A Mercy Corps small business loan helped Najeeba expand her successful baby cradle business in Kabul, Afghanistan. Photo: Cassandra Nelson/Mercy Corps

Over the past decade, Mercy Corps’ microfinance services have lent more than $1.5 billion, reaching more than one million people. Twelve Microfinance Institutions (MFIs) founded and supported by Mercy Corps operate all over the world, with 270,000 active clients — 65 percent of them are women. To better serve those excluded from formal financial services, Mercy Corps is working with these MFIs to develop and offer savings, remittances, and micro-insurance services as well.

I recently sat down with Zhanna Zhakupova and Jim Anderson who were in town for a microfinance conference hosted by Mercy Corps, to find out more about Mercy Corps microfinance programs and how the global economic crisis is impacting microfinance loans. Zhanna is the Executive Director of the Asian Credit Fund (ACF), headquartered in Almaty, Kazakhstan. Jim is Mercy Corps’ Financial Services Manager and works from UlaanBaatar, the capital city of Mongolia. Together, they have experience working in countries as diverse as Uzbekistan, Vietnam, Japan, Bosnia, Poland and Afghanistan.

Haley Dillan: Jim, tell me a little bit about Mercy Corps’ use of Microfinance.

Jim Anderson: Microfinance is an integral part of what we’re [Mercy Corps] doing as an agency. Mercy Corps works with a group of well-established MFIs to complement other programming. All these MFIs provide loans to individuals and small businesses, and in Mongolia and Indonesia our MFI affiliates also offer deposits. Many support agriculture and offer consumer loans for purposes like tuition payments and health care costs. A micro-loan can range from $65 to a Guatemalan woman raising chickens or piglets, to $7,000 for a Kazakh businessperson.

Microfinance is a great tool because, when managed correctly, it is sustainable. Projects can be established and continue on a sustainable basis: they don’t require ongoing injections of donor money. As the NGO, you create the legacy, and then it often continues independantly.

Haley: Why are the majority of loans extended to women?

Jim: Typically, women are the more common borrowers. From a broad source of statistics, women are more reliable borrowers. They invest their business profits to support the family — educating, feeding, housing, and providing health care for their children. As of this June, Kompanion in Kyrgyzstan had over 91,000 clients, of whom 98 percent were women. What’s the percentage for Asian Credit Fund, Zhanna?

Zhanna Zhakupova: About 93 percent of ACF loans are to women.

Jim: Yes, and the XacBank in Mongolia has over 63,000 clients, and women comprise about 55 percent of that. However, in certain countries, it’s not always clear that just because the borrower is a woman, she’s the one in charge of the money. In Afghanistan, for example, a female borrower may just give the loan money to her husband, and it’s hard to track that.

Zhanna: Also, men are less interested in small loans. When they think about business, they think about “big.” And after the global economic crisis, group lending has grown significantly, and women dominate group lending. Men are more reluctant to join groups.

Haley: What other impacts has the global economic crisis had on microfinance? Have you changed your lending criteria? Has it affected the ability for applicants to repay their loans?

Zhanna: As I mentioned, our portfolio has shifted towards group lending since 2008. So, yes, the global economic crisis definitely caused a shift in our lending. In Kazakhstan, the crisis has been quite severe. The GDP growth was averaging about 8 percent annually since 2000, from oil and mineral resources. A pretty strong middle class had emerged, especially in the two largest cities Almaty and Astana. The economic crisis really affected this middle class; the crisis led to a sharp decline in real estate and that hit a lot of people. It seemed like everyone had loans that were secured by real estate… and when the real estate bubble burst, MFI loans were under water.

The banks stopped lending, because real estate was the key piece of collateral for most people, and it has continued to fall in value. No one had sufficient assets to meet tougher bank requirements, and so couldn’t qualify for loans after the global economic crisis. Lenders accumulated loan repayments, but refused to relend that money, sitting on it instead of pumping it back into the economy. No liquidity — no lending — no economic development — falling living standards.

In the rural areas, lending was completely frozen. When I recently visited rural areas served by ACF, every village asked us to open a branch. Small loans were in big demand but no one was lending. Now, Asian Credit Fund has about $1 million dollars in group loans, with the average loan size at around $500 per person.

