MIME-Version: 1.0
Date: Sat, 11 Jun 2022 04:24:12 +0200
References: <629FA78A00EC009800390001_0_65968@msllnjpmsgsv06>
In-Reply-To: <629FA78A00EC009800390001_0_65968@msllnjpmsgsv06>
Message-ID: <cakrppjrjg_-e0ghhtfxgrdrtnkaam0x9b7efbu5wogtsxvecrw@mail.gmail.com>
Subject: Re: Sorry for the delayed reply……
From: Daniel Rozas <daniel@danielrozas.com>
To: David Kocieniewski <dkocieniewsk@bloomberg.net>
Content-Type: multipart/mixed; boundary=”000000000000362c0305e122c0de”</dkocieniewsk@bloomberg.net></daniel@danielrozas.com></cakrppjrjg_-e0ghhtfxgrdrtnkaam0x9b7efbu5wogtsxvecrw@mail.gmail.com>

–000000000000362c0305e122c0de
Content-Type: multipart/alternative; boundary=”000000000000362bfd05e122c0dc”

–000000000000362bfd05e122c0dc
Content-Type: text/plain; charset=”UTF-8″
Content-Transfer-Encoding: quoted-printable

Hi David —

I’m glad to hear you’re better after the bout with covid. The past two
years have been a trying time for all of us…

I appreciate the equally in-depth response from you. It’s to be expected
that we don’t agree on all things, but this is in no small part due to the
very different perspectives we have. Despite this, there’s a question where
maybe our interests overlap: how DO you provide meaningful financial
services for the poor and protect clients at the same time? The World
Bank’s reaction here is instructive — they’ll work on tightening their
screening process. But really, what does that mean? How will their criteria
differ from what they have now? And let’s consider what “perfect” criteria
look like and what sort of outcome it can generate? Is there a “perfect”
microfinance institution out there, and how does it differ from others?

After all, the sector has developed a whole suite of tools that aim to
create exactly this kind of screening, and they’re used by a whole group of
investors. No doubt they’re imperfect, evolving, and work better in some
areas and worse in others. For example, in the area of price transparency,
despite the fact that Chuck Waterfield has become completely jaded, he’s
missing the extremely important point that the type of pricing disclosure
he advocated has largely become the norm in many markets. Indeed, in quite
a few countries, it’s now mandatory, with the force of law behind it. And
there many other areas like this — the folks who create and advocate for
these rules and norms — SPTF & Cerise, the rating agencies and assessors
that carry out these screenings, and even the social investors that really
put their money where their mouth is — they can spend many hours
explaining the details. Boring as they are, those details go to the heart
of what screening really means, and it’s in those details that you could
realistically find what’s likely to work, and what’s likely to fall through
the cracks. I really don’t think it’s possible to answer that fundamental
question above without dealing with those boring details.

But even beyond those, there are the really hard areas. Let’s acknowledge
openly that credit at its heart is a financial tool that can both help and
also cause real pain. And then there are the confounding factors — tension
in the family, illness, or just bad luck — credit can exacerbate these as
well. The goal of a serious, responsible institution is to ensure that the
clients who do experience that pain are as few as possible, and that the
level of suffering is capped. After all, some hardships are unacceptable.
There’s a recent study that interviewed 18,000 clients — and found that a
large majority of clients are satisfied with their loans and are not
feeling overindebted
.
But most isn’t all. I posit that even under the very best possible
environment, offering credit to the poor will, inevitably, result in some
cases of hardship, and enterprising journalists will find them — always
and at every institution of significant size. But acknowledging that isn’t
the same as saying anything goes, and that MFIs become unrecognizable from
subprime, payday or their ilk. There is an absolutely clear, distinct
difference here — the default rates of the latter are high, often 15 or
20%. Their business model expects frequent defaults and simply prices for
it — which is another way of saying that subprime is built on the
expectation of widespread hardship. Microfinance doesn’t work that way at
all — MFIs spend a lot of effort to make sure that the clients they lend
to have the capacity to repay. Those efforts are never foolproof, and some
MFIs do a lot better job than others, but the effort is always there.

