PlaNet Finance Internship Blog

One thing I’ve particularly enjoyed learning about at ARDY is their model of mutual fund groups. These groups, which are started in various villages by ARDY, are each composed of roughly 100 people from the town. Each one of these people is responsible for contributing his or her own money. While the amount varies by group, the typical amount is 500 RMB (or roughly US$70). This money is then pooled and loaned out in the community, usually to members of the mutual fund group itself. The amount is loaned at a 10% interest rate with biweekly repayment, though the length of the loan varies depending on the group and the person. At the end of a year, the mutual fund members are able to take back their initial investment plus the interest that has been earned on it, or to continue with the group. The group is monitored by three officials, elected from within the membership, who are trained and supervised by ARDY. They also receive a small stipend for their work, paid initially by ARDY but later out of group funds as the group matures.

This model really intrigues me, as it not only offers microfinance loans to more villagers than ARDY thus far can reach on its own, but it also provides a very viable investment opportunity to other villagers. Additionally, it’s extremely low risk for the villagers involved. This is in part because the members select to whom the loans are dispersed, monitoring them and provoding a strong group pressure, even though the loans are individual. It is also low risk because the operation functions like a joint-stock collaborative, meaning that the risk is spread across all members, so even if an individual were to default on his or her loan, each group member would suffer little to no personal hardship. ARDY already has 16 groups that operate under this model and has plans to set up new ones, as this model is abundantly replicable and easily sustainable.

For the last three days we have been running a training session for the three leaders of each mutual fund group, as well as for the respective government officials of each of those sixteen towns. As Jenn has mentioned in many of her posts, the role of the local government is incredibly important. While these government officials have little involvement with the actual monitoring of the fund, it’s important to keep them “in the loop,” so to speak, as the influence they have in their various communities is enormous. In fact, as ARDY seeks to set up more mutual fund groups in other towns, their first activity will likely be to contact the local government officials for those towns so that they can help to spread the word about the new opportunity to the local villagers. These three days of training have been focused largely upon planning for next year, as well as learning about other models (such as a particularly successful one in Taiwan) and discussing any problems the individual mutual funds have faced, so that they can learn from one another and avoid similar pitfalls.

This past week Daba took part in a workshop, hosted here in Tongjiang, for over 40 staff from rural poverty alleviation NGOs around China. The workshop was conducted by an organization called ActionAid, a UK-based organization which has one of their 11 international field offices in Beijing. While the workshop was planned and run by ActionAid staff, my colleagues and I liaised with them to give a few talks and host a trip to the countryside, showing the group some examples of our successful field work projects.

A large part of the focus of the workshop was discussing and learning about the the ways in which NGOs in China must cooperate with the local governments throughout the extent of project development and implementation. One entire day of the workshop was spent role playing a scenario in which an NGO wanted to help fund a new road through a village that would provide better access for the farmers to the nearest town, yet there were cost, construction, and safety discrepancies that the NGO and government needed to resolve. Everyone participating in the workshop took turns acting out various government or NGO staff roles. Additionally, at the beginning of the role play, the ActionAid staff had all the workshop participants select a piece of paper from a bag–some slips of paper listed questions that were to be posed to the government and/or NGO workers during the activity.

In addition to the hands-on nature of the role play, several more experienced senior NGO staff from ActionAid and Daba Shan discussed ways to collaborate with local governments and work together to alleviate poverty, illustrating their presentations with examples from their own work. To give further insight into the nature of these projects, we spent one full day in Huaxi township, where Daba has carried out numerous successful projects. ActionAid divided the workshop participants from all the NGOs into small groups which each visited several households. There, the farmers answered their questions about how a range of projects–from biogas stoves to Heifer International animal loans to access to running water–have positively impacted their lives.

At the conclusion of the 5-day workshop, after an afternoon of workshop feedback, we all relaxed with a fun and impromptu talent show before everyone had to part ways the following morning.

