By Martina Welke
Communications Fellow

What Motivates You?

At a professional development seminar in a previous life, I was introduced to David McClelland’s Theory of Motivation, which locates the impetus of human action in three basic needs: the need to influence, the need to achieve, and the need to affiliate.  I’m always skeptical of theories that seem to be overly simplistic—particularly when they attempt to taxonomize something as unpredictable and complex as human behavior—but  something about McClelland’s trifecta resonated with me, and I’ve since found it to be useful for reflecting upon my own choices and the actions of those around me.

I recently found myself ruminating on two themes that routinely occupy my mind—microfinance and communities—and realized that the needs trio provides a great framework for discussing some of the exciting community building strategies that two of my favorite microfinance organizations are beginning to employ.  OikocreditUSA and Vittana are both engaging their lenders in a variety of ways that feed our “basic needs” and incorporate us into an interactive, international microfinance community.

Influence:  Both Vittana and Oikocredit share client stories with investors and offer updates on the impact loans have made.

Vittana, which partners with microfinance institutions in Latin America and Asia to offer student loans, provides a biography for each student listed that includes their goals and the projected earning potential the investment in education could facilitate.

Oikocredit’s new Community Hub features a Meet the Entrepreneurs section where investors can read detailed stories about individual clients and browse through profiles of Oikocredit’s partner organizations in order to better understand the influence their loan could have.

Achievement: Both sites have plenty of information to help illustrate collective and individual achievements.  Vittana’s Community Page includes an update summarizing the total amount loaned through the website and the total number of community members.  A summary of individual’s loan history is listed on the each lender profile page.  In the spirit of friendly competition, Vittana organized a March Madness lending contest, during which lenders were encouraged to organize groups and compete with other Vittana groups for the most members and dollars loaned.  The leading groups were highlighted on Twitter and in comunity e-mails to recognize their achievement.

Oikocredit also updates lenders on the total amount loaned and allows lenders to track individual loans.  The site clearly outlines 5 Levels of Engagement for community members, so that those motivated to become increasingly involved in the organization might map their progress.

Affiliation: The opportunities to affiliate with other community members through both on and offline activities are abundant after joining OikocreditUSA or Vittana.  As I alluded to earlier, both websites offer users the chance to create and populate lending groups. The OikocreditUSA hub allows members to create blog posts, share photos, and even video chat with other community members.  Additionally, members can download a toolkit with materials to host a Community Organizer Toolkit that inculdes materials for developing local groups and hosting informational houseparties.

Never underestimate the power of a party.  Over the weekend, I attended a Seattle party that Vittana hosted in partnership with SeaMo to celebrate passing the $100K loan benchmark (which happened in early March) and the great success of their March Madness campaign (they exceed their goal of $50K in loans and fully funded every student listed on the website).  As I mingled among a few familiar and many new faces, I happened to bump into OikocreditUSA’s new Northwest regional comunity organizer.  I chatted about all the great developments on the OikocreditUSA website and the exciting potential for growth.  I toasted to Vittana’s wonderful achievements.  I met other people with an avid interest in microfinance (and even someone who shares my enthusiasm for cupcakes!).  At the end of the night, I left feeling well-fed–in McClelland’s terms–and very motivated to do more.

The passionate nerds in Revision Labs’ Learning 2.0 Lab have been brewing a new, more effectively customized yet community-inclusive model for organizational learning.  I tweet.  But given how much of their fancy philosophizing flies around the office, I thought a tangential blog about how people make decisions around education could be appropriate.

I’ve been working with Professor David Harrison and  SkillUp Washington on an upfront financing mechanism to help King County’s working poor onto a path of sustainability through education and training.  While that sounds boring and tedious (to me initially, at least), the essence for this need stems from the oft-overlooked heterogeneity of decision making models across socio-economic classes.

