Microfinance: By Children, For Children

My only travels in the developing world thus far are limited to the month I spent in Ethiopia last year. I marveled at the ingenuity of the children—many of whom fended for themselves. When I visited orphanages, I carried with me more than 5,000 “twisting balloons” to make balloon hats and animals for the kids. The rough terrain, rowdy behavior and stray voltage common there was hard on the balloons, and they popped almost instantly.

What surprised me was that the children collected up every last scrap of broken balloon and put them to use. Some made jewelry, some built sling-shots, others took the ends and made hair elastics from them for braids. A balloon micro currency erupted in each building that I visited over the two weeks that my balloon supply held out.

Another thing that I’ve learned from families who have since visited is that the balloon currency still exists in some of the buildings—months later! Children have stashed and preserved balloons (some still intact and un-inflated) for another day.

My mind came back to this scenario when I saw a story today on the Children’s Development Bank (CDB). CDB is a bank run by and for children in India, Afghanistan, Bangladesh and Nepal.

CDB serves the street children of these countries. These kids use their entrepreneurial skills as workers for hire. Because street children are so vulnerable to theft, they rarely amass enough money to make an entrepreneurial move in building their business or education. Instead, they spend what they need to meet their day-to-day needs and spend the rest of their money on small luxuries (Pepsi and chewing gum were the favorites among the street children in Ethiopia).

CDB is solving this problem by providing interest-bearing deposit accounts to children as well as low interest microloans. The novelty of this plan is that the entire business is operated by children. A board of children determine who will receive loans—and they evaluate the credibility and creditworthiness of the child who wants the loan, as well as their intentions. The children on the advisory board also determine membership, eligibility and the size of the loan available as well as interest paid on savings for members of the bank.

Children are encouraged (and do) invest in the bank their daily earnings. They also take loans to improve their education or business services. They can borrow for items such as inventory (many children in Ethiopia had toilet-paper sales businesses) or shoe-shine supplies or any number of other tools to provide their services.

While the process is facilitated by adults with knowledge of finance, recordkeeping and banking, children are the decision-makers.

You can read more about the Children’s Development Bank by visiting their Web site at http://www.childrensdevelopmentbank.org/new.htm.

IMAGE CREDIT: CDB Web Site www.childrensdevelopmentbank.org

Jessica Ward is a freelance writer, blogger and mother of two children. She blogs at www.pennywisefamily.blogspot.com.

Micro Health Insurance the Grameen Way

Did you know that in America, the leading cause of bankruptcy is medical bills? Indeed, even with a pretty cushy health care plan in my household, medical bills certainly get our attention. For many families, this is the last straw. For the very poorest in the world, medical care can be financially out of reach entirely.

Grameen Bank hopes to fill that gap and has formed another division, “Grameen Health” which will be a provider of Micro-Health Insurance.

Grameen Bank is leveraging it’s reputation and infrastructure in rural and impoverished places in Africa. Grameen Health has been operating in India and Banlgadesh for some time, but with a $100 Million Euro investment from the Dutch government, Grameen is beginning a pilot program in four sub-Saharan African nations.

This will pose initially education and credibility challenges for Grameen—how to convince families to pay $1.75 per year for a family of six, up front before an illness, when alternatively the family could save up for an illness or may not be sick at all.

In nations where the average annual wage is less than $3,000 per USD, that $1.75 premium will not go unnoticed.

I read in a brief article from the knowledge bank at INSEAD that several organizations are branching in to micro health insurance including Africa’s largest HMO, AAR, but few are finding wild success.

All seem to agree that experimentation and developing a consistent supply of medical support is critical before micro insurance can be successful. “The one day that the medication isn’t available…they are never going to buy insurance again. Then you’ve lost them. That’s why it’s so different from micro finance” said Johanna Mair, a former doctoral student at INSEAD, who is now an associate professor of strategic management there.

I’ve mentioned before about my brief travels in Africa last fall, and I certainly saw the need for medical care there. (I had to be treated in a hospital there for a dog bite—that was an experience in and of itself!) I could see how families had to go out and buy their loved one’s wound dressings and surgery supplies and medications at the pharmacy. While it wasn’t wildly expensive by my standards, I don’t believe that many people would seek preventative care, based on how expensive it could be, and competing financial priorities.

The potential here is fascinating, should this catch on, that the poor worldwide might have access to preventative health care for themselves and their children. This would mean there are more people studying medical coding and billing to work for the expanding health care industries.

I’ve looked around for more articles on the subject but most seem to be theoretical and scholarly, if you see any articles about micro health insurance reaching the masses—please let us know.