As part of the wrap-up of the aid program we conducted with the help of the China Foundation for Poverty Alleviation (CFPA), I had to select three grant recipients and submit a brief write-up of their situations to CFPA. I thought I’d share the profiles here to give some insight into a few of the hardships facing China’s peasant farmer population:

1. Sun Guo Chun (孙国春) is one of the farmers who received aid funds through our “Especially Impoverished Farmer” aid program. Sun Guo Chun lives in HuaXi township, Village #8, District #3. At 54 years of age, Guo Sun Chun is unable to work and earn money due to an injury he suffered in 1997: while working to break apart boulders for use in construction, road repair, etc., a large rock landed on him and the pressure broke his right leg. His leg did not heal properly and still gives him trouble when he does hard labor. His wife, 54 years of age, also suffers from health problems—she has uterine fibroids that cause her pain and discomfort, yet she cannot afford to seek a medical solution to the problem. Sun Guo Chen and his wife have one son and one daughter, though the daughter has already divorced and her ex-husband left her with their mute son. While Sun Guo Chun’s grandson can understand those who talk to him, he cannot speak and thus requires extra care. Finally, Sun Guo Chun’s son left the countryside to seek paid work in Guangzhou province, but has not returned home in over two years.

2. Li Dong Yun (李东远) is a farmer who received funds through the “Especially Impoverished Farmer” aid program. He lives in HuaXi township, Village #8, District #3. Li Dong Yun is 51 years of age and his been living by himself for over three years, since his wife became ill and passed away in 2006. He looks after himself, but his high blood pressure and poor vision prevent him from partaking in any income-generating activities. As a result, he lives in a very tiny and dilapidated home with large cracks and holes in the crumbling structure. His home only has a small bed, a table, and a couple other personal belongings as he cannot afford to buy anything. He has one son who is 28 years old and does paid labor in Zhejiang province, however it has been a few years since his son was last in touch with his father.

3. Ji Chang Long (纪昌龙) is a rural peasant living in HuaXi Township, Village #9, District #4 who has received money from the “Especially Impoverished Farmer” aid program that we conducted with China Foundation for Poverty Alleviation. At 47 years of age, Ji Chang Long lives by himself in a single room that is part of a courtyard dwelling shared with several other families. His room has only a bed and small table for his belongings, and has a gaping hole in one of the walls that he cannot afford to repair. This damage to his home will prove to be a huge burden during the cold winter months as the inside will be fully exposed to the elements. Furthermore, it is nearly impossible for Ji Chang Long to find any form of paid labor, as he suffers from slight mental disabilities. In 1990 he went to Beijing to seek work in construction, yet was swindled out of all his money by someone who accompanied him in seeking employment. Later, while in Beijing, he fainted and passed out at work, causing further damage to his mental awareness. While he can still cook food and generally look after himself, his brother often assists him as the only way to financially support himself is by collecting garbage.

This past weekend we took a short overnight trip to the countryside to give out the remaining aid grants for the CFPA project that I have had to opportunity to be highly involved in. Daba Shan’s director again had me give a short speech thanking everyone for their cooperation and emphasizing that these grants were to be used to help overcome the biggest hardships in the recipients’ lives. My colleagues diligently checked the ID cards and paperwork for every recipient, had them sign a form acknowledging receipt of the money, and collected a thank-you letter from each person (to be passed on to CFPA and Evergrande Real Estate Group) before allocating the money. On each of the two occasions in which the grants have been disbursed, I have noticed that there are a number of older farmers–mostly women–who cannot even sign their own names; they must instead have someone else sign the relevant form and then leave their thumbprint (in that ubiquitous red ink!) next to the signature. Furthermore, they have to enlist someone younger who can read and write to help them draft the required thank-you letter to CFPA and Evergrande. While I don’t find it terribly surprising that much of the older peasant population is illiterate, I did not expect that some people had never even learned to write their own names.

While I was working on the CFPA project, a couple other colleagues from Daba Shan had a meeting with local leaders about a long-term project that we are about to begin in conjunction with Partnerships for Community Development (PCD), a Hong Kong-based non-profit organization that works toward achieving sustainable rural development in Mainland China. The project encompasses several smaller projects–providing potable running water to 218 homes, installing biogas units in 137 rural homes, and building 10 facilities to process both trash and animal waste–which will take place over an 18-month period of time in three different villages (村).

This week, together with the Beijing office of the international non-profit ActionAid, we will host roughly 40 NGO workers from various organizations throughout China to share ideas and observe some of the rural development projects in this area. I’ll report back again next week with a wrap-up of the meetings!

Finally, I added a few photos from the days spent inspecting homes for the CFPA project to the blog’s photo album.

For the last few weeks I have been taking a free online course about microfinance with curriculum designed by the United Nations Capital Development Fund (UNCDF). While mine did not involve interaction or graded homework, this is actually possible for a relatively small fee, either in Chinese or in English. In fact many of my coworkers have taken the Chinese version of the course for credit and have received certificates to indicate their completion. However, while mine did not result in a grade and I may have benefited from greater interaction with an instructor, it was an incredibly valuable and informative class that I would recommend to anyone who does not have a strong background in microfinance, as well as to all future PlaNet Finance interns.

