The Uganda Rural Development & Training Program (URDT)

Tucked away in Kagadi Town, Kibaale District, is the Uganda Rural Development & Training Program (URDT).  I first heard of URDT through my mom after she was invited to a fund-raising event in Boston.  I had checked out their website but Kagadi is a bit off the beaten path so I hadn’t gotten a chance to visit until late last week when I traveled from Hoima to Fort Portal – a casual trip of 200km and 5 hours.  The website suggests they run a girl’s school, a radio station, a farm with progressive and even organic practices, a technical institute, a microcredit project, a land rights center, a recently established “rural university”, and more.  From all this I was a little doubtful, it just sounds like t0o many initiatives for one NGO to do well, and arrived expecting to find a local NGO with a comprehensive if half-way plan for addressing all the various aspects of rural development issues.

I was blown away; my idea of a 30 minute walkabout turned into a 24 hour layover.  Enoch, the Farm Manager, gave me what he called the “marathon tour.”  Not only does URDT actually have each one of those programs but the staff and faculty that direct the various initiatives are exemplary leaders, are passionate about their professions and rural development, and truly buy into the URDT ideology.  URDT is founded on the belief that rural development should focus on achieving goals rather than solving problems.  Sounds simple but in reality that is the difference between single-entity project oriented development and a comprehensive systems-wide approach to transforming lives.  The first says, people don’t have access to clean/enough water – let’s fix that problem and development will follow.  It’s about removing constraints.  The second says, this 13 year old girl comes from a very poor household and she wants to go to university and then go on to do [fill in the blank].  How can we make that dream a reality?  The answer to that question lies in the multitude of complimentary programs and initiatives that URDT has put together both on their beautiful 80 acre campus and in collaboration with the families and communities from which their students come.

The Girls School is home to 30 students per class, grades P5 to S6 (essentially middle & high school), all of whom attend completely free of charge.  Girls are selected based on their needs and the willingness of the family to buy into what they call the “Two Generation Model” where the girls come home during each break with a specific project or series of lessons to pass on to their families and communities.  Anecdotally it appears to be working.  The new African Rural University will open it’s doors this September to a class of 30 young women who want to become rural development professionals.  It’s an attempt to keep talent in rural areas and prepare young women for jobs that exist in the context of rural development.  The faculty has been involved in a five year curriculum development effort and are all excited to welcome the first official class of students.  I sat down with the University Secretary Jacqueline Akello and essentially asked, how’d you guys do all of this?!

While a good portion of the funding comes from outside sources, URDT was founded by two visionary Ugandan men and an Italian woman and started with a small office in Kagadi town in 1987 and they’ve been taking one small step after another ever since.  The Rural University is the capstone in their vision of creating a center that promotes rural development for girls, young women, local professionals and the community as a whole.  Co-founder and CEO Mwalimu Musheshe is an Ashoka Fellow and recently was asked by the Government of Uganda to serve as the director of the National Agriculture Advisory Services (NAADS) in an effort to clean up one of the historically corrupt institutions of this country.

One story that hit home for me: every morning the entire campus comes together for a one hour “Foundation Course” led by one or two members of the faculty, staff or student body.  Topics can cover just about anything related to URDT initiatives or rural development in general.  That morning the course was covering the different appropriate technologies being studied and promoted by the URDT teams.  It was an interesting summary of technologies, including modern bee-keeping techniques, rainwater harvesting, a bio-gas installation, homemade pesticides and a handpump mechanism for collecting water from underground tanks.  At the end of the hour there was a Q&A session and one man stood up and said Thank you for this, but many of us are already aware of these technologies.  Now we need to discuss how these technologies can be used for development, how we can integrate these technologies into the community.  That is what is really important. It was an effort to push the conversation to the next level and to me it spoke of the passion and determination of these individuals to really promote rural development in a way that many groups only talk about.  The question, I later learned, came from the man that directs the solar electrification courses at the technical institute.  Yeah, they do that too.

Check out their website but I will say in their defense that they are well aware that the site is dated and could use some work.  It sure beats a flashy website and a hollow NGO – and there are certainly plenty of those.

Microfinance, a personal view.

