USAID MicroLinks Note from the Field

Honduras: Blending Finance, Technology, and Training to Encourage Responsible Growth

La Mosquitia, one of the last remaining tropical forest areas left in Central America, is the most impoverished region in Honduras. Local communities, including the indigenous Miskito (or Mosquitia) people, have struggled to keep alive their distinctive cultural heritage while dealing with the threats of environmental and economic uncertainty.

Through a carbon-neutral biofuel initiative,  the MOPAWI (from Mosquitia Pawisa) seek to generate equitable social development through sustainable microenterprise  utilizing palm oil  that is used for a variety of purposes.   This approach will provide financial, social, and environmental returns in order to:

• Increase local employment while decreasing out-migration;
• Lower the cost of production and with lower agricultural labor;
• Reduce waste and increase product yield; and,
• Decrease emissions and deforestation.

“The beauty of this enterprise,” says David Hircock, Senior Advisor for Estée Lauder, “is the multidimensional, entrepreneurial approach. Many elements of this approach can bring much-needed cash into the economy and also negate the need for cash. For example, the indigenous community may not need to purchase diesel. Additionally, the enterprise incorporates important elements affecting local security issues, such as food, water, land and economics. Perhaps most importantly, this enterprise could show that the Mosquitia people are integral to the sustainable development of the area and local economy of Puerto Lempira, whereas at the moment they are so often marginalized. Now they can have a much-needed voice.”

Monday night  GreenMicrofinance and Jamii Bora announced their intent to work together on the Jamii Bora gamechanger: Kaputei, its eco-village outside Nairobi, eventual home to 10,000 Jamii Bora members.  This microfinance institution, which has grown to nearly a quarter million borrowers in just a decade, is headed by the indefatigueable Ingrid Munro.  Here you see her (she's on the left) and GMf's Elizabeth Israel, putting their heads together, strategizing about how poverty can be alleviated, families strengthened, education provided, and health improved, all while taking good care of planet Earth.  These two wise women have some fantastic answers to those perplexing questions!  (And hats off to Ingrid as she addresses the Clinton Global Initiative tomorrow.)

“We’re coming together, two organizations that have been working toward the same goals, Jamii Bora and GreenMicrofinance,” said Munro.

“The needs we’ve seen in Kenya are the tip of the iceberg,” said Ira Wagner, of GreenMicrofinance. “We hope to use Kaputiei as a model for interventions aimed at ameliorating such growing environmental problems as the 885 million people who rely on polluted, contaminated drinking water, a result of the absence of sanitation.”

A thought-provoking read that reminds us to dig deeper, and empathetically, when we contemplate the intricacies of the poor's role in microfinance.  The Poor and their Money: Microfinance from a twenty-first century consumer's perspective by Stuart Rutherford is revised and available at http://tinyurl.com/maz43h

Read the summary below, as printed on their site:

"The Microfinance revolution is usually considered to have been led by the NGOs, donor agencies, and more recently banks who offer poor people financial services. But what can we learn from the ways that poor people already manage their money? What are the essential elements that they prize so much that they are willing to pay high interest rates to money lenders, or spend time and energy setting up elaborate savings clubs? The poor and their money emphasizes the pivotal role of savings in the lives of the poor, and in so doing overturns the common misconception that they are 'too poor to save'. Building on the huge acclaim that followed its first publication, the second edition of The Poor and Their Money brings readers up to date with microfinance developments in the twenty first century, including India's self-help group movement, village banks, and microfinance on Wall Street. It also describes the most detailed accounts to date of poor people's day-to-day financial strategies - their financial diaries. The book's clarity and avoidance of jargon make it appealing not only to microfinance students and practitioners, but to general readers as well."

Practical Action Publishing (formerly ITDG Publishing) The Schumacher Centre for Technology and Development, Bourton on Dunsmore, Rugby, www.practicalactionpublishing.org

We want to hear your comments on the book!  

MICROCREDIT SUMMIT CAMPAIGN CARTAGENA, COLOMBIA

GreenMicrofinance has organized  four panels for the Microcredit Summit Campaign...
from Halifax, Chile, Bali and now Colombia! 
GreenMicrofinance appreciates the support of USAID, microLINKS, and the Microcredit Summit Campaign in collaborating with us over the past years in promoting 'environmentally sustainable microfinance'.



