Don't Give to the Poor, Invest in them. Draft by Anthony McKernan

Donâ&#x20AC;&#x2122;t Give To The Poor Invest In Them V3 Draft

Anthony McKernan Development Director, Five Talents

Introduction

1. How to flourish 2. Give. Donâ&#x20AC;&#x2122;t Give 3. Who are the poor? 4.

The problem with aid

Do we really mean development

Misdiagnosis

Poverty as broken relationships

Helping each other

Letâ&#x20AC;&#x2122;s walk together

10.

Microfinance as empowerment: part 1

11.

Microfinance as empowerment: part 2

12.

Why Five Talents?

13.

Conclusion

What you can do References

Introduction There is a charity that sends second hand knickers to Africa. Really there is. Would you like to be given second hand undies? When Winston Churchill allegedly said “We make a living by what we get, but we make a life by what we give” I don’t think he had this kind of thing in mind. If you are anything like me, you probably suspect that giving a handout isn’t always the best way to help a person in need. Yes, we want to do something to help, and so we support one of the charities that is seemingly doing good work. We make our donations and that’s it. If we do ask questions, it’s usually about the amount the charity spends on fundraising, not about the success of their work. This booklet is designed to provoke. I want to raise some questions about how we give to poor communities and then introduce you to microfinance and the example of the Five Talents charity. It is incomplete. This is a work in progress and your feedback will help make it better. Do get in touch when you have read it.

1. How to flourish We flourish when people believe in us. We flourish when we have an opportunity to use our talents. We flourish when we can do the things we are good at on a regular basis. Think of a time when you did some really good work, when you were energised in the process. Now think about your manager/parent/ teacher in that situation. What was their role? Did they force you to work late, to have all the paperwork in order or go the extra mile? Probably not. Chances are, they gave you what you needed to excel - an opportunity, responsibility, tools perhaps, trust certainly. Itâ&#x20AC;&#x2122;s no different for people in poor communities. For those living on just a few dollars a day. Do we trust the poor? Do we believe they have talent to change their situation? Will we give them the opportunity they need to flourish? Or will we continue to think of them as people in need of our money, our education, our western values, our undies? Will we continue to give them a hand out when a hand up could be far more effective?

2. Give. Don’t give. A wise man was known for one of his favourite sayings “it is more blessed to give than to receive”. So who benefits here? Both do, the giver and the recipient. But the giver benefits more. We give because it is good to give. “Giving with glad and generous hearts has a way of routing out the tough old miser within us. Even the poor need to know that they can give. Just the very act of letting go of money, or some other treasure, does something within us. It destroys the demon greed”. Richard J. Foster, Money, Sex & Power. My church uses the phrase “My need to give is greater than the need I give to”. But what about the recipient of our giving? Is it good for them to receive? Well this depends on many factors. There is a particular difficulty in giving money or material goods to people we don’t know. Is it what they need? Will they use the money as intended? Will it actually help? Might it even do harm? My church community frequently embraces individuals and families in deep financial need. How should my wife and I help such a person in our home group? Giving them money might not be the best action. What if they aren't very good at handling money? So we have a conversation. We try to see if the presented issue is actually the real underlying issue. We seek to understand their situation and their thinking. What is their responsibility and what is ours? If we try to fix the situation, or worse, try to fix them - what does that say about us? What does it say about our attitude? Good intentions don’t always result in good actions. For poor communities overseas, perhaps giving money to a charity is the best way of doing something. Trust the charity. But just because a charity has a right heart for the poor doesn't mean it is doing the right thing for them. 5

What if a poor community’s receipt of help from a charity... ● ● ● ● ●

...creates a dependency on the charity? ...denies local tradesmen an opportunity to work or make a living? ...imposes a western solution not really owned by local people? ...reinforces a view that they need to look to others for help? ...creates local resentment or jealousies between those who benefit and those who don’t.

I have done this. I have been on teams that have constructed buildings and donated clothes. It was good for me and I don’t regret it. I lead teams to Africa even now. But when we go on a team, give money to charity, or buy Fair Trade we have to ask ourselves tough questions. We could be doing more harm than good. (This isn’t the place to discuss Fair Trade, but to challenge assumptions I recommend ‘Fair Trade? Its prospects as a poverty solution” by Economist Victor Claar).

