MICROCAPITAL STORY: The Rotarian Action Group for Microcredit (RAGM) Promotes Worldwide Rotary Involvement in Microfinance at Last Month’s 2008 Rotary International (RI) Convention by Hosting Phil Smith (Author of A Billion Bootstraps) Christopher Crane (CEO of Opportunity International), and Lynn McMullen (Co-founder of the Global Democratic Citizens Union)

Last month—June 15th through the 18th—Rotary International (RI), a service organization with 1.2 million members in over 32,000 clubs located in more than 200 countries, held its annual convention, which was attended by more than 19,000 Rotarians, participants of Rotary youth programs, and other guests. With a larger emphasis than ever before in the organization’s history, microcredit was promoted as an attractive cause for Rotarians around the world to support by establishing sustainable microfinance projects and partnering with existing microfinance institutions (MFIs). Behind the push is the Rotarian Action Group for Microcredit (RAGM), a voluntary association of Rotarians aiming to educate the general membership, standardize Rotarian/MFI partnerships, and ultimately increase Rotarian involvement in microfinance activities for the long-term.

The official program of the RI Convention included a breakout session on June 16th entitled “New Frontiers of Microfinance” which was hosted by Steven D. Rickard (steve@propertytaxes.com), the President of RAGM, and was attended by over 600 people. First on the list of presenters was philanthropist Phillip B. Smith (PhilipBSmith@sbcglobal.net), the co-author of A Billion Bootstraps, a book which was published in April 2007 and addresses why microfinance “permanently changes poverty and ensure[s] the reader that an ordinary person can ‘accelerate the revolution’ while earning substantial returns on microfinance investments (MicroCapital article).” Mr. Smith provided the attendees with an overview of the scale of extreme poverty (4 billion people living on USD 4 per day or less as he stated) as well as the nature of the poor’s monetary requirements and sources from which they draw cash in times of need. After briefly explaining typical microfinance operations, Mr. Smith presented the weaknesses (potentially high administration costs, limited access to capital, etc.) in addition to the strengths (community benefit from foreign investment, value-added support system provided by many MFIs, etc.) of microfinance. See pages 4-15.

Next to take the floor was Christopher A. Crane (ccrane@opportunity.org), the President and CEO of Opportunity International, a Christian-affiliated nonprofit which was founded in 1971 and operates in 28 countries through 45 partner organizations and reports a 2007 total loan portfolio of USD 702.3 million for its entire Opportunity International Network (OIN). Mr. Crane stressed the fact that MFIs can offer their clients much more than simple loans, thereby facilitating a social transformation through the provision of a wide array of products such as savings, insurance, mobile banking, biometrics identification technology for secure transactions, and even the building of private “micro schools” and affordable “micro clinics and pharmacies” in poor, remote areas. See pages 16-31.

To illustrate this effect, Crane shared several anecdotes, including the success of the Oak Brook, Illinois-based Micro Insurance Agency, a holding company operating through “fully owned subsidiaries in the countries of operation.” An Opportunity International company, the institution insures crops, funerals, health, livestock, and property, and has been operating since 2002, when it was a part of the OIN, and became its own organization in 2005. As of November, 2007, the Micro Insurance Agency had “over 750,000 policyholders covering 3.3 million lives in 10 countries (MicroCapital article).” Financial information was not available for the insurance provider.

Crane also mentioned the accomplishment of a private Ghana micro school pilot project that has produced a student body scoring higher, on average, in standardized tests than public counterparts. However, it was unclear how schools would be able to pay back a loan plus interest.

As of December 2007, the OIN had close to 306,000 voluntary savings accounts and 84 percent of its loans went to women. Opportunity International reports to the MIX Market and MicroCapital recently wrote about the organization here.

The third and final speaker was Lynn McMullen (lynn@gdcu.org), a fundraiser and political activist who has thrown her efforts behind several causes, including the creation of a United States Department of Peace, fighting hunger, and the eradication of poverty through microfinance. McMullen, who is a member of the Grameen Foundation’s (GF) Africa Advisory Council and served as the Executive Director for RESULTS, spoke about the Youth Empowerment Through Business Opportunity (YEBO) program that she runs through her nonprofit Global Democratic Citizens Union (GDCU), an organization she co-founded in 2003. The Advisory Board for the GDCU includes Muhammad Yunus of the Grameen Bank (GB), Alex Counts of the GF, Marcia Odell of Pact, and Peggy Clark of The Aspen Institute.

She opened by putting the AIDs epidemic in Africa in perspective and by encouraging Rotarians to invest in African economic initiatives, especially microfinance activities. She then described YEBO—listed as “Micro Finance for Youth” (MFY) on GDCU’s web site—which is taking place at Sizathina High School in Loskop, an impoverished rural area in the KwaZulu-Natal province of South Africa. Basic business functions such as marketing and accounting are infused in the students’ curriculum and they are subsequently offered micro loans to establish their own small businesses. Five profitable businesses have resulted from the first round of YEBO, and GDCU will engage 60 students in the next phase to take place at nearby Ngibongileni High School.

The convention also included a microcredit discussion forum that had overflowing attendance into the hallway and the University of Lethbridge (U of L) Rotaract Club (rotoract@uleth.ca) received the 2008 Rotaract Outstanding Project Award for a microfinance initiative in Costa Rica, as detailed here.

RAGM was established in 2007 and lifetime membership is restricted to Rotarians, their spouses, and Rotaractors, for USD 100. However, the organization encourages outside institutions to make contact for further partnership in delivering microcredit. As stated in their 2008 Brochure, RAGM is a registered nonprofit and they have over 300 members located in 30 countries. Financial information for RAGM was unavailable. The slides from New Frontiers of Microfinance are available here.

RI reported total assets of USD 138.1 million (page 4). The Rotary Foundation, a nonprofit founded in 1928 through which RI conducts its education, exchange, and PolioPlus projects, reported total assets of USD 709.2 million (page 4). (Data as of June 30th, 2006.)

MicroCapital recently reported on Rotary’s involvement in microfinance here.

By Anthony Busch, Research Assistant

Additional Resources:

The Aspen Institute: Home, Peggy Clark

A Billion Bootstraps: Home, About the Authors

Global Democratic Citizens Union: Home, About, Micro Finance for Youth

Grameen Foundation: Home, Africa Advisory Council, Alex Counts

Micro Insurance Agency: Home, About, Products and Services, History and Vision

MicroCapital article, November 13, 2007: “Compassion International Invests USD 5 Million in Opportunity International to Develop Microfinance in Africa”

MicroCapital article, March 22, 2007: “Eric Thurman of Opportunity International and Phil Smith of One World Projects Write Effort to Bring Microfinance to the Masses”

MicroCapital article, May 22, 2008: “Oikocredit of the Netherlands Loans $10.3m to Microfinance Institutions Opportunity Bank Montenegro, Micro Finance Bank of Azerbaijan (MFBA) and Inicjatywa Mikro of Poland”

MicroCapital article, November 21, 2007: “Rotary International’s Uniendo America Project Fair as Launch Pad for Central American Microcredit Projects”