Tag: Poor

First Book mixes market forces and philanthropy to help poor children

In a small, two-bedroom apartment in Corona, Calif., Trinity Santos, 5, reads her hardcover copy of “Green Eggs and Ham” again and again. She never tires of the Dr. Seuss classic, sometimes reading it to her 3-year-old brother, Joshua, said their mother, Diane.

Life is a struggle for the Santos family. Diane worked as a waitress before her children were born, and the family of four lives on the $35,000 that her husband earns as a phlebotomist. They don’t have much.

But the children own the four dozen books in a small, homemade bookcase, courtesy of First Book, a nonprofit organization that combines market forces and philanthropy to get new books into the hands of poor children to encourage early reading.

“I didn’t have books at home when I was growing up in the Philippines,” said Diane Santos, 33, who connected with First Book through a local parent­ education program she attended shortly after Trinity was born. “I learned the most important thing is reading with them, talking to them, introducing new words.”

First Book, founded in the District in 1992, has grown into a sophisticated national enterprise that gave away more than 15 million new books to low-income children and teens in 2015. But as financial troubles have deepened in households nationwide, First Book has turned to items well beyond books, this year adding winter coats, nonperishable snacks, toothpaste, fleece blankets, underwear and other goods to its charitable arsenal.

“There’s a profound need that is really unprecedented,” said Kyle Zimmer, 55, a onetime corporate lawyer who formed First Book with two friends after she volunteered at a D.C. soup kitchen and realized that many of the children had no books at home.

Even as the economy recovers from the housing collapse of 2008, many families continue to falter. The number of homeless children in public schools has doubled since before the recession, reaching a record total of 1.36 million nationwide in the 2013-2014 school year, the most recent one for which data is available.

World’s first aid academy to target Arab relief workers

Training Arab aid workers as first responders to local disasters and conflict could shrink the cost of responding to global crises, according to the CEO of the world’s first academy for humanitarian relief.

A dearth of frontline aid workers from the region slows the delivery of relief in the first, crucial 48hrs after a disaster, and ramps up costs as agencies parachute in foreign teams, said Saba Al-Mubaslat, CEO, Humanitarian Leadership Academy (HLA).

“When the Syria crisis response began in Jordan, Lebanon and Iraq, we found the number of those able to hit the ground running, speak the language and understand the cultural aspects, were minimal,”Al-Mubaslat told Philanthropy Age. “That’s concerning because it translates into costs. If each aid worker needs a translator, for example, to communicate with the affected population, then you are in trouble.”

The HLA, a collaboration between the private sector, governments and global aid agencies, aims to train 100,000 people from 50 countries in the next five years as relief workers. Based in London, it hopes to launch operations in the Middle East next year, and open 10 training centres around the world by 2020.

Last year saw a record number of severe global humanitarian emergencies, with the highest number of refugees the world has seen since the second world war. Some 50 million people were forced to flee their homes.

Though international aid agencies will always be able to offer additional resources and expertise, the HLA could help create local teams able to lead relief efforts, Al-Mubaslat said. The academy hopes to train 4,520 individuals globally in its first year. There are just 450,000 professional humanitarian workers worldwide, according to the charity’s estimates.

Another tactic could be to set up national databases to track aid workers – and their skillsets – who could be called on in times of crisis. “[A database] is not an innovation; it’s a need,” she said.

Another challenge is encouraging local graduates and school leavers to consider aid work as a serious career option. Deterrents include lower salaries than those seen in other industries, the lack of relevant courses in Arabic, and limited information about how to advance in the industry.

“Learning materials are mostly not available in Arabic, so it becomes a prerequisite to have good English – those who had good education and private schools – to professionalise their careers as aid workers, rather than those who were less fortunate,” said Al-Mubaslat. “One of the key points of the academy is to facilitate access to quality learning and experience exchange.”

Moreover, the academy wants to promote a shift in thinking towards investing in disaster preparedness and the money that could be saved from limiting economic losses. “What we want to change is the upfront, proactive investment in building people’s capacity,” said Al-Mubaslat. “Preparedness is investment you make even if you’re not sure it will be needed. [But] when it is needed, it pays back immediately. That’s the discussion we need to have with governments.”

HLA hopes to swell the ranks of understaffed emergency aid teams, who face a rising number of complex global disasters, including the more than 4 million Syrian refugees in the region. The academy has received just over 40 per cent of the £50m ($77.5m) it needs for the first five-year phase.