3. Who are the poor? The World Bank defines poverty as living on less than $2 a day, and extreme poverty as living on less than $1.25 a day. We still have about 2.4 billion people living on less than $2 a day 1 In subSahara Africa 50% of the population still live on less than $1.25 day. The United Nations defines poverty as "a denial of choices and opportunities, a violation of human dignity.... a lack of basic capacity to participate effectively in society." What we have here is something more fundamental than simple material deprivation. This wider view of poverty often points to a lack of freedoms, especially economic and political freedoms. Helping the poor therefore, may have a lot to do with fostering freedoms and creating opportunities. Think of poor people grafting in the informal economy and you might imagine people hawking food on city streets, selling fake designer clothes, pirated DVDs and scavaging rubbish dumps for things that can be sold-on. You would be right. This global informal economy is responsible for 1.8 billion jobs and if it were a country would have an economy bigger than any other except the USA. 50% of the worlds economic growth is expected to come from cities in emerging economies in the next 15 years. The poor are enterprising.

4. The problem with aid The amount of aid to Africa in the last 50 years has been huge - some estimates put it at least $2 trillion 2. But economic growth has been weak. Aid doesn’t grow economies. The chart below shows the shocking truth of economic growth per person (GDP) in Africa, along with the simultaneous rise in aid.

Source: World Development Indicators Online

Poverty increases as GDP decreases. The opposite is also true again pointing to the role of economic growth as the major factor in poverty alleviation. Interestingly, the UN target to halve world poverty by 2015 has been met three years early. But closer inspection shows that this is mainly due to China. This one country has brought 660m people out of poverty since 1981. How? Because of economic growth. The story is similar in India. Our charitable giving and help for the poor must take some lessons from the effect of economic development. But the issue isn’t just economic. Aid isn’t empowering. It doesn’t bring dignity. It doesn’t create freedom and it rarely plays to people’s strengths. It comes with strings and it often comes with a wrong mindset. 2

“Every time you do aid to Africa, you create that parental relationship. I’m helping you. You should be guided by me because I have a bag of money. The responsibility for your future is actually on me, not on you because I have the resources to develop you. It’s patron-client; it’s master-slave; it’s donor-recipient. It’s all broken.” Michael Fairbanks, co-founder of the SEVEN fund. Books like ‘Dead Aid’ by Dambisa Moyo have made the case that aid has trapped nations into a cycle of dependency which frustrates economic growth. You may wish to challenge these views. I am not trying to prove a point, but provoke a discussion.

5. Do we really mean development? This may be a little unfair to the aid sector. Communities in real difficulty tend to go through three stages of need; Relief, Rehabilitation and Development. Relief is the provision of urgent help, say in the aftermath of a natural disaster or civil war where people have limited capacity to cope. Aid in this setting certainly has its place. But it can be difficult to deliver well because the troubled communities often lack the very infrastructure needed to make the distribution of aid effective - roads, security and good governance for example. We then hear stories of aid being misappropriated and delayed. Rehabilitation is the next stage when aid agencies are leaving and the communities are getting back on their feet. Here, the need is for people to work together, in partnership to rebuild what was destroyed by human or natural disaster. The final stage, ‘Development’ is a long term process of both parties learning together for mutual empowerment and improvement. Did you get that? We should be learning from one another. Too often, development is simply a more sophisticated form of handout. There is more involvement of the ‘partner on the ground’, but not necessarily a solution owned by the poor themselves. When things don't turn out as expected, is this viewed as a failure? Imagine donating money to a charity that uses the funds to build 1.6 million toilets in India. This output looks great, but what if half of them end up being used as store rooms? This would be a bad outcome. In fact this is a true story. The World Health Organisation did this between 19972000. Only 47% are being used as toilets. What can this teach us? Dare a charity share this kind of information with donors so that together we might learn?