 GreenMicrofinance Director, Dr. William Yager, joined Dr. Muhammad Yunus, Nobel Laureate 2006,  on a panel focused on "microfinance and the environment" at the Microfinance Summit in Cartagena Colombia.  Dr. Yager, with the support of USAID, was one of the 1,000 delegates attending the Summit.

 Dr. Yunus chaired the panel, entitled "How MFIs and their Clients can have a Positive Impact on the Environment!"  
Dr. Yager commented on the environmental risks facing microfinance clients.  With a new paradigm shift, he emphasized that paying attention to the environment = enhanced productivity! 
Dr. Yunus closed the session with the following key points:    

• Global Warming was created by us, we can solve it just by stopping what we are doing wrong.

• The Poor are not the cause of Global Warming, they are the victims.

• Technology is key. 

• Government can do more harm: Subsidies stifle creativity and market sustainability, taxing ecological solutions.

               City Dump  - Guatemala                                                                   Hotel Waste Bio-gas Plants - India

Nobel Laureate 2006
Microcredit Summit Webcast - Colombia
microLINKS Blog - Colombia

Two of our recent pieces -- the CGAP article "Microfinance and the Environmental Bottom Line" and GMf Director of Communications Betsy Teutsch's column on improved cookstoves -- have been included in MicrofinanceFocus' special environmental issue this year! 

You can download the entire issue from MicrofinanceFocus' homepage, www.microfinancefocus.com, or access the PDF by clicking here.  The CGAP article is on page 19, Betsy is on page 24.

Many thanks to Vikash Kumar, Managing Editor & Executive Director of MicrofinanceFocus, for taking great interest in GreenMicrofinance and coordinating our participation in this issue; Betsy for all your tremendous input and contribution to both these insightful articles; again to CGAP and Sara Yamaka; and everyone else for their support.

To refresh your memory, below is the beginning of the cookstove piece:

Backyard BBQs Meet Improved Cookstoves
Betsy Teutsch, Director of Communications, GreenMicrofinance.org

Last Sunday's supplement ran an ad which really stuck with me -- so much that a few days later, I went back to my recycled newspapers to confirm my recollection: Walmart is selling spiffy, stainless steel backyard BBQ gas grills for $298.  Such grills have long been a suburban status symbol of macho domesticity, much evolved from the little kettle-style charcoal burning versions of my childhood.  My first shock was that they're so cheap (thank you, China) that all elite symbolism has passed.  Now average people with backyards who shop at discount stores can afford this luxury and fuel it with a tank of propane gas, advertised for $17.82. 

My second reaction is looking at this snazzy item through the lens of third-world cooking; in my role as Director of Communications for GreenMicrofinance, I have learned a great deal about life without the infrastructures we in North America take for granted.  GMf's mission is to bring clean energy, environmental benefit and poverty alleviation to the world's two billion people without access to modern energy systems.  Most of these households cook over foraged wood or dung in open fires; given population expansion, this requires ever more time to gather since close-by supplies are exhausted.  This is not exactly Martha Stewart's domain.  Not only is the direct burning of wood, dung and crop residue extremely inefficient, it is highly polluting, resulting in respiratory disease as well as black carbon emission.  It's exactly the kind of outdoor "campfire" that in the affluent world has been replaced first by kettle barbeques and, as we all became more affluent, gas grills. 

Slightly better-off families in the developing world can afford LP, liquid petroleum - generally all imported and way beyond the means of a Bottom of the Pyramid family.  So the type of grill Walmart is selling is actually a high-end third-world stove.  The irony, of course, is that for Walmart's customers, this is not a primary cookstove.  It is just for recreational warm weather backyard barbeques.  The indoor range, gas or electric, serves that duty. 

One breakthrough for perpetually impoverished developing world households is improved cookstoves, paired with gas produced by a family's biodigester.  A slightly higher-tech version of composting, these cisterns have a seal so the waste which is dumped into them is processed anaerobically.  Within a month or so, the biodigester yields methane gas along with very rich fertilizer.  There are hundreds of different types of stoves being designed and marketed in the developing world.  While very simple, they accomplish a great many improvements.  They consume less fuel, making them less expensive to run.  They utilize locally produced gas (ideally the "in-house" product!), eliminating the time required foraging for wood and dung.  And since they are more efficient, they produce less pollution, resulting in improved health...

