Category Archives: Development

Big Men

Big Men Documentary

Photo courtesy of

This weekend I had the pleasure of attending Toronto’s hot docs, showcasing some of the latest and greatest in documentary filmmaking.

I saw the premier of Big Men, which tracks several actors through the exploration and exploitation of oil in Ghana. Private US investors, Kosmos Energy, the Ghanaian Government, militant insurgencies in Nigeria, and Exxon Mobil each play a part in the scramble for oil. As you watch the disparate groups clamour to get a piece of the pie, the film continually challenges the audience to think critically about the role of greed within our society.

Following the screening, director Rachel Boynton did some Q&A with the audience. She had lived and breathed Big Men for the past six years. One of her ideas stayed with me long after the session…

The film engages two types of people:
People who are desperate for the things they need (Ghanaian citizens) and
People who are driven by ambition (Western investors)
Although they may act in very different ways, their behavior is driven by a fervent need to be “Big Men,” as in powerful and wealthy individuals.

What I like most about this film is that it does not tell a simple story of good and evil. Rather, it entwines greed, poverty, politics and culture to help us discern the global pattern that we are weaving and inevitably responsible for.

A side note about Resilient Reality blog: The hiatus was due to some East African travels and Vancouver visitations. I’ve now relocated to Toronto but will continue to blog about my experiences in Ethiopia, potentially Tanzania and Kenya, as well as some Toronto tidbits. The frequency of posts will pick up!


Building Resilient Livelihoods

In the rural areas of Amhara, rice farmers live a hand-to-mouth existence. Having enough money to afford inputs for farming, school and household expenditures, particularly before harvest time is a significant challenge. Farmers are often forced to sell rice during harvest season when prices are low, which endangers their livelihood and hinders their income potential. As farmers are without savings habits, any surplus income earned following harvest is squandered at the local Saturday market on drinks. This was the previous experience of thirteen rice farmers who, with the assistance of Mennonite Economic Development Associates (MEDA), formed a group known as Addis Alem Village Savings and Loan Association (VSLA).

MEDA’s Intervention

Gizaw, Community Facilitator

Gizaw, Community Facilitator

In 2011, Gizaw, a rice farmer, received MEDA’s training on the benefits of saving and how to form a VSLA within his community. The training covered topics on saving, credit, managing risk, and resolving conflict. MEDA also provided Gizaw with the necessary materials to start saving, which included: a savings box with two locks, thirteen passbooks, four plastic plates, and a bookkeeping ledger.

Addis Alem VSLA

Gizaw recognized the vulnerability of his livelihood and the serious lack of saving in his community and as a result, established the Addis Alem VSLA. In Amharic, Addis Alem means “new world,” or “appreciating what new thing you have,” which reflects the farmer’s change in mindset towards saving. Gizaw led the formation of the group and trained the thirteen members on VSLA methodology. The VSLA collectively agreed to each save three birr and one birr weekly for the regular savings and social fund respectively. Regular savings is used towards small loans to members and investment, while the social fund is used for emergency purposes. After one year of weekly saving, Addis Alem accumulated 2000 Birr inregular savings and 547 Birr in the social fund.

Unlocking Entrepreneurship

The group decided to invest 2000 Birr from their accumulated savings into two plots of land. They planted rice and expect the harvest to generate 15,000 Birr in earnings, including next year’s collected savings. Addis Alem plans to store the rice for up to six months and sell the crop when the price of rice is high. Farmers have the confidence to store their rice because the risk is shared between members and the business is an additional stream of income. Previously, members never stored rice because they required cash for monthly expenses. Addis Alem’s investment overcomes the frequent need for cash by using regular group savings to support costs. In addition, members have realized other benefits from group saving including a reduction in community disputes, improvement in social life, and renewed interest in microfinance institutions.