What?  I know, right?  Different people make decisions differently, and they all (to some extent) deviate from those archaic models of “rational decision-making” that we swallow and regurgitate in every Economics 101 class.

While we all respond to signals slightly differently, there’s a dramatic difference between how the low-income make decisions and weigh trade-offs and their middle and upper-class counterparts.  Cognizance of this alone can help us better customize public policy toward funding around training and education for the working poor.

Arlene’s Decision Making Model

“Arlene” is our avatar.  She is the traditional socio-economic underdog; over 25, under-skilled, working but earning annually less than 200 percent of the federal poverty line.  Arlene struggles to satisfy her basic needs, and the opportunity cost of enrolling in school and remaining actively enrolled is high.  The conventional incentives traditional students are motivated by (well paying job, financial security, social status) to persist through each semester are not the same for Arlene, who can’t consistently afford the time it takes to obtain a degree.  More importantly, her expected value of a degree as far lower, given a lifetime of internalizing social stigmas and/or low-paying, crummy past employment.

The oft-cited “rational” decision-making model is not ubiquitous.  Divergences from the standard model are most obvious among the low-income, who must choose daily between basic necessities like food and rent.  Their immediate future is mired in uncertainty, let alone long-term future, much unlike their middle and upper-class counterparts.

Low-income, often ethnic minorities and/or women, in King County (and everywhere) possess so few tools and resources that the constraints and preferences they juggle in making the most “rational” decision are frequently misaligned with a sustainable future.

Greater income volatility for low-income individuals increases their need for short-term credit.  Arlene’s time preferences and discount rate on future earnings is higher than middle and high-income earners; she can’t afford to prioritize education, given the many imminent constraints working poor face.  Arlene’s expected value of future full-time employment is diminished by daily uncertainties, and consequently far lower than what we may “rationally” predict.  Education has been shown to lower one’s discount rate in decision-making and permit the self-discipline that financial sustainability demands[1].

The inability to “afford” to wait to consume A (food, rent, childcare) over B (books and transportation to school) by Arlene and her counterparts reinforce barriers to graduation and full-time employment.  Arlene’s continued enrollment and active participation in community college and training programs is one of the most crucial building blocks of self-sufficiency, yet it is highly fragile and easily disturbed.  And the reason it is so fragile is because of the above: she can’t afford time and the expected value of that time spent on education is low, shrouded by uncertainty and past experiences.  Promises just aren’t as incentivizing for Arlene as they are for you and me.

An upfront financing mechanism that lowers the discount rate of re-enrolling next semester and raises the expected value of earning a degree would help clear Arlene’s path to self-sufficiency by making it more obvious and more certain.  A pay-as-you-go system that financially supports Arlene’s ambitions to become, for example, a registered nurse by providing partial upfront wages (that she would earn as an RN) would give her both the financial stability and confidence in the future necessary to complete the steps needed to do so.  It is precisely this lack of ready resources that reinforces the traditional barriers to entry to sustained training and employment.  This financing is an investment in human capital.  The outlay cost is the price of Arlene’s increased certainty in earning a degree that secures a good job.  The reward is the development of human capital, satisfying demand for high-demand industries, and the social and economic spillover effects of having the working poor move out of poverty.

We propose helping Arlene along the way to employment and bringing future financial rewards closer to home, before securing a job, and allowing her to repay the investment over time and below market-rate interest, post-employment.

[1] Bauer and Chytilover: The Impact of Education on Subjective Discount Rates in Ugandan Villages. March 2009.  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1369803

Last week, on a dreary, rainy Seattle night, 500-600 people walked through a door in the Fremont neighborhood of Seattle.

Inside, they mingled. The room was filled with conversation about sustainability, about ambitious goals, and about fundamental world change.

Terry Provance and Re-Vision Labs gave everyone something new to think about: how our money can change the world. And not with donations, with real investments in people.

Join The Movement

The economics of the past clearly haven’t worked, as we have seen over the past several years, but particularly in the last year. The economic norms don’t have humanity in mind, they are not for the good of the people, they are for the good of the few. The rich few.

