Bird's Eye View

Hailed as the solution to commercial banks’ exclusion of the poor and the alternative to moneylenders’ rapacious interest rates, the microfinance sector has fueled optimism, and cash, into all corners of the world. It has particularly saturated Southeast Asian markets where the need to stimulate local economies from the ground up was and still is pressing. The current economic crisis however, has fervently shaken up the Cambodian microfinance industry, including its clients, while surfacing many of its innate yet corrigible weaknesses. To this end, the crisis presents an invaluable opportunity for the sector to reinvest in its mission to ensure the sustainable delivery of financial services to the poor.

Volunteering at the Cambodia Microfinance Association (CMA) during the last two months has given me a bird’s eye view of Cambodia’s microfinance sector. Prior to taking the full dive into my research, I naively assumed that Cambodia’s economy would benefit tremendously from Yunus’ highly-acclaimed Grameen Bank model. Unbeknownst to me Cambodia’s microfinance sector is already one of its claims to fame, whose business approach to microfinance would however not be endorsed by Yunus. Approximately 860,000 borrowers strong, the microfinance institutions (MFI) operate as private limited companies. The sector is bolstered by a continuously amending legal framework, international investors, and free-market competition. Having been bestowed multiple awards by the Consultative Group to Assist the Poor (CGAP), HE Prime Minister Hun Sen declared 2006 as Cambodia’s Year of Microfinance.

Laudable, yes; financial crisis-proof, no. Today’s global financial crisis is striking across all sectors of Cambodia’s economy and poignantly challenging the sustainability of its microfinance sector. I’ve landed right into the sector’s fight to tread water; most of my research is focused on the sector’s efforts to establish a private credit bureau in order to dampen the mounting cases of multiple loans. I recently attended a workshop wherein CMA invited 150 leaders in the Cambodian microfinance sector to participate in its third annual Healthy Competition Workshop in Sihanoukville in effort to strengthen the Cambodia microfinance industry. The workshop was presided over by Mr. Kim Vada, Deputy General Director of the NBC, and participants included leaders from the National Bank of Cambodia (NBC), Ministry of Economy and Finance (MEF), Rural Development Bank (RDB), ACLEDA Bank, CMA, 19 MFIs and 9 registered NGOs.

Healthy Competition Workshop Participants

The two-day workshop focused primarily on the prevalence of multiple lending, whereby an individual has taken out loans from more than one MFI, and thereby unable or unwilling to commit to the terms of his or her multiple loans. These cases limit the involved MFIs to resort to suboptimal options, which include selling the client’s collateral, writing-off the respective loan outstanding as bad debt, restructuring or rescheduling the loan, or bringing the client to court. During the workshop participants outlined the root causes of this mounting problem as follows:

*Lack of a thorough preliminary credit assessment – Currently, loan officers are providing loans without conducting detailed assessments of clients’ credit history. Loan officers may lack proper capacity building and training or may feel pressure to reach a loan quota in order to receive commission and earn favorable opinion from their branch managers.

*Weak credit-reporting system – Today, the Cambodian financial sector is equipped with a dismal and incipient Credit Information Sharing System (CIS). It is based on a single database owned by the NBC, which MFIs have very limited access to, and is not user-friendly. Furthermore, the system provides only negative information and consumer rights regarding data are not properly addressed. The NBC is currently drafting a law to implement a credit bureau for use by both the banking and microfinance sectors. The credit bureau will include both positive and negative information of the client.

*Issuing of multiple land titles by local authorities – The Ministry of Land Management recently issued a Land Law to manage the issuing of land titles by local authorities. However loosely enforced, multiple land titles for the same land lot to villagers continue to be issued in return for kickback pay and constituent support. Clients often provide these duplicate land titles as collateral for their loans knowing that MFIs are unable to verify the authenticity of the land title. Hereby, in the event the client is unable to repay his or her loans, multiple claims on the same collateral will make it hard for MFIs to minimize their loan outstanding.

