Foreign Affairs Committee on Feb. 15th, 2012

[The Chair, Conservative, Dean Allison]

I call the meeting to order.

Pursuant to Standing Order 108(2), our study on the role of the private sector in achieving Canada's international development interests will commence.

We've just got an hour and we've got a couple of excellent witnesses here. From the Grameen Foundation, we've got Alex Counts, who is the president and chief executive officer. Alex, welcome today. We're looking forward to hearing from you.

Then we've got Katleen Félix from Fonkoze, another great organization, so we're looking forward to hearing from you.

Since we only have an hour, let's get started right away.

Alex, why don't we start with your presentation? Then we'll move over to Katleen, and then we'll go around the room and we'll ask some questions for the remaining time.

Alex, I'll turn it over to you, sir.

[Alex Counts, President and Chief Executive Officer, Grameen Foundation]

Thank you very much, Mr. Chairman, and honourable members of the committee. I'm very pleased to be here to talk about this important issue.

If I had to summarize my observation, number one, I'd say the two fields that I've been most involved in--which are, first, microfinance or financial services for the poor, and second, technology, especially information technology for poverty alleviation and development—are both classic examples of the private sector playing a role in international development alongside the public sector. They can also be a platform or a partner for other private sector actors getting involved in the future, and I'll say a little bit about that in a minute.

The second thing is this: how the private sector can interface with the public sector and international development efforts really defies easy categorization along the lines of “it should be this way” or “it should be that way”. Every sector, every country, and every moment in time is different, and those relationships, we think, should be recalibrated over time as times and sectors change. I won't be giving you any major pronouncements on what this should look like, because it's very context-specific.

Microfinance is a very classic example of the private sector working with a social purpose. I grew up seeing microfinance evolve in Bangladesh, and I must say that Canada played a very important role in the growth of microfinance. Grameen Bank, BRAC, and others in Bangladesh, without CIDA's support, might have turned out very differently in terms of the maturity and the strength of the microfinance sector there. Bangladesh is a very different country from what it was when I first landed there in late 1988. It's much more vibrant in both the private sector and in the overall infrastructure of the country, and it's much less poor. Anyone who's looked at it, including Jeffrey Sachs at Columbia University, can see that microfinance was probably one of the top two or three reasons that the country advanced so much in the past 25 years.

In fact, we did a literature survey of all the impact studies of microfinance, called Measuring the Impact of Microfinance, and one of the many studies said that over a three-year period about ten years ago, the districts in Bangladesh where microfinance was expanding rapidly experienced poverty reduction rates at triple that of the districts where it was expanding very slowly, so I think it's a big part of the poverty reduction experience in Bangladesh.

Looking forward, I think that microfinance, which now reaches more than 150 million of the world's poor families, can be a strong partner to other private sector actors wanting to get involved in international development, and I'll talk about that in a moment.

We think of microfinance as being a platform, a partner, a channel to market for other interventions. One example is solar panels. It's not a new technology, but it's very rare for it to actually reach, in a usable form, the poor of a country so that they can afford it and go off the grid and have affordable, clean electricity, but a sister organization of Grameen Bank, called Grameen Shakti, which means “rural energy”, formed a company from very small beginnings and is now profitable, selling to people across rural Bangladesh a thousand solar home systems every single day now, and doing it profitably.

The technology has existed all along, but the infrastructure to finance the poor to borrow for it, to repay it, to use it, to understand the opportunity of solar energy, was only possible because the microfinance infrastructure was already there. Microfinance, which is basically bringing banking services on a businesslike basis to the poor, makes possible the entry of many other people producing products--whether health care, educational, or energy products--and makes it possible for the poor to afford them and to understand why this could benefit them.

Certainly there are regulatory issues that microfinance is facing in certain countries, Bangladesh and India in particular, and it's ironic that certain regulatory agencies and politicians have chosen to accuse microfinance of being exploitative of the poor by charging interest when those two countries are two of the countries with the lowest microfinance interest rates in the world.

Politics sometimes is not a little out of step with reality, everywhere except, I guess, in Canada.