Haley: What's the difference between non-profit and for-profit microlending? Does Mercy Corps work with for-profit lenders?

Jim: Actually, microlending is for-profit in most areas of the world, particularly Latin America and Central Asia. Non-profit lenders are more often located in places like India and Bangladesh. So most of Mercy Corps' microfinance work is with for-profit MFIs, many of which source funding from for-profit socially responsible investors (SRIs).

If these SRI lenders were to calculate the true risk of the loans they’re extending to MFIs, the interest rate would be so unmanageably high — possibly 60 or 70 percent in places like Tajikistan or Afghanistan. But the individuals who invest with SRIs are willing to forgo a certain amount of return because they want to encourage social improvements by lending to developing countries. As a result, SRIs can lend to MFIs at affordable interest rates.

In order to help MFIs attract capital to expand and serve more clients, Mercy Corps utilizes various sources of investment, including equity and debt, typically with SRIs.

Haley: Is there an idea or sentiment that you are taking away from the conference?

Jim: At the conference participants included a diverse group of organizations, culturally, geographically and in terms of business models, yet we all face similar challenges and issues, and it’s great that we have an opportunity to come together and talk about that.

Zhanna: Yes, everyone was talking about development, and long-term goals.

The G-20 is meeting this week in Pittsburgh, Pennsylvania. Chaired by President Barack Obama, the purpose of the summit is to, “review the progress made since the Washington and London Summits and discuss further actions to assure a sound and sustainable recovery from the global financial and economic crisis.” I’ve heard of the G-8, but the G-20? I began to wonder about this alphanumeric soup of organizations. Who are they and what are they concerned with? The following scorecard should help interested followers of this subject keep track of the major players.

The G-6: Organized in 1975 by the finance ministers of Germany and France who were frustrated with the formality and structure of larger international meetings, the G-6 and subsequent evolutions of this body are strictly informal bodies that meet to discuss economic issues of mutual interest. After the creation of the G-8, the term G-6 is now used to refer to the six most populous members of the European Union. The member countries are: the United States, United Kingdom, France, Germany, Italy, Japan

The G-7: Formed in 1976, this is an informal forum for the finance members of seven big industrial economies to discuss economic issues and seek agreement. Member countries include: Canada, France, Germany, Italy, Japan, United Kingdom, United States. Now also includes the European Union.

The G-8: An evolution of the G-7, membership grew to include Russia. The European Union is a limited member; it cannot host a meeting or hold the presidency of the body. Members are: Canada, France, Germany, Italy, Japan, United Kingdom, United States, Russia. European Union (limited member)

The G-8 plus Five: Recognizing the growing influence of other countries, the original group sometimes broadens their meetings by including the Outreach Five. As with all meetings, other countries are sometimes invited to attend. Members: Canada, France, Germany, Italy, Japan, United Kingdom, United States, Russia. European Union (limited member) Plus: Brazil, China, India, Mexico, South Africa.

The G-20: According to their website, “[t]he G-20 was created as a response both to the financial crises of the late 1990s and a growing recognition that key emerging-market countries were not adequately included in the core of global economic discussion and governance.” Where the earlier groups (G-6 through G-8) were organized around the industrialized countries of the world, the G-20 begins to bring emerging economies into the dialog. Their first meeting was in Berlin, Germany. The Managing Director of the International Monetary Fund (IMF) and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis.

The G-20 is made up of the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, European Central Bank

The G-33: The name for a group of developing countries that coordinates on trade and economic issues. It was created in order to help group countries which were all facing similar problems and give a unified voice to countries that were traditionally excluded from discussions among the industrialized countries. Members: Antigua & Barbuda, Barbados, Belize, Benin, Botswana, China, Côte d’Ivoire, Cuba, Democratic Republic of the Congo, Dominican Republic, El Salvador, Grenada, Guyana, Guatemala, Haiti, Honduras, India, Indonesia, Jamaica, Kenya, Laos, Mauritius, Madagascar, Mongolia, Mozambique, Nicaragua, Nigeria, Pakistan, Panama, Peru, Philippines, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Senegal, South Korea, Sri Lanka, Suriname, Tanzania, Trinidad & Tobago, Turkey, Uganda, Zambia and Zimbabwe.