Addis Alem VSLA Group

Addis Alem Village Savings & Loan Group

Members say…

“We care for each other. If a member gives birth or is sick, we will use money from the social fund” – Addisie, VSLA Secretary

Alamrew, VSLA Member

“We benefited remarkably from VSLA. We understand that our livelihood is dependent on agriculture and there are risks associated with nature such as hail and flood. In such cases, we can take out our savings and use it for household consumption. Without VSLA, there would be no way for us to pay for our living expenses” – Alamrew, VSLA Member

Building Resilient Livelihoods

The most enduring impact of Addis Alem is how it has changed members’ perception of saving. Before VSLA, members never saved but now each member understands the importance and necessity of saving. They have experienced how saving positively impacts their farm, family and future. Consequently, the group plans to continue saving and investing in the coming years:

“In the future, we hope to increase our rice production and own milling equipment so that when our children grow up, they will have something to develop our business with. Our children will see how we saved and they will learn from our experiences and be able to expand our business further”

VSLA Group 2

Sustainable and Replicable Impact

Addis Alem demonstrates how Ethiopian farmers can build group trust and combine resources to save and invest productively. Since Addis Alem is self-managed, it will continue to save and invest in the years to come, functioning independent of MEDA. Moreover, MEDA has replicated the VSLA model by forming fifty VSLAs in one year. The rapid establishment of VSLAs can be attributed to MEDA’s simple, non-bureaucratic and low cost approach to forming savings groups. MEDA’s involvement ends after one year, and 98% of VSLAs have agreed to continue saving autonomously, ensuring sustainable impact. Through MEDA’s intervention, VSLAs can form quickly, establish trust, build savings habits, and ultimately strengthen income potential and develop resilient livelihoods.

The 5 Cs of Credit in Development

Field Staff in the Rice Field

In the field, literally

Working with consultants has its perks. Not only do they offer a fresh analytic perspective, but they also provide advanced industry knowledge. Most recently I was introduced to the “5 Cs of credit approval” applied to rural entrepreneurs in developing Ethiopia. Each “C” is used to assess whether a loan applicant is eligible for credit:


When evaluating an applicant, it’s essential that the individual is trustworthy, honest and reliable. You must determine their willingness to repay and entrepreneurial zeal. The challenge here is to gauge their proclivities through indirect questions:

  • Cross-check references – credit and repayment history (if available), reputation among the community, partners, customers, suppliers, family relations, employees (punctual wage payments)
  • Extract examples of the applicant resolving strenuous circumstances in the past (think job interview)
  • Compare their lifestyle and spending habits to income level
  • Distinguish their degree of openness in answering questions

The majority of owners do not keep a formal record of their financials, forcing the loan officer to depend on the individual’s oral account of the business. To evade false information, verify numbers with competitors and speak with the applicant on multiple separate occasions. If the character is questionable, rejection is the only reasonable decision.


Assess the business’s capacity to repay. Primarily, the cash inflows and outflows are the lifeblood of the company. Without cash or profitable operations, the company will fail to repay. Management, technical and labour capacity also contribute to the health of the business. Examine:

  • Seasonality
  • Income statement – operating profitability
  • Cash flow statement – monthly operational debt service ratio (operating cash / debt payment; 2 and higher indicates a strong candidate)
  • Sensitivity analysis (ie: reduced sales, higher input costs)
  • Other sources of income
Ethiopian Children

Family needs can impact an entrepreneur’s ability to repay

Most if not all small and medium enterprises deal in cash. Credit is seldom used but informal lending is practiced. Typically, cash is the critical factor. Incorporating household expenditures in the income statement is advisable to be conservative. Businesses with less than 6 months experience are unlikely to be approved. In the case of microfinance loans, analyzing the character and capacity to repay is enough.


Less important than Character and Capacity, Capital refers to what is financing the business. Basically, a balance sheet:

  • Assets: cash, accounts receivable, fixed assets
  • Liabilities: debt, accounts payable
  • Equity: Family contribution (equity)
  • Current ratio, liquidity ratio, level of indebtedness

Typically the more equity, the better the indication that the entrepreneur is committed to the success of the business (although my supervisor argues the opposite – anyone know a study on whether equity or debt financing is more correlated to default?). Most applicants lack debt so the balance sheet is simply constructed by plugging for equity.


Assets the applicant is willing to pledge to the borrower in order to secure the loan. Obtain the market, historical, marketability and psychological values of the assets like buildings, land, equipment and vehicles. Certain assets, regardless of their actual worth, can be advantageous to secure because of their perceived psychological value. For example, a processing machine may have a low resale value but in seizing the machine, the processor cannot conduct business thereby motivating them to repay responsibly. Surprisingly, assets tend to appreciate in value because of Ethiopia’s high inflation. A well-used year old machine may be worth more today than at the time of purchase. Collateral can be a make or break factor for banks because collateral ensures the bank will recover the costs of default. Unfortunately, if entrepreneurs lack brick (or other non-mud) buildings, it is very difficult to obtain a loan. To overcome insufficient collateral, banks can partner with a third party through a credit guarantee agreement. MEDA has one such agreement with an Ethiopian bank.

