Message-ID: <9606010225.AA00886@lan.vita.org> Date: Fri, 31 May 1996 22:25:35 EDT From: DevelopNet News <mailto:dnn@VITA.ORG> Subject: Your VITA Newsletter for June. To: Multiple recipients of list DEVEL-L <mailto:DEVEL-L@AMERICAN.EDU>
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June 1996 Volume 6, No. 6
IN THIS ISSUE
MICROENTERPRISE LENDING
Making it Work
LITERATURE REVIEWS
The "New" Tropical Surgery
India's Poultry Industry
Private-Sector Accountability
ORGANIZATIONS
Consultative Group to Assist The Poorest
VITA PROJECTS
VITA Honors Volunteers
ANNOUNCEMENTS
Renewable Energy
International Courses on Food Processing
* * *
DevelopNet News is published monthly by Volunteers in Technical
Assistance (VITA) in Arlington, Virginia, USA. For additional
information, please see the end of this newsletter.
* * *
M i c r o e n t e r p r i s e L e n d i n g
MAKING IT WORK
Mahamat Faki Ali needed money for his business. He is one of millions of
microentrepreneurs in developing areas around the world who have found
it hard to borrow money from commercial banks because they cannot supply
the required guarantees and collateral. Ali, a professional transporter
of goods in Bangui, the capital of the Central African Republic (CAR),
owns three vans and two taxis; but with his limited funds had been
unable to keep them in service. "I could only travel on foot and did not
know whom to contact for financing which would allow me to get the
vehicles back into working order. The mechanical problems were not very
serious but access to commercial banks was very difficult." he says. Ali
got the funding he needed from VITA's project for assistance to the
rehabilitation and development of private enterprise in the CAR. Today
he has all his vehicles in good working order and provides full-time
jobs to six employees.
The project experiences of VITA and other organizations demonstrate the
unique and productive contributions of small and microenterprises to a
country's economy and societal development. Unfortunately, these experi-
ences also repeatedly demonstrate the impact that the lack of even mod-
est financing has on microenterprise businesses. Common examples include
the inability to make economically sound advance purchases of raw mater-
ials that eliminate costly supplier or marketing intermediaries or to
pay the investment costs of opening a second shop at another location.
VITA's project is one of many that have received funding in recent years
as donor organizations have increasingly recognized the importance of
the small and microenterprise sectors in a country's economic develop-
ment. As this recognition has steadily increased so too has donor sup-
port of microfinance projects around the world. By the mid-1980's the
U.S. Agency for International Development was involved in more than 87
active microenterprise projects in 35 countries. By 1995, the agency was
allocating more than $140 million dollars a year to fund financial serv-
ice programs for the poor.
Microenterprise Lending in the 1990's
Lenders that finance microenterprises have shown considerable creativity
in efforts to improve their services to poor clients, thus reducing pro-
gram costs and increasing their outreach. In the 1970's and 1980's
microenterprise programs around the world built a basic understanding of
entrepreneurs' needs and designed methodologies that would address those
needs. Lending organizations became larger and more self-sufficient. By
the 1990's microenterprise finance programs had departed from earlier
practices in significant ways.
At first, microenterprise programs were donor-driven and patronizing;
their managers made loans under rules they thought would be "good for"
the borrowers. Much time and effort were spent in deciding which bene-
ficiary groups were the most deserving of assistance, and how to target
them. Programs narrowly defined their assistance guidelines and restric-
ted the use of credit by the borrowers. To reduce risk, lenders thor-
oughly analyzed loans and required significant collateral. All these
practices limited credit outlays, kept the loan approval process long,
and kept administrative costs high. Because interest rates were subsi-
dized by donors, it should come as no surprise that the early programs
were neither cost-effective nor self-sufficient.
Then, in the 1990's, new approaches allowed a number of lending programs
to become fully self-sufficient and become models for others to consider
imitating. First, the successful programs now viewed their borrowers as
financially accountable customers rather than beneficiaries. This is
significant because the programs now recognized that as a customer a
microentrepreneur doesn't need the lender to define his credit needs.
Thus, less time is now spent deciding whom to target as potential bor-
rowers and much more time matching program services to their borrowers'
needs. As a result, lenders now place fewer restrictions on the use of
credit, seek to broaden rather than narrow their client base, and try to
expand services to encourage an extended relationship with successful
borrowers.