The course is divided into 11 lessons, which fall into three major thematic areas: the world of microfinance, which surveys the theories behind microfinance and the environment in which it operates; financial analysis, which focuses on reading financial statements, interest rates, and ratios; and institutional analysis, which presents issues related to institutional viability and donor and MFI relations. Each lesson features a video, complete with numerous examples and interactive questions, as well as a course workbook summarizing the lesson, supplementary materials, and a homework assignment (with an available solution key). While I personally found the financial analysis section the most useful, as it was the area with which I had the least familiarity, the other sections were also valuable for the theoretical background to microfinance. In particular, many of the articles that accompanied even the more elementary chapters proved to be quite useful and informative. For example, some of the articles touched on the current debate of whether or not microfinance is actually helping people escape poverty. Others focused on the controversial debate about whether or not microfinance banks should make a profit and whether or not it is appropriate to charge the high interest rates often required for sustainability.

Overall, the course has given me ideas for questions to ask ARDY, as well as a greater understanding of how to read their various financial statements.

As Laura mentioned in her last post, we spent the day together last Monday when staff from ARDY, several of Heifer International’s other Sichuan field partners, and staff from Heifer’s Chengdu office came to Tongjiang as part of a training and review of program success stories. Laura detailed the visit in her post, and I have added a couple photos of us with some of the program participants to our blog photo album.

As I’ve described in previous posts, one of the main fieldwork projects I’ve been involved in at Daba has been one in which we’re giving out cash grants to a number of particularly impoverished rural farmers, with funding we received from the China Foundation for Poverty Alleviation (CFPA). We’ve distributed money to 120 out of the total 300 households that will receive the grants, and met with local village leaders a couple weeks ago to receive nominations for the remaining 180 recipients.

This past week, we returned to the countryside once again to conduct home inspections of the remaining 180 nominated recipients. Because money tends to be scarce for almost everyone in the countryside, my colleagues want to ensure that we are giving the funds to those who need it most and that the nominees weren’t recommended because they happen to be a friend or family member of the leader who nominated them, or because the parameters of the project weren’t clear to those making the nominations. We visit every home, look around the inside and take photos for later reference, talk to the resident to get a better understanding of his or her circumstances, and generally evaluate whether or not we agree that the person’s situation is particularly difficult or impoverished.

The home visits, while exhausting (we spent a few 12-hour days traversing the countryside!), have been incredibly insightful for me and have shed tremendous light on some common situations in rural China. The most prevalent phenomenon, by far, has been that of family members leaving their home to seek work in some of China’s larger cities. While I was familiar with the sight of migrant construction workers toiling away on Beijing’s highrise buildings, or the inflection of restaurant staff whose spoken Mandarin hinted at simple origins in a different province, I was never fully aware of the extent to which this phenomenon occurs. In every single household we visited, the majority of the working-age family members (those over 18 years of age up to those who were not yet grandparents–roughly in their 50s) had left the countryside to seek work in other cities and provinces (在外面打工, as they refer to it). Guangdong and Xinjiang provinces were particularly popular markets for their manufacturing and coal mining industries, respectively. Still others had headed for Beijing, Zhejiang Province, and Shenzhen, to seek construction work, restaurant work, or a host of other odd-jobs. Through linked bank accounts–largely with the Agricultural Bank of China or the Postal Savings Bank–the workers send monthly remittances back to their family members in the countryside. Although this phenomenon allows for a cash flow into rural households, it also leads to a situation in which many children are raised by their grandparents and only see their parents once annually, at the Chinese New Year holiday. Spouses who work in different cities will also often rarely see each other; in extreme cases, some may even leave their families and never return home–a few households shared stories of parents who had left behind a sick or disabled child, who had met another partner while working in the city and divorced their original spouse, or who had simply gone off to work, never to be heard from again.

After five long days conducting the inspections, we returned to Tonjiang and collectively discussed each household, reviewed our photos and notes, and ultimately decided to eliminate roughly 15% of the original nominees who we felt were at or above the average living standard for that area and/or whom received remittances from a number of family members working in the city. In the coming weeks, we will streamline our paperwork and notes to forward on to CFPA, then return to the villages to disburse the funds.

