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Greater Caribbean Energy & Environment Foundation, Inc. GCEEF personnel pioneered “game-changer” models in these areas: Technology, Environment, Human Development.

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The Chief Executive Officer of Greater Caribbean Energy & Environment Foundation (Andrew Oerke) played a prominent role in the development of microfinance as an institutional product. A decade before Grameen Bank, his organization, Partnership for Productivity (PfP) with David Scull initiated the so-called “peer pressure” system that would make micro-credit capable of being connected to formal capital flows. PfP went on to create successful and culturally appropriate methodologies in more than fifty developing countries during the60’s, 70’s and 80’s, by which time microfinance had become the preferred approach to poverty alleviation. In the 90’s Mr. Oerke began working on the protection and restoration of the environment with GCEEF, UNEP, UNESCO, and the World Bank. Recently, under his direction, GCEEF was asked to assist Haiti with microfinance efforts. He is presently seeking funding to pilot a new model designed to prove that the curse of systemic poverty can be ended if a more dynamic generative model is crafted.

GCEEF proposes a shift from sustainability to a generative paradigm based on the following assumptions: 1. There is not enough donor money available to eliminate poverty within a frame work that does not self-generate, that does not grow by itself. 2. Human consciousness has not yet evolved to where the social will exists to do as Rabbi Jesus suggested, “Sell all that you have and give it to the poor”. 3. A disastrous century has proved that you cannot force, bully, intimidate, brainwash, selectively murder or starve a population to do something they are not freely willing to do.

The new paradigm will be based on the law of Nature that produces “more seeds than it needs”. The reason business is powerful is that it is also based on the principle of surplus-generation, upon which civilization itself rests: surplus time to create social structures, art, games, innovations, and knowledge. Business calls this the “profit motive,” but “surplus generation” can be either for profit or not-for-profit, a more comfortable framework for most development agencies. The point is that surplus creation is dynamic and self-generating. If there is not enough money or will to eliminate poverty, then the poor must be given a system in which they can do it for themselves. An auto-generative paradigm, with its attendant spin-off policies and methodologies will allow them to do this.

If microfinance is to avoid the fate of development’s failed panaceas, (community development, integrated rural development, intermediate technology, women in development, trickle up, etc.) it should stop advertising itself as the panacea, which will “build the museum to poverty”. Silver bullets discredit themselves by over-promising. Eliminating poverty is not simple. Systemic poverty is a system and is built of interlocking pieces. Additional factors must be integrated into the anti-poverty methodology if systemic poverty is to be eliminated.

The orthodox methodology for microfinance has come to be known as the “peer pressure” system, though it operates under many names with many permutations. When David Scull a Quaker businessman and Partnership for Productivity first developed the peer pressure methodology in Kenya in the 60’s,the system worked as a breakthrough technology but fell apart several years later through late payments and defaults. (If someone defaults; the next person in line does not get a loan.) InKakamega, Kenya, where this approach was introduced, the town was too large and diverse for peer pressure to function well. In 1973, a high-level development aid policy group concluded that microfinance was not a viable option and that money should instead be given directly as grants to start small businesses. PfP, however, refused and persevered with a combination of credit and enterprise creation. It expanded the peer pressure methodology to include physical, social, and intellectual collateral in a systemic (product-to-market chain) context based on subsistence economics, that could be linked step-by-step to a quasi-monetized and then a monetized system. This approach enabled farmers and the smallest of enterprises to link up with other enabling enterprises (transport, storage, manufacturing, repair, and whole sale-retail and market connections) to increase reliability and productivity. Suddenly, microfinance repayment rates shot up to the 80’s and 90’s percentiles. PfP replicated, designed and/or trained microfinance/microenterprise programs in more than fifty countries and USAID backed the movement in a big way. The rest of the development world followed suit. It should be noted that ACCION, Technoserve, PACT, Michaela Walsh’s Women’s World Bank, and Grumeen Bank in the 70’s and 80’s were other organizations critically important to the development of microfinance. PfP’s essential lesson was that microfinance had to be linked up with other enabling enterprises and culturally appropriate technologies. Access to credit by itself does not eliminate systemic poverty.

For emerging economies, for growth and productivity increases to occur, there must be a priority focus on enterprises that enable other enterprises. Without enabling enterprises between product and market, farmers and other producers know better than to leave the subsistence base which has kept them and their families alive over the centuries, and whose subsistence economy remains invisible to Western eyes. Our Western, money-and-jobs economics lowers agricultural production by attracting rural areas to urban centers that then require extensive and expensive infrastructure outlays. The result is that most governments in Africa can’t even pay the interest on their loans. So much for money and jobs as the be-all and end-all.