There are other groups variously labeled as G-8, G-20, G-33, and even N-11 (countries which Goldman Sachs considered in 2005 to have a high potential of becoming the world’s largest economies this century: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam).

One of the best, reliable, sources of information about these groups and their members may be found on the websites of the World Trade Organization and the previously mentioned G-20.

You can Track the ongoing discussions of the Pittsburgh G-20 Summit here. But be prepared for slow page loading. It is a very busy website.

By the summer of 2008, the price of rice had increased five times from the average price in 2005. Photo: Thatcher Cook for Mercy Corps

The following post is from One Table, a Mercy Corps campaign to fight world hunger by investing in the world's women.

Today almost a billion people worldwide are unable to buy or grow enough food to avoid malnutrition. That's 120 million more than were hungry in 2006.

What happened? Basically, the world saw dramatic spikes in food prices. But there were many underlying causes of what's known as the global food crisis:

• Drought and other climate-related problems that resulted in smaller harvests
• Changing diets — rise of the middle class in India and China and an increased demand for food, especially meat, which requires large amounts of grain to raise
• Diversion of crops from food production to the production of biofuels
• High fuel prices during 2008 — if it costs more to transport food, prices go up
• Declining investments in agricultural productivity — total agriculture development aid to poor countries plunged from $8 billion in 1984 to $3.4 billion in 2004. At the same time, the developing world's cities have been ballooning with people who do not grow any of their food
• Export bans and restrictions last year in several major grain-producing countries like China as governments sought to lower food prices for their own citizens, with the result of reducing the global supply on hand.

While food prices have come down from their highs of 2008, they remain substantially above historic levels. Many economists feel this trend, which most severely affects those who can least afford it, is likely to continue for some time.

The economic, health and societal costs of the global food crisis have been severe. One of the first things Mercy Corps did to figure out how and where to direct our efforts was to survey the communities where we work. We discovered that within communities Mercy Corps serves, roughly 70 percent of income is spent on food, and 80 percent of the population had been affected by rising food prices over the past year. The survey also confirmed something we already suspected: that families were coping with higher prices by eating fewer meals, selling off household belongings, going into debt and removing children from school so that they can work.

In addition to being a record year for food prices, it's also been a record year for our food security team, allowing Mercy Corps to aggressively respond to this crisis. We now have 17 programs in 13 countries designed specifically to respond to this on-going problem. Through support from donors including USAID, the Bill & Melinda Gates Foundation, the Gap Foundation, the Hunger Site, and private individuals, our Food Crisis Response employs a strategy designed to ensure that the groundwork for increased prosperity in the future is laid — even while addressing the immediate problem of accessing sufficient food.

Food distributions, much of which are specifically targeted to improve child nutrition, are taking place in Tajikistan, Kyrgyzstan and Zimbabwe. Meanwhile, in the Central African Republic, India, Indonesia, Liberia, Nepal, Niger, Somalia, Sri Lanka, Uganda and again Zimbabwe, Mercy Corps is helping hungry households to access food by providing employment opportunities, agricultural training and inputs (such as seeds and tools), and helping people establish and grow small businesses.

Combined, these programs are reaching almost 1.5 million individuals who have been directly impacted by higher food prices. Overall, Mercy Corps’ Crisis Response will lead to a sustainable increase in income for these people, leading in turn to greater food security over the long-term.

Biorocks in action. Photo: Rani Morrow-Wuigk

Walking down the beach at Pemuteran Bay provides a glimpse into both the past and future of Indonesia’s coastal communities. One end of the beach serves as the mooring and launching area for the fleet of traditional fishing craft that have so long provided subsistence to the community. At the other is a community-driven reef restoration and conservation project that is changing not only the reef itself, but also the attitudes, livelihoods and economy of the entire region.

