Being self-employed and running a small family business is the norm in most African countries.  Just consider the graph below.

In this helpful article, published by McKinsey, the Chief Economist for the World Bank (Africa Region) shows why supporting such small family businesses is important.

This is what we do at Five Talents.

He writes “The challenge of youth employment in Africa, therefore, is not just to create more wage and salary jobs—important as this may be—but to increase the productivity, and hence earnings, of the majority of young people who will be employed in informal farms and household enterprises”.

He also says  ”In the case of household enterprises (where the farm labor will move to), most are tiny—mom-and-pop or pop-and-son shops—that do not benefit from capital investment”.  Well, with your help, we are changing that at Five Talents – providing small business loans and training.

Anthony McKernan

Anna Pienaar, Programme Director, blogs from the Harvard Business School – Accion programme for Strategic Leadership for Microfinance

Wow – this is going to be an incredibly busy schedule. 7am-8pm daily, with the breaks filled up with group discussions.

Glad I did the prep work as every session is an interactive discussion on case studies. Yesterday the discussion was around what ’social value’ is, and whether an organisation has to have intent to be able to achieve it.  Some lively and very differing opinions!

It’s amazing and the discussions in between are brilliant.  Yesterday I was talking to a guy in front of me from China, who said “we’ve only got 200,000 clients, we’re still very small”.  Ha!

There are 70 people here from 28 countries, with investors, commercial MFIs, regulators and some NGOs.  There are people from Kiva, Compartamos, Freedom from Hunger, Equity bank, national banks, Accion and lots of impact investor-type people.

Its a real priviledge for Five Talents to be represented and learning in the midst of such folks.

I have just completed a five day trip to northern Uganda, the region recently brought to the attention of the world by the Kony2012 film.

In addition to this blog posting, you can watch a 5 minute video presentation here.

I was staying in Kitgum, the town most frequently abused by the Joseph Kony and his Lords Resistance Army. Five Talents are about to launch a brand new microfinance programme here. The trip revealed a number of things.

Street in Kitgum

Firstly, peace has been present for some years now and people have returned from their displacement camps to re-establish their homes and livelihoods.  Everyone I spoke to had been touched by the war, often in the most tragic of ways. This is still the backdrop to all new community and business endeavour, but the people I spoke with are putting the war  behind them. There is a genuine desire to move on.

Secondly, there is a desperate need for capital to grow small businesses. Running a small business is the primary way to make a living here but it is still rather hand to mouth. I spoke with a welder who needs a generator as he can only work when the power is on for just a few random hours each day and a lady who keeps chickens to sell for meat but wants a loan so she can switch to more profitable egg laying hens.  The marketplace was vibrant, with about 70% of the stalls occupied with traders.

And thirdly, there are the numerous village savings and loans groups. These have been an important feature in rebuilding community trust and cooperation. However, members told me they have to wait months or even years before it is their turn to borrow a modest sum from the savings pot. And it is rarely enough.

The Five Talents model for microfinance in post conflict communities will fit perfectly here. As an enhanced facility for these village groups we will enable any member to take a business loan of the size they need at the time they need it.

We need £90,000 to fulfil the first phase of this new programme. About a half will be spent on employing local people to be loans officers and deliver business training. The rest will be loan capital – there will be no shortage of applicants. The savings groups currently charge each other 10% to borrow, so our 3% was very warmly received.

Please consider what you can give to Five Talents to enable entrepreneurial success in this community recovering from conflict.

Anthony McKernan

Development Director, March 2012

Programme Manager Anna Pienaar with Prof. Mohammed Yunus

Yesterday I attended an event organised by ‘Women Advancing Microfinance’, at which Prof. Mohammed Yunus talked about the launch of Grameen in the UK.  What impacted me most was his focus on re-imagining a world system that is not based on selfish motives, but on selflessness.   He said the world system assumes human beings will only have one motive: a selfish drive to make money.  But actually, if we could restore human beings to their fullness we would see a new system based on selflessness, with people dedicating their lives to doing things for other people, not just for themselves.  His new book “Building social Business” and describes a new form of capitalism – in which people build businesses to solve the world’s problems, not just to make money.  In that scenario, he argues, there would be no need for anyone to be unemployed, or to live in poverty.  I remember Sam Daley-Harris at the Microcredit Summit talking about his experience of the impact of microfinance on people’s lives, and calling it ‘redemption’.  Some people may think this is too strong a word, and there are certainly plenty of critics around who will tell you that there is precisely zero evidence to show that microfinance reduces poverty.  Those people are trying to apply scientific methods (called randomized control trials) to situations in which people are living in volatile climates and insecure economies and they are basing their argument on less than 10 of these trials that have been conducted worldwide, most of which are said not to be valid due to insufficient data or poor methodologies.  David Roodman’s book (‘Due Diligence’) rightly argues that there is more to microfinance than that, that there is tremendous value in giving people control over their own lives (Amartya Sen’s ‘Development as Freedom’ argument); and that the poor need financial services even more than we do in order to manage their fluctuating incomes (as per the ‘Portfolios of the Poor’ research).  So, when providing a local response to a local need, in a culturally sensitive manner, with social not just financial goals in mind, microfinance can indeed bring ‘redemption’ and gives us a glimpse into a new way of doing business. This is exactly what Five Talents is seeking to do. You can see our approach to Social Performance here.