6. Misdiagnosis Critics say that we should stop applying relief and rehabilitation ‘solutions’ to communities that don’t need it. We are just trying to fix people and places according to our own perspective. Too many charities and donors continue to make this mistake. Most poor communities fall into the ‘development’ category. If we correctly diagnose the need for a two-way relationship, both communities ‘here’ and ‘there’ can benefit from this approach. It needs relationship if we are to understand and help each other in a meaningful way. Many churches believe they have such a relationship. They are invited to go on trips to help build classrooms, donate books, install second hand computers and provide other forms of encouragement. But this doesn’t mean that all their actions are in the best interests of the community. Peter Greer, President of Hope International, tells the story of a church who wanted to help Rwandans after the genocide. The church sent eggs to a village, enough to flood the market and put the local egg producer out of business. When the church changed it’s focus the village had to bring eggs from elsewhere because their local producer was no longer in business. Sometimes, charities and donors have perpetuated a problem that frustrates a relational approach. Together they want to see results, and quickly. They want things that can be seen and photographed. They want low risk and tangible stories. Anything less is likely to be viewed as poor use of donor funds. Sometimes donors and charities want to restrict the funds for a certain use. That’s understandable. I want it too. But it’s not necessarily a good fit with learning and walking together over time. It says "I like the project”, more than "I believe in you".

7. Poverty as broken relationships Some Christians see poverty as the result of broken relationships. Corbett and Fikkert, for example, say that sin has created broken relationships - a disconnect with God, with others, with ourselves, and with creation. Poverty alleviation, they argue, “... is the ministry of reconciliation: moving people closer to glorifying God by living in right relationships with God, with self, with others, and with the rest of creation”. [page ref needed] If they are right then this changes everything. Helping the poor becomes a work of reconciliation. It is about seeing communities learning to forgive, to trust, to serve and to steward their resources. They cast off rivalries and dependencies and recognise that local problems can have local solutions when people work together. Reconciliation will result in development. It also means that my own reconciliation is at stake. In what area of life am I poor? Where do I need to see reconciliation? Visiting or living with a poor community overseas (or in the UK) should throw a light on this if we have a humble attitude. From this viewpoint, helping the poor is no longer about giving. It is about investing in relationships. I don’t think we should read this as poverty=distance from God though. Much Christian teaching singles out the poor as closer to God because of their poverty (ref needed). A secular approach would take a different view of course. We could debate how a different set of motivations and beliefs results in different development practice, if indeed it is different.

8. Helping each other Do we really, really believe that we need to learn from the poor? When did you last ask for their advice? What did they last teach you? My own church had been supporting the rehabilitation of boy soldiers in Sierra Leone for a number of years. A breakthrough came when we saw something that they had been doing, which we needed here in the UK. The Sierra Leonians in their poverty were initiating income-generating community projects that inspired our church. We realised they had something to teach us. The new ministry that was created in the UK as a result became a multi-million pound social enterprise, one of the largest in East London within five years. More generally, attitudes need to change on both sides. Years of bad development and paternalistic attitudes in Africa especially have perpetuated the problem. All too often, communities overseas, look first to the educated and rich westerners for help, rather than recognising first what they have and can do. There is a whole body of literature describing the richness of Africa now available. I visited the north of Uganda with a Five Talents partner as we established a new microfinance branch in a former war-torn town. The aid agencies were leaving and we were introducing ourselves to the mayor, local councillors and others such as market stall leaders. What was painfully obvious by their questions, is that my presence, as a white outsider, caused them to think of us as another agency coming with money, 4x4 vehicles and a team to provide stuff for them - just as had been the case when they genuinely needed relief following destruction during a 20 year rebel conflict. But this was a community needing to move beyond relief and handouts. It was my Ugandan colleague who stressed that the microfinance services were going to be provided by a Ugandan company who would be hiring local people. This was about harnessing local resources and providing a new opportunity for people to flourish in their small business. You could sense the shift as people realised that was something that they could be proud of, and have a stake in.