At the heart of this transformation is the application of a novel technological innovation known as Biorock for the creation of new coral reefs and fish habitats. The technology, developed by the late Prof. Wolf Hilbertz and his colleague Dr. Thomas Goreau of the Global Coral Reef Alliance, relies on low-voltage electricity to attract minerals through accretion to simple metal rebar structures placed in the water. The structures can be placed in a range of places because they're powered by a range of traditional and renewable electrical sources, including solar and experimental tidal and wave-generators.

There are now 100 Biorocks in use worldwide. Pioneers in eco-tourism such as small dive shop operators and beachfront hotels have been using them for years as unique ways of enhancing snorkeling and diving experiences.

Biorocks were first used to help reefs recover after the devastating coral bleaching caused by El Niño in 1998 and the severe strain on marine resources for income and food generation during the The Asian Financial crisis of the late 1990’s. Use of Biorock technology continues to increase as reef restoration and conservation move to the forefront of global environmental issues.

The first projects were a collaborative effort between community leaders, local businesses and environmental advocates. A local dive shop in Pemuteran, Reef Seen Aquatics, with funding from AusAID, has trained a number of local fishermen to PADI Rescue Diver standards and employed them as “Reef Gardeners”, working from within the community to enhance and protect the local reefs. A champion of the projects has been a local resort operator, Taman Sari Hotel, which has donated facilities and electricity to run the structures, and employed scores of villagers as staff serving the eco-tourists who come to the North Coast.

These relatively small-scale projects have realized immense benefits. A wealth of new economic opportunities have arisen in the case of Pemuteran and surrounding communities as international acclaim and recognition of the projects has ensured a stream of visitors to resorts professing an ethos of sustainability and restoration. The Indonesian government has recognized the project with its highest environmental award, the Kalapataru Adipura Award, while also providing several high-speed boats to be run by a group of community enforcement officers whose duty is to protect the reef from dynamite and cyanide fisherman.

Development pressures, increasing populations and rising demand for seafood have led to the near complete collapse of the health of Indonesian reefs. Indonesia, an archipelago with over 81,000 kilometers of coastline and more than 17,000 islands at the confluence of the Pacific and Indian Oceans, is considered to have some of the richest and most diverse marine ecosystems. Approximately 40 percent of the world’s fish species and 80 percent of the world’s coral reefs are found in its coastal waters. It is also the largest exporter of marine fish and corals in the world. But today only 6 percent of the coastline is considered pristine.

Coastal conditions are vital to Indonesia's economy. Approximately 70 percent of coastal communities depend directly on products from the sea — activities that generate over US $ 1.6 billion a year. A lack of effective management, coupled with the fact that the bulk of Indonesian fishing activity is done by migrant fishermen with limited vested interests in long-term sustainability who utilize destructive fishing techniques such as dynamite fishing and cyanide poisoning to harvest high-value fish species has contributed significantly to the massive losses in diversity and health of remaining reef systems.

But there is hope to be found in the waters of Pemuteran Bay and in the efforts of grass-roots reef conservation and restoration programs that have spread across Indonesia and beyond. Inspired by success and marked improvement in the environmental and economic health of participating villages, and driven by the intense need and internal drive of community leaders in Bali, Lombok and Sulawesi, Biorock installation is now being used not only for small-scale reef restoration and marine protected areas but also for its potential to attract fish for capture from surrounding waters, for use as cultivating platforms for sustainable harvest of marine products (seaweeds, corals, clams, oysters, lobsters etc.), and for erosion prevention.

Increased attention to Indonesia and the Coral Triangle — the 2.3-million-square-mile wedge between the Australia and the Asian mainland — are making a difference. Projects by governments, international academic research programs, and organizations such as the World Wildlife Fund, Conservation International, The Nature Conservancy and Mercy Corps have provided a catalyst leading to the formation of the Coral Triangle Initiative on Coral Reefs, Fisheries and Food Security. The future of the millions of people who depend on the marine environment — for sustainable use of marine resources, environmental restoration, and economic stimulation — is at stake.

As the world's euphoria following Barack Obama's election fades (watch VOA's Africa coverage above), what can Africa expect from America's first African-American president — especially when it comes to issues of global poverty?

Many Africans are hopeful that Obama will work to vigorously tackle poverty and disease throughout Africa. Former South African President Nelson Mandela echoed those sentiments in a note of congratulations to President-Elect Obama: "We trust that you will also make it the mission of your presidency to combat the scourge of poverty and disease everywhere."