Anna Pienaar

UK Team: What do you like most about working for the Thika Community Development Trust (TCDT)?
Lillian: Having been with TCDT for over three years now, there is nothing as fascinating and fulfilling as getting to witness success stories of our clients’ transformation in all spheres and specifically at the home fronts.  Getting to see especially women gaining financial independence as to make key decisions at the home and business fronts has added to my joy of looking forward to a new day whether at the office or in the field.

Our members too, have encouraged me by their positive support over the years and have all nicknamed us ‘Mwalimu’ or Teacher. This is change that can be seen, is felt and experienced. I am also very lucky to work in a Christian environment. This has been made possible by the mentorship of our very able Director whooccasionally organizes staff training sessions, as well as the warmth and support we offer each other as a team in the office.

UK Team: What’s the biggest challenge you face in 2012?
Lillian: There is the overwhelming number of Parish Vicars streaming in the office requesting we start new Trust (savings) Groups in their parishes. This means establishing new groups that require a lot of dedication to ensure a firm foundation for their sustained growth.  This is in addition to other regions of the country that are also requesting for our attention. The translation of some of the groups into FSAs (a registered form of community bank) also calls for closer and advanced monitoring as they handle larger portfolio volumes while offering key lessons to those that will be following. This is one area that I must ensure delivers tangible results.

I am the one directly in charge of the establishment of savings groups and training as well as extension services. However, these are challenges brought about by the exponential growth of the programme and we are all grateful for them as we remain steadfast in praying for sustained vigour and capacities as well as the continued strong partnership that we have had with Five Talents internationally to be able to decisively handle them.

UK Team: How many clients do I see in a typical day or week?
Lillian: 60% of my working time is spent in the office dealing with matters administrative, but I spent at least 2 days in a week in the field. While in the office I handle on average five clients in a day who are majorly Parish Vicars and representatives of the Groups. When out in the field I meet on average 70 clients/ two groups in a week.

UK Team: What do you do to relax and have fun with your family?
Lillian: My husband and I are trained environmentalists, so we love doing nature walks and visits to parks and other places where we feel one on one with ‘nature and ourselves’. When I have a free weekend, I dedicate it all to my young family especially after church for outings, and sometimes we just relax in the house and catch a movie. Occasionally when we can, we travel upcountry to catch up with the extended family.

Coming from Luxembourg and looking for a work experience within the microfinance sector, I was aware that London was a microfinance hub in Europe. I was therefore delighted when the opportunity arose to intern with Five Talents, whom I knew to have a good reputation, particularly in their mission to reach the most vulnerable communities. I am extremely pleased I came across this motivated and committed team.

My four month placement, was partly financed by a scholarship from the Leonardo da Vinci programme at the European Commission, and enabled me to obtain a clear overview of the sector.  Furthermore I used my free time to attend additional courses to supplement my technical knowledge.

The Five Talents team provided me with the necessary tools and resources required so that I could undertake the different tasks assigned to me on a day-to-day basis. This ranged from design work, researching new ways to enhance our financial and social indicators for our projects and also analysing some of the programme data.

I would really encourage anyone looking for some pro bono or volunteer work to contact this amazing and dedicated team.

By the end of my placement I made a lot of contacts in the microfinance sector which I hope to pursue going forward. My time with Five Talents has only made me more passionate about the use of microfinance as a tool for alleviating poverty in a sustainable manner. My next goal is to obtain more on-the-field experience and I hope this internship will provide me with a great platform to secure a job in this amazingly upcoming sector.

Sami Masri, Five Talents Intern

I am often asked ‘How Christian are you?’. Well, I hope you find the answer in our 10 principles reproduced below.

In short, we are motivated by our faith and work with others of like mind. This leads us to honour and serve  all peoples – irrespective of tribe or religion.  The global network of Anglican churches provides an excellent springboard or supervisor for microfinance programmes, being respectful of local culture and trusted by their communities.  In addition, the church is often present in rural and challenging areas of the world neglected by other organisations.

We don’t have a list of values framed on the wall of our office, but those who encounter us, see that we strive to be clear, transparent, excellent and with a care for the whole person, whether staff member, volunteer or client.