Alexander the Great defeated armies far larger than his by focusing his forces to a sharp point to break through the enemy’s lines. The enemy in this case is hopelessness, and the focus has to be on interlocking enterprises and increased productivity as well as on access to credit. Western economics, based on money and jobs, values redundancy that lowers costs through competition. In the poverty world, it is the House that Jack Never Built for the want of this or that link in the economic chain or value chain as it’s called now.

Cracks are beginning to appear in the microfinance juggernaut, which would not happen if microfinance were to adjust its methodology and join it to the other legs of development’s three-legged stool: culturally-appropriate technologies and enabling enterprises, so that increased productivity would be the overall through flexible objective.

The transition from a welfare paradigm to a sustainability paradigm took years to achieve, but a tipping point occurred in the 80’s when people began to gravitate towards the new philosophy. It is time to create a critical mass for the next paradigm, a generative paradigm using the principles of Nature and private business at first mostly in a non-profit mode. It is our estimate that in ten years the tipping point for the new paradigm can be reached if more experimental programs can be started soon. These programs will show that even the very poor can create a surplus and a dynamic that will attract donors and investors alike in a win/win strategy free of the politically partisan tragedies that infested the 20thcentury.

The following things need to happen:

1.) For the shift to occur quickly, people must be conscious of the need for a shift and of what constitutes the new paradigm. This means that the development community’s negative attitude towards profit and business must be turned into a positive by using the term “surplus generation” instead of “profit” and by operating in a not-for-profit context to re-assure donors that greed is not a factor. Words matter.

2.) An emphasis on enterprise creation and support, especially for those enterprises that enable other enterprises in the “value chain,” must be brought back into focus as the indispensable partner of microfinance. Culturally appropriate technological improvements must be included in the mix. They say Norman Borlaug’s technology and the green revolution “saved a billion lives.” That may be an understatement.

3.) The guiding principle of the new paradigm must be that the poor, even the very poor, can and will lift themselves out of poverty if we give them the chance to create surpluses (profits) that will then attract the capital markets. Innumerable financial instruments and opportunities will appear as soon as people see that this is possible.

4.)There must a policy shift not only to private sector principles and methodologies, but away from the bureaucratic reliance only on big “reputable” organizations be they private sector or governmental. The stakeholders are the key, and policy must go back to working as well with small organizations, local, national or international, eager and willing to take the risks to be innovative outside the present failed“Aid Trap” system. Remember, the mouse survived; the dinosaur did not.

5.) This means the donor organizations themselves must change. They desperately need to“de-bureaucratize” and go back to a reliance on experienced field hands who frequently visit the projects handwork on the ground. There, the truth lies.

6.) This also implies that the evaluation context must change. Evaluation has been taken over by the green shades, the bean counters, with nimble digital fingers. In its initial, most seminal period, Peace Corps relied only on subjective evaluations done by experienced field hands who made their mistakes but whose noses were close to the ground. We could use a little chaos and a few wild cards thrown into our assessments in order to be inspiring and creative again.

7.) “Embedded generosity” is catching on along with a policy shift towards a private sector approach to development practice. Microfinance/microenterprise needs to take advantage of this movement in an “adopt a small or micro-enterprise” approach. A few organizations already do this and several businesses donate, for example, a gift shoe for every one you buy. Corporations will be competing in the new paradigm to involve the customer who is purchasing the product in adopting a tiny little microenterprise, say for that Mama on a street corner in a shantytown near Nairobi who needs to buy a few cabbages to sell them today, or the farmer who has no seeds or fertilizer, and so forth and so on. You get the idea.

Most of all it is a new philosophy that is needed, that the poor can lift themselves out of poverty if we apply generative principles to the art of development. If the philosophy changes and shows that it works, policies will change as they did when the microfinance movement in the 70’s and 80’s proved that poor people could be a good credit risk if the right methods were applied.

Andrew H. Oerke

Mr. Oerke was President of Partnership for Productivity in the 70’s and 80’s. Before that he was a Peace Corps Director in Africa and Jamaica. In the last two decades he has worked as a development consultant and as CEO of the Greater Caribbean Energy and Environment Foundation, an NGO that restores marine and terrestrial habitats. He has been asked to start a microfinance program for Haiti and is now raising funds to establish the model suggested in this thought piece. He has worked in more than eighty developing countries and intends to replicate the new model in other countries as soon as start-up and investment funds are available.