The workshop adjourned with CMA and its members drafting a Memorandum of Understanding (MOU) on healthy competition to address the problems at hand. The MOU included outlined alternative solutions to deal with existing cases of multiple loans and how to prevent future cases, improve capacity building for MFI staff, and strengthen relationships with potential competitors who operate within the same communities. The MOU will be agreed upon and signed by all CEO members in the next CEO meeting.

Beach Diversion in Sihanoukville with CMA Team

Stay tuned as I will continue publishing posts, random and research-related. Any suggestions will be highly appreciated!

Celebraaaaaaation time, OH YEAH!

Don’t mean to constantly dish out an excuse for not updating my blog religiously but I’ve been riding along srok Khmer’s flow and have not found one place to dock. If Khmers are not working nor eating, then they are celebrating life. Say, it’s not an over exaggeration to claim that one is guaranteed to spot a wedding on the daily: swab out your ears and you’ll hear traditional Khmer wedding melodies. If I live here long enough, I may have to start a ‘wedding savings account’ so that I have enough to all my newlywed poukmaks (friends)!

This week’s party: Bon Om Thook. As I wrote in the last post, the Water Festival celebrates the changing of the seasons, usually around the beginning of November. Now that the Tonle Sap Lake has doubled in size, its fish have bred, and the rice fields are submerged in rainwater, the country can store away its raincoats, umbrellas and torrential downpours for the next 5-6 months. This year, like every year, boat racers representing all 24 provinces came to Phnom Penh to sign off on the rainy season. Of course, they did not come unarmed. When my Khmer poukmaks warned me that the whole country was coming to town, I told myself yea, yea, yea, it doesn’t get any more packed than Times Square on New Year’s Eve. Boy was I mistaken.

Days before the scheduled celebrations on November 1st, 2nd, and 3rd, vendors claim their stalls and stock up on inventory in anticipation of the crowd. The police round up as many homeless men and women as they could and brought them to the "ministry of social services" (which they should do on a regular and properly) to make Phnom Penh look “pristine”. And as the river reverses its flow, the population does so in unison: the city fled to the country while the country flocked to the city. Given all the brouhaha, I decided to stay put in Phnom Penh.

Day 1: let the games commence
Early start to walk past the commercial stalls and all I could hear was “boom, boom, boom”. The whole place was shaking with promotions for telephone services, deodorants, and toothpastes. I cut my day short to work all day so that I could play hard over the next two days.

Day 2: no room for losers
After venturing out of the apartment and past the numerous blockaded roads, I finally arrive at the riverfront on Sisowath Quay…talk about being packed like sardines! The boats are racing each other two by two as they are being cheered on by their hometowns. This year’s fear that the water is 1 meter higher than usual due to recent floods is not taken seriously by the boat racers. In fact, they take pride in their well-adorned boats (or maybe their huge guns and calves), which are meticulously handcrafted by their local villagers.

Day 3: the King and I and a blessing from the skies
I should have taken into account the time it would take to safely escort the King to his royal seat on the riverfront, when I left the apartment at 3:15 thinking that I would get to the river in time to meet up with my poukmaks at 3:30. I was just in front of the Royal Palace, just a mere 3 minutes away from my meeting point when the Cambodian National Police blocked off all access for both vehicles as well as pedestrians. The little kids trickled to the front of the crowd while the uninterested stayed behind to take a breather from

the festivities. All the ones in between shifted left, right, up and down for the next 45 minutes to catch a 5 second glimpse of His Majesty King Sihamoni. Just as he waved through the crowd, a roll of thunder took announced the arrival of the rain. Could it have been a blessing for the King and the champions of the finals boat race? If so, I didn’t stay long enough to see the finals as I was more concerned about finding shelter from the downpour.

A Post Long Overdue from Srok Khmer

Jumreap Sua,
Sok sabai chier te? Somthou, kniom awt see ser =/

Ok, in English now...