Money is one of the things that makes the world go round, there’s no denying it – when the economy goes south, we all feel it.  However, I firmly believe individual actions make a difference. I believe each of our actions together can change the world.

So let’s redefine finance, change how money works or doesn’t in our world. Let’s put our money where our passion is and truly, completely, invest in our future.

How Does This Movement Work?

Instead of investing your money in a money market fund, or keeping it in a savings account, you put it into a microfinance fund like Oikocredit. That fund is used to provide loans and business services to people in the developing world who cannot obtain a bank loan for their business plan (because they are poor and have no collateral or previous credit history). These loans have a 95-99% success rate – much higher than typical small business loans. And in 35 years, Oikocredit has repaid every single lender with their money plus interest.

It is a strategy for bringing people out of poverty by helping them become self-sufficient. And it is a strategy for changing the world by changing what we do with our investments: why give our savings to a big bank who cares nothing about you, your money, or the greater good of the world? You can do more with your money.

How Is That A Movement?

Because we can only change the world if we all do it together.  So that requires each of us to take a few moments and literally join the movement – not just invest, but spread our excitement and encourage our friends and families to invest in people.

Who Does It Help?

Here is a bit I wrote on the Oikocredit website about a woman named Flora:

Flora lives in a region of Kenya where 90% of people in the area live below the poverty line on less than $2 a day. When Flora’s husband was killed and their cattle stolen in 2001, she cried, feeling helpless and hopeless. But with four young children to support, she desperately needed to rebuild her life. With a series of loans – and a lot of hard work – she was able to re-establish her herd and eventually open a small grocery store. Little by little Flora started thinking big again and taking control of her life.

Flora has never forgotten her own struggle and is devoted to helping others in her community. She offers fair credit in her shop to customers who need it. In addition to a home for her family, she has also built rooms to rent out. This housing means others can live affordably and benefit like she has from the town’s growth. Today, she not only feeds and clothes her family; she pays school fees for her two brothers and plans to send her own children to college. Her future dreams include opening another business. Not only does Flora have improved her own life, but she has also become the inspiration for other single women in her community. Photography: Samburu Teachers Sacco

But quite honestly, it doesn’t just help Flora.  It helps you, and me, and our friends, our families, our neighborhoods, and our world. I firmly believe that part of living in a sustainable world is helping our neighbors, helping spread the wealth and happiness to other communities, and being there when others need us most.  Sometimes the best thing we can do for the planet – and for ourselves – is to help others.

Why am I so excited about creating a movement with our partners at Oikocredit?

The founders of Re-Vision Labs set out to change the world as a business, and we don’t choose our clients lightly.  Oikocredit has been around for 35 years, with an amazing mission and truly selfless people working together. They also take huge strides to make sure their work is socially, environmentally, and economically sustainable.  They want to improve the world just as much as we do, and they believe, as I do, that we can change the world by changing what we do with our money.  Learn more at the new interactive website we’ve created with Oikocredit.

There are other great microfinance organizations as well.  If you want to look around at other microfinance organizations to pick which one works best for you, just make sure you investigate them as we did with Oikocredit.  Make sure they are offering loans at reasonable rates to people in the developing world, and that they offer services beyond loans – support services like courses in creating a business plan, accounting, marketing, etc – these things are what make the biggest difference.

Thank You For Joining Us

Last week we gathered 144 names of people interested in becoming a part of the movement in microfinance.  We gathered $1,000 in donations to the Seattle Greendrinks Oikocredit investment fund.  We gathered a lot of excitement and interest in a new way of investing.

And this is just the beginning.  This is just Phase 1, the pilot project. We will be expanding this movement around the country, and eventually around the world. So if you know anyone who may be interested in helping us champion this cause, PLEASE let us know! Leave a comment, send us an email, give us a ring. Thank you for helping us truly make a difference in the world.