9. Let’s walk together Be transparent. Be honest. Have a two-way relationship. Establish a plan. Agree the steps together. Walk the journey shoulder to shoulder and be prepared for the long term journey of ups and downs. This isn’t easy. It takes time. And it particularly needs humility on our part. As westerners, we need to see our own poverty - perhaps not material, but in other ways. We have quite different views from many Asian and African cultures. Just consider the differing views we have of time, money, family, community and achievement. There is much we can learn. In a short ‘mission’ trip, we will be driven to achieve as much as possible - but that quick-fix, task oriented approach might not foster the kind of ongoing relationship needed to see the poor realising new opportunities and using their resources and talents to flourish. Back in Sierra Leone, my church had been concerned with the lack of a clean water supply for the former boy soldiers, (and we still are - we feel they need a sanitation solution), but this is what we feel. It’s a western priority, not necessarily a local one. We need to stand back and listen to what they want and why they want it. And crucially, what they don’t want (which is often hard to elicit unless there is a deep relationship). They are our friends and friends should have frank conversations and work through issues together. Colleagues at Five Talents have been honest in saying that the design of a microfinance programme must be done with genuine local involvement. This isn’t always easy. At least one of our programmes would have looked differently if more time had been spent assessing and discussing local needs. Microfinance isn’t just about small loans. A programme must choose from a menu of methodologies and products including savings, training, insurance and money transfers.

10. Microfinance as empowerment: part 1 Earlier, we were reminded that enterprise generates wealth and there is dignity in doing a day's work. People, no matter how rich or poor, find fulfilment in providing food and resources for their family. Poor communities don't have big employers or social security. The options are stark - beg, steal or work. Working at your own farm or small business, no matter how basic, is crucial if you are to move out of poverty. Moving your business from a hand-to-mouth existence to something a little more profitable makes a massive difference. Eventually you have enough to pay the children's school fees and save a little to help when you suddenly need to purchase medicine or fix a leaky roof. This upgrade to your business requires some working capital. Done properly, microfinance can play an excellent part in development, challenging our preconceptions whist also empowering our partner communities. Microfinance isn’t a project done to the poor. It’s something we do together, for mutual benefit. ● ● ● ● ● ● ● ●

it starts with what people have, not with what they lack it encourages faithfulness with small things it rewards diligence and consistency it requires trusting relationships it teaches accountability and shared responsibility it helps foster peoples talents it can be banking in the hands of local people it teaches and reminds us of vital principles

Some of these principles can be seen in the Bible parable from which Five Talents gets its name (Matthew 25, 14-30): Three managers were given 'Talents' to look after on behalf of their boss. A talent was a large some of money measured by weight - 60Kg we think, an amount equivalent to many years worth of wages. The two who were commended "went at once and traded" and obtained a return in relation to what they were given (100% return). The one who was scolded and

would be punished had 'looked after the money' in one sense and returned it when asked, but had chosen not do what was expected and did not put his talent to work, but simply buried it. We see these principle in group-based microfinance. All Five Talents programmes are group based, whether members are saving together or co-guaranteeing loans. They have an agreed constitution that governs their practices. They also have a system of record keeping and their regular meetings require a level of relationship, trust, transparency and accountability. They therefore have a vested interest in living right with one another (reconciliation) and seeing each other thrive.

11. Microfinance as empowerment: part 2 The success of microfinance has attracted for-profit entrants to the market. The poor, it turns out, make excellent customers. As a result, millions of people excluded from formal financial services have been able to access loans. In 2011, 137 million poor families had a microloan. Unfortunately, as we have seen with other financial services, this led to a financial bubble in some regions, which in turn led to over-zealous lending among some companies and the over-indebtedness of their poor clients. A spate of debt-induced suicides in Andhra Pradesh in India almost shut down the microfinance industry overnight in 2011 as the Indian Government scrambled to change the regulatory environment. Articles and research have since appeared doubting the miracle of microfinance. The European banking and financial crisis which began in 2008 and continues to this day is largely the result of poor lending practices. Microfinance charities now have a lot of experience of good lending and borrowing practices. What we find with microfinance funded by charities is that they are driven by mission, not profit. A desire that clients are rewarded more than shareholders and that risks are properly assessed and mitigated. That doesn't automatically mean that they have the best model, but it isn't a bad place to start. Microfinance for the marginalised is expensive but with charitable funding can reach the parts others can’t. “Donors and governments should take note of the peculiar strengths of faith-based development institutions, and should try to work with them to reach the un-reached…” Development, Divinity and Dharma; Harper, M., Rao D.S.K., Sahu A.K. (2008) Microfinance programmes can be a great investment for donors to support the poor. To believe in their talents. To give them opportunity to flourish, free from paternalism and cultural biases. There is also an opportunity to walk together.