Microfinance is huge.  In the last 30 years microfinance has undergone a rapid evolution from the low interest rate group-lending model pioneered by of Mohammad Yunus to a formalization of rural (and urban) money lender services. At its core, microfinance is designed to bring financial services (usually loans, but increasingly saving accounts as well) to the poor.  In practice, today’s microfinance institutions are often for-profit businesses who pitch themselves as sustainable social welfare institutions.  As he wrote in a NYTimes op-ed recently, Yunus and others are not pleased: here.

The two important questions then become: is this business or charity? and, if it’s charity, is it sustainable?

Banerjee & Duflo have put together a very accessible theoretical explanation of micrfinance, here.

There are a few basic principles:

1.  Whenever any institution makes a loan, there are some costs associated with loan administration that are largely fixed.  That means that if you set your interest rate just high enough to reclaim the cost of the loan then the smaller the loan the higher the interest rate.

2.  Next, the higher the interest rate the more likely borrowers are to default.  Note that this may be a reality (higher rates are more difficult to pay) but it could also be a choice – if the cost of defaulting (likely fixed) is less than the cost of repayment (determined by interest rate), many will simply choose to walk away from their loan payments.  While not a choice people make lightly, under certain circumstances people choose to default on their home mortgage payments (in the US) and one of the founding blocks of microfinance is that collateral is usually not part of the deal.  The cost of default then comes from social norms or the loss of future borrowing opportunities.

3.  This introduces adverse selection, or, those good borrowers who are likely to repay their loans are going to be more concerned about high interest rates than bad borrowers who do not plan to repay regardless of the interest rate.

Their article goes on to discuss experiments (many of which are IPA projects) which tease out the effect of adverse selection vs. moral hazard, but we’ll leave it at that for now.  The important point here is that for every small increase in the overhead cost of administering a loan there will be a corollary increase in interest rates and therefore default rates, which only make it more costly to administer future loans.  This isn’t rocket science – rural money lenders have traditionally had very low administrative costs; one lender who knows everyone in town and one big goon to come beat you up if you fail to repay, pretty simple stuff.

Ok, so I promised this was “a personal view”, not a theoretical discussion.  I made my first microloan to a friend here in Kamwenge back in November to the tune of $500.  Said friend runs a small enterprise selling grilled chicken on the street every night and between a few family debt issues and covering the school fees for his younger siblings he was quickly running out of the operating capital he needs to buy more chickens.  He asked, he drew up a contract for 3 months, he let me name the interest rate, and I gave him the cash.  Last week he made the first of two payment installations so now I feel confident enough in my decision to blog about it.

Because microfinance has grabbed so much of the limelight there has recently been some discussion, especially in the popular media, about its rather obvious limitations.  The idea of a loan is that someone can use that money to make more money – they have to invest in something.  The implicit story sold by microfinance institutions, I think especially back home, is that everyone in poor countries is a budding entreprenuer just waiting for their first micro-loan to unleash their business potential.  This is obviously flawed.  Most people in the world are not good entrepreneurs (that statement is not founded on anything, but sounds about right).

Well aware of all that I decided to go ahead and make the loan.  I had been watching his business (and eating his chicken) for several months and I thought he handled it well.  I also know where he lives and that he’s not very likely to run away with the money which, by the way, is more than he would need to cover the first term of university, something he’s trying to save up for.  And it seems that this time it worked out well.  I’m looking at a 5% return over three months and he’s looking at the best loan offer anyone in this town has ever seen (we’ve kept the deal a secret, I hardly want to become known as a lender).  5%! you say? That’s over 20% APR?! Yep, and still below most interest rates offered to full time employees of the formal economy (mostly civil servants around here).

My friend doesn’t exactly keep “books” on his business.  There’s no tax and nobody is asking for written records of anything.  So I can’t say what his returns are going to be.  But I can say with a good deal of confidence that he’s paid off a significant debt that was drowning his parents, his brothers returned to secondary school over the weekend (school fees paid), and now, with those burdens off his family’s back my friend can go back to saving for university with the hope of enrolling in September.   So sometimes it does work, at least to some extent.

Check out this recent post by David Roodman about MFI interest rates: here, and also the rest of his blog for all things microfinance related.