Christian monastery painting

Religion can impact business operations. In Ethiopia, some applicants choose to not work on the (plethora of) religious days. Others, mostly Muslim, do not take loans because of the interest rate.


The external environment impacts the applicant. Market factors, economic indicators, inflationary risk, competition, politics and legislation, and other conditions should be taken into account.

Spices in Bahir Dar Market

Entrepreneurs should have access to markets and current commodity prices

Applying the 5 Cs

I’m working with a bank and two loan applicants and will post about it soon. The descriptions above are brief, and are simply intended to be a starting point and guiding structure to appraising a client.

Village Savings in Action

Working with MEDA has been a busy unpredictable but mostly informative first month. I am interning at the main office for the EDGET project, which stands for Ethiopians Driving Growth Entrepreneurship and Trade, also meaning progress in Amharic. EDGET is a pro-poor five-year project, funded by the Canadian government with the objective of raising the incomes of 10,000 weavers and rice farmers.
Theoretically speaking, raising income is a strategy to improve food security. We hope rural Ethiopians will become more resilient against famines and less dependent on food aid programs as a result of EDGET interventions.

There are many different facets to such an ambitious project, and I am primarily focused on financial services. Financial services supports EDGET’s objective by employing financial interventions, like the Village Savings and Lending Associations (VSLAs).

Village Savings and Lending Associations

The VSLA model was pioneered by CARE in Ethiopia and is a low cost, effective and sustainable method of educating low income, often illiterate groups to practice saving and lending together. VSLA is well suited for Ethiopia, considering 83% of the population lives in rural areas and 70% of adults are illiterate[1].

village saving and lending association

A VSLA I visited 35 km outside of Mizan Teferi.

What is VSLA?

The village saving and lending association is a group of 10 – 20 self-selected individuals who agree to save a predetermined amount each week. As the pooled savings grow, members can take out loans and pay interest to the group, allowing the fund to expand further.

In the case of EDGET, community promoters introduce the concept, initial training, and startup materials to the project’s target weavers and farmers. After 9 – 12 months, the VSLA graduates the program and chooses to either divide the accumulated savings between members and stop, or continue saving as a group, independent of MEDA.

Why does VSLA Work?

The members are decision makers in every aspect, and create an association flexible to them. Members can easily respond to the specific needs of the group, such as sudden deaths or unforeseen business risks.

Some members are already a part of informal credit groups, like Iqqub or Iddir. VSLA is a natural extension of such programs, adapting easily to the rural environment.

Typically, credit is perceived as high risk, while savings is a readily adopted practice.

Cost effective
Aside from a few startup materials (2 bowls, cash box and notepad), there are no operating costs. Note, the community promoters typically receive payment for upfront training and in-kind payment for follow-up.

Village savings and lending association promoter training

A snapshot from MEDA’s training session for VSLA promoters. The training informs participants on community engagement and approval, how to set up VSLA, savings/credit concepts, and monitoring and evaluation.

The group is voluntary and small, allowing for transparency, accountability and most importantly trust.

Multi-Purpose Platform
Acts as a common ground to share community issues, encourage income-generating activities, and eventually apply for microfinance institution (MFI) membership.

VSLAs are independently operated, long after NGOs have left.

EDGET’s Progress

From the project’s inception (February 2011) until October 2011:
50 VSLA groups were formed. (More recent figures will be coming soon for 2012)
In 39 groups assessed:

Savings Mobilized From… Amount Ethiopian Birr (ETB)
$1 CAD = 16 ETB[2]
Amount per Group
Regular Savings 50,429 1293
Social Fund Contribution 7242 186
Fines & Interest 705 18
Total (savings + social + fines) 58,375 1497
Loans Disbursed 10,850 278

Some groups are engaged in income generating activities (such as commerce of various grains, making and selling local drinks) with the savings fund. Others have decided to use the fund for lending to group members, thereby earning interest.

registration booklet for attendance

The ledger used to track attendance, savings and loans disbursed.


One question that immediately emerged in my mind … How can these weavers (or farmers), who live a hand-to-mouth existence, save even a few birr weekly?
Understanding the issues that weavers currently face helps answer this question…

1)    No Concept of Saving
Since these weavers have had elementary or no education, and positively no financial literacy training, they have no concept of frequent saving.