I’ve worked with MFI collection units, walked with loan officers visiting
clients who are months behind on their loans. What I’ve seen is a courteous
visit, not friendly per se — such things are never really friendly — but
it was more of a reminder that we’re still here, and you should try to
repay if you can. That’s where it ends. And it does work, especially where
clients went through a rough, but temporary patch. I’ve also seen the
universal mantra among well-run MFIs that, especially when dealing with
situations of disaster (like covid), the first call to clients isn’t to ask
them when they can pay, but to ask how they’re doing and what support might
they need. None of this is to say that abuse never happens — I know it
does. But the key question is how to prevent it, how can an MFI balance the
training, compensation and oversight of its staff in way that reduces the
chance of abuse, and also gives clients meaningful channels to complain
when abuse does happen.

Anyway, this is getting rather long, but I really do want to emphasize this
key point — that to do justice to this fundamental question of ensuring
client protection while lending to the poor — requires delving into these
hard questions, and dealing with the reality of both the very real benefits
of credit as well as the reality that it can cause hardship too. Focusing
on just the former (the puff PR stuff) or the latter (the MF is failing
stuff) is not really telling the full story.

So, I’m happy to engage and help put you in touch with the various folks
who work on these issues. And happy to share what I know too.

Finally, I’ve written a brief letter to the editor that raises these
questions in a hopefully somewhat clearer manner. It would be great if you
could share it with the relevant colleagues at Bloomberg. Thanks!

Best,
Daniel

Daniel Rozas | Brussels, Belgium | tel +1 202 436 9864 | mob +32 489
677 056 | skype: danrozas | danielrozas.com | Follow me on Twitter
!

On Tue, 7 Jun 2022 at 21:31, David Kocieniewski (BLOOMBERG/ NEWSROOM:) < dkocieniewsk@bloomberg.net> wrote:

> Hi Dan,
>
> Thanks for reading – and for taking the time to write such a thoughtful,
> candid email.
>
> And apologies for the delayed response: I was stricken with COVID shortly
> after I received it, and am just getting back up to speed.
>
> You raise a lot of important points in your note. While I don=E2=80=99t a=
gree with
> all of them (i.e. =E2=80=93 we spoke to a wide and, broad, assortment of =
investors
> and human rights groups who were troubled by the debt load, collection, a=
nd
> land re-titling practices of Prasac and LOLC) I respect the fact that
> you=E2=80=99ve done an extensive amount of research in the field and are =
committed
> to finding ways for microfinance to accomplish the maximum amount of soci=
al
> good.
>
> Much of our difference of opinion seems to stem from the fact that Gavin
> and I approached the issue as investigative reporters rather than academi=
cs
> or think tank researchers. You are correct, of course, that many of the
> abuses we write about have been known for more than a decade (we
> acknowledge that in the opening paragraph); and that the majority of
> microlenders act responsibly (we mention that in the 8th paragraph). From
> the vantage point of a researcher, perhaps that makes the whole thing
> unworthy of further discussion, and reason to move on to untrod ground th=
at
> might be of more interest to fellow academics or think tank funders.
>
> But as accountability journalists, our role is to act as consumer
> advocates for taxpayers: assessing how public money is being used and
> whether public policies are effective or create unintended consequences. =
So
> the fact that the problems persist – and are still bringing harm to some =
of
> the world=E2=80=99s most vulnerable and impoverished=E2=80=A6=E2=80=A6yet=
continue to be subsidized
> with (an increasing amount) of taxpayer funds intended to alleviate pover=
ty
> — raises important questions for policy makers. And it=E2=80=99s our job=
to ask
> them. What=E2=80=99s prevented the problems from being solved? What happe=
ned to the
> industry=E2=80=99s promise to fix them by becoming more conscientious abo=
ut
> consumer protection and more transparent? What sort of vetting policies d=
o
> development banks use to sort the predatory lenders from the responsible
> ones? And why are development banks continuing to direct taxpayer money t=
o
> abusive lenders?
>
> I can understand that it may not be the story you would have written, or
> been most interested in reading, especially since some of our reporting
> didn=E2=80=99t line up with your research. But it is inaccurate to cast i=
t as
> taking the easy way out, or trying to present a simplistic version of
> events. Frankly, it would have been far easier to do what so many other
> finance/development publications have done. Just repackage the self-servi=
ng
> happy talk that the industry puts out, without doing independent reportin=
g
> and data analysis=E2=80=A6 without looking at where the system does more =
to protect
> investors than the poor and financially-inexperienced borrowers=E2=80=A6.=
and
> without bothering to analyze whether the development/finance world mantra=
s
> of =E2=80=9Cscale=E2=80=9D and =E2=80=9Cmarket-based solutions=E2=80=9D a=
re actually delivering what they
> promise.
>
> So I hope that, despite your disappointment with our stories, you can see
> that rather than peddling outrage or click bait we were attempting (howev=
er
> imperfectly) to hold policymakers accountable and ask that they make
> microfinance more effective by doing more to weed out the exploitative.
>
>
> The good news is that our stories have stirred up debate among some
> decision makers.
>
> The World Bank is reviewing its screening processes, and discussing
> whether to adopt clearer consumer protection guidelines, as are some impa=
ct
> investors. There=E2=80=99s a push in Congress to make USAID improve its d=
ue
> diligence: until we wrote our follow-up story about Jordan (appended belo=
w)
> no one knew that USAID apparently has no regulation that forbids funding
> micro lenders who put delinquent borrowers in debtors prisons. There’s al=
so
> a rethinking about whether US should steer more of its funding for
> financial inclusion to policy options like village savings associations o=
r
> credit unions, which don’t generate profit for investors or banks but als=
o
> don’t rely on exorbitant interest rates or abusive collection practices.
>
> We have a few more stories coming about the microfinance world=E2=80=99s =
promise
> (responsible lenders) and perils (the efforts to weed out rapacious fin
> tech/digital lenders).
>
> It=E2=80=99d be a huge help to get your thoughts on the issues, so please=
let me