Greetings Everybody,
How are you? Sorry for not having written =/ I have had to fine tune my plans a little bit but am back on track ;p

A lot has developed since I wrote you last from Bangkok: I am now in Phnom Penh, Cambodia! Where to begin in a city so tangled up in its phleu/preahs (streets), psars (markets), motodops (taximotos), keteouy stands (Khmer noodles)! So let me start with my daily activities and add a bit of randomness...

5:45 AM - No "rain or shine" here. I wake up and put my running gear on to treck my way over to the Independence Monument where I jog around the park for about 45 minutes. The weather is somewhat of a dictator in Cambodia, and in Southeast Asia for that matter (the news is literally flooded with updates on Typhoon Ketsana and her sibblings). Sunrise and sunset are the ideal times during the day to workout so as to dodge the tough mid-day heat which often reaches up to 90 degrees F. When I first adopted this park as my outdoor gym, I was surprised by the number of Cambodians doing just the same. They also attend aerobic dance classes (could be the national sport) around 5 PM when you'll find people jumping and punching in unison to one instructor's directions! Everybody is looking forward to November because it marks the end of the wet season and ushers in the dry season. So students, myself included, will no longer opt out of attending class that day because of monsoon rains! The Water Festival, a tradition since the 9th century, is a tribute to this transitional weather. Villagers from all of Cambodia's 24 provinces flock to Phnom Penh to celebrate. According to the reviews I've read..."During this time Phnom Penh takes on a carnival atmosphere, and as well as the river banks being lined with exuberant spectators there are also live concerts, hundreds of food stands, games of chance, fair rides, and at night fireworks light up the sky and people dance in the street. This truly is Cambodia’s Mardi Gras!" So I will definitely keep you posted on this party if I do decide to brave the roudy crowd!

7:40 AM - Say a little prayer, secure your helmets, and play "survival of the fittest"! I heard someone describe PP's traffic as a quest for the "survival of the fittest". The motodop comes from the French word "moto-double" to describe a motorcycle for two and is the most efficient way to get from point A to B in Phnom Penh to beat the neck-to-neck traffic. However, there certainly is an opportunity cost for a little bit of time-saving: the risk of colliding with a fellow motodop. The traffic lights and dividing lines are ornaments for PP's busy streets. You'll have somebody driving in the 'wrong' side of the lane and honking at you for being in their way...even though they clearly are breaking the 'law'. It's amusing that some neighborhoods in NYC slap a $250-$300 fine for honking your horn...boy, wouldn't PP'S revenues increase by at least 1000% if it passed this law. However, I am lucky to have found Pou Pi Rum to drive me to and fro work and school. Thanks to him, I'm almost fluent in traffic terminology and am starting to recognize street names.

Morning in Phnom Penh is my favourite time of the day..it is BURSTING with energy. Everybody is in keteouy (breakfast noodles) stalls enjoying their last minutes of freedom before heading to work, school kids are riding their kongs (bicycles) to school, and vendors are setting up their newspaper and fruit stands for the day, if they have not already done so.

8:00 AM - FOCUS TIME. I arrive at Cambodia Microfinance Association's (CMA) headquarters located on a residential street on the other side of the city. CMA is a professional association which acts as the hub for 20 microfinance institutions (MFIs) in Cambodia. As you may recall, I proposed to examine the development of social enterprises in Cambodia. After having been in Bangkok for one week and in Phnom Penh for nearly three weeks now, I realize that my project proposal would be barren without properly defining the ‘social entrepreneurship’ field. I have already met with several social entrepreneurs, one of which I wrote about in a previous post (The Jaab Design Company) and the term applied to all three social entrepreneurs despite their very different natures. Given the all-inclusive application of the term, I choose to narrow the parameters of my research to highlight the growth of Cambodia's microfinance sector, one of entrepreneurship’s many lenses.

