Dr. Kendall Mau's MICROFINANCE TRAVELS

Right on Hillary Clinton!

Hillary Clinton commented on the Zelaya return 2 days ago.  Although the US is backing the peaceful reinstatement of Zelaya, she indicated that there would probably have to be some compromise on his part.

Did you catch Zelaya's statement today from New York?  He just wants to return to Honduras to finish up his term.  He then very quietly added...... and then retire.  No more trying to change the constitution to allow him to run again for another 4 years?  Did I hear correctly? 

For or Against Zelaya?

Coming from the US, the prevaling view is that we need to always support peaceful transitions of Presidents.  If you have a corrupt or bad President, the population should vote him/her out.  That's the concept to which we adhere in the US and in other democratic countries.

While I never really gave it much thought, I've lately come to consider country size.  With a small country like Honduras, things can move swiftly.  Lots of damage can be done in a short span of time VS the US where we're so big, it takes so much more time to turn the ship towards unfavorable practices.  We have enough time to vote the bad ones out of office.  What do you do in the case of a small country where you don't have the luxury of time?  If we want to stick to the peaceful transition concept, we've got to find a process through which small countries can speed up the change legally and please the self-righteous international community.

At Prisma Honduras, we deal with the poorest of the poor.  We see what goes on daily as we work with the lower economic segment of society.  There is so much hype, but nothing gets really done.  A good example:  President Zelaya upped the minimum wage last year by 45%.  Great leap and a wonderful gift to the poor population.  Good for Zelaya's ego and to sway voters.  However, he failed to consider whether the macro-economic situation could actually carryout such an increase.  The result wasn't that the government had to enforce the new wage, instead the businesses just went bankrupt and closed shop.  Now where did that get you?  How are you going squeeze more juice from that turnip?   Easy solution - blame the rich people who  don't want to pay the new wages.  However, our customers don't work for rich people.  They work in small shops, make tortillas, barely make a living.  So much political hype.

Summer Intern's Blog - a Must Read

Our summer intern, Scott, from the University of Maryland Business School, just returned to the US.  He was called home by his family just before the coup.  He maintained a wonderful blog during the month that he spent with Prisma Honduras.  Lots of good narrative and pictures.  Please visit the blog:  http://summerinmicrofinance.blogspot.com

Our staff is doing well and all hope to return to work tomorrow or on Wednesday.  Our General Manager observed that the international reporting was so one-sided with most interviews going to backers of Zelaya.  She had hoped that there would be more balanced reporting with interviews of those who opposed Zelaya and how he flaunted the constitution and ignored the rulings of the Supreme Court.  They do not consider it a coup - more like having removed a very bad egg before he destroyed the constitution.

Thanks to old friends like Julia, Laurent, Wolfgang, Claus-Peter, Jillian from France and so many others for your continued support.  Despite political upheavals, poor people still need our support to create businesses which generate enough income to feed and educate their families.

Honduras Lock-down

Received an e-mail on Thursday from our General Manager, Orbelina.  Due to expected strikes and political upheavals this weekend, all financial institutions were asked to close by 2:00PM on Thursday and stay closed until next Tuesday.  This action was taken to ensure the safety of employees in case the strikers got out of control and started invading banks and other financial organizations.

The President is trying to push through a referendum this weekend to convince the populace to agree that he should be allowed to run again for office a la Chavez style in January 2010.  The current constitution only allows him one 4-year term.  The ruling elite in Congress, the Judiciary, and the Army are opposed to this action and have refused to allow the referendum.  Followers of the President are being brought into the capital to make sure the referendum takes place.   

Where Have I Been the Last 4 Months?

Been gone a long while, but I'm back.

• Had the neck operation.  Recovered completely after 6 months.

• Moved residence.

• Took over daily accounting and A/R for my other affiliated company, BookingCenter.com.

• Just got back from Hawaii where I accompanied my sister to her 50th high school reunion.  A blast to see all her old friends and our cousins.