I will move on to information services. We think that not only do the poor not have access to the financial services they need, but they also do not have access to the information they need or the ability to communicate with others, such as family members, business partners, and overseas relatives.

On the microfinance success story, we observed something happening right when I was setting up Grameen Foundation 15 years ago. Grameen Bank joined with Telenor, a Norwegian telecommunications company, to set up a phone company in Bangladesh, which was later named Grameenphone. It's a purely commercial, private sector, for-profit company, but it's set up with a sister organization with a social purpose to set up what became 300,000 Grameen Bank clients with cell phones to be a human pay phone, a pay phone for their village. It was a very unique example of leveraging the infrastructure of microfinance in a brand, bringing a new technology, which was being privatized, and doing it in a way that could be commercially successful but that could set up hundreds of thousands of women in business. It was a smashing success. The company became the largest company in Bangladesh, and the effort to set up the women in the pay phones was highly profitable for them.

Grameen Foundation, which I started, took that model to Uganda, joined with MTN, a private sector telecommunications provider. It is Africa's largest mobile network operator, in fact. We set it up in Uganda. We made some mistakes and got a little bit of a rough start, but ultimately we set up a profitable company that set up 80,000 Ugandans, mostly women, as pay phone operators. They became familiar with being the information and communications technology hub of their village.

Then that business started to come down. This is the way of the business in the private sector: what it hot one year is a dying business the next year. We decided to use that learning and that infrastructure to set up these women not just simply to use the phone to make phone calls, but to actually download information about best practices in agriculture, health, and commerce. We transformed what we called village phone operators to community knowledge workers. We now have 1,000.

We are focused now on agriculture in Uganda. We're looking to spread this to other geographies such as Colombia, Indonesia, Tanzania, perhaps, and other places, where a peer farmer--1,000 of them are now operating--does two things. Through the phone and accessing a database on agricultural best practices, they can get just-in-time information about market prices, about how to deal with a disease, about what fertilizer to use, and get it right to the farmer when he or she needs it. It picks up where the agricultural extension agent leaves off, which is often maybe one visit a year, by using the power of the phone and the database behind it.

Secondly, it aggregates information about farmers, such as what they are producing, what they need, what they want to buy, what they want to sell, and when. I've literally seen one of these peer farmers taking a survey on their phone, uploading it just when they finish with GPS coordinates about where they are standing. That information is then being mined by companies in Kampala, where literally a brewery wants to know where they can buy barley to make beer. There are many other such examples.

One of the reasons that companies don't work with the poor and don't contribute more to international development is they don't have real-time information about subsistence farmers or poor market women—what they need, what they want, what they want to buy, and what they want to sell. The mobile phone, put in the hands of people out on the field, poor people themselves, can be a way of capturing and aggregating that information that can remove a lot of the friction from the process between the private sector and the poor and allow partnering in ways that mutually benefit each other.

The final word I'll say is this. My chairman of the board, who runs a major company in Silicon Valley and once worked at a very senior post in Microsoft, has said that in philanthropy or in international development, the easiest person to deceive is yourself.

It's very easy to be patting yourself on the back and saying you've got a private sector solution—it's reducing poverty or claiming some other thing—but there should be an accountability mechanism to figure out if you're really doing that.

Grameen Foundation and Fonkoze, which I'm also involved in, have been using an accountability tool called the progress out of poverty index. It's a very simple survey tool that can show trends about whether people are just treading water or are actually getting out of poverty.

Again, if that's going to be our goal through private sector or public sector solutions, it needs to be based not on anecdote, not on hope, not on intuition, but on hard data. There are many, many tools coming onto the market, including ours, that can contribute to that end.

Thank you, Mr. Chairman.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Counts.

We're now going to move over to Ms. Félix.

[Katleen Félix, Project Director, Haitian Diaspora Liaison, Zafèn Projects, Fonkoze (Foundation kole Zepol)]

I would like to thank you for inviting us to appear before you today to talk about the role of the private sector.

My presentation is going to be in French. I am a francophone from Montreal. I grew up in Montreal and I studied at HEC Montréal. It is a great honour for me to be here today and to be able to share our experience in Haiti with you.