Unlike Bangladesh's microfinance sector which was sowed by Muhamad Yunus in the 1970s, Cambodia's microfinance sector has gained momentum only very recently thanks to a more politically stable government. Because the Khmer Rouge regime decimated Cambodia's population and bulldozed all legal institutions, the economy has had to rebuild itself from zilch. The government installed the National Bank of Cambodia to manage the country's economy, but like most countries emerging out of conflict, it tried to play catch up by only investing in large-scale projects and coordinating with interntional businesses, rather than nurturing its micro-level economies. Therefore a lack of investment in local agriculture and little support for small enterprises left most Cambodians out of the money scheme. International NGOs filled the gap creatd by the banking sector by providing microcredit loans to the poorer segments of Cambodian society. The first microfinance experiments were credit-oriented, to provide a kick-start to new business activities. After 1993 and the international recognition of a new Cambodian government, aid started to flow in the country...

This part gets a little dense so I will gradually fill you in as I continue my research with CMA and have the opportunity to meet with a few MFI representatives in PP, as well as in the provinces.

12:00 PM - Chong niam mawhob Khmer, mmmmmmmm. Lunch time =) I get back from work and am ready to feast on anything, be it a pumpkin soup, amhok (a traditional Khmer dish made out of prahok, aka very strong-smelling, some say repulsive, fish), or simply rice with tuk trey (fish sauce). By the time I'm done with whatever delicacy I will have enjoyed, I've been struck with hard-core itis. This is usually when I choose to explore the streets, get my chores taken care of, or practice for my next Khmer class.

4:00 PM - Repeat after me: Kaw, Khaw, Ko, Kho, Ngo, Tchaw, Tchaww, Tcho, Tchoo, Nio. Great, you can join us at the Royal University of Phnom Penh for our daily Khmer for Foreigners course! But make sure you come everyday because catch-up is hard for this class. There are about 24 eyeballs scrambling between the workbook and the patient professor, desperately trying to adjust our phoenitics to the beautiful twists and turns of the Khmer language. Khmer is derived from Sanskrit, and in fact a lot of Khmer culture has its roots in Hinduism.

5:30 PM - See where the night takes us. Back home to wind down with Tata Annie (my lovely aunt), try one of PP's delicious interntional cuisines, or meet with new and old friends;)...Goodnight!

I hope you got to read what my daily schedule looks like. The weekend varies from week to week: I was in Svay Rieng last week and had the privilege to see where my Mak Yeay, and my aunt's and uncle's parents, were born. I'm headed off to Siem Reap this weekend to visit the enchanting temples of the Angkor Empire (both adventures will be elaborately illustrated in the next couple of posts). Feel free to write back and definitely keep me updated on your happenings.

Cheers!

Just Voted!

Just casted my vote for my favorite idea on Project 10 to the 100th. Which one did you vote for?

The Jaab Design Company: The "Cool" Original Hand Painted Cards...

After sharing my project idea with business-savvy Aunt Bonnie on Monday morning, she immediately phoned her friend Mrs. Judith Saengprathum (Mrs. S), CEO of The Jaab Design Company, for us to meet. On that Wednesday, I started my transit from the highly congested Saphan Khwai district, maneuvered my way through Bangkok’s infamous bottle-neck traffic, and made discrete left and right turns onto several Sois (Thai word for ‘small street’) to finally arrive at the company’s homely headquarters. Seated in her office, Mrs. S and I discussed everything Jaab (Thai slang for ‘cool’)…

I invite you to browse through the selection of The Jaab Design Company cards, one of which I have sampled for you below. If our aesthetic tastes are remotely similar to each other's, you are to fall in love with these cards (I say this without any intention of influencing you ;). Reading the back flap of each card will give you even more reasons to enjoy these social works of art:

"Part of the proceeds goes to: The Queen Sirikit Centre for Breast Cancer Foundation who run a Breast Cancer Outreach Project that offers Breast Cancer education, screening and treatment to Underprivileged women in Thailand.

