshop, a pluridisciplinary team gathering accountants, loan admin and IT realizes that the MFI volontarily does not reach villages further than 70km of their base, because of collection costs. In the workshop, they think on how to improve this, and realize that they could use a representative in the nearest village to deal with far customers. In this workshop, they not only plan to do that, but the group prepares all the necessary stuff to actually start a pilot initiative the day after : accounting isolation for this activity, bonus scheme for the village intermediary, new procedure for collection, etc. And they turn the wheel again and again : http://en.wikipedia.org/wiki/PDCA.

Hope it helps.
PP

--- In MicrofinancePractice@..., "Jerome Peloquin" <jpeloquin@...> wrote:

>
> Hello!
>
> A WARNING - This is intended to be humorous NOT offinsive.
>
> With due respect, the fundamentals are not part of your query.  Lean
> focuses upon cost reduction and not service delivery improvement.  TQM
> (total quality management) would seem a better model for the MFI.  Why?
> because it is no just loan production that needs improvement.  It is
> customer service and support.  Remember we are not loaning money to just
> anyone.  The MFI's customers are the poorest people in the world (or,
> they should be) The first fundamental question is:  What are your costs?
>  The second question is:  How much is your profit?  So, don't tell me
> MFI"s have high costs because no one believes the data that gets
> published!  That's one reason why MFTransparency exists!  In accounting
> there is a term called:  Normal Profit!  Just cosider:  If the SEC in
> America could not understand the financial dealings of US banks ...
> pray, how will we ever learn the truth bout the MFI's operating issues?
>
> What is "normal profit" for an MFI?  Is there such a thing as, "... too
> much profit?"  How much is that?  So, before you tell me that operating
> costs are too high, let's gat a bit of objectivity in the game.  Let me
> know exactly what you pay your loan officers and staff ... let me know
> just how much your effective interest rate is?  Naahhhh, on second
> thought ... forget it!  I don't believe the data anyway.
> ******************************
>
> Jerome J. Peloquin
> VP Professional Services
> MicroVenture Support, Inc.
> 717 Lawrence St. NE
> Washington, DC 20017 USA
> Skype: agidigm
> Phone:   [phone]
> Mobile:  [phone]
> web:     www.microventuresupport.org
> email:   jpeloquin@...
>
> See my editorial in Microfinance Focus Magazine
> www.microfinancefocus.com
> ******************************
>

[calkinspersonal]

David,
Another question to ask in this debate is what Kiva's MFI partners think. There are certainly a number of them on the Microfinance Practice listserv. Who better to chime in on the transparency of Kiva?
As I expressed in my post yesterday (http://www.seattlemicrofinance.org), I think Kiva has been exemplary in terms of transparency--at least from the point of view of lenders.

What about from the MFI and borrowers side? Is Kiva transparent in how it raises and disburses funds?
Ryan


--- In MicrofinancePractice@..., "David Roodman (droodman@...)" <droodman@...> wrote:

>
> The New York Times carried an article yesterday about the Kiva
> controversy that was triggered by my October blog post
> (http://bit.ly/1yAS6n). (If you read the post, you'll see I claim no
> originality for the key point.) The NYT article is at
>
> http://www.nytimes.com/2009/11/09/business/global/09kiva.html
>
> The more I think about it, the more I feel that the headline, "Confusion
> on Where Money Lent via Kiva Goes," is unfortunate because it makes it
> seem like Kiva is embezzling money into bank accounts on the Cayman
> Islands. That's not what's been suggested.
> --David
>

[Peter Burgess-2]

Dear Colleagues

I like the potential of this conversation ... the operation of any
organization is not simple ... and simple solutions rarely work ... and
simplistic metrics make things worse.

A key to successful performance is being clear about the purpose of the
organization ... and many of the not for profit microfinance organizations
that started the successful track of the microfinance industry were really
clear that their purpose was to help the poor progress out of poverty.
Grameen, BRAC and others organized to do this ... while also structuring the
organization to survive.

An idea that for profit and capital markets is the silver bullet for the
future expansion and success of microcredit is worrisome ... not that the
microfinance industry would not benefit from more capital ... but the
clients may not benefit as the purpose of the microfinance industry migrates
from progress out of poverty to profit on top of poverty.

Because the only ubiquitous metrics circulating in the microfinance industry
are those that relate to the financial performance of the MFI ... it is most
likely that funding will swing from the progress out of poverty purpose to
one that has profit performance as the main focus. This is a dangerous trend
... and almost certainly will set back the core purpose of progress out of
poverty.

The mainstream financial services industry has no purpose whatsoever that
aims at progress out of poverty ... it is about profit and not much else.
Whether or not the profit is good for society is of no interest ... impact
on society is not part of the core performance metrics that are used
anywhere in the corporate and investment world. As far as I know the ideas
of double bottom line and triple bottom line are not part of the calculation
of corporate remuneration with some very few exceptions ... and certainly
not in the big international banking sector.