I’ve been lucky enough to attend many different Heifer International events and trainings since I have been with ARDY. ARDY is one of their partners in the Sichuan/Chongqing region, as is Jenn’s group Da Ba Shan, so this past week’s field trainings actually allowed us to get together, which was an added bonus. Before I begin describing this past week’s event, let me take a moment to describe other Heifer events I have attended, all of which together have given me a very interesting and well-rounded perspective of the organization.

At the end of last month I went to a three day meeting which brought together all of the Sichuan/Chongqing field partners. Each group gave a presentation about its work for the year and answered questions. This meeting was incredibly informative for me, and there are many aspects of the Heifer model that I find brilliant. For example, Heifer focuses on “passing on the gift,” meaning that when the animals they have given to the rural families have babies, those offspring are passed on again. This model of replication is incredibly sustainable and instills a notion of community engagement and assisting others that I find laudable. Moreover, I believe in the idea espoused by the founder, that giving someone a cow is better than simply giving them milk; meaning, these animals are more beneficial to people than sheer aid money is, as they also represent a source of nutrition, potential labor, and certainly a business opportunity. I also value Heifer’s model of using partner organizations to enact their programs– in this way they are able to reach very diverse clientele. For example, the partner organizations who presented ranged from my group, which does microfinance in a regional area, to groups that focused on the Yi people, to those that worked with AIDS patients, among others.

In the middle of the month we also attended a “passing on the gift” ceremony in a nearby village. With the help of Heifer and ARDY, this village had purchased chickens and was raising them together as a community in order to sell them and make a profit. This group seemed to be having a very positive experience with the program, and they were actually some of the attendees on the trip we just took this week with Jenn’s organization. I am impressed with Heifer’s dedication to these clients and I hope that this trip was educational for them, as they were able to see how Heifer projects in other regions (and with other animals) had been enacted. I also believe that Heifer’s work to foster partnership among smaller NGOs in Sichuan is valuable, as bringing them together can allow them to share their successes, hardships, and goals, learning from one another to produce better end results.

This most recent trip was informative for me, in that I got to see Jenn’s organization, among others, as well as their field operations. I was also struck by how many of these rural people seem to have exposure to multiple NGOs or aid programs. For example, one house we entered not only had a relationship with Da Ba and Heifer International, but it had also been a recipient of a government program involving biogas for their kitchen.

Please stay tuned for a few photos of Jenn and me on our trip together, which she will post when she returns from her adventures in the field visiting the 特困 (extremely impoverished) houses she mentioned in her last post.

I just returned from a 6-day trip to the countryside, in which we distributed the CFPA aid grants mentioned in my last post, and met with the community leaders from the remaining five villages (constituting the remaining 180 households) that will be involved in the project.

We held a large meeting for the distribution of the aid grants, which was attended by all the recipients, and well as a number of local leaders. The director of Daba thought it would be good if I spoke a bit about the aid program at the meeting, so he and I worked together to craft a short speech for me to deliver. The speech emphasized the fact that we (Daba), as an organization, are responsible for transparency in reporting back to CFPA, and that we must abide by the regulations they have set forth for the aid program. The recipients should use the money for the pressing financial challenges they described to us, and we informed them that we will return to follow-up in one month. Furthermore, the director and I noted in the speech, we should be honest in explaining our reasoning for withholding funds from some of the nominees (those whom we had felt were better off that average during our inspections). “Your cooperation will help us go forward in this difficult predicament. Your hard work will help set an example for the next recipients and will extend greater love to the community!”, we told them. Some of the content of the speech amused me, but I felt that it served its purpose to explain that our goal is to be as impartial as possible in distributing this money, and that it the funds should be used to help alleviate some of the greatest hardships faced by the farmers.

Following this assembly in which we gave out the money, we spend the next few days meeting with the local officials in the remaining villages, going through the nomination process for the remaining five villages and 180 households. The content of the meetings was identical to that of the previous meetings, except that this time around, Daba’s director mentioned that I will be “supervising” the program, and had me speak a bit about our goals and the fact that this money is meant for those who are in the most desperate need.

It has been interesting to note the effect of having a foreigner present for these meetings with the local village officials and leaders. It lends an additional credibility to the aid program by speaking to the fact that Daba truly does want to remain unprejudiced throughout the allocation process–since there’s obviously no way that a foreigner could have any personal ties to anyone in the village, it would be difficult to accuse Daba of showing favoritism towards anyone.

As part of my work to help ARDY, I have been helping their partner organization, Wokai. Wokai is a portal that uses the internet to connect potential donors with those in need of microfinance loans in China. For those who know Kiva, it has many similarities to Kiva, but Kiva does not presently operate in China. Wokai disperses its grants using its “field partners,” and ARDY, the organization at which I work, is one of these partners. Wokai asked if I could help by writing some blogs about how people actually use the loans that they are given and I obliged, interviewing three of their recipients, with more to come.