I have submitted documents in both French and English. I have a few others but they are in English only. I have Fonkoze's annual report and social performance report.

The social performance report and the annual report are here, and I also have some small flyers about Zafèn, which that I will speak about a bit later.

I was told that I had to do both at the same time, and that is what I am going to try to do. There are some pictures missing, but that is not a big deal.

First of all, Fonkoze is a microfinance institution in Haiti that has been around for over 16 years. We have more than 270,000 savers and more than 60,000 credit clients. The founding principle on which we operate is that women are the backbone of the economy. You can’t just give them a loan; you also have to support them in their fight against poverty. If you just give them money, it is not going to work.

We are also talking about the fact that all Haitians must participate in the Haitian economy. So, in a commune or in a communal section, we make sure that everyone participates, even those who are very poor and who are not necessarily able to do business. We include them in the process. We will talk about this later.

Democracy cannot survive in Haiti without an economic democracy. That is quite important. Father Joseph, the founder of Fonkoze, has always said that there will be no democracy in Haiti if people do not have access to finance, or if people cannot have savings and access to insurance or credit to run their business. It may seem trivial, but those are the facts. The poor cannot think about voting and about being involved in politics if they don't have access to finance first.

The final pillar is the Haitian diaspora and that is what I am most involved in at Fonkoze. The general feeling is that there will be no opportunities in Haiti as long as the diaspora—Haitians living abroad or migrants who left the country—does not get involved in the Haitian economy as well. So we support their efforts. We know they send $1.8 billion annually in remittances.

How can we make those money transfers smoother? Most transfers are definitely for consumption. But some of those transfers are for investments. Yet investments are not always successful. Problems may crop up. We are trying to find ways to support people and to make those investments possible so that they are not lost.

I have already provided an outline. We have 46 branches across the country with over 900 employees, and 99% of our clients are women. We have over 60,000 credit clients, representing a $16 million credit portfolio. We have 270,000 savers; that’s a $26 million portfolio in savings from the people who save with us. Last year, we had $96 million in remittances from the diaspora. And we have about $34 million in assets at Fonkoze.

Essentially, Fonkoze's mission is to eliminate poverty. You can see all the branches we have. I mentioned that there were 46 branches; we got the country covered. It is very important to keep that whole territory in mind. When you talk about partnerships with the private sector and when my colleague talks about an existing microfinance infrastructure, it is an infrastructure that can make marketing possible and that can promote involvement in health, for example, or other involvements. The infrastructure is there and, since all the branches have computers and satellites, they can communicate with each other. This is quite a significant infrastructure. Once again, with 900 employees, we are not a small organization.

You see a bunch of little dots. We have a number of credit centres; we have 1,750 centres across the country. Groups of women get together to receive credit, but also to receive financial and health-related training. The training does not necessarily have to be about financial matters. It can be about something else.

All those centres are active. They have meetings every week or every two weeks. Here is quite an interesting image to help you see that our credit officers cross rivers and climb mountains. That is why I wanted to show you this picture. In some cases, they risk their lives to reach our clients. Here is an example of a group.

As I was telling you, microfinance is not just microcredit. It also entails microsavings, microinsurance, microcapital, money transfers, as well as any non-financial services. We are talking about financial literacy and leadership training to ensure that people can stand up to talk about their problems and seek solutions. Those are some of the issues that the groups deal with.

Here is what we call the “Staircase out of Poverty”, which includes all the products and services provided by Fonkoze to alleviate poverty. I will not go into too much detail, given the time I have, but we offer a number of products to clients, depending on where they are at. Some are very poor and are not able to run a business. They are really too far down the poverty ladder. What they need first is an 18-month program, involving a case manager. They meet with the case manager every week to talk business. They learn to read and write or to at least sign their names. We also do asset transfers. We give them young goats that are part of what we call the livestock. We show them how to start a small business, but we cannot give them credit right away. We have to reintegrate them first. This is called the Chemen Lavi Miyò program or the Road to a Better Life. It is in purple at the bottom.