> know if there=E2=80=99s a time soon when you might be free to talk and I=
=E2=80=99ll send
> over a ZOOM link. I’m looking forward to the conversation.
>
> Cheers,
>
> DavidK=E2=80=A6.
>
>
>
> ________________________________
>
> This 63-Year-Old Grandmother Was Sentenced to Prison for Owing $845
>
> Tamweelcom, a Jordanian microfinance company backed by Citigroup and
> development banks, has brought cases against more than 1,200 women for
> nonpayment of debt.
>
> By
> Gavin Finch ,
> Rana F Sweis =
,
> and
> David Kocieniewski
>
> May 26, 2022, 12:01 AM EDT
>
> Nayfeh Abumuhareb, a 63-year-old mother of seven, cleaned offices in
> Zarqa, Jordan=E2=80=99s second-biggest city. But when she borrowed about =
$2,000
> from a microfinance company in 2013 to tend to her own home, she had litt=
le
> idea she would end up in prison.
> The $138 monthly payments on the loan to repair her roof exceeded her
> salary. And when an old back injury flared up, making it difficult to wor=
k,
> she fell behind. The lender, Tamweelcom , took
> her to court for the remaining $845, and in 2017 she was sentenced in
> absentia to three months in prison and put on a police wanted list.
> Jordan is one of the last countries to imprison
> =
people
> for nonpayment of debt =E2=80=94 a legacy it only recently has begun addr=
essing.
> But in 2019, more than 23,000 women like Abumuhareb were wanted by the
> police for defaulting on small loans, Justice Ministry officials have sai=
d.
> Many were reported to authorities by microfinance institutions, including
> Tamweelcom, according to court filings reviewed by Bloomberg News and
> interviews with lawyers, human rights activists and borrowers. And for
> years, those firms have had large backers: taxpayer-funded US and Europea=
n
> development banks and one of the world=E2=80=99s biggest commercial lende=
rs.
> Abumuhareb borrowed about $2,000 from Tamweelcom in 2013.
> Photographer: Nadia Bseiso/Bloomberg
>
> Tamweelcom, which says 1,286 women who borrowed money from the company
> were on police wanted lists as of March 2020, has received more than $70
> million in loans from development banks and commercial lenders, including
> about $20 million from the World Bank and $10 million since 2007 from Cit=
igroup
> Inc. The US Overseas Private
> Investment Corp., known as OPIC, lent Tamweelcom $3.5 million in 2019, an=
d
> the European Investment Bank approved 6 million euros ($6.4 million) of
> financing last year.
> Read More: Big Money Backs Tiny Loans That Lead to Debt, Despair and Even
> Suicide
>
>
> The Jordanian lender is one of a number of microfinance companies around
> the world that have received hundreds of millions of dollars from
> development banks despite predatory practices ranging from annualized
> interest rates that can top 100% in Latin America to aggressive
> debt-collection tactics in Cambodia that have left some borrowers homeles=
s,
> a Bloomberg investigation
>
> found. While donors, regulators and microfinance companies promised chang=
es
> a decade ago after a wave of suicides by Indian borrowers, cleanup effort=
s
> have stalled as development banks increasingly outsourced consumer
> protection screening to industry-led groups or weak national regulators.
> Tamweelcom says it hasn=E2=80=99t been informed of any clients going to p=
rison in
> the past five years, although some may have been arrested and held in
> detention centers for a few hours or overnight while their loans were pai=
d
> off or canceled. Chief Executive Officer Bassem Khanfar says no women hav=
e
> been put on police wanted lists since he took over in November 2019, a fe=
w
> months before the government announced a moratorium at the start of the
> pandemic on imprisoning debtors owing less than 100,000 dinars ($141,000)=
.
> The company says it still reports delinquent borrowers to the courts for
> sanctions that may include travel bans, but executives didn=E2=80=99t pro=
vide
> numbers and said it was up to judicial authorities to decide on
> punishments. Khanfar says the firm only reports borrowers as a last resor=
t,
> after trying to collect the debt in what he calls a =E2=80=9Cfriendly=E2=
=80=9D way, a
> process that can involve postponing or rescheduling loan payments. He say=
s
> Tamweelcom uses the courts because failing to do so would signal other
> borrowers that they didn=E2=80=99t need to repay their loans. =E2=80=9CTh=
ose who are not
> willing to pay are getting credit and benefits,=E2=80=9D Khanfar says. =
=E2=80=9CWe don=E2=80=99t
> want to send that message out.=E2=80=9D
>
> The moratorium is
> scheduled to expire in June. Earlier this month Human Rights Watch called
> on the
> Jordanian government to end all debt imprisonment, describing it as a