Successful lending programs have also sought to reduce risk by increas-
ing borrowers' motivation to repay. This not only makes more economic
sense for the client, but also significantly reduces administrative
costs for the lender. Two of the most widely used motivational tech-
niques are lending to groups of borrowers and promising ongoing and
increased access to credit for borrowers who repay on time. Successful
programs have decreased administrative costs by simplifying and decen-
tralizing the loan application, approval, and collection processes.
Finally, lenders found that microentrepreneurs are prepared to pay more
than commercial bank rates to get their loans. So they now charge rates
that cover the higher cost of providing credit in small amounts, but
which are still much lower than usurious rates elsewhere in the market-
place. In sum, by streamlining their administration, focusing on cus-
tomer repayment motivation, and adopting market-based pricing for their
services, they have laid the foundations for self-sufficiency.
As the practices of microenterprise finance programs changed, so too did
donors' approaches to the programs they were funding. An assessment of
programs funded by a variety of donors including the World Bank, the
International Labor Office, the UN Development Programme, the UN Capital
Development Fund, USAID, and the European Investment Bank found that
over the years the donors have become increasingly concerned about pro-
ject sustainability. And they have become less interested in what the
borrowers are using loans for, and the impact of the loans on them.
Donors also seem to be focusing more on projects that provide few ser-
vices other than credit, reach thousands of beneficiaries, and operate
on a commercial basis with interest rates high enough to cover direct
costs and loan recovery.
Planning for Success
As more programs serving the needs of small and microentrepreneurs
strive for self-sufficiency, more reports are becoming available on suc-
cessful practices. Given donors' dwindling resources and changing prior-
ities it is opportune for lenders to re-examine and modify their
approaches and adopt blueprints for future success.
VITA is already involved in this reappraisal. While no one definitive
method will serve the needs of all projects, a number of trends and suc-
cessful practices will repay study by microenterprise lenders. Recogniz-
ing the importance of microenterprise promotion in international devel-
opment, VITA plans to devote this space in the next several issues of
DevelopNet News to analyzing factors in the success of microenterprise
lending. To achieve the goal of self-sufficiency, the factors include
interest rates and management information systems, as well as savings
and other means of mobilizing additional capital.
L i t e r a t u r e R e v i e w s
THE "NEW" TROPICAL SURGERY
Paul Chinnock, 1996. "Tropical Surgery: A New Discipline?" (Editorial.)
Africa Health, Volume 18, No. 2, page 3.
In surgery, the technology gap between North and South is increasing
year by year, for several reasons. For one thing, pharmaceutical manu-
facturers "abandon older products so they can concentrate on meeting the
more sophisticated requirements of the richer nations." Thus, the anes-
thetics spinal nupercaine and trilene "are no longer in production and
ether and ketamine could be threatened," even though the World Health
Organization has recommended them as "essential." Such materials are
still important in the Third World where the buying power of developing
countries is poor.
Surgical procedures are also at risk. In the North, the standard treat-
ment for most bone fractures (pinning and plating) costs $400. Older
procedures, including the application of plaster casts, require skills
that are no longer common. Chinnock (Africa Health magazine) emphasizes
the need for advocacy for Third-World surgery, so that essential chemi-
cal agents are still manufactured and surgeons continue to learn proced-
ures that meet rigorous surgical standards and still are affordable.
These issues were raised by the German Society for Tropical Surgery,
which will hold its next meeting in Olm, Germany, in October.
INDIA'S POULTRY INDUSTRY
P. T. Sreenivas, 1996. "Management and Feeding in India." Far Eastern
Agriculture (March / April), pages 48-49.
Production of eggs and broilers in India has increased 16% and 27% annu-
ally for the last 25 years. These startling growth rates are expected to
remain high for a while in spite of rising input costs, since the demand
for chicken meat is expanding annually. Yet, the average annual per cap-
ita consumption in India is only 32 eggs and half a kilo of chicken
meat. The industry is aiming for 180 eggs and 9 kg of chicken meat by
2015.
Poultry farming is highly profitable, but the second reason for its
rapid growth is successful research on the feed requirements of chick-
ens. Research has concentrated on the use of protein-rich plant crops
whose production does not directly compete with human nutritional needs.
Soybean meal makes cheap chicken feed, but it is deficient in the amino
acid methionine; adding such foodgrains as sesame and maize make up for
the methionine deficit. Feed research has also coped with changes in
yolk color which, though unrelated to the nutritional quality of the
eggs, affects their marketability. Feed requirements also vary if the
weather is hot (above about 32 degrees C), when birds consume less
energy-rich foods than they need, so formulation of rations must account
for this. Management guidelines for hot weather, the development of cage
rearing, and the defeat of microbial parasites have worked together to
develop the industry.