Investment in aid professionals continues to pay dividends even once the initial shock has passed, added Al-Mubaslat. “The need for aid workers in the recovery stage is going to be immense. The whole Middle East is being reshaped. The better prepared we are, the more we can all contribute to shaping it in a positive way.”

Banking the poor

Stuart Rutherford founded SafeSave in 1996, to provide basic banking services in the slums of Bangladesh’s capital, Dhaka. Nearly two decades on, the company serves 19,000 clients, helping them afford everyday expenses and budget for bigger life events. He tells us why financial services matter for the world’s poorest – and for the push to eradicate poverty.

Why is financial inclusion so critical for the poor?

The financial lives of poor people are no different from those of the rich. You need the means to feed your family every day and the ability to budget for big expenditures, such as weddings, children’s education and building a home. But if you’re poor, your income is small and unreliable. The main barrier is to do with economic lives. If you’re poor, you don’t have a regular income and the banks aren’t interested in doing business with you. None of your financial life is automated; you live in a world of do-it-yourself finance. Each week, you must remember to put money aside, or repay debt.

To what extent did microfinance help the unbanked?

For a long time the Grameen Bank [set up by Muhammad Yunus in Bangladesh] and its mode of microcredit seemed to be working extremely well. But there was a founding myth of microcredit: that every poor person is inherently capable of taking and repaying loans, and of putting all the loan into a business, which would then grow and lift them out of poverty. If you believe that myth, then the best thing to do is to get as many loans out to poor people as possible.

In some cases, that led to too much debt. In southern India in 2010, vast numbers of microfinance organisations sprung up, tapped the financial markets and gave multiple loans to poor villagers. Suddenly there were 10 microfinance firms lining up on villagers’ doorsteps offering $50 or $100 loans. A lot of people got into over-indebtedness.

But – again – the poor are no different from the rich. Only a minority of people in the west have the desire and willingness to start and run a business. Most people want a job, with a salary and a regular income.

We need to place a much bigger emphasis on understanding the economic and financial lives of poor people. The World Bank’s Consultative Group to Assist the Poor (CGAP), for example, has shifted its stance and is much more interested in understanding real customer needs – for savings, insurance, pensions, the need to be careful when you lend. The criticisms of microfinance were just. But things have got better since.

Where do savings fit in to microfinance?

There is a general prejudice that poor people can’t save money – that they need fresh money coming in, not money going out. But if you look at their behaviour, you find most poor households have some informal mechanism to save. The most common way is at home, hiding money under the mattress or sewing it into clothes. Or, you give the money to someone you trust – a money-guard. The third way is through savings clubs, where neighbours pool their savings to produce the sums of money they need.

The problem is that not only does this approach forgo interest; it loses money. In southern India and western Africa, one of the most common ways to save is with a deposit collector, a person from the community who goes around each day and collects small amount of savings. When a good amount is built up, she gives it back to them, less a bit to pay her. You lose on the deal, but people regard the few dollars they pay as a good price for the security.

What impact can savings have on poverty?

SafeSave lends and takes savings. On the lending side, we charge borrowers 2.25 per cent per month on their loans, and on the savings side we pay between 5 and 8 per cent a year. We provide a daily service to collect deposits from each household. Today, in Dhaka, SafeSave has eight branches in slum areas reaching 19,000 clients. On average people put away 600 taka per month ($7.50).

Savings can make a lasting difference. In Bangladesh a couple of weeks ago, I met a young woman who had previously had a miscarriage, and a child die just after birth. She was determined her next child would have better chance so she opened one of our long-term savings accounts, expressly to set money aside for childbirth. I learned a few weeks ago she took the money out of the account and spent it on a good hospital, getting good treatment, and her child is doing well.

SafeSave became part of the Bangladesh-based NGO Brac two years ago. It currently has $1.5m in savings on its balance sheet and $1.1m in outstanding loans. In other words, poor people are using SafeSave much more to save than to borrow.

How can we increase access to financial services for poor people?

Commercial banks are profit-making organisations with big overheads. It isn’t that big banks should get involved in financial services for the poor, but rather there are other things formal banks can do, such as lend money to nonprofit microfinance organisations. And as technology improves, there are opportunities such as within mobile money, where big banks can get involved on a profit-making basis.

While we’ve made progress on access to credit and savings, poor people still lack insurance and pensions – these two are where we still have an awful lot of work to do. I think the impact outsiders can have will come through more direct interventions, the kind of work the Bill & Melinda Gates Foundation does, or that we’d see if a big bank became involved with mobile money. The breakthroughs are going to come from that.