Anna Pienaar

Our Ten Principles for Partnership – Five Talents UK

1. We are motivated by God’s love to provide financial services that empower the enterprising poor to liberate their families from poverty.
2. We are committed to serving the poorest communities, to achieve real and lasting holistic, social impact in the lives our clients and their families.
3. We are committed to excellence in our work and relationships with our partners, to honesty and transparency, to client protection and social responsibility.
4. We do not use financial services or our influence as incentives to conversion.  We believe this is unethical and dishonouring to people as well as to God.
5. We do not use our faith as a ‘dividing line’ in the communities where we work (eg. providing better loan terms or larger loan sizes based on clients’ faith).  Five Talents, and our partners, provide financial services to the poor regardless of ethnicity, political affiliation or religion.
6. We are transparent about our Christian identity in our communication with all of our stakeholders incl. governments, donors, clients and partners.
7. We will work with partners who share the same Christian motivations and foundation, and who are recommended to us by and/or are in partnership with an Anglican Province or Diocese in the areas we are working in, or plan to work in according to our Programme Strategy.
8. We support partner organisations in their decision to hire indigenous staff.  We treat all UK and overseas staff and volunteers, regardless of faith, race, ethnicity or culture with dignity, and grant them the equal professional development opportunities appropriate for their position.
9. We expect our senior leaders to be highly professional and competent and we desire to see spiritual maturity, reflecting Christ-like values in their life and work.
10. We recognise the sensitivities and challenges partners have in contexts of great poverty and where other world religions are in the majority. Each partner will therefore have their own strategy for the appropriate and effective expression of their Christian motivation in their own context.

I was privileged to meet Prof. Muhammad Yunus on 25^th November 2011 in London.  As you know he is the founder of the Grameen Bank in Bangladesh and holder of the Nobel Peace Prize.

As a member of the Steering Group for the UK Microfinance Club, I was invited to meet Prof. Yunus, together with several other stakeholders to discuss setting up a new initiative: Grameen UK, to provide microcredit to the poor in the UK.

Prof. Yunus has made links with Glasgow Caledonian University and they have established the Yunus Centre for Social business and Health and the Grameen Scotland Foundation. The pilot microcredit branch will be in Glasgow targeting the estimated 200,000 unbanked population.

I was initially very sceptical about translating the Grameen model to the UK for four main reasons:

1. Banking Sector: The UK has a very advanced banking sector, with extensive financial access through branch networks, ATMs, internet and telephone banking. Do we really have that many unbanked people and do we really want to encourage greater indebtedness?
2. Welfare State: The UK has a very sophisticated welfare state, providing a safety net for the poor. Do people on state benefits really want to engage in micro-enterprises and microcredit?
3. Charity Sector: The UK has a large number of charities addressing social deprivation, inner city problems, youth and long term unemployment, social exclusion etc. – the issues are very complex and can Grameen really succeed where others have tried?
4. Cost-effectiveness: I was uncomfortable with the request to raise £1 million grant income for Grameen UK that will benefit 200 people directly in year 1, when I know that £1 million spent on Five Talents’ programmes in developing countries could equivalently help around 20,000 people or 100 times as many.

Technically, I also had questions about the business plan, particularly the sustainability of a UK microfinance operation.

1. Operational Costs: Wages of the UK loan officers, manager and accountant, together with office and transport costs are much higher than in a developing country setting. How could the income from loan interest payments be sufficient to cover these costs?
2. Interest: The rate of interest, declared to be 15% per annum, is similar to a UK credit card rate. Would borrowers choose this option, when there seem to be many alternatives available.
3. Interest Income: Can Grameen UK attract enough clients, to borrow enough money, to generate sufficient interest income to make it sustainable in the long run?

These are questions that we commonly address at Five Talents with all of our ongoing and new programmes. Even as a registered charity, we assess the sustainability – and shortfall – of our programme operations. If a programme is not sustainable, we need to know why and whether we wish to subsidise that work for ‘missional’ reasons.

However, the experience of Grameen America – launched in 2008 – demonstrates that the Grameen model can be adapted to advanced economy settings. They’re successfully working in the Bronx in New York, as well as Omaha and Indianapolis – serving 7,000 members (virtually all women) with group-based microcredit. Average loans are around $1,500 per person, with weekly repayments over 6-12 months with interest at 15% pa. Members have to run a small enterprise and there is a savings component, with training and mentoring delivered in group and centre meetings.

Having spoken to the man, heard his vision, and addressed my doubts, I have come away feeling inspired that once again, Prof. Yunus is taking on a tough challenge and I’m confident it will work. There will be many lessons and adaptations along the way. It will start small and start quickly. So watch out!

With the persistence and generosity of supporters, £40,335 has been given to launch a new work in the post-conflict community of Kitgum, Northern Uganda during 2012.  A big thank you from the Five Talents team.

This is particularly pleasing given the rush to give which overwhelmed the BigGive website and caused considerable aggravation.  On day one, supporters of all charities were met with a website that failed to co-operate and on days three, four and five, the pots of matched funding were exhausted within minutes. The BigGive have acknowledged the problems and apologised.

We are just thrilled that so many of our supporters did manage to give in the limited time-windows and helped raise such a large sum.

The team in Uganda have been wanting to expand into the fragile communities of the north for several years. The microfinance operation based in the south of the country is now self-sustaining, with interest on the loans covering the operating costs. This is terrific and expansion into the north will be a further boost to the team, bringing much needed financial services to communities that are now trying to get back on their feet.

Anthony McKernan