12. Why Five Talents? Christian-based microfinance has several important features: ● ● ● ●

we are motivated by a concern for the poor we are concerned with the whole person, not just financial transactions we have a value system that prioritises transparency, accountability and relationship we partner with the church as a trusted, locally embedded civic organisation

Committed to 'fighting poverty, creating jobs and transforming lives', this mission ensures that marginalised communities remain the focus of Five Talents’ work. It is microfinance beyond the reach of profit-making microfinance companies. It is frontier work that tends to be a little more risky, a little more costly, a bit more innovative and certainly a lot more rewarding for all involved. Five Talents uses donor funds in the following four ways; a) As loan capital to lend to micro-entrepreneurs b) To establish self-sustaining village savings groups c) To deliver business training within groups d) To build institutional capacity so that small microfinance providers, can become stronger, more self-sustaining and reach more marginalised people. In every case, the Five Talents partner is rooted in the community itself. Belshaw et al. note in their book “Faith in Development”: “Christian institutions are rooted in their communities. They have developed a credible leadership familiar with the needs of the poor, familiar with cultures, histories and contexts of its people. Religious communities approach their development work from a unique perspective that reinforces the moral and ethical values systems of these communities."

13. Conclusion My wife and I started a small business last year as an alternative to putting money into a pension fund. We had to borrow money to get going and make some sacrifices (we gave up a living room to make space for a lodger). We signed up to some training courses, linked in with a professional group and a whole new prospect has opened up for us. It required some courage yet it has been fulfilling to see a positive cash flow each month. Our asset is producing a small return and the motivation to grow the business is strong. When a villager in Burundi or Tanzania joins a local Five Talents savings or loan cooperative, a whole new prospect opens up for them also. They are joined to a group who provide encouragement and accountability. They have access to capital (either savings or loans) and they can take advantage of business training and mentoring provided by the locally employed Five Talents team. Microfinance is a wonderful opportunity enthusiastically seized by those with few options. It has a largely positive track record and now provides a whole range of financial services for poor communities. Helping the poor is really about investing in them. Believing in them. Providing opportunities for them to succeed with what they have. Five Talents is providing a little more resource, a lot more opportunity and a belief that the poor have the talent to flourish. Actually, it is people like you who could help them to flourish and in doing so, discover a new way of empowerment and lasting impact.

14. What you can do Look more closely at the practices of your chosen charities, your church, your own giving. Ask them, and yourself, hard questions to uncover views and practices which may or may not be in the best interests of the local community. Consider microfinance as one way of investing in the poor, so that they can flourish in their new opportunity to grow their own family business. Consider supporting Five Talents with a regular donation. Get in touch and let me know your thoughts and reactions to this booklet. This is only a starting point so let us learn together.

Anthony McKernan October, 2012

15. References Winston Churchill, (there is no record of him having said this although it is frequently attributed to him). Richard J. Foster, Money, Sex & Power (Hodder & Stoughton; New Ed edition (17 Jun 1999) http://www.economist.com/node/21548963 William Easterly, Can Foreign Aid Buy Growth? (Journal of Economic Perspectives 17, No.3, Summer 2003). The Millennium Development Goals Report, 2011. Steve Corbett & Brian Fikkert, When Helping Hurts, (Moody Publishers), 78 Microcredit Summit Campaign, 2011 Report Harper, M., Rao D.S.K., Sahu A.K. Development, Divinity and Dharma (2008) Belshaw, Calderisi & Sugdenl, Faith in Development, (World Bank Publications, 2001) Dambisa Moyo, Dead Aid, (Penguin Books, 2010) http://www.fastcoexist.com/1679219/meet-mr-toilet-the-man-trying-to-makecommodes-a-global-status-symbol Morgan Clendaniel, FastCompany Amartya Sen, Development as Freedom, (OUP Oxford, 1999) Five Talents, www.fivetalents.org.uk Peter Greer, Hope International, PovertyCure film.