“I have neither given nor received…”

Every Midd kid can finish this sentence in their sleep.  I took the liberty of borrowing the my alma mater’s (that sound’s weird) honor code for a quiz I gave to enumerator yesterday at the conclusion of the first day of training.  Some of the trainees have worked with IPA before but many have not.  IPA has a vetted list of enumerators from Kampala but I brought in 18 people from Kamwenge, most without experience but all with university degrees and all passed an interview.  That was important to me, and hopefully they’ll do well at training.  All agreed that the tone set yesterday morning was more serious and more productive than most training sessions they have previously attended.  That’s nice to hear, but also doesn’t mean all that much;  “Going for workshop” is one of the most commonly heard lines when you are trying to find people of some importance.  The aid industry’s emphasis on “capacity building” (whatever that means) has led to such an outgrowth of these workshops with fat per diems that it has become a favorite pastime of government officials and corporate managers.  By some accounts a middle level civil servant can double his monthly pay through attending certain workshops where invitee lists are screened by political connections or friendly patrons.

There’s none of that going on around here.  We brought in about 40 trainees and will only be selecting 25 for the job.  Everybody is well aware that they must preform and most seem to be responding to the incentive which is great to see.  Best Icebreaker in Uganda?  “Simon (or Brian) says”,  nobody had ever played before and everyone loved it.  That was my way of saying, even after lunch, you still need to pay attention.  Training will run for two weeks, which is good because it gives me another few days to work out the bugs in the PDA programming before introducing the electronic data collection in week two.  If anyone knows good icebreakers for large groups please share!  I’m running out and there’s still 8 more days to plan and google was not helpful at all.  Thanks.

Executive Order 0001

I’ve spent a lot of time, particularly when moving about on foot, on bodas, or on buses, thinking: What would development look like here?  Right here. As in, what am I seeing now that would be increased, reduced, improved, demolished, praised, condemned – whatever – if this place right in front of my eyes was more developed?  It’s super easy to say “more employment” or “less maternal deaths” but that’s just a cop out – those are symptoms and I’m trying to think about causes.  The bottom of it all.  Schools and clinics are the partial answers I keep returning to, or at least the ideas that are the hardest to dislodge and put down.

That said, after three months and a hundred plus hours on buses, I have only managed to reach one real concrete resolution.  If I were president of Uganda for a day, Executive Order 0001 (let’s face it, there’d be thousands!) would be this: NGOs, remove your logo from every vehicle, billboard, project sign, school, clinic,  t-shirt, EVERYTHING, except the brick and mortar storefront (or fortress compound more likely) you call home. The 20 foot tall billboard in Kamwenge that reads “Don’t blame people living with HIV / AIDS” is not necessarily a bad message.  But the all to common caption that reads “USAID  From the American People”.  Really?  Thank goodness we took credit for that one, no average country could have come up with such a creative slogan and the folks here in Kamwenge are grateful for the genius communications department in Washington.  And more grateful still that they know where to direct their thanks!  Nothing screams local capacity and community led development like a new clinic or school dressed up like a NASCAR driver with NGOs competing for logo space.  One thing that is of interest – the USAID logo is seemingly everywhere but the UK edition, DfID, which I believe has an even largely presence in Uganda, is largely invisible.  Perhaps it’s hiding the hand of the lingering colonizer, but in my mind it’s a welcomed absence.

Executive Order 0002: every UN vehicle shall carry an antenna that is so conspicuous it can been seen from a low orbit satellite, with the naked eye.

Auditors needed?

Came across an editorial of some interest by Jaindi Kisero in the Daily Nation, Kenya’s largest daily newspaper.  MyC4, a Danish group similar to Kiva has apparently had trouble with microfinance partners in Kenya fabricating entrepreneurs and turning their lending program into a Ponzi scheme.  When a list of fabricated borrowers surfaced, which just happened to include some real names, confused citizens listed as borrowers came forward to express their concerns.

There has been no response by MyC4 on their website . This raises interesting challenges for international microfinance platforms regarding how to keep overhead costs low while ensuring the validity of the loans overseas. Audits are costly, but so are Ponzi schemes.

Read the full article here.

 

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A collection of observations, thoughts and experienced going back to 2010.