> =E2=80=9Cclear violation of international human rights obligations.=E2=80=
=9D A few days
> earlier, lawmakers had voted to ban prison sentences for nonpayment of
> debts less than $7,000, except in cases of rental arrears or unpaid labor
> charges.
> Lending Boom
> Tamweelcom=E2=80=99s loan portfolio more than tripled over a decade
>
> Source: MIX Market data
> Note: Numbers have been adjusted for inflation in 2018 US dollars
> A Citigroup spokesperson said the bank seeks to ensure that microlenders
> it supports are in compliance with local regulations and that =E2=80=9Cno=
one
> should be imprisoned for not being able to pay their debts.=E2=80=9D A sp=
okesman
> for the European Investment Bank said the incarceration of borrowers =E2=
=80=9Ccould
> be considered an excessive or abusive treatment and use of force=E2=80=9D=
in
> violation of its lending guidelines and that it planned to investigate.
> The jailings in Jordan have become such a fraught issue that King Abdulla=
h
> II repaid the loans of 1,500 women in 2019. That year, according to Human
> Rights Watch, about 2,630 people were locked up for nonpayment of debts
> ,
> roughly 16% of the total prison population. Yet development banks, whose
> guidelines generally forbid lending to microfinance companies that engage
> in abusive debt-collection practices, have continued to provide funding t=
o
> Tamweelcom.
>
> Tamweelcom was started in 1999 by the Noor Al Hussein Foundation,
> established by Queen Noor, the fourth wife of the king=E2=80=99s father a=
nd
> Jordan=E2=80=99s former ruler. Since then, it has become one of Jordan=E2=
=80=99s biggest
> microfinance companies and has made more than 800,000 loans to women. The
> foundation, which still owns the lender, didn=E2=80=99t respond to emails=
seeking
> comment.
> The lender=E2=80=99s website boast=
s of
> providing a =E2=80=9Cgateway to financial stability, sustainability and
> self-preservation for Jordan=E2=80=99s unbanked individuals.=E2=80=9D But=
for some
> borrowers, the loans just compounded already dire financial problems.
> The Tamweelcom office in Zarqa where Abumuhareb took out her loan.
> Photographer: Nadia Bseiso/Bloomberg
>
>
> That was the case with Nihad Saeed, 40, who took out a group loan from
> Tamweelcom with a friend in 2012. After the friend stopped making
> repayments and fled to Turkey, Tamweelcom reported Saeed to the
> authorities, and she was put on a police wanted list. Being on a wanted
> list doesn=E2=80=99t mean police will turn up at your front door, but it =
does mean
> you could be arrested at any time your ID is checked. Many women go into
> hiding to avoid the risk of being detained.
>
> For more than five years, Saeed, an unemployed mother of four, says she
> was forced to live like a fugitive, afraid to leave her house in Zarqa.
> When she did, she left her ID at home and used a false name. Tamweelcom
> said it canceled the loan in February 2021. =E2=80=9CI lived like a priso=
ner in my
> home,=E2=80=9D Saeed says. =E2=80=9CI was afraid every time I stepped out=
of the house. The
> fear overwhelmed me, and I became depressed. I couldn=E2=80=99t do anythi=
ng with my
> life.=E2=80=9D
> The number of women in default in Jordan, mainly on microloans, increased
> tenfold in the five years to 2019,
> according to a statement last year from Justice Minister Ahmad Ziadat. Ma=
ny
> of those loans were for home improvements, a new TV set or repaying other
> debts =E2=80=94 more in the realm of consumer lending than microfinance=
=E2=80=99s
> traditional role of incubating income-generating businesses.
> A Tamweelcom mobile bus in Wadi Musa, Jordan, in 2019.
> Photographer: Artur Widak/NurPhoto/Getty Images
>
>
> The World Bank=E2=80=99s International Finance Corp., known as IFC, was c=
oncerned
> enough about over-indebtedness in Jordan that in 2018 it commissioned a
> report
> from
> the industry-funded Microfinance Index of Market Outreach and Saturation,
> or Mimosa. It found 34% of microfinance borrowers in Jordan took out a lo=
an
> primarily for debt repayment. Mimosa also said that about 6% of
> microfinance clients had three or more loans and about 18% had also
> borrowed money from informal lenders.
> Martin Holtmann, a microfinance official at the IFC, said it is
> =E2=80=9Cunacceptable=E2=80=9D for anyone to be imprisoned for defaulting=
on a microloan.
> But the IFC, which has been working with Tamweelcom since 2010, is
> considering
>
> extending the firm a $5 million loan. A spokesperson for the IFC said tha=
t
> if the loan were approved, Tamweelcom would be bound by the development
> bank=E2=80=99s environmental and social performance standards
> ,
> including not infringing on the human rights of customers.
>