So what's new with Prisma?

• David has resigned as Chair and CEO of Prisma.  He is now devoting full time to the MicroCapital Monitor and the on-line blog.  I have replaced him as Chair and CEO.

• Orbelina, our GM in Honduras, was here for a week with her daughter during Easter break.  We did some strategic planning combined with tourists stuff.  Great to see her and talk face-to-face about all the going-on in Honduras.  Orbelina has been promoted to President of Prisma USA and also retains her title as GM of Honduras.

• We're fully engaged with Kiva and have found a new level of operating synergies that were lacking during the first 2 years as we strove to define our roles.  Kiva and its investors allow us to continue helping the poorest of the poor with new micro-businesses.  I check the funded loans every week to see who is attracted to our loans.  I'm happy to see so many old friends and want to thank everyone for believing in us.  I'm especially grateful to Orbelina for ensuring that an enhanced variety of micro-loans are being offered to Kiva investors.  Thanks Premal and Giovanna.

• We have to say thank you to Sierra Visher, Kiva Fellow, who did a wonderful job during her stay.  Orbelina tells me that she was well loved by all our employees and proved to be highly independent - she knew how to take care of herself and thrive in the Honduras climate.  That sure makes our job easier.

• One June 1st, we're initiating a new internship program with the business school of the University of Maryland, College Park, MD.  Our first undergraduate intern will be spending June and July at Prisma Honduras working as a junior loan officer.  It has taken over 1 year and a half to set up the program.  Many thanks to Elizabeth M, Dean Cleveland, Claire J., and Dean Anand for doing all the heavy lifting.

• Why UMD?  I got my MBA from there in 1976, and have been an active alumni.  I've been wanting to offer their undergraduate business students the opportunity of  a foreign internship - a very rare position to find these days.     

Happy New Year 2009!

Happy New Year 2009 to all my friends in the micro-credit, micro-finance community!

Yes, I did go under the knife on December 8, 2008.  The surgeon removed 4 bulging disks from my neck which were lodged against the spinal cord causing pain and motoring problems.  Four bone fusions and a steel plate with 10 screws later, I'm in zero pain and getting stronger each day.  I'm no longer walking around like a drunken sailor - I can walk a straight line again.  Thanks Jill and Ramon for your kind words.

What's been going on the last 2 months.  Our Honduras division is doing well.  We have a Kiva fellow (Sierra Visher) in residence and our loan portfolio continues to grow with the help of dedicated investors from www.kiva.org  In December 2008, Prisma Honduras was the winner of the Outstanding Micro-Entrepreneur Company in Honduras.  The award was given by the leading Honduran microfinance magazine, Micro Empresas & Finanzas.  Last year, we were also honored because one of our borrowers was named micro-entrepreneur of the year 2007.

In Nicaragua, we are still slogging along.  Doing business there is very difficult right now as the government is supporting the idea that micro-credit organizations are no better than modern day usurers.  Some cheaper subsidized funds have entered the country via Chavez-Venezuela.  There is a new Anti-Repayment Movement forming which has the backing of the government.  We are re-evaluating our business model and will make some major changes and decisions in the coming months.  We expect delinquencies to start climbing.  

www.prosper.com has been a great experiment for me.  As I'm about to complete my third year, all of the original investing mistakes I made because I did not take the time to truly understand the Dutch auction system used, have worked themselves out of my loan portfolio.  I'm ready to charge ahead in 2009 once Prosper finishes the certification process it is now going through.

Meanwhile, one of its competitors, the www.LendingClub.com which has already gone through the certification process, has attracted my investment capital.  I enjoy searching for borrowers looking for money to continue their education, start new businesses, and increase working capital.  I don't do credit card consolidation loans which are so prevalent right now given the precarious economic situation.  During my 20+ years in the business, I've never had success trying to help that segment of borrowers.