Donors and investors can build capacity for green microfinance by providing necessary technical assistance and by supporting environmentally sustainable microfinance projects. For example, the Netherlands Development Finance Company (FMO) has developed evaluation criteria and tools to help MFI's assess and manage the social and environmental impacts and risks of microenterprises. CIDA has also produced an Environmental Sourcebook for MFIs. IFC, Triodos, Calvert, Shell Foundation, and EBRD are among other donors who are including the environmental bottom line on their agenda.

In this article, we explore some of the eco-microfinance initiatives promoted today, such as:

• Green microenterprises
• Renewable energy entrepreneurship
• Carbon credit aggregation

Green microenterprises

Eco-friendly microenterprises can provide sustainable sources of income to microfinance clients, including the production of organic fertilizers and biomass charcoal briquettes, clean energy cookstove fabrication, and handicrafts made from sustainably sourced materials. Various industry standards, from groups like the Forest Stewardship Council, provide guidelines on “sustainable sourcing.”

MFIs that deal with agricultural clients can seek partners that will help clients adapt to evolving conditions through the adoption of environmentally-friendly farming techniques. Organizations, such as Sustainable Harvest International, help by providing key technical support. Subsidy can also play a positive role as clients shift their approach to a more eco-friendly standard.

Engaging in environmentally sound business practices can:

• Help microentrepreneurs preserve and protect their long-term income
• Protect the health of communities
• Lower overhead for microenterprises
• Enable MFIs to invest in a growing market that meshes well with the agendas of triple-bottom line investors.

Renewable energy entrepreneurship

Microfinance clients often use fossil fuels like natural gas and petroleum as sources of energy. These fuel sources contribute to the greenhouse gas problem, the degradation of local ecosystems, and cause health problems. Implementing renewable energy systems, like solar, wind, and biogas can offer great cost savings, as well as health benefits. MFIs offering personal consumption “energy loans” can help microfinance clients leverage these resources for their homes and businesses.

Renewable energy can also be a source of income for a new class of business – renewable energy microenterprises. Social and environmental entrepreneurs from the industrialized world are helping to create this microentrepreneurship opportunity. For example, Barefoot Power is a socially-conscious business that employs microentrepreneurs to distribute solar-powered products and systems in the developing world.

Grameen Shakti is a nonprofit with the mission of eliminating energy poverty with renewable-energy entrepreneurs. They support programs in solar energy, biogas, and improved cookstoves, which include training and capacity building for entrepreneurs who promote the systems, as well as financial products tailored for renewable energy uptake. In the micro-utility model, one entrepreneur will install a solar system and sell power to those in the community who cannot yet afford to invest in their own.

Carbon credit aggregation

Carbon credit aggregators, like MicroEnergy Credits and E + Co, work with MFIs that provide renewable energy loans to clients. Each loan can be translated into a small carbon credit. Though these credits are too small to be traded on the multi-million or billion dollar carbon markets created by the Kyoto Protocol, aggregators bundle these credits and then sell them on the voluntary carbon market to net polluters. Carbon credit aggregation offers:

• Financial rewards for MFIs that provide energy loans, creating an incentive to continue greening products
• A better standard of living, and more control over energy resources, for clients who switch to renewable sources of energy for their homes or businesses
• Business opportunities for microentrepreneurs who supply renewable energy services or systems

Conclusion

The conventional path of economic development has tied greater prosperity to increased energy consumption, with its corresponding negative environmental impact. This does not have to be the case. MFIs can contribute, along with their clients, to solving the crises we face today. Microfinance clients continue to be impacted by global climate change and environmental degradation, but we are also seeing that they can be part of the way forward.

Congratulations GGAP on a MUST READ!

...for the April 2 Report on Greening Microfinance: Clients and the Climate of Change

With environmental challenges-from drought to flooding-disproportionately affecting poor people's livelihoods, microfinance institutions have a strong incentive to mitigate the risks of climate change while helping their clients adapt to that change, argues Paul Rippey, the author of the latest report from CGAP on microfinance and climate change.

...to Paul Rippey, on the well-written article,  Microfinance and Climate Change: Threats and Opportunities.   Great work, Paul!