Are those hopes well-founded? Perhaps. President-elect Obama was a key sponsor of The Global Poverty Act which seeks to cut global poverty in half by 2015. After its passage in February of this year, Obama stated:

With billions of people living on just dollars a day around the world, global poverty remains one of the greatest challenges and tragedies the international community faces. It must be a priority of American foreign policy to commit to eliminating extreme poverty and ensuring every child has food, shelter, and clean drinking water. As we strive to rebuild America's standing in the world, this important bill will demonstrate our promise and commitment to those in the developing world.

Some humanitarian agencies, like World Vision, are already strongly urging President-Elect Obama presidency to increase foreign assistance, food aid in order to meet the UN Millennium Development Goals.

But will the current global economic crisis limit these commitments to poverty alleviation? During the Vice Presidential debate, Vice President-elect Joe Biden admitted that given the current state of the economy an Obama administration may need to "slow down" their previous commitment to doubling foreign assistance.

Obama isn't talking about poverty alleviation nowadays. He (and everyone else) is focused on the U.S. economy. So despite the world's hopeful outlook, it's still unclear how Africa — and its poor — will benefit from America's first African-American president.

An example of the "trashion" bags created by XSProject. Photo: XSProject

Used plastics from Indonesia are being saved from landfills. And former waste pickers are turning these plastics into fashion bags to sell in Singapore, Australia and the United States.

The fad known as "trashion" has gained mainstream acceptance with chic, urban designers worldwide now posting big profits by using leftover, discarded and found materials to create jewelry, clothing and housewares.

The type of plastic used in the bags is found in packaging ranging from soft drinks to detergent to toothpaste and is mostly aluminum bonded to plastic. Use of this plastic is on the rise because it costs companies less to produce, but because it's not recyclable, as hard plastic bottles are, it ends up costing the public more in terms of pollution and environmental damage.

So, the XSProject began as a way to recycle these plastics. Ann Wizer is an artist and environmental activist, who while living in the Philippines had the idea to use trash as her primary medium. This art progressed into developing the XSProject, a non-profit organization which buys plastics from trash pickers and trains trash pickers themselves to make the bags, providing much needed wages. Proceeds from sale of the bags go directly to help the trash-picker communities by providing assistance for daily needs, scholarships and health protection.

Most of us cringe at hearing the word inflation. It takes a toll on everyone's pocketbook, but for many Indonesians, it is also tearing families apart.

Many Indonesian parents are being forced to place their children in orphanages. In a country where 100 million people live on less than a dollar a day, skyrocketing costs of food and fuel are making it difficult for families to feed themselves. Childcare institutions offer the children not only food, but also an education and the chance at a brighter future.

"I know my children are angry with me, but I try to convince them that is the best choice for us.… As a mother I want to take care of my children but I cannot be selfish. I want the best future for them, so I have no choice," said Tinor Niang, a mother who brought her two sons to an orphanage in central Jakarta nine years ago.

Only 6 percent of the 500,000 Indonesian children in childcare institutions are orphans, according to a recent report released by Save the Children in conjunction with UNICEF and the Indonesian government. Many of the institutions were understaffed, the report found, with nearly half running on less than $10,000 a year. When not being schooled, the children were found cooking and cleaning while caring for themselves and those younger than them.

While rising costs put financial pressure on parents, the children bear the price emotionally. "I just want to be with my parents, even if it means I cannot get an education," says 13-year-old Yulianto who has spent half his life in an orphanage.

Some parents argue that education is worth the emotional toll. "I just want him to get a proper education," says one mother who had to take her 11-year old to an orphanage. "I hope that one day he'll do something useful for this country and help his brothers, because we are living in poverty."

Photo: sektordua (flickr)

Fuel prices have risen 40 percent since the start of the year.

Skyrocketing fuel prices make people angry. How angry you ask?