> The US Agency for International Development, which works alongside OPIC
> disbursing federal aid, published a report
> in 2019 on microfinance in
> Jordan that praised Tamweelcom for its commitment to improving the social
> circumstances of its borrowers. There was no mention in the 73-page repor=
t
> of referring delinquent borrowers to judicial authorities.
> The US International Development Finance Corp. ,
> formed in 2019 by merging USAID and OPIC, didn=E2=80=99t respond to quest=
ions about
> whether the agency was aware of the practice or if it violated its fundin=
g
> guidelines. A spokesperson said its vetting processes are =E2=80=9Crigoro=
us=E2=80=9D and
> that it relied on consumer-protection standards established by an
> industry-led group. Those guidelines forbid collection practices involvin=
g
> physical violence, harassment or compromising a borrower=E2=80=99s privac=
y, but
> make no mention of debtors being jailed.
> A spokesperson for Dutch development bank FMO, which provided Tamweelcom
> with $1.4 million in loan guarantees
> in 2019, said it has =E2=80=9Cu=
rged
> Tamweelcom to be reticent in making use of this legal route=E2=80=9D and =
believes
> the lender has shown forbearance.
> Abumuhareb=E2=80=99s grandchildren play in the yard.
> Photographer: Nadia Bseiso/Bloomberg
>
>
> MAIL1The first that Abumuhareb knew her name was on a wanted list was whe=
n
> she visited her brother in prison several months after the court=E2=80=99=
s 2017
> ruling in her case. She says she presented her ID to guards, only to be
> whisked away to Jwaideh prison for women and put in a cell with four
> inmates who mocked and humiliated her. =E2=80=9CIt was awful,=E2=80=9D Ab=
umuhareb says,
> sitting on a floor cushion in her unfinished home in Zarqa, which has no
> glass in the windows and plaster falling from the ceiling. =E2=80=9CI am =
poor. I am
> not a criminal.=E2=80=9D
> Abumuhareb says she used the money she got from Tamweelcom to help feed
> her extended family, eight of whom share her tiny home, and for repairs.
> Tamweelcom says it gave her the loan based on the income of the entire
> household, which it says was about $845 a month.
> After learning that her mother was in jail, one of Abumuhareb=E2=80=99s d=
aughters
> sold most of her jewelry and, with her siblings, managed to scrape togeth=
er
> enough to clear the remaining debt. Abumuhareb was freed the next day.
> =E2=80=9CThat one night I spent in there might have been a lifetime for a=
ll the
> horrible things I saw and went through,=E2=80=9D she says. =E2=80=9CI was=
treated like a
> criminal.=E2=80=9D
> Khanfar says he feels sorry for Abumuhareb and that Tamweelcom has writte=
n
> off almost $600,000 of loans during the pandemic. =E2=80=9CPersonally, I=
=E2=80=99m against
> putting people in prison for not repaying their money,=E2=80=9D he says. =
But he
> also says Tamweelcom has to find a way to keep its business sustainable,
> serve its new clients and keep its creditors happy, =E2=80=9Cotherwise al=
l the
> economic and financial markets would be affected.=E2=80=9D
>
>
> =E2=80=94 With assistance by Sinduja Rangarajan, and Christopher Cannon
>
>
> @GavinFinchBBG
> + Get alerts forGavin Finch
>
> + Get alerts forRana F Sweis
> @davidkski
> + Get alerts forDavid Kocieniewski
>
>
>
>
>
>
>
>
> David Kocieniewski
> Bloomberg News
> 731 Lexington Avenue
> New York, New York 10012
>
> dkocieniewsk@bloomberg.net
> davidkski@gmail.com
>
> mobile:(215) 431-6679
> office (212) 617-4702
>
> From: daniel@danielrozas.com At: 05/06/22 23:19:53 UTC-4:00
> To: David Kocieniewski (BLOOMBERG/ NEWSROOM: )
> <dkocieniewsk@bloomberg.net>, Gavin Finch (BLOOMBERG/ NEWSROOM: )
> <gfinch@bloomberg.net>
> Subject: Re: Our microfinance story is (finally) online….
>
> Hi David and Gavin —
>
> thanks for sharing this piece. I’ll be honest — I’m disappointed. Not
> because it’s a critical piece, for there’s plenty to criticize, but becau=
se
> you’ve taken the easy path and avoided the harder, and arguably far more
> interesting and relevant one.
>
> First, the fundamental story you’re conveying here isn’t new and has been
> covered by major papers before. There were NYT pieces on the Compartamos
> IPO back in 2007-08, pieces by WSJ and NYT on farmer suicides in Andhra
> Pradesh in 2010, and of course the more recent stories on land sales In
> Cambodia a couple of years ago. And while it wasn’t in the US press, ther=
e
> have been stories in the European press on the use of police powers to
> force borrowers to pay in Morocco (this was in the early 2010s). The link
> to international finance, both public and private, is also not new. Using
> data from MIX (arguably a bit dated) and from individual public investor