"Within microfinance, the word ‘sustainable' has tended to be used in a very narrow way, mainly referring to institutions that are financially viable," says Rippey. "But just as many MFIs have added social performance to their bottom line, they should also consider how their actions-and those of their clients-can help combat climate change."

Thank you, CGAP, for making mention of GMf in the Report and as an Additional Resource on your Feature page.  

Students at college entered last fall with the Bush administration in place resisting any climate change policy and a flush financial system.  Now just one semester later there is a new president, new policies and green stimuli afoot, and a financial system in tatters.  Fortunately, as one student described, they're in a bubble and somewhat insulated from trauma. 

However, tonight's group of Princeton students is surely not ivory tower elitists.  They are applying their prodigious brain power to some of the world's really big challenges and learning together through the Princeton Microfinance Organization. The span of subject they're studying emphasizes to me just how many disciplines are soon-to-launch University Forum will encompass.  Hearing all the fields represented at today's program was very impressive: financial modeling (Princeton actually has a Department of Operations Research and Financial Engineering - which will likely be doing some Re-Engineering), a chemist working on solar energy, an electrical engineering major focusing on design that requires people to be more efficient, a student focusing on environmental justice, a graduate student in Development.  These all link to aspects of GreenMicrofinance.The once exception was the astrophysics major - but she is entitled to have interests outside her major!

Probably the most surprising, and informative for all of us, was a student doing a project on biochar; she elegantly explained this carbon sequestering soil improvement medium to us all!

Stay tuned.  You'll be hearing more interesting things from this group, I am sure.  You can see us up above, not actually IN Africa, but at the Woodrow Wilson School.

 PS - great planning work, TIng-Fung!

This very instructive post from the Center for Financial Inclusion's Blog caught my eye - reposting it here for all of us clean energy geeks to enjoy and learn from!

Making Something From Nothing: Biomass Briquettes Bring Fuel and Business Options 3/19/2009

Posted by David Levai

I'm on my way back from Uganda where I spent the last week working for the Energy Links project. Together with the Legacy Foundation, we were supporting a workshop to train members of a local NGO, UWESO (Ugandan Women's Effort to Save Orphans) to produce biomass briquettes.

"What on earth is a biomass briquette you might say?" - a reaction which happened to be mine when I first heard about it. It's a type of solid cooking fuel made out of organic waste material. With its round shape and a hollow core, it looks like a donut. So, what makes it so important? It is an environmentally friendly alternative to charcoal and a cheaper substitute for the billions of households that cook their meals everyday using the inefficient combustion of charcoal or firewood.

In the developing world today, charcoal and firewood are the primary cooking fuels. But as forests shrink and as the prices of raw materials and energy keep rising, cooking fuel expenses are a growing burden on low-income households in developing countries, monopolizing on average 8% of a family income, much more than in western countries. Just imagine an average U.S. household with a monthly cooking (cooking only - not heating or lighting) bill of over $300!

By definition, producing charcoal requires wood, which increases both deforestation and the stress on ecosystems, emits large amounts of CO2 in the process and regularly ends up burning down entire chunks of forests. And apparently 10% to 20% of that very charcoal is lost in dust and fines along the distribution process. What a waste!

Therefore on top of protecting the environment, the advantages of biomass briquettes are threefold:

* Economies: Since briquettes can be made of almost any dry organic waste - from tree leaves to cereal husks, from scrap paper to banana peels, from saw dust to charcoal fines - input materials are free or quasi-free (the only cost might be that of collection). Producing one's own briquettes can entirely replace charcoal or firewood purchase and induce substantive savings.
* Livelihood improvement: Women are traditionally those collecting firewood, transporting heavy packages on long distances everyday. With a painful, time-consuming and sometimes even perilous activity gone, women can now engage in other activities, particularly income generating ones.
* Income generation: A group of 6 people, with a small working capital start-up investment to buy the tools and the press (around $200), can easily produce fuel for 50 families. Selling the briquettes on the market can answer two needs: generate a substantial income to the producer and substantial savings for the end-user compared to charcoal and wood.

Turning waste into a renewable resource, looking at clean energy and 'cleantech' in the long term, discussing the future of carbon markets... GoingGreen East by AlwaysOn is at the forefront, bringing in experts in related fields to provide the latest on these topics. Watch live, at the AlwaysOn network.