We thank our community so much for joining us, and for having open ears and warm hearts. Together we can change the world.

It all started because I was young, visionary, and progressive-minded.

(Perhaps your story starts like this as well.)

Over the five years since I graduated college, I’ve spent a shocking amount of time working in my dream job.  This has been possible primarily because I’ve given myself the permission to go into debt when the projects and work that matter most to me don’t come with a paycheck.

On several occasions I’ve volunteered for months to support a visionary project, land a position in a bold (and of course, risky) new start-up, or launch that start-up myself.  Always these projects were immediate, exciting, and leveraged the things I cared most about – pushing back on climate change, booting the bad guys out of office, incubating young social entrepreneurs. I’ve learned a ton, and done some cool stuff.

But of course, these values-driven ‘freedom-stints’ of mine have added up to considerable debt.

Now, in theory, this debt isn’t bad.

Friends of mine have taken out school loans and I’ve taken out (far smaller) loans to invest in myself and my own off-roading approach to making a difference. (No, you can’t take out education loans to apprentice with a philosopher. But you sure CAN try.)

The difference, however, is that my friends owe money to the government at approximately 3%, and I owe money to my credit card – at approximately 14%.

So here I am, living my values as best I know how, and sometimes I feel extra generous and powerful when I cut out some cash to send to charities and game-changing political campaigns. Over the last year, these modest but heart-felt offerings have added up approximately $600.  (Mmm…being a donor gives me a warm, fuzzy feeling.)  And of course that doesn’t include the small businesses I go out of my way to frequent and the artists I support by buying (like, paying for) their albums.

But then, after the careful allotment of these meager cash resources and dutiful embodiment of my deeply progressive values, each year I write one very special check to cover the 14% interest on my loans. I write it to the tune of $924* – roughly 1.5x my annual donations to progressive causes – and make it out to Chase Bank.

I’m sorry. CHASE bank?

That’s right. THE Chase Bank. The one that last year took twenty-FIVE billion dollars of OUR American money and has just announced that it will deliver an astonishing twenty-NINE billion dollars in BONUSES to its CEOs.   (Translation: We got hooooodwinked and I’m paying the villain). $25,000,000,000 of our common money is no longer available for the climate fight, or economic independence for the poor, or any of the other causes I care about…because it’s locked up in some fat cat’s 3rd residence or H2.

$25 Billion?!! That’s mind-boggling. I can’t even IMAGINE what $25 Billion is.

But I can tell you what that $924 is.

$924 is a serious chunk of my friend Oliver’s mustache during his Mustache for Kids Campaign at DonorsChoose.  $924 is 92 Gaggles of geese (I still don’t know what a gaggle is, but Heifer says I could by 92 of them with my Chase Check.)  $924 is my VIP seat on a local candidate’s victorious election night, or half way to my contribution limit on Obama’s campaign.

In short, this particular $924 is my ticket to Shmuck-Dom.

And for me and my – what did I call it again? “young, visionary, progressive-mindedness?” – that’s just embarrassing.  And it’s particularly embarrassing because (sneak attack!) this is Microfinance Week at Re-Vison Labs.   In preparation for tonight’s big Greendrinks event with Oikocredit USA, we’ve been talking a lot about the power banks and creditors.

But, luckily, so has the rest of the country.

The Move your Money Campaign is raging across social media sites, building momentum off a fantastic video that Gabriel posted earlier this week.

And watching those clips of George Bailey the ethical banker made me think right away of another hero of good finance.  Muhammad Yunus, the founder of Grameen Bank and Nobel Prize winner, pioneered the concept of microcredit by financing loans to poor people with his own money. (Check out this short video for the story.) I originally learned about Yunnus while working (in between ‘freedom stints’) at another great financial institution – ShoreBank – which is a well-loved Chicago-based bank that uses many of the lessons of community-based credit that Yunnus pioneered.