2)    Immediate Household Spending
When weavers receive profits from traders, they immediately spend their earnings on household consumption, perhaps fitting a drink or two of tej (locally produced honey beer) in too.

So how does the VSLA model remove the immediate spending habit?
As is the case with Grameen bank and other successful microcredit schemes, social pressure lies at the center of successful group saving. Nobody wants to be the neighbour who doesn’t have his/her life together and misses a payment.
An important aspect of VSLAs that must not be overlooked, is the need to mobilize savings. If the fund is not used for anything, the savings group is unnecessary.  So another question I had … What if members want to take out loans at the same time?
Potential borrowers need to submit their loan proposals to the group. Each proposal is disseminated between members, and a democratic vote is cast to determine the most deserving candidate.

What about Microfinance Institutions – Isn’t it their role to provide financial services to the poor?
VSLAs are complementary to MFIs. MFIs are not designed to lend to extremely poor clients, where income is inconsistent, repayment rates are poor, and loan amounts are so small that they are unprofitable. Rather, MFIs are better suited to accommodate growing entrepreneurs, whose income is expected to rise significantly and has greater access to capital. VSLAs accommodate clients lacking collateral and who are exposed to high risks in generating income.
One indication that the VSLA model is working effectively is that there is a growing demand for VSLA in the project areas. Since the first year, more low income earners want to join VSLAs. Unfortunately, MEDA does not have the resources (or strategic capacity because our target is farmers and weavers) to meet the demand. This is a bittersweet outcome, as illiterate poor entrepreneurs do want to improve their financial literacy to live out better livelihoods.

If you’re interested in supporting EDGET click here.

Village Savings and Lending Association in Mizan Group Picture

During my visit, we found that members had disbursed two 500 ETB loans to members for purchasing fertilizer.

[2] my estimate for exchange rate for Feb- Oct 2011. Currently 18 ETB = 1 $CAD


MEDA Departed.

On July 30, I embarked upon a mental journey at the headquarters of the Mennonite Economic Development Associates (MEDA) in Waterloo, Canada. It was only two short months ago that I had accepted an offer to work in Addis Ababa, Ethiopia with MEDA. Before departure, interns are required to undergo training at head office. I was thrilled with the opportunity, and had been waiting in quiet anticipation.

During the training, I was forced to face my beliefs and assumptions head on. Envisioning myself in Ethiopia: my hopes and fears were magnified. How was I, an ambitious recent business grad at the naive age of 22, supposed to contribute to a project in a country with $US 800 GDP per capita1? 2.19 dollars a day. Who did I think I was?
Asking these types of questions helped me define my expectations coming into the project. And even now as I prepare for departure, I have recognized that this is an ongoing process of self-awareness, assessment and change. The MEDA training emphasized the significance of reflection. I also gained remarkable relationships, complex insight, and what I believe to be a more sensible and realistic perspective on economic development.

1 At PPP 2008. Statistics vary widely, in part due to differing population estimates – estimates range from 76 – 91 million people.

MEDA Work.

MEDA logo

Dedicated to market-oriented approaches to international economic development, MEDA aims to establish sustainable enterprises for the benefit of the poor.

But what exactly does that mean?

In my limited experience exploring debates in international development, there are many different ways to see an issue. The key question – how do we develop? Especially least developed countries (LDCs2)? – is hotly contested. Some believe that the “west’s” interventions have poorly served LDCs. Fosturing dependence, destroying local industry, perpetuating civil warfare, and so often projecting our idea of development on their communities and governments. The international development world is pretty daunting, which makes it all the more interesting to be involved in!

2 According to the United Nations, LDCs are “low-income countries suffering from the most severe structural impediments to sustainable development”

Pathways to Pursestrings

Pathways to Pursestrings : Market Access Project for Women Producers in Pakistan

For MEDA, a project should…
Benefit the poorest workers [who are economically active]
Address an existing market need [demand-driven]
Continue long after MEDA has left [sustainability]
Reach a significant number of people [scalability]
Create innovative models [replicability]
Work alongside locals [participation]
Partner with local institutions [collaboration]
Invest (typically 10%) directly in the project [shared risk]

Using these core principles allows MEDA to get impact. Each goal speaks to MEDA’s underlying belief in the entrepreneur. If we can unlock the potential of entrepreneurs, we can facilitate community growth. It’s initiated by the locals, for the locals.

