Hunger Blog

Twenty Years of Credit with Education

Microfinance is the most exciting and dynamic development innovation in the past quarter century, because it provides a highly useful resource in very high demand by the poor - money! Having money offers far more options than having a bag of seeds or even a bag of fertilizer. To support the exercise of free will, money is the king of resources. But what about the information necessary to use money for good rather than ill - not just to use money to make money, but to use it to seize the new options that having more money opens up for the poor?

Here’s a story from Muhammad Yunus, shared with me some time ago, and not well known. It’s about the origins of the Sixteen Decisions chanted at Grameen centre meetings - such as to not take or give dowry, to practice family planning, and so on. A rather radical social change agenda is promoted very clearly as a set of expectations of each and every person who joins Grameen Bank.

The story arises from the Grameen concept of member ownership in the sense of both “buy-in” and control. To foster this, Grameen very early on organized national consultations with member representatives, who were the leaders of centres who elected from their number at the branch level women to represent them at the national meeting. In the first, or one of the first, consultations, the representatives indicated their desire to adopt and promote among the members an agenda for personal and social change. Yunus said, “Fine, what do you want to change?” The meeting came up with something like ten changes, called them “decisions,” and figured out how to promote them at the centre meetings. The next time a national consultation was held, the representatives indicated they wanted to expand the social change agenda. Yunus said, “Fine, what more would you like to add?” They expanded the ten to sixteen decisions. The next time a national consultation was held, the representatives wanted to expand the agenda again, and Yunus said, “No! We’re going to stay with the Sixteen Decisions, lest we lose our focus on microcredit.”

Yunus admitted to me that his passion was for the microcredit, but that he wanted to respond to the demand from members for this non-financial service, as long as this could be done without distracting his staff and the members from the primary business of microcredit. Thus was created the first Credit with Education program, even though Yunus did not use this label. Most interesting is that the education was demand-driven! It was constrained, however, by its tight integration with the microcredit service - so as not to absorb undue amounts of staff time, energy, and cost beyond what could be supported by the revenue from the margin-on-credit operations.

Now here is another story, a story that Freedom from Hunger staff jokingly call the “origin myth” of Credit with Education. It’s not really about the origin, which goes back to Grameen Bank, as I just said. It’s also not a myth; it has the added value of being true.

Back in mid-1988, several of us at Freedom from Hunger were inspired by a video about the Grameen Bank, which was shown to us by Jeff Ashe, when he was evangelizing us to build on our many years of experience with revolving loan funds to do high performance, minimalist microcredit programs. “Minimalist” meaning no tying of credit to particular uses, just getting the loans out to current or would-be microentrepreneurs and getting the loans repaid with enough interest to cover costs. But what caught our eye, or at least my eye, was those women chanting their Sixteen Decisions - decisions about what they would and would not do with the profits they made on their enterprise activities.

Cut now to the foothills of the Nepalese Himalaya. In September 1988, Ellen Vor der Bruegge, Kathleen Stack, and I were hiking long hours from village to village, puzzling over how to convert a typical community development program - trying to do too many things for too few people - into a more effective package of valued services for large numbers of stunningly poor people in this difficult terrain far from the nearest road and even the most basic amenities. Of the great variety of projects within this overall program, we had seen enthusiastic participation of villagers in only two - a revolving fund making cash loans and clinical health services for young children.

We asked ourselves whether the program might be persuaded to pare down its menu of services to just those two, coordinate them in some way, and focus on delivering them to a much larger number of communities.

The paring down could be done - with due sensitivity to the people involved in the de-selected projects - and coordination seemed straightforward, but the inevitable questions regarding sustainability soon surfaced. Once the program got off the ground in one set of villages, how would it keep going as we moved on to new villages? In other words, how could we free up the resources needed to maintain the service, in order to invest in expansion? This seemed to put a premium on village capability to manage its own services with only minimal maintenance by program staff. It also put a premium on keeping costs very low - essentially only one staff person per visit per village.

Providing clinical health services, especially in those mountains, seemed out of reach. That’s when Ellen, a public health specialist, pointed out how the still-new Child Survival movement had shown that most child health problems can be prevented or managed by providing mothers and others with very basic information about those problems and the peer motivation and support to use that information as needed.

The light bulbs went on, and we looked at each other and said, “Why not train a new kind of field agent who can both support a self-managed lending program and a child health education and promotion program for the same groups of mothers and other women?” This would focus scarce resources on a couple of high-impact interventions and allow for large-scale spread of the program.

This wonderful combination of naïveté and necessity led us to create an integrated delivery model, which we call Credit with Education. Ironically, this delivery model never got started in Nepal. The paring down process proved impossible in that program. Instead, Credit with Education got its start at the end of 1988 in both Mali and Thailand. In early 1990, we added Bolivia, Ghana, and Honduras. Now, as we mark the 20th anniversary of Ellen’s, Kathleen’s, and my shared insight in the Himalayan foothills, Freedom from Hunger has extended Credit with Education to more than 700,000 women and their families, through about 50 local partner organizations in 14 countries on four continents. The microcredit has become more sophisticated, the education more diverse and effective, including women’s health issues and basic business and money management. Many of the partner organizations are now fully covering the costs of both the microfinance and educational operations, with just the financial return from the local credit operations. Careful impact evaluation research projects have demonstrated that Credit with Education increases the income and assets of women, their knowledge and use of good health, nutrition, and money management practices, their sense of self-confidence and status in the community, and improved nutritional status of their children.

This level of success confirms the value of Freedom from Hunger’s 62-year-old strategy of using science to innovate new ways to reduce hunger among the poor and of distributing these innovations through other organizations…rather than trying to deliver them directly to the poor ourselves. Innovation breaks through persistent barriers to really helping the chronically hungry poor help themselves. And working through others allows our small organization to reach hundreds of thousands, and soon millions, of chronically hungry families, through the resourceful and resilient women of those families.

Happy 20th Anniversary, Credit with Education!