Microfinance…It Ain’t for Sissies

by Allison Scuriatti

When I moved to South Africa two and a half years ago I saw it as a chance to finally see development microfinance in action. I wanted to get involved in operations – a slight re-focus of my career. I had no contacts but I knew that my background in communications and business, as well as nonprofits, might be of use to someone. I also thought that my experience with large funding and development agencies might be of help.

My husband had a full-time contract elsewhere, so my plan was to offer my skills and experience for free, in exchange for access to operations information and management-level learning.

In short, with a little research and outreach, my plan worked. I started working part-time for Phakamani Foundation in 2011. Phakamani provides training, micro-enterprise loans and group support to very poor women in rural areas. What I found and learned were so many things, but these are the key ones I want to pass on to the students following Month of Microfinance (bravo, by the way, for this initiative):

  • Microcredit for microenterprise development – the original kind based on Mohammad Yunus’ principles  – does work to improve people’s lives if the programs are well-designed and include safeguards to ensure no harm. In South Africa we call this “development microfinance” to distinguish it from other things going on in the market (e.g. pay-day loans to the poor.)
  • Microfinance ain’t for sissies! It’s hard work that demands incredible heart, starting with the field officers who walk the village roads every day.  It also demands firm resolve. In the face of so much need, not everyone will be an appropriate client and sometimes the clients do struggle.

LESSON #1:  Recognize that business is business, and give due respect to the clients.

Being a successful micro entrepreneur or micro business owner is really no different than being a “regular” entrepreneur whose business may be formalized and measured in larger amounts of money. In both cases, it takes hard work, savvy, attention to cash flow, savings, stock and investment to make ends meet. The difference is not in the business, it is in the fact that the very poor person has a harder time getting started, and can face severe personal and family vulnerability if things go wrong.

LESSON #2:  Grow thick skin, patience, and if you are working for a facilitating agency, remember that small NGOs have real restraints in terms of human capacity and available skills.

What I want to convey is how much corporate, academic and “international organization” baggage I had to shed in order to accept and work within the operational realities of a small NGO striving for sustainability.  I was not totally naïve … but still, when you are wooed by this dream of helping women and the great idea of “taking it to scale”, getting down to the nitty gritty of what it takes to grow is a shift of several gears. It is, however, invaluable experience.

When you are building an organization, you often don’t have the basic tools that larger or older organizations have – or even that a typical American university student might have in his/her laptop. Our field officers don’t have smart phones, laptops or Internet access.  Phakamani’s management team has good systems in place by now but all people must wear many hats, often building or adapting tools (like software) or acquiring new skills to get the basics done in some new area, or taking time (and money) to find out who can deliver what is needed next (meanwhile literally praying that somebody will just know and come to us instead.)

Meanwhile, you can NEVER take your eye off the ball of the core operation and mission. Every dollar spent on overhead is a dollar not spent recruiting or training new micro entrepreneurs and building revenue for long-term sustainability. There are many demands from donors (understandably.) Tempting opportunities come up that you know could help your beneficiaries but will diffuse your focus. People who want to “help” come along with big ideas – but might not understand that what you need are not just ideas but the money or hands to implement the basics as well as the big ideas.

So, I have had to learn patience and perseverance.  It’s a classic conundrum for all small businesses and NGOs but it burns inside when you just want to see something good expand faster.  To stay motivated, I think about the women entrepreneurs in our program:  how proud they are of their work, how much better off they are when they can generate their own income, and how some of them won’t leave their kids behind to become underpaid maids in the city.

LESSON #3:  Learn some accounting, financial basics applicable to this sector.

Understanding the financial side of MFIs is critical if you aspire to management-level positions in this field. Microfinance institutions large and small, including the “kindest” of NGOs, need people who understand what will make them grow, what will make them sink, and how to use the numbers to spot small problems in the process before they become big ones.

If you want to work for donor programs or do other types of outreach for larger institutions, an understanding of the finances will also help.  Besides being a more understanding/better donor, your ability to read financial ratios and truly evaluate what is going on inside your MFI partner will be very helpful and ultimately advance the cause.

You don’t have to do an MBA in social enterprise (although it can help.) But if you do not have any accounting or financial background (or even if you do) then at some point in your experience, I would recommend at least a short course focused on MFI management. That’s what I did, at the University of Pretoria’s Centre for Inclusive Banking in Africa. It was a real boost. CGAP lists a number of institutions that offer such courses, perhaps even online.

LESSON #4: Language skills can differentiate you.

If you already speak more than one language then you will know how much can be lost in translation. I do speak more than one but I did not happen to speak isiZulu or Tsonga when I joined Phakamani Foundation, two of the languages used by many of the women in Phakamani’s program. I found this incredibly frustrating – not just because of my work in communications but it is important when it comes to looking at client feedback, program design, impact measurement, and everything else.

At Phakamani, all of our field officers and branch managers are required to know the local language and we deal with clients in their own languages. In fact, the loans officers and most of the management team are drawn from the local area, which makes sense from many perspectives. Thanks to their interpretive skills and goodwill, I was able to get my job done but it took longer and I felt handicapped. Luckily for me, it has not required much in the way of language skills to personally see and understand how appreciative and proud Phakamani’s clients are. I am so grateful and humbled by this experience.

Allison Scuriatti joined Phakamani Foundation in 2011 as a part-time volunteer to assist the CEO in developing strategic communications, external partnerships, funding, impact monitoring, and industry relationships. She has nearly 20 years of professional experience in international organizations, non-profits, as well as the private sector. She holds a Masters of International Relations from the Graduate Institute of International Studies at the University of Geneva, in Switzerland. She was raised in Canada but maintains her permanent home and independent consulting business in Washington, DC.

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