Once they complete the program, they usually have more stability. Their homes are more stable. The children go to school and eat fairly regularly. They are able to cope with everyday problems. This stability enables them to either be part of a credit process or to work perhaps, which is quite significant. We realized that by limiting ourselves to solidarity-group credit, so by working with groups, we were leaving many people behind who could not access this type of credit or, if they had access, they were not able to succeed.

Once the solidarity group stage is complete, and they have gone through all the processes, the people can access personal credit in the official sector. That is a milestone. Actually, nothing has been official yet. It is at this stage that it becomes official. People have access to various types of credit. This is when additional guarantees come into play. We can offer them various products. It is quite an integrated approach through which we really target people based on where they are in society and on their ability to have access to finance.

In terms of our promise, we measure it in the social performance impact report that we are committed to produce each year. We check if things are working or not, but we promise our people that they will have food daily, that their children will go to school, that they will learn to write regardless of their age—for example, this lady was quite old, but she learned to read and write—and that they will have tin roofs, cement floors and latrines, which is quite something. They will be able to accumulate assets. They will also be able to face the future with more confidence. Being part of a network enables them to take care of some problems without waiting for international aid. As I said, we also measure the social impact.

As for the people in Canada with whom we do business the most, I am not sure if you have heard of ROCAHD or the Regroupement des organismes canado-haïtiens pour le développement. It has been around for over 20 years. When Father Joseph had the idea of founding a microfinance institution, the people from ROCAHD, this Haitian association in Canada, were the first ones to believe in Fonkoze. That is where Fonkoze got its first loan, a loan of $12,000.

I found that approach very interesting, especially since, in looking at the investments of Haitians abroad, we are now wondering how to improve the flow. So it is a good thing that they had the vision that this could work.

Since 2010, the KANPE foundation, with Arcade Fire, have been raising funds and have been working with us specifically in a village called Bay Tourib, in the Central Plateau, where we have set up the CLM program or Chemen Lavi Miyò, which targets the poorest of the poor, and Partners in Health.

Partners in Health, co-founded by Paul Farmer.

In terms of the general public, Zafèn is a program for small and medium enterprises. It is a bit like Kiva, but really aimed at small and medium enterprises. You can take a look online and see a list of businesses and the types of loans they are looking for. You can set up the loan online.

Canada is the second most active country for us. The number of participating Canadian taxpayers is growing by the day. It is always surprising to see the number of visits we get.

In terms of interest for Canada, I think we need to talk about microinsurance. I won't go too far into that, but I would just like to say that this component might need to be addressed. If your committee is interested, we could send people to talk about microinsurance. Développement international Desjardins (DID) is on the market looking for agricultural microinsurance. We have microinsurance for disasters.

We also have life insurance. The insurance model works if we have enough volume. For example, DID started to develop its own insurance. So we would have competition. People would certainly benefit from it, but there would be more profit if we could agree on only one insurance model for the same population. So I would like to throw this idea out there to look into microinsurance. We have actually developed quite an attractive model. There are even countries other than Haiti that are studying this model and that would like to use it.

To conclude as far as Zafèn is concerned, we have an investment fund that might be of interest to you if you are looking to support small and medium enterprises. I am not talking about micro-enterprises. I am talking about businesses that create jobs, more than four or five jobs, and that give back to the community. That is what we are looking at.

It is equally interesting to see that the diaspora is also suggesting businesses in which to invest. We can help the ones that are viable through Zafèn. So that approach might be a way to support the Haitian diaspora in Canada.

Finally, there is always the vulnerable segment. When we talk about development on a large scale, we cannot forget about those most in need, the poorest of the poor. The Chemen Lavi Miyò program has demonstrated results. I have some statistics that I can share with you if you have any questions. This is something that can be done very easily. I would also like to invite DID to consider a partnership.

So there you go. Thank you.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We are going to start over here with the NDP.

Go ahead, Madame Groguhé, for seven minutes, please.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

Thank you, Mr. Chair.

I would also like to thank the two of you for your presentations and for your very interesting comments.