Also supporting:
· Traditional Thai Handicraft
· Fair Trade employment for women
· Environmentally safe Thai mulberry paper"

After having been in the fashion industry for most of her career, Mrs. S fueled her business idea from the materialistic excesses produced by the 80s’ and 90s’. Mrs. S moved from the UK to the Lat Phrao suburb of Bangkok on a contract with Channel in 1996. During her first few months in Bangkok, she was disturbed by the living conditions in the slums and decided to dedicate her time to help alleviate the poverty level within these geographic confinements. She met a couple from New Zealand who had given up their privileged lives to live amongst the slum villagers and who made their living by teaching their neighbors how to produce mulberry paper, a traditional Thai product made from fibers from the bark of the mulberry tree.

Mrs. S developed the business idea of selling greeting cards crafted on mulberry paper by an underprivileged population. She brought art supplies and her card designs to the Suan Plu slum and essentially outsourced the production of her cards to the local slum dwellers. Business was running smoothly until the slum suddenly caught on fire on April 23, 2004. Hundreds of people lost their homes and Mrs. S had lost all of her investments. Fortunately charities and civil society groups were organized to assist the victims of the big fire and Mrs. S moved her business a little closer to home…

Mrs. S’ neighborhood is neither affluent nor comparable to Bangkok’s many slums. Its population dances around the margin, which means that there are individuals who fall above the margin and those who fall short of it. Unfortunately, these are the communities which are often overlooked by local governments as the income inequality is buffered by the average GDP of both the better off and the not-so-well off. The most vulnerable group within this community includes young women with either or all of the following characteristics:

a. Come from low-income families
b. Sexually abused
c. Pregnant and disowned

Mrs. S took it personally when she discovered that her housekeeper lived in an illegal house (landlord rented out 8 rooms to different individuals/families) and was pregnant with her first child at the age of 16. Mrs. S gradually converted her home into the headquarters and working studio of The Jaab Design Company. She reached out to local girls of her community who were looking for employment and set out to teach them the business of card production in exchange for a generous package. Mrs. S also has offered the young women the opportunity to move up the business. For example she sent one of the girls to night school to develop her computer skills.

Mrs. S now has a full staff with an executive assistant, an accountant, a chief painter, and usually about12 ‘makers’ at a time. The card production process is modeled after a ladder system:
Mrs. S designs each card -> the chief painter reproduces it and gets it approved by Mrs. S -> the chief painter teaches the makers how to mass produce them.

The mass production does not require any use of machines or modern technology. Each card is hand-painted by the makers, placed on drying racks and packaged in sets of 6. They are then sent to the 13 outlets in Bangkok’s Suvarnabhumi Int’l Airport or sent to their happy owners all over the globe who place their orders online.

Although today’s economic recession has provided a great challenge company operations, The Jaab Design Company has managed to retain its head over water. The gross profits earned from the net card sales, are distributed accordingly:

• 10% of it goes directly to the The Queen Sirikit Centre for Breast Cancer Foundation
• Each young woman earns a salary equivalent to Thailand’s minimum wage (210 baht per day, or approximately 7 US dollars), social security benefits, healthcare, sick and maternity leave, and rice for lunch.
• Overhead cost, but relatively low with help of internet sales
• Business tax
• Mrs. S' salary

Being that the definition of a social business remains an ongoing debate, it is always challenging to categorize any organization as a social business. So is The Jaab Design Company a social business? In my humble opinion, it is a loud 'yes'.

In Thailand, Fish Swim...and Give Quality Pedicures Too

-Dinner for breakfast?

-Good evening or good morning?

If you are asking yourselves these questions, then you are suffering from a serious case of jet lag and must occupy yourself with activities which will be sure to awaken every cell in your body. Let's stop over in Thailand to recuperate ourselves.

How privileged we are to be in the safe hands of Uncle Jamie, Aunt Bonnie, cousins Kit and Alex, the lovely zookeepers of 4 dogs, 2 cats, and George, the hornbill!