So, with all this background in good money practices, what was I THINKING, letting this $924 slide?

I guess I just WASN’T thinking. I wasn’t, frankly, adding it up.

So this is it, Chase, it’s over. You and me? We’re done. I’m moving all my uber-expensive debt elsewhere because I can’t stand the idea of sending you another dime.  I don’t know how I’ll do this just yet, but I’ll figure it out.

And in the meantime, this is my challenge to all my values-driven friends: Add up the power of your money – whether it’s in the black or in the red.  And if you don’t like what you see, move it.  Because the good guys are out there.

And we can’t afford the rest of this stuff.

*Technically, it’s 12 little checks and I’ve already subtracted the principal to make my point.  The $924 is just the interest.

We at Re-Vision Labs are only trying to change the world, something that is a group project, so we like to see other grassroots efforts in our community. Through the alumni association at Bainbridge Graduate Institute, I connected with my friend Kristine who is involved with addressing the serious problem of human trafficking. She asked if anyone had any microfinance connections and since we do, with the venerable Oikocredit, I inquired as to why.

Overlake Christian Church, an organization Kristine participates in, has been partnered with international organizations preventing, rescuing and offering healing to those victimized by human trafficking.

As anyone who frequents this blog no doubt already knows, Microfinance Institutions (MFI’s) operate in some areas where human rights take a backseat and exploitation is still a problem. So I think the folks at Overlake are asking – does the MFI “value chain” offer an opportunity to help the people who are outside event the boundaries of the “unbankable” – the victims of human trafficking.

A group based at the Overlake Christian Church near Seattle, Washington, are working on initiatives in orphan care and human trafficking issues and beginning their work in Kenya with orphan care and in Thailand with human trafficking.

Their goal in Kenya is to facilitate adoptions for 2000 street children in the next three years.  They will provide transitional housing for the children and provide training and support to families able and willing to adopt.  We believe it is important to build families and that these children know the love of parents.  Microfinance will be incorporated to make it possible for families to adopt.  We also see microfinance as a way to keep children from becoming orphans.

Their goal in Thailand is to prevent children from being trafficked.  They also are working on rescuing 1000 girls in Pattaya in the next three years.  They will be using microfinance as a tool to empower these women and to help them support themselves.

They hope to build a business plan that is replicable and sustainable so they can move into other countries.

This group is connecting with people and organizations who have been working in the microfinance space to gain knowledge about best practices on the ground. So I invited a few of the folks from OCC to EVO this Tuesday for the launch of our new community organizing movement for Oikocredit. Hopefully the place will be jammed with folks who can help. C’mon down.

In honor of RVL’s focus on Microfinance last week and tonight’s big Greendrinks event featuring Oikocredit, I’ve decided to put my Lululemon topic off until next Tuesday in order to touch on the role community plays in microfinance.

I first heard about microfinance, microlending, microcredit (however you want to term it) from the master of microfinance himself: Muhammad Yunus. Yunus was giving a guest lecture to myself and a bunch of other university students at the University of British Columbia. He was definitely an inspiring figure, and the way he spoke about microfinance…well, he made it sound like microfinance efforts could be the golden ticket to a world without poverty.

But what is it that makes microfinance so successful? Why does microfinance seem to work where other development policies have failed?

I would argue it’s because microfinancing incorporates elements of community into its model and for that reason, it has become one of the most popular trends in poverty reduction of our time.

Three Ways Microfinancing Incorporates Community

#1 Peer Pressure to Ensure Payback

In the case of Yunus’s Grameen Bank, money wasn’t lent to isolated individuals. Instead, the bank lent to groups of Bangladeshis who then served as co-guarantors of each other’s loans.

In other words, a community of individuals took out loans from the Grameen bank, distributed the funds amongst themselves, and then ensured that all the funds were paid back in full. They used peer pressure.