First, I would like to remind you that, ever since the committee has been studying this development issue, the NDP wanted to focus on the private sector. The private sector can play a role in development, especially in terms of accountability and transparency, by making sure that programs reduce poverty in a sustainable way. I feel that we have to keep this aspect in mind because it is crucial so that development actions are constructive and so that they really reach their target, meaning the poor and the poorest of the poor.

My question has to do with the key conditions for the success of microfinance operations. What do you think about that? Have specific challenges or best practices been identified from the Haiti experience? What are they?

[Katleen Félix]

Let me go back to my little table. In the area of microfinance, as I said a bit earlier, when we did a comparative study of various programs to determine which ones were a success and which ones were not, we realized that it is very important to know our clients, to know what their situation is. Take the very specific example of someone who is hungry, who is not able to eat every day. A secure source of food is very important. That person cannot become part of a solidarity group and get consistently involved in business activities. The situation must be stabilized first.

We divide the market into segments. When we arrive in a village, we check to see who the very poor people are. We ask poor people to show us people who are even poorer. We try to put them in groups so that we can decide how we are going to work with them. Together with BRAC, CGAP and the MasterCard Foundation, we developed the program called Chemen Lavi Miyò or Road to a Better Life. We set up a pilot project to see if it would improve the credit situation. People want to do business and they want to see the program succeed. But if they are not equipped to make it happen, they have to be given the necessary training. We have to be able to work with them in a number of respects. That is why we developed the four programs: Chemen Lavi Miyò, or Road to a Better Life; Ti Kredi, or Little Credit, solidarity groups and business development. Now we are working with Zafèn.

We realized that people working in agriculture, for example, needed to diversify their incomes. They cannot make a living from agriculture and farm animals alone. They must have goats and pigs, and if they can have a little business as well, so much the better. It gives them additional income, and, if things get tough, they can keep paying off their loan. It is also good for their self-esteem.

These are transferable practices, I feel. You have to know how to divide up the market. There are no one-size-fits-all solutions. You really have to study the situation in each country. In Haiti, we were able to choose our targets well from region to region because of the evaluation grid that was developed.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

You put a lot of emphasis on coaching, education and the need to avoid going too far into debt, which is a major issue. We know what happened in India. Unfortunately, there were negative consequences. Microcredit got off to a great start, but in the end, people found themselves back in debt again. Unfortunately, there were suicides, and so on. That's why that aspect is equally important.

I would like to ask Mr. Counts a question. You mentioned transparency and responsibility tools and the importance of having those tools. Can you tell us exactly what those tools are and how you use them?

[Alex Counts]

I'd be happy to, and thank you for the question.

I think this issue of over-indebtedness that you mentioned is an important one. One of the emerging best practices at the industry level is to bring in credit bureaus so that if a lender is lending to someone who is indebted to others, they can understand those levels and have certain self-regulatory guidelines.

That said, it isn't a cure-all. There has been a credit bureau in Peru since the late nineties, and yet there are pockets of over-indebtedness there. It's not the one solution.

Also, I think that these discussions of suicides by borrowers in India have been wildly exaggerated. In fact, the only serious studies of that have actually shown that the suicide rate—which is a tragedy if it happens even once—among microfinance clients seems to be much lower than among the general rural population in India. Also, for those who have suffered this tragedy, it is caused by many factors, not simply microfinance. It has become an important issue, but also one that has not always been correctly characterized based on hard data.

In relation to our tool, the progress out of poverty index that you mentioned, we felt it was very important to quantify the results of anything that is trying to attack poverty, because it's so easy to just talk about process and not about outcomes and results.

We joined with the Ford Foundation and an arm of the World Bank called CGAP, which I know Fonkoze has also worked with, to develop a very simple tool, a 10-question survey that's customized for every country based on census data. The census data are often hundreds of questions; we have statisticians who look at which of those questions are most highly correlated to someone's poverty level, and then which of them are easily observable in a household, so that the survey can be filled out accurately in 10 minutes or less. We've done that now for 46 countries in the world.