PRIVATE-SECTOR ACCOUNTABILITY
Michael Edwards and David Hulme (eds.), 1996. Beyond the Magic Bullet;
NGO Performance and Accountability in the Post-Cold War World. West
Hartford, Connecticut: Kumarian Press.
This book is the place to find out how nongovernmental organizations are
evaluated by themselves and by their donors. Less space is devoted to
evaluation by their clients. Here we also learn what makes NGOs grow and
succeed, shrink and fail, measuring their success as organizations with
or without regard to accomplishing their external social goals. A con-
cluding chapter by the editors (Edwards of the Save the Children Fund,
London; Hulme of the University of Manchester, U.K.) targets lessons
learned; they tell us that NGO "performance, accountability, and legit-
imacy are tremendously complex areas." How NGOs deal with each other and
with donors and clients has more to do with success than size, growth,
or organizational ideology.
The book is a first volume of essays produced by an international work-
shop held in Manchester in June 1994. The 18 selected papers describe
issues of NGO performance and accountability and how these are changing.
The second volume will review broader relationships among NGOs, govern-
ments, and official donor agencies and the effects of these relation-
ships on the achievements of NGO goals. It will bear the title "Too
Close for Comfort."
O r g a n i z a t i o n s
CONSULTATIVE GROUP TO ASSIST THE POOREST
This group of donors aims to reduce poverty by systematically broadening
and deepening the successful work of pioneer institutions in the field
of microenterprise support. Its goals are to strengthen donor coordina-
tion in the field of microfinance, increase learning and dissemination
of best practices for the delivery of financial services to the poor on
a sustainable basis, support microfinance institutions that deliver
credit or savings services to the very poor on a financially sustainable
basis, and help established providers of microfinance to assist others
to start such services in underserved regions.
To achieve its objectives CGAP promotes best practices into donor policy
and operational support, disseminates information on best practices to
governments and practitioners, and works to channel funds to programs or
institutions to build sustainable specialized institutions and to
broaden and deepen the services available to the poorest of the poor.
CGAP began last June with the participation of nine member-donors:
Canada, France, the Netherlands, the United States, the African Develop-
ment Bank, the Asian Development Bank, the International Fund for Agri-
cultural Development, the UN Development Programme, and the World Bank.
They have pledged roughly $200 million to the CGAP portfolio, of which
the World Bank has contributed $30 million. This amount has become the
basis for the funding facility for eligible microfinance institutions.
Information: CGAP Secretariat, The World Bank, 1818 H Street, NW,
Washington, DC 20433; <http://www.worldbank.org/html/cgap/about.html>,
fax +1 (202) 522-3744.
V I T A P r o j e c t s
VITA HONORS VOLUNTEERS
At its Board of Directors meeting 19 and 20 May, VITA honored two long-
time VITA Volunteers for their many years of exemplary service.
Richard A. Whiting of Minneapolis, Minnesota, and David G. Henderson of
Erie, Pennsylvania, were both named "Volunteers of the Decade." They
were at VITA headquarters in Rosslyn, Virginia, to teach a week-long
course on "Low-Cost Digital and Packet Radio Techniques: Operation and
Applications" through the United States Telecommunications Training
Institute, which provides tuition-free training for technicians from
developing countries and eastern Europe. VITA has participated in pro-
viding USTTI classes since 1987 and has trained over 150 persons from
more than 30 countries.
With Volunteer Pat Snyder of Brentwood, Tennessee, Whiting installed a
packet radio system between Dire Dawa and Addis Ababa, Ethiopia, to com-
municate food stock levels during that country's severe drought in the
mid-to-late 1980's for CARE and the Ethiopian Relief and Rehabilitation
Commission. That effort was the first known installation and use of
packet radio technology for humanitarian purposes anywhere in the world.
Packet radio embraces a suite of techniques to permit computers to com-
municate together using two-way radios instead of telephone lines.
Whiting later traveled to the Philippines for VITA and helped develop a
sophisticated project-planning capability within VITA. He is an indepen-
dent telecommunications and wireless consultant.