The actual project of interviewing the recipients is both interesting and challenging. I really enjoy hearing about the details of the businesses, figuring out exactly where money is spent, and learning if and how the loans are changing the quality of life of the recipients. However, getting the stories is no easy task, as the interviewees all speak Sichuanhua, a dialect I really can’t understand. Moreover, ARDY’s branches are located in small towns where I stand out as a foreigner even more than in Jin Cheng, where the head branch is located. As a result, when I conduct these interviews, I tend to attract a group of twenty to thirty men who leer and laugh and generally make me even more nervous about my limited Chinese and lack of sichuanhua comprehension. Oh well! Nonetheless, it’s a satisfying project and I think this coming week we will be returning to the country for me to conduct more. Please enjoy the following three stories and also look at Wokai’s website for more information about their work.

Story 1: A Prescription for Development

For those who have never been to a small town in China, one of the most ubiquitous sights is the small, medicine stores. These stores have an important role in the community, as the pharmacists serve as ad-hoc doctors for many, and they sell medicine in either single servings or in larger quantities for at-home dosing. Zhou He Town is no exception, and while it has many small medicine stores, Zhou JiGui took a loan because he felt that with it, he could offer more services and improve his store. Plus, as he laughingly said, the rest of the stores aren’t as good as his, and the loan can ensure that his store is the best!

Zhou JiGui received a loan of 3000 ￥, or roughly US$450, which he used predominantly to increase the number of medicines he was able to stock. While he had operated the store before the loan, he was unable to carry some of the more expensive medicines nor the medicines for less common ailments (basically anything but a cold, fever, or headache). He said that on average, he used to be able to make only 2000 ￥ a month, but now he makes somewhere between 2000 and 3000 ￥, which he is very pleased about. His annual rent, as he has his own store is 1000 ￥, a fee for which he also used some of his loan. He has had many years of loans from ARDY, and is pleased with the impact they have had on his family. In particular, he is able to save small amounts of money for his two children, who are presently in 1^st and in 3^rd grade, with the hope that they will later be able to afford the tuition for the high school.

When asked about the difficulties that his business faces, he pointed to the repaving going on in the road out front of his store, noting that the many weeks of construction had impacted his ability to receive his stock in a convenient way. None of his medicines are made in house, and they usually come in a relatively large shipment every few months from some of the larger cities in Sichuan. However, even with the road difficulties, his store’s location is good, as a rural village nearby is best accessed by walking by his store. As a result, he believes, his store receives more business than some of the others in the town. Additionally, his store is only about a minute away from the Zhou He branch office of ARDY, so the twice a month loan repayment is, as he noted, quite simple.

Story 2: Progressing One Grain of Sand at a Time

Zhou JiaCheng took out his first loan this year to improve his sand-making business. His loan, which was for 4000￥, has allowed him to increase the number of people he staffs and helps to offset some of the start-up costs he faced, which were roughly 20,000 ￥, or almost US$3000. This money went towards the necessary tools and machinery, their upkeep, and the license to operate his business where he does, at a rocky cliff near Zhou He. He also pays salaries to his three employees, each of whom are paid based on production, given 20￥, or almost US$3, for each ton they produce. This sand is later sold to those involved with construction and building for roughly 250 ￥/ton, or a bit less than US$35.

According to Zhou JiaCheng, the loan has helped him make significantly more money– up to 1000￥more per month, as his ability to hire these three workers has dramatically increased the output of his business. The sand that Zhou JiaCheng produces is mostly used locally, as it’s relatively difficult to transport it long distances (transportation is another one of his costs). However, of late, there has been quite a bit of business in Zhou He, as they have been repaving the road, building sidewalks and curbs, and rebuilding many buildings damaged by the earthquake.

The actual mechanics of making the sand are pretty simple, but quite labor intensive. The three laborers and Zhou JiaCheng use pick axes and other tools to break apart the hillside, creating relatively large rocks, that then have to be further broken down until they are small enough to fit into their machine. The machine then grinds them into fine sand which can be used to create concrete, bricks, or mortar, among other things. The sand is then piled up or transported away, depending on demand. Zhou JiaCheng is pleased with the growth in business he has experienced since his microfinance loan and is able to use it to save money for when he retires. His three children are already grown and living in Chengdu.

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