This tool is being used by both microfinance organizations and by many others attempting to deal with poverty reduction. They use it on intake when you take your first loan, and then this survey is filled out every year when you take a new loan. Then there are random audits of them so that the field force isn't changing the numbers to make things look better. It gives one a sense of the broad trends such as, first of all, if you are dealing with the hard-core poor to begin with, which is a question, and then whether they, on balance, are making progress towards and ultimately above the poverty line.

We've now seen more than 150 of the world's leading microfinance organizations take up this tool, and we're developing some online tools to help them get business intelligence, because this isn't about pointing the finger to say that you're not doing a good job—though there is some of that—but more to figure out, even within an organization, if you're doing a very effective poverty reduction job in one part of the country and less so in another. If so, why is that?

This type of transparency and insight into poverty reduction success is fairly new, but it's very easy and cost-effective to do through this tool and through some similar ones that are on the market.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to move over to Ms. Brown for seven minutes, please.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you very much, Mr. Chair.

Thank you to both of you for being here.

Mr. Counts, I had the opportunity three years ago to be in Bangladesh and actually spent an hour with Muhammad Yunus. I have a signed copy of his book, and we had a very interesting discussion.

Bangladesh is a country of about 140 million people. The population there has exploded since their independence 40 years ago, so they have an enormous number of challenges ahead of them.

I had the opportunity to visit a number of the Grameen Bank projects. I have to tell you that I also had an opportunity to visit many of the BRAC Bank projects, because they took us out as well.

I wonder if you could share with the committee some of the stories that I had the opportunity to hear. One woman started off with a loan for five chickens, and I think she now owns half the village. She has a three-bedroom house for her family, she has indoor plumbing, and she has several little shops. I wonder if you could talk about some of those stories. Microfinance in Bangladesh is now about 20 years old, so can you tell us some of the stories of people who have moved from microfinance loans to creating what have become real enterprises, and can you tell us what impact that's having not only on the individual but on the family and the community at large?

[Alex Counts]

Sure, I'd be happy to.

We're big believers in data telling us what's happening, but stories can give people a sense of real possibilities for making progress on poverty, so I'm happy to share those.

When I was in Bangladesh, I worked for Grameen and my wife worked for BRAC, so we were considered a mixed marriage. I have a strong admiration for both organizations.

While writing a book called Small Loans, Big Dreams, I lived for the better part of two years in one village in Bangladesh. Not all the borrowers were equally successful, but one of them was a Hindu family that traditionally made sweets out of milk. Cottage cheese is the raw material for Indian sweets, as we see even in Indian restaurants here, but because they lacked capital, they had gotten out of that business and they were just labouring for hire in the fields for people who had land.

They got a loan that started with $70 and grew over time. They had had to sell their cows because of some crisis or natural disaster, but they started buying milk on the market, selling cottage cheese, making sweets, and selling the sweets in the market. Their big break was getting a contract with a shop in Dacca, which is about 90 kilometres away, to sell cottage cheese on a daily basis, usually one or two duffel bags of it. It was around 80 pounds, if I'm not mistaken, so they became a thriving business. They sold sweets locally and they sold the raw material for sweets to the capital city.

To show you the enterprising nature of the poor, I'll tell you about a 14-day transit strike in 1996. The opposition stopped all motorized transport, and except for 10 miles on bike, this family would send their cottage cheese on a public bus. I was trapped in the capital. When I came back after the strike broke, I asked what happened—whether they lost the contract, how they managed.

As if it was the strangest question, they said every day they'd have to finish work a little earlier and put those 80-pound bags of cottage cheese across their bikes. They would just bike all 90 kilometres into the capital, deliver the cheese, and then bike back the next morning to pick it up and do it all again.

This is a family in which the males had been reduced to wage-labouring for under $1 a day, but with a little capital to recover a skill that had almost been lost, they were a thriving business, creating business linkages for other dairy farmers in the area.

As you can see, the notion of the poor as superstitious, lazy folk sitting around waiting for people to do things for them doesn't stand up in this example.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

In Bangladesh, Grameen and BRAC are both providing health care services through the shasta shabika. I wonder if you could tell the committee a little about how that is affecting the growth of business in Bangladesh.