> disclosures is a nice addition, and your data reporting colleagues deserv=
e
> credit for doing that well, but it’s not fundamental to the story. It’s
> true that you’ve pulled together multiple stories from multiple countries=
,
> and that takes a lot of time and effort, but on its own, it doesn’t reall=
y
> cover new ground.
>
> So what about the path not taken? The fundamental challenge is how should
> financial services be made available to poor, vulnerable households in a
> way that protects them from harm — a question that is especially difficu=
lt
> when it comes to credit. For 15 years, Yunus has basically made the same
> argument, that the commercialization of microfinance has been a tragedy,
> and he especially talks about this in the context of interest rates. But
> this simply isn’t true. There’ve been plenty of studies showing that
> there’s really no link between the profit status of an institution and th=
e
> price it charges its borrowers. Sure, prices in Bangladesh are very low,
> but this isn’t because the MFIs there are doing something unique or
> exceptional — it’s a function of the extremely high population density
> (makes operations easier) and the broad availability and low cost of staf=
f
> with the types of skills needed to run an MFI. You see similar prices in
> India for the same reason. And even Bangladeshi MFIs (including Grameen)
> have dealt with problems of overindebtedness. Back in 2010, there were
> stories accusing Grameen itself of this (see, for example, this Norwegian
> documentary ). Indeed, it’s well
> known in the sector that the joint liability methodology pioneered by Yun=
us
> can create real problems, when members of a group put serious pressure on=
a
> delinquent borrower — without any need for the MFI to get involved.
>
> On the other hand, the value of financial services, including credit, is
> also very real. Not necessarily as a path out of poverty (this is way
> oversold, notably by Yunus himself), but as a means of managing the kind =
of
> volatile finances that the poor often face (excellently described in the =
Portfolios
> of the Poor ) and also as a means of
> accessing opportunities that those of us living in wealthy countries take
> for granted. Take Cambodia as an example — a large amount of MFI credit
> (including loans classified as microfinance) is used by households to
> build, expand, and otherwise improve their homes. And indeed, the average
> household in Cambodia today is vastly better off than they were 20 years
> ago (it’s also hardly “one of the poorest countries in the world” as you
> describe in the video). And just like with housing in wealthy countries,
> credit is a crucial tool for housing in Cambodia as well — surely you
> wouldn’t suggest that a family with three working adults, earning a month=
ly
> income of $600 (pretty typical for a rural family), must content themselv=
es
> with building a home bit by bit, entirely out of leftover income? Doesn’t=
a
> loan of $5000 not make sense as a faster and more efficient way to do thi=
s?
>
> You talk a lot about LOLC, including in Cambodia — surely you’ll have
> seen the rows and rows of white Bajaj tuk tuks in the back lot of just
> about every rural branch. Its vehicle leasing program effectively
> revolutionized the rickshaw market in the country, bringing many thousand=
s
> of more efficient and vastly cleaner tuk tuks to a country previously
> choked with pollution from converted motorcycle rickshaws. Does that not
> matter?
>
> In your piece, the world is simple. Bad, irresponsible, even rapacious
> MFIs are impoverishing poor households, and their investors are too
> careless or too greedy to notice. The facts are more complicated. First,
> without the MFIs, those poor households would live very different lives,
> with fewer opportunities. It’s not about being “better then moneylenders”
> — frankly, that’s just dumb. It’s because without effective,
> well-functioning financial institutions serving them, the options for poo=
r
> households would be a lot more limited. Consider your own lives — it’s a
> safe bet that at least one or both of you have a mortgage. What would you=
r
> home look like if you couldn’t get one? What would your life be like if y=
ou
> didn’t have a bank account? Talk to your barber, dry cleaner or local
> pizzeria — ask how easy their business would be without access to a smal=
l
> business loan? And then ask yourselves — should poor households in poor
> countries have fewer options?
>
> As for investors being careless, you can see perfectly well that many
> investors DO care, and try hard to get it right. I can’t speak to the one
> in Sri Lanka, and certainly the same doesn’t apply to Prasac, but LOLC in
> Cambodia actually runs a pretty decent operation. Nan’s story is awful, b=
