For the past two weeks, a group of 28 Northeastern students and 20 students from intec (instituto tecnológico de Santo Domingo) have been working with Esperanza International to figure out why the retention rate of borrowers who are Haitian is so low. This has involved many late nights fighting over survey questions or analyzing data, and many long, hot days in the field.
To start, Esperanza is an MFI (micro-finance institution) in the DR as well as in Haiti. They are a Grameen Bank replicant (remember Yunus and that Nobel Prize?) which means they make their services available to the poorest of the poor, especially women. Women are targeted due to their usual exclusion from traditional banking services and for their direct impact on the well-being of the family. ie men tend to spend the money on vices and consumables, whereas women take care of their children’s health and schooling first and are better at planning for the future of their businesses. In order to get small loans without collateral, these women are grouped together in fives, and are responsible for the other group member’s bi-weekly payments if they show up without sufficient cash. Finally, the loans are for business-use only, have interest in the neighborhood of 30% on a declining balance, and are typically for a six-month period. Also, for those interested, Esperanza is a Christian organization. But that’s for another day.
So back to our project. We were given this assignment by Carlos Pimentel, the CEO of Esperanza. I’m told this sort of interaction between students and MFIs is unheard of in the industry, especially with so much personal attention from a CEO. We had classes taught by Professor Shaugnessy about Social Business, Social Entrepreneurship and Micro-credit, divided up into color groups (Rojo!) and dove into a survey created by Dtra Lourdes of Esperanza (a Cuban!), which was meant to be used with current and former Haitian borrowers. In order to speak with these associates, we went into the field in Santiago, Puerto Plata, Santo Domingo Norte y Los Alcarizos which are areas of particularly low retention rate of Haitian borrowers (in La Romana they do just fine). We gathered over 200 interviews that covered information like literacy, numeracy, and sending remittances to Haiti in order to make recommendations to Esperanza about how to retain more Haitian borrowers.
What I can tell you now is that we have no idea. Statistically, there is no reason why these borrowers aren’t doing well, and that just doesn’t sit well with me (or pretty much anyone else here.) Our presentation to Esperanza of our findings was therefor uncomfortably short, and based on observationally-based recommendations backed up by outside research of the micro-credit industry. While I was discouraged by our findings, the six presenters (4 NU, 2 intec) did a great job. I was particularly impressed by all the people who did not present but wanted to and still stepped up to do the behind the scenes work. In the end, I think Carlos and the Esperanza team were impressed by our work, and I’m glad someone at their organization will be digging deeper into the issue in the coming months.