One day ... hopefully soon ... there can be a paradigm shift in the metrics
that are used to assess organizational performance. My effort with Community
Analytics is a step in this direction. Until social performance is an
integral part of the metrics for decision making, be very wary of profit
performance in the microfinance industry ... it might prove embarrassing.

Peter Burgess
___________
Peter Burgess
Tr-Ac-Net Inc ... The Transparency and Accountability Network
Community Analytics (CA)
Integrated Malaria Management (IMM)
Microfinance Focus Magazine in New York
website: www.tr-ac-net.org
tel: [phone] or 212 772 6918 or 212 744 6469
email: peterbnyc@...
skype: peterburgessnyc
Books: Search Peter Burgess at www.lulu.com

/////////////////////////////////////
On Wed, Nov 11, 2009 at 4:51 AM, Pierre <pierre@...> wrote:

>
>
> Thank you Jerome. I totally agree with your points about optimizing just
> not only costs. Edward Demings, one of the father of lean once said that if
> you focus on cost reduction, they soon tend to rise ...
>
> If you look a bit closer to lean management though, you'll see that it is
> not about optimizing costs, but a method to continuously improve your
> results, in all their dimensions : social impact, inclusion, affordability,
> staff empowerment ..
> You can use lean to continuously diminish your costs, but it would be
> somehow narrow minded. Let me take an example : in a ritual workshop, a
> pluridisciplinary team gathering accountants, loan admin and IT realizes
> that the MFI volontarily does not reach villages further than 70km of their
> base, because of collection costs. In the workshop, they think on how to
> improve this, and realize that they could use a representative in the
> nearest village to deal with far customers. In this workshop, they not only
> plan to do that, but the group prepares all the necessary stuff to actually
> start a pilot initiative the day after : accounting isolation for this
> activity, bonus scheme for the village intermediary, new procedure for
> collection, etc. And they turn the wheel again and again :
> http://en.wikipedia.org/wiki/PDCA.
>
> Hope it helps.
> PP
>
>
> --- In MicrofinancePractice@...<MicrofinancePractice%40yahoogroups.com>,
> "Jerome Peloquin" <jpeloquin@...> wrote:
> >
> > Hello!
> >
> > A WARNING - This is intended to be humorous NOT offinsive.
> >
> > With due respect, the fundamentals are not part of your query. Lean
> > focuses upon cost reduction and not service delivery improvement. TQM
> > (total quality management) would seem a better model for the MFI. Why?
> > because it is no just loan production that needs improvement. It is
> > customer service and support. Remember we are not loaning money to just
> > anyone. The MFI's customers are the poorest people in the world (or,
> > they should be) The first fundamental question is: What are your costs?
> > The second question is: How much is your profit? So, don't tell me
> > MFI"s have high costs because no one believes the data that gets
> > published! That's one reason why MFTransparency exists! In accounting
> > there is a term called: Normal Profit! Just cosider: If the SEC in
> > America could not understand the financial dealings of US banks ...
> > pray, how will we ever learn the truth bout the MFI's operating issues?
> >
> > What is "normal profit" for an MFI? Is there such a thing as, "... too
> > much profit?" How much is that? So, before you tell me that operating
> > costs are too high, let's gat a bit of objectivity in the game. Let me
> > know exactly what you pay your loan officers and staff ... let me know
> > just how much your effective interest rate is? Naahhhh, on second
> > thought ... forget it! I don't believe the data anyway.
> > ******************************
> >
> > Jerome J. Peloquin
> > VP Professional Services
> > MicroVenture Support, Inc.
> > 717 Lawrence St. NE
> > Washington, DC 20017 USA
> > Skype: agidigm
> > Phone: [phone]
> > Mobile: [phone]
> > web: www.microventuresupport.org
> > email: jpeloquin@...
>
> >
> > See my editorial in Microfinance Focus Magazine
> > www.microfinancefocus.com
> > ******************************
> >
>
>  
>

[Non-text portions of this message have been removed]

[Farhat Abbas Shah Shah]

 Rayan and David,
As I observed by supervising the Kiva lending. It is very transparent with the intention of making the process fool proof. However the borrowers don't know about the Kiva. They think that the MFI is lending to them. What the MFIs are doing as a middle link between Kiva and borrowers, this is a different perspective. It needs a deep study.
Regards,
Farhat.



      Yahoo! India has a new look. Take a sneak peek http://in.yahoo.com/trynew

[Non-text portions of this message have been removed]

[Jerome Peloquin-2]

The KIVA issue is another argument for full transparency, is it not?
There is no question that one can always be maligned by malefactors, but
openness is always the best policy, yes?  
Jerry
******************************

Jerome J. Peloquin
VP Professional Services
MicroVenture Support, Inc.
717 Lawrence St. NE
Washington, DC 20017 USA
Skype: agidigm
Phone:   [phone]
Mobile:  [phone]
web:     www.microventuresupport.org
email:   jpeloquin@...

See my editorial in Microfinance Focus Magazine
www.microfinancefocus.com
******************************