ut
> is it representative of LOLC’s operations? I don’t think so. As it happen=
s,
> LOLC was one of the MFIs that was completely open to us going in and
> reviewing the loan files of borrowers who’d sold land in our research, ev=
en
> though we never told them that none of the 10 cases we had involved a sal=
e
> to repay LOLC. So maybe Nan’s story shows a gap in LOLC’s process, maybe
> there’s more to it. But LOLC is an institution that has been especially
> transparent, open to a well-respected rater (MFR) reviewing its operation=
s
> and policies (and subsequently receiving the highest rating in client
> protection). And all of this was used by investors in their vetting.
> Nothing is and nothing can be perfect, but it’s a bit facile to point to
> one or two examples of hardship, and say this is a failure. There’s not a
> decent-sized financial institution in the world that would pass such a
> test.
>
> And yet, you make no distinction. You didn’t say anywhere that Prasac was
> the only MFI in Cambodia to lose its Smart Certification. You made no
> meaningful effort to differentiate between institutions that take client
> protection seriously and those that couldn’t care less. In your video,
> everything’s lumped together — images of AMK (strongly committed to clie=
nt
> protection) and photos of WB Finance (extremely aggressive) are
> indistinguishable from each other. That’s just sloppy.
>
> Over the past several years, I’ve had several investors (including IFC an=
d
> Proparco, as it happens) ask me about what I’d advise regarding Cambodia,
> both because of findings from MIMOSA and similar studies, and also becaus=
e
> of PR pressure from articles like yours. The easy path would be to just
> exit (as quite a few investors have done already). My advice to them has
> been consistent — if you leave, your place will only be taken by an
> investor focused entirely on the money, and the market will be worse off
> for it, so stay, focus on the MFIs that care, and work to build a better
> market that protects clients. Sure, a lot isn’t working, and sometimes it=
‘s
> failing completely. There’s a ton more that can be done. It’d have been
> amazing if in your reporting, you’d spent at least some of the time
> focusing on these, far harder — but also, far more constructive question=
s.
> Indeed, the work on client protection in microfinance is relevant well
> beyond it. Countries like the US and UK — both of which have pretty weak
> consumer protections — can learn and benefit too. Instead, you just push
> all that under that rug. Too boring! Too complicated! I get it. Outrage
> sells.
>
> I hope this bit of constructive criticism helps. And if you decide to loo=
k
> at these questions more seriously, you know where to find me.
>
> Best,
> Daniel
>
> Daniel Rozas | Brussels, Belgium | tel +1 202 436 9864 | mob +32 48=
9
> 677 056 | skype: danrozas | danielrozas.com | Follow me on Twitter
> !
>
>
> On Wed, 4 May 2022 at 17:20, David Kocieniewski (BLOOMBERG/ NEWSROOM:) < > dkocieniewsk@bloomberg.net> wrote:
>
>>
>> Here’s a pdf of the story….its a little janky in the middle because th=
e
>> online version has a scrolling graphic function.
>>
>> But if you keep reading, the text is all there.
>>
>>
>>
>> MAIL1
>>
>> David Kocieniewski
>> Bloomberg News
>> 731 Lexington Avenue
>> New York, New York 10012
>>
>> dkocieniewsk@bloomberg.net
>> davidkski@gmail.com
>>
>> mobile:(215) 431-6679
>> office (212) 617-4702
>>
>> From: daniel@danielrozas.com At: 05/04/22 05:52:32 UTC-4:00
>> To: David Kocieniewski (BLOOMBERG/ NEWSROOM: )
>> <dkocieniewsk@bloomberg.net>
>> Subject: Re: Our microfinance story is (finally) online….
>>
>> Hi David — is there a non-paywalled version of this, by any chance?
>> Would love to read it. Thanks.
>>
>> Best,
>> Daniel
>>
>> Daniel Rozas | Brussels, Belgium | tel +1 202 436 9864 | mob +32
>> 489 677 056 | skype: danrozas | danielrozas.com | Follow me on
>> Twitter !
>>
>>
>> On Tue, 3 May 2022 at 20:51, David Kocieniewski (BLOOMBERG/ NEWSROOM:) < >> dkocieniewsk@bloomberg.net> wrote:
>>
>>>
>>> Here’s the link to the story ….and the video
>>> .
>>>
>>> Thank you again for all of your help.
>>>
>>> I’m interested in hearing your thoughts about it.
>>>
>>> And I’d be grateful if you’d post it on any social media outlets where
>>> you think it might be of interest. As I mentioned when we spoke, it rai=
ses
>>> some important issues, so the wider the discussion it stirs up, the bet=
ter.
>>>
>>> Thanks again,
>>>
>>> DavidK….
>>>
>>>
>>>
>>>
>>
></dkocieniewsk@bloomberg.net></gfinch@bloomberg.net></dkocieniewsk@bloomberg.net>

–000000000000362bfd05e122c0dc
Content-Type: text/html; charset=”UTF-8″
Content-Transfer-Encoding: quoted-printable