MEDA Structure.

MEDA is divided into 3 interrelated branches:
Market Linkages: using business strategies to strengthen supply chains, support health services, and enable female financial empowerment
Financial Services: develop financial institutions
– Investment: Sarona Asset Management

MEDA Learned.

I heard many powerful messages during my training:
1) Be humble
“I came as an intern to save the world, and left hoping I didn’t make it worse.”
2) Be analytic
“Measuring performance against initial donor objectives is critical”
3) Be balanced
In development, some people accuse advanced economies of taking a disproportionate share of the profits generated from the poor. However, “without profit, there is no social outcome.”
4) Be positive & adaptive
“Attitude and flexibility are critical to overseas effectiveness”

Interns at MEDA

Fellow interns after training, sampling some Ethiopian cuisine.

Perhaps the most satisfying part of the training was realizing how strongly my values aligned with MEDAs. Their approach to development is serious, sober and no-nonsense market-oriented. At the center of MEDA’s development approach is the belief that everyone deserves to have choice. And many would agree: without money we do not have choice.

I sincerely look forward to my placement in Addis Ababa, Ethiopia, where I will observe first-hand if the inspiring mission of MEDA is merely wishful thinking or a reality.

Energy Access for All

I recently attended a workshop on the topic of global sustainable energy development and local initiatives. The seminar was supported by the United Nations Industrial Development Organization (UNIDO), Society for International Development (SID) and Austrian Development Agency and hosted by the International Institute for Applied Systems Analysis (IIASA). With Rio+20 beginning today, the workshop took place at a very opportune time.

Each workshop session provided a kind of sneak peak into the lives of these inspirational academics and field researchers. Although the sessions covered a diverse range of material, there were several unifying qualities. Each presenter showed dissatisfaction with the status quo, highlighted the need for cross-sector cross-level collaboration, and emphasized the impact of local initiatives.

Here are some of the key take-aways I gained from the 2 day workshop:

Sustainable development is a global system, not a mosaic of countries. Therefore, we need to treat the world’s greatest challenges (energy, sustenance and poverty) as an interrelated system.1 [More]

Food - Energy - Poverty Venn Diagram

Conflicting criteria is inherent in implementing energy projects. Take the World Bank’s US$ 3.75 billion loan as an example.2 The loan was provided to South Africa to build a coal-fired power plant, representing economic and social gains at the expense of environmental protection.

Energy demand is guaranteed to rise in future demand forecasts and fossil fuel is necessary to meet our  thirst for consumption.2

Source: Global Energy Consumption by Energy, BP Energy Outlook 2030 (2012)


3 billion people currently lack access to clean cooking fuel. Although energy consumption would rise, the gain in energy efficiency from switching from biomass to cleaner fuel is surprisingly climate neutral.3 [More]

Annual investments of US$ 36 – 41 billion until 2030. Although this figure seems large, it represents 3 – 4% of total annual investments in energy projects globally. Implementation would involve microfinance and subsidy schemes, enabling the poor to purchase equipment.3

Many effective community-based projects in developing economies require small amounts of funding but have no communication channel through which to voice their needs. Projects could further benefit from increased access to technical support.

Local initiatives must be resilient and competitive in order to be adaptive. Resilience enables sustainability, while competition fosters innovation. Both are essential to adapting to change.4 The project lead from Solanterns explained its aid + trade strategy for switching Kenyans from using kerosene to solar lamps.

Solanterns Initiative

Well this is more of a personal take-away. IIASA is located in the regal palace of Schloss Laxenburg. In the 18th and 19th centuries, the palace was one of the summer residences for the royal Hapsburg family.

Schloss Laxenburg

Although the takeaways seem to diverge in different directions, I believe that the messy overlap of ideas and research can bring to light fresh solutions.

Five universities (University of Natural Resources and Life Sciences, University of Vienna, Vienna University of Technology, Vienna University of Economics and Business, and Modul University) were in attendance, which contributed to the richness and interdisciplinary nature of the discussions.

Research Representatives
1 Kabat, Pavel. Director/CEO IIASA
2 Wohlgemuth, Norbert. University of Klagenfurt
3 Pachauri, Shonali. IIASA “Promoting Universal Energy Access: Achievements and Challenges”
4 Lukesch, Robert. OEAR