Henderson played a major role in VITA's first successful large scale
packet radio implementation in Sudan (1989) for the UN Development Pro-
gramme. This project combined eight local (Khartoum) and distant sta-
tions into a single network, some communicating from distances greater
than 1,000 kilometers. He returned to Sudan the following year to con-
figure two additional networks for that country's Relief and Rehabilita-
tion Commission and CARE and has also installed or studied networks for
VITA in Chad, Madagascar, and Nigeria. Henderson pioneered the integra-
tion of low-cost packet radio wireless and wireline technologies, so
that e-mail can be seamlessly passed through radio and telephone modems.
He is an elected official serving Franklin Township, Pennsylvania.
At the meeting, both persons were said to exemplify the best qualities
in volunteerism at VITA: professionalism and dedication.
Information: Gary Garriott <mailto:garyg@vita.org>.
A n n o u n c e m e n t s
RENEWABLE ENERGY
the Renewable Energy Asia Pacific '96 conference and exhibition in
Manila, Philippines. The event will be dedicated to a review of solar
photovoltaic, thermal, wind, biogas/biomass, and hydro projects in the
Asia Pacific region. The conference will focus on issues of renewable
energy promotion, including marketing strategies and project financing,
as well as policies and incentives for the implementation of renewable
energy projects in Asian countries. The related exhibition will display
the latest products and services in renewable energy and energy effici-
ency. Participants are expected to include government and nongovernment
agencies, financing institutions and associations, renewable energy man-
ufacturers, distributors, suppliers, and consultants.
Information: Sulvia Gikes, Alternative Development Asia, Ltd., 5/F 3
Wood Road, Wanchai, Hong Kong; tel. +852 2574 9133; fax +852 2574 1997;
e-mail <mailto:altdev@hk.super.net>; <http://www.hk.super.net/~altdev/>.
INTERNATIONAL COURSES ON FOOD PROCESSING
The International Agricultural Centre has announced two courses on food
processing to be held in Wageningen, the Netherlands. Food processing is
an important means to decrease food losses and improve food availabil-
ity, quality, and variety throughout the year. Thus it contributes to a
region's food security.
The 14-week course on Quality Assurance and Marketing starts 11 August.
It is designed to help participants identify and solve problems in food
processing by focusing on the selection of technology, quality assur-
ance, and marketing. It is intended for professionals who provide busi-
ness advisory, training and technical support services to food proces-
sing enterprises or groups. The course is also intended to benefit own-
ers of small and medium-scale food processing enterprises.
The 6-week course on Food Fortification Management starts 6 October.
Food fortification is the most sustainable long-term strategy to control
iodine deficiency disorders. It is also an important short- and medium-
term strategy to combat vitamin A deficiency and iron deficiency anemia.
The course is designed to provide participants with information on food
fortification technology and processes, appropriate food vehicles that
may be fortified, and fortificants that convey micronutrients. The
course's strategic focus is to assist governments, private enterprises,
and consumers in developing the capacity to eliminate micronutrient mal-
nutrition. The course is intended for government employees with an advi-
sory role to the food processing industry, industry employees in charge
of food fortification processing, and individuals who can play a techni-
cal or operational role in food fortification in their respective
countries.
Information: R. van Agen, Head, Student Affairs Section, International
Agricultural Centre, P.O. Box 88, 6700 AB Wageningen, The Netherlands;
tel. +31 (317) 490111; fax +31 (317) 418552; e-mail <mailto:iac@iac.agro.nl>;
telex 45888-INTAS NL.
* * *
HOW TO JOIN VITA'S ELECTRONIC FORUM
VITA's free, public, online discussion forum, DEVEL-L, provides for the
exchange of ideas and information on a wide range of issues and topics
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ture, women in development, the environment, small enterprise develop-
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Please do not send these messages to VITA or to DEVEL-L.
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DevelopNet News is an electronic newsletter published monthly by Volun-
teers in Technical Assistance (VITA), a private, nonprofit, interna-
tional development organization located in Arlington, Virginia. The
newsletter needs your stories: you are invited to send them to the edi-
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downloaded gratis from VITA's BBS and gopher addresses.
President: Henry R. Norman <mailto:hnorman@vita.org>
Editor: Vicki Tsiliopoulos <mailto:vickit@vita.org>
Editorial Assistant: Rafe Ronkin, VITA Volunteer <mailto:rronkin@vita.org>
VITA specializes in information dissemination and communications tech-
nology. It offers services related to sustainable agriculture, food
processing, renewable energy applications, water sanitation and supply,
small enterprise development, and information management. It has pro-
jects in 6 African countries.
VITA's publications, on a variety of practical subjects, are designed to
assist persons and organizations in developing countries. You can
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You also may download the list by anonymous ftp or gopher.
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