For lunch, we feasted on tangy pomelo salad, fried sea bass with tamarind sauce, and pad thai at an authentic Thai restaurant - cannot get any better than this for me. Weighed down by the itis, Aunt Bonnie takes us to Phunnee Massage to take advantage of the 4 person for 3 person price deal at the fish spa. Yes, the picture will prove it: after rinsing our feet, we dunked them in the fish tank and in no time, approximately 100 fish called Gara Fish, aka Dr. Fish, went hunting for our dead skin cells. Feels like immersing your feet in a bottle of champagne! Made me think: if fish can provide good skin for the people then business can rethink their bottom-line mentality and be good citizens for the people. Too much of a stretch? Hey, at least we can give props to Mother Nature and her symbiotic relationships.

Stay tuned for meeting with the director of Jaab Design Company and Sister Louise from the Fatima Center, two examplary social businesses in Bangkok...

Are We There Yet?

Oh, did you not get the itinerary? It will take us approximately 24 hours to travel from Dulles International in the Washington Metropolitan area to our first stop in Thailand, so we certainly have a heap of time on our hands. I'll use this as an opportunity to introduce the purpose of our trip...

Between 1975 and 1979 the Khmer Rouge regime purged one third of Cambodia’s population in attempt to eliminate any social hierarchy, including symbols of wealth and culture. The genocide decimated the majority of the country’s intelligentsia and artists, leaving it in a state of abject poverty and collective amnesia. After years of recent stability, Cambodia has received significant attention from donors and other respective groups who are looking to support social enterprises in the country. For example, in 2004 the World Bank Group’s International Finance Corporation (IFC) launched the Grassroots Business Initiative (GBI) to assist organizations that directly work with the poor to offer financing and capacity building knowledge and training. The GBI has supported over thirty projects throughout the world, among which at least three of them are based in Cambodia. The benefits of social enterprises in Cambodia has equally extended to the global economy as more stores carry items produced by local Khmer artisans who are required to commit to the principles of social entrepreneurship. Thus, in wake of the genocide which has so shattered Cambodia’s economy and national psyche, engaging Khmer citizens will start the engines of productivity and awaken a national identity.

In 2005 the Royal Government of Cambodia published the National Strategic Development Plan (NSDP), which it considers the overarching development strategy for the period of 2006-2010. After reviewing the document, two objectives stood out to me. First, the government commits to collaborating with Khmer civil society, enlisting it as a key stakeholder in the socio-economic development of the country. Second, it pledges to promote the development of the private sector, notably of small and medium enterprises, in order to create jobs and generate income. Both the demand for increased collaboration with civil society and the need to strengthen the private sector are intrinsic goals of social entrepreneurship, a rapidly developing field which applies business solutions to social problems as a means to create sustainable economic opportunities for the poor and engage them in the marketplace. With the support of the Fulbright Scholar Program, I propose to examine the participation of Khmer civil society in social businesses in Cambodia.

I have prepared a set of questions to establish the parameters for my project: How is Khmer civil society educated on the goals of the NSDP? What mechanisms are social businesses using to reach out to members of civil society to engage them in their social entrepreneurial activities? What is the average retention rate of civil society throughout the course of their respective projects? Are social businesses operating in the more poverty-stricken rural provinces with the same efficiency and intensity as they are in urban cities? How have the activities and projects benefited Khmer civil society?

I plan to divide my project equally between urban and rural Cambodia, spending five months in each location in order to gauge Khmer civil society investment in social enterprises on a macro-level. The focal activities of my research will consist of working directly with a social business, one in Phnom Penh and the other in one of Cambodia’s rural provinces, and compiling my experiences, observations and data to create individual case studies for each entity. I hope to highlight them as business models for current and prospective Cambodian social enterprises and will focus specifically on the organizations’ commitment to the lives of their constituents and their contributions to Cambodia’s economic development. In each case study, I will include the company’s background, a SWOT (strengths, weaknesses, opportunities, and threats) analysis, information about its financial performance and lessons learned from actively engaging civil society in its business operations...

Woa, that was quite an earful! I am thrilled to have you accompany me on this voyage. Sit back, relax (as much as you can on this cramped flight) and get ready for some madness, all worth our while!