[Alex Counts]

Grameen has its own series of health initiatives: a profitable eye hospital doing cataract surgeries and health clinics attached to some Grameen branches that recover over 90% of their costs. BRAC has a different approach, which has now been replicated in Uganda. It sets up women in the business of selling non-prescription drugs and other health products. They go that last mile in helping their peers to understand why modern medicine is important and they give referrals to local doctors.

As in rich societies, but even more so, there are a lot of myths about health care, education, and the modern world. Who better to demystify this for poor people than one of their peers? Setting a poor person up in business to deliver health care products and health care information is probably the single biggest way to break through some of the superstitions that prevent people from adopting their own solutions.

[The Chair, Conservative, Dean Allison]

We can probably get another round in.

Go ahead, Mr. Eyking.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you.

Thank you all for coming. You guys are doing quite a job helping people who need help.

I have a couple of pointed questions and then I have some overall questions.

The money you use comes from donor countries. Does it come from donors themselves? How do you get your pool of money?

[Alex Counts]

Maybe we can both answer it briefly.

I think a lot of microfinance organizations in their early stages get money from donations from wealthy people in their own countries or overseas. Over time, because there's a limited pool of donated capital, that shifts to borrowing money from commercial banks. They may have a lot of liquidity, but they have no distribution mechanism into the rural areas and no knowledge of that market, so the Grameen Foundation put together a loan guarantee program that has facilitated more than $200 million worth of lending from local banks to microfinance organizations to ease that process.

The final piece--and Fonkoze is a shining example--is developing deposit-taking capabilities so that an MFI can be not only a lender but can also intermediate savings from the community. We've put together an amazing partnership with ICICI Bank, the largest private bank in India, with a leading microfinance group that collects savings as an agent for that bank, because they're not legally allowed to do it themselves.

That's a great private sector partnership model, but it also took philanthropic support from the Bill and Melinda Gates Foundation to set it up to work, meaning to develop the technology and partnerships that would allow that to unfold. Right now there are 5,000 new savers being brought in by this organization in India every month.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

What are your interest rates?

[Alex Counts]

They're very obviously based on context and inflation. I'll take the example of the Grameen Bank that I refer to the most.

Commercial loans are 20%, so if you take into account inflation, they're less than an American consumer pays on credit card debt. There are student loans for 5%. There are housing loans for 8%. There are loans to beggars, which is kind of the Grameen equivalent of the Chemen Lavi Miyò, that are interest-free.

So they range from 0% to 20%.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

What's your default rate?

[Alex Counts]

It is under 3%, which is basically the norm, except following natural disasters. Historically with Grameen it's been under 1.5%.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

I've done projects before, but mostly with cooperative ventures. As you alluded to, a lot of these communities require cooperative ventures. Examples would be a well system, irrigation, or storage facilities.

Do you finance cooperative ventures too?

[Katleen Félix]

We do co-op financing. More recently it's through Zafèn,which is our loan for social projects for SMEs, so we do have a more cooperative approach--Fonkoze through Zafèn. At the moment it's an interest-free loan for 14 months.

That might change, because it depends on the source of funding. Who is going to subsidize it for that long? We had some subsidies to do it for the past two years, but we won't be able to carry it like that. However, for the moment it's still interest-free.

Fonkoze has also supported some co-ops and peasant associations at different stages. It's on a case-by-case basis, but we have loans for them also.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

It seems that most of the uptake is from women, for various reasons. Most of these countries were war-torn, and the men were in armies. Women seem to be more proactive.

Is there an attitude change among boys and young men that they can step up to the plate, take on some of these initiatives, and maybe break the trend of how their fathers did it, because of various circumstances? Do you see that happening?

[Katleen Félix]

At the business development level you do see more men getting loans, because they already have collateral and are organized. They might have inherited some assets from their parents.

Poverty in Haiti is more feminized. When you go through rural areas, you'll most likely find women with five or six children and no husbands around. That's a social issue that we have to deal with as a society. I think that's also why we cater more to those women. They're the doorways to the family units, and when you give them loans, they really make sure that everybody is taken care of.

On youth credit, what do you think? We see more young guys now.