• Truck drivers in Spain started an indefinite strike on Monday, threatening to bring the entire country to a standstill. A growing number of gas stations have reported to have run out of fuel as a result, and supplies of fresh food are running low.
• From Portugal to Italy, commercial fishermen have protested rising fuel prices by blockading ports and refineries
• Last Thursday, more than 500 motorcyclists staged a “go-slow” demonstration outside Manchester, UK.
• Over in Asia, angry Indian consumers burned tires and blocked traffic after the government raised fuel prices. The protests shut down schools and businesses in West Bengal State.
• In Hong Kong, 500 buses and trucks colluded to bring traffic to a standstill in the central city.
• Enraged by the government’s recent 41-percent fuel price hike, Malaysians have planned a nationwide strike and a major demonstration in Kuala Lumpur on July 12.
• Truck drivers in Thailand are threatening to wreak traffic-havoc next week by clogging the roads with 400,000 trucks.
• In South Korea, truck drivers threatened to strike on Monday, ignoring the $10.2 billion government aid package designed to cushion the impact of soaring fuel prices.

What other angry reactions have you heard about?

An Indonesian mother and her baby outside a North Jakarta health clinic. Photo: Bunga Sirait/Mercy Corps

You may have heard the news that American mothers are breastfeeding their kids at rates higher than ever before, according to data released last week by the U.S. Centers for Disease Control.

The fact that 77 percent of U.S. infants born in 2005-06 were breastfed is good news for child health — studies link breastfeeding to a wealth of benefits, from lower infection rates to higher intelligence — as well as for families' pocketbooks. In the U.S., a year's worth of infant formula can cost well over $1,000. Overseas, the financial bite is even bigger in per-capita income terms.

If breastfeeding is cheaper and healthier, then why do six of every seven Indonesian mothers feed their babies formula?

One reason: Formula companies in Indonesia spend a lot of money convincing mothers their product is as good or better than breast milk, and they've successfully insinuated their product in healthcare settings, according to Mercy Corps.

Dr. Fransiska Mardiananingsih, Mercy Corps' Healthy Start program manager, says formula companies[']... "aggressive marketing has convinced many mothers and health providers that formula feeding is just as healthy for infants," she says, "but in fact it has significant negative effects on children's health."

Dr. Mardiananingsih says formula companies go as far as to deliver gift baskets to new mothers to encourage the continued use of their product.

Mercy Corps, Global Envision's parent, is helping build a more supportive environment for breastfeeding moms in Jakarta's poorest neighborhoods. They're also offering a way for you to help: $75 buys a "Breastfeeding Kit," a symbolic gift that supports the program and equals the cost of training a breastfeeding counselor. It was unveiled last week as a Mother's Day addition to the agency's regular Mercy Kit lineup.

Training midwives, health officials and support-group facilitators is one part of the program; marketing is another. Mercy Corps is working with local government leaders and holding rallies to spread the word about breastfeeding's benefits. They may not be able to match the formula companies' marketing muscle, but with both health and economic advantages on their side, they at least have an easier sell.

December's United Nations climate change conference in Bali, Indonesia could have ended in a logjam of indecision until Kevin Conrad, spokesperson for Papua New Guinea, took the floor challenging the United States to take the lead or get out of the way. In a recent interview, Conrad explains why the success of this agreement is vital to smaller countries like Papua New Guinea:

“I think collectively we as humanity have become more mature in this climate battle, and we understand collectively that we’ve got to turn off all the emissions sources in order to win,” he said. “The climate doesn’t know whether it came from a factory or from Papua New Guinea’s deforestation. We’ve really got to get all hands on deck and tackle all of the issues.”

Mr. Conrad said the potential breakdown in the session’s final hours was particularly vexing to him because New Guinea and other forested tropical countries were finally getting attention for a proposal of payments by rich countries for preserving tropical forests. Deforestation currently contributes about a fifth of carbon dioxide emissions worldwide.

He said the rich-poor divide in the talks, which crystallized in the final clash in Bali, is a distraction from the reality that all countries have agreed, by the end of 2009, to do something new: define a threshold for greenhouse gases beyond which the world will not go.

Mr. Conrad's willingness to stand up for his cause will hopefully have positive results in furthering global cooperation on vital climate change issues, but in the very least, his willingness to speak out has brought greater heed to his country’s situation.