I remember Yunus outlining this specific feature in his talk. If one of the women borrowers was behind on their payments, the rest of the group of borrowers would almost shun them. It was repay the money or risk disconnect from a community.

#2 Community-Based Development vs. Top-Down Development

Microfinance is very much a community-based approach to development. Money is lent to needy individuals or groups, and then it is those individuals and groups who decide where the money will be best invested. The part that matters is that the communities who borrow money have both the incentive and the insider know-how to guarantee that the money will be used wisely.

This is in contrast to the top-down approach where wealthier nations swoop into an impoverished village somewhere and start throwing money at poverty claiming all the while to know how best to ‘develop’ that village.

This approach is wasteful and simply does not work. I remember reading in university about one seriously misguided non-governmental organization who thought impoverished females would be best served by charitable gifts of high heels. Money that could have been put to good use in the hands of a community was thrown away to purchase high heels!

Obviously, community involvement is necessary for community development. There are countless examples of successful efforts towards poverty reduction that have centered around community involvement. I myself witnessed the staying power of a community-based initiative in Nepal in the form of a community hospital. Of the numerous hospitals I visited in Nepal on a public health internship, it was the community hospital that most impressed me with its technology, cleanliness, and procedures.

The fact that the microfinance model fully embraces community empowerment is partly the key to its success.

#3 Lending Lenders a Sense of Community

With the increased use of the internet, microcredit has found itself an increasingly  secure niches among lenders. The internet has allowed microcredit organizations to create community for lenders online.

The first microcredit organization to really tap into social media was Kiva. Kiva allowed lenders to go onto the Kiva website, search and read the stories of people in need of loans, and then select which individual they wanted to send their loan to.

Kiva provided a direct connection between lenders and borrowers.  Lenders suddenly felt they were a part of a community of other lenders in support of a common cause: the needy person they were investing in.

As it turns out, Kiva does not actually connect its lenders directly with borrowers. See New York Times’ article “Confusion Over Where Money Lent Via Kiva Goes” for more information on this Kiva’s lending practices.

The point is that Kiva discovered how to create an online community for lenders and thereby compel them to give more loans to impoverished people across the globe. The potential for further development of this concept is incredible.

Empowering Individuals and Communities

It will be interesting to see where microfinance goes in the future in terms of helping alleviate poverty. Of course, microfinance can’t be the one and only golden ticket for ending poverty altogether; poverty is much too complicated of a problem for to be solved so easily. However, microfinance does currently represent one of the best opportunities for your average, every-day person to contribute to the global battle against poverty. It empowers individuals and communities to take the problem of poverty into their own hands and actively do something about it. And out of the many different ideas around development, microfinance definitely had my vote as one of the most effective methods available!

If you want to find out more about microfinance and if you happen to live in Seattle, this Tuesday night (January 12th) is your chance! RVL, in partnership with microfinance organization Oikocredit USA, will be hosting a Greendrinks event for your socializing and green-organizing pleasure.

And as promised, up next week: Lululemon: Cultevating Community or Cultivating Cult?

How is social media changing the world? Check out this week’s hottest hits in global development!

1. Phone and Technology-Based Solutions in the Field of Microfinance

David Roodman from the Center for Global Development discusses the changing landscape of “savings” and its potential implications for MFIs.

2. Climate Change and the Microfinance Industry

Asif Dowla gives advice regarding the changing climate and its impact on microfinance. Her number one suggestion for MFIs: adapt!

3. Microfinance and Climate Change Adaptation

A white paper explores the interconnect between the issues of climate change and microfinance.

4. A Skeptic’s Look at Microfinance

Michelle Chen of Of These Times, paints a skeptical picture of the microfinance industry and the detrimental effects of its presence…Microfinance supporters..start your engines!

5. The Role of  Women in the Arenas of Climate Change and Microfinance

Ban Ki Moon, UN Secretary General, comments on the important role of women in mitigating climate change and the success of microfinance.