Thursday, May 6, 2010

Microfinance ... the great news of Fonkoze in Haiti

Dear Colleagues

Early this week I attended a meeting where Leigh Carter, the Executive Director of Fonkoze USA and Linda Boucard, Director of Communications for Fonkoze in Haiti talked about the work of Fonkoze in Haiti ... both over the years before the earthquake, and, of course, in the three months since the earthquake.

One of the nice things about Fonkoze is that it is not confused about what it is doing. Simply put, it is doing what it can to help improve the quality of life of poor people all over Haiti.

In my view, Fonkoze in Haiti is an organization that does an awful lot right ... but Fonkoze is will not appear as a high performance microfinance institution (MFI) as long as the metrics of performance are those that simply relate to money profit accounting. Fonkoze does so much more. Fonkoze does things of value for its clients way before doing these things has any hope of being "profitable" for the organization.

The idea of Fonkoze being an MFI is really not sufficient ... Fonkoze might be much better characterized as a Comprehensive People Progress Institution (CPPI), because it is doing a whole lot of things that are needed to help people help themselves to climb out of poverty.

If the allocation of capital ... money resources ... through capital markets was based on value adding as much as it is on money profit, then Fonkoze would attract resources from capital markets because it is doing work that has a huge social value. Because the metrics are just about profit, an organization like Fonkoze has to get its resources from other sources ... and it does fund raising well ... and uses its resources very well.

I very much like what Fonkoze does ... but I get a little mad as I reflect on the amount of work that needs to be done in Haiti to help people at the "Bottom of the Pyramid" ... the enormous value of this work ... and yet the very limited resources that flow into this work. The work that Fonkoze does may not be profitable, but it is very valuable ... and it sets the stage for people that need help to help themselves. The cost of building value ... human capital ... the Fonkoze way is not inconsequential, but it is very value positive over time, in stark contrast to welfare assistance that has costs that cumulate continuously over time, with no exit that will end the process.

Fonkoze's work is neither quick nor cheap ... though cheap is a relative term. The work Fonkoze does cannot be accelerated merely by throwing money at the problem ... there is a people dimension of the work that takes time. The idea of "helping" has a lot of value ... but it takes person to person contact, and that takes time and is expensive. My impression of Fonkoze creating "leverage" in value is very strong and favorable ... and confirmed in a way by the fact that almost the whole of the staff are Haitian locals rather than a big expatriate team.

This meeting once again highlighted for me the incredible importance of getting a system of metrics that reflects what is valuable in society as well as merely what is profitable. Unless the capital markets start to have a value dimension as well as a profit dimension to their metrics, we are going to lurch from crisis to crisis ... and maybe not be able to recover from the mess.

Peter Burgess

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