I'm also an active supporter of www.MicroPlace.com.  With domestic savings interest rates so low these day, the product offerings on MicroPlace are quite attractive.  Their investment products cover some of the most far flung countries in the world.  Having worked in Central Asia and Africa, I love investing in those areas. 

On the Speaking Circuit

It's already November and I haven't posted in several weeks.  I've been busy selling the house, ready to move to a 55+ adult community, fighting some physical ailments, and facing a pending delicate neck operation in 3 weeks.

Last month I received an invitation from an old high school and college friend, David Gill, PhD, who teaches business ethics in the Global MBA program at St. Mary's College in Moraga, CA.  There were 21 active participants who asked a lot of questions.  We spoke about bribes and how they work overseas and dealing with managers from other cultures who have different social values than we do.  It was a very spirited discussion.  I came away from the discussion with much better clarity when it comes to having to pay bribes - sometimes it really isn't a bribe but a ransom when a third party is preventing you from completing a legitimate task.  I'm not talking about paying bribes to officials to beat other competitors who are trying to win lucrative new contracts.

This week I received an invitation to speak at the Hass School of Business at UC Berkeley.  The microfinance investment series is the brainchild of Sean Foote of Labrador Venture Capital of Palo Alto, CA.   This is the third year I have spoken to his class.  This year was a little different in that the talk was televised to 10 other universities in the US.  Very spirited group of students who were very interested in what actually goes on in the field at the micro-level.  The questions continued via e-mail the next day.  We discussed loan delinquencies, defaults, gender issues when making loans, are women really better risks than men, where growth occurs through the Balance Sheet and not really through the Profit and Loss Statement, and so forth.

On to ailments.  I was having some neck issues that the doctors now find are damaging my spinal cord and reeking havoc with the nerves affecting my left arm and leg.  After 3 months of physical therapy and exercises, improvement has been minimal.  It's time to surgically remove 4 bulging disks in the neck.  Not a walk in the park, but I should be back on my feet in a few weeks.  A forced vacation.

Thanks Giovanna

While I was in Honduras 2 weeks ago, Kiva Central America Representative Giovanna Masci paid us a visit.  It was great to have her in the Division.  She's highly qualified - speaks Spanish fluently, a recently minted MBA, grew up in Washington DC and Italy, a true internationalist.  She trained our staff, visited clients in Danli, and checked out our bookkeeping.

Our staff was really happy with her training and suggestions for more efficient operations.  Two employees in particular were amazed that they themselves could invest in projects featured on the website.  I have a personal Kiva loan portfolio of over 75 projects and was able to show them how easy it is to participate.

We are still in pilot mode and hope to gain full status within a few months.  There are lots of good projects to be listed, especially from our Southern offices in San Lorenzo and Choluteca.  I had the opportunity during this trip to visit all the branch offices and can testify that Kiva is an integral part of our operations, providing needed capital for loans, and now participating in group loans.

To El Salvador and Honduras and Back

Sorry I haven't been blogging lately.  I've been on the road trying to define the future of Prisma Honduras.  We've come to the 2nd phase of our development and learning curve when we have to consider bringing on new partners or going it alone.  We were very fortunate to receive an unsolicited offer to partner with a very strong and well-known organization in El Salvador.

I went immediately down to San Salvador to meet the management and see the operations.  All wasn't perfect, but it was a positive step into the future.  We agreed to meet again in a few weeks in Honduras.  Time for them to meet and observe Prisma's operations.

Then we entered into hard negotiations.  This is always tough when trying to fuse 2 organizations with different styles of management and purposes.  Usually the larger and stronger one will prevail.  In our case, that was in the cards.

Two of our biggest concerns were:  1) what would happen to our employees? and 2) would we be forced to stop serving the poorest of the poor in Honduras?  The answers were both very unfavorable if we did the deal.

I've always followed the philosophy that you don't necessarily have to be big and dominant to be a strong company.  What's wrong with being small, offering quality products and services to clients, and still be profitable?   I've been in the business for over 3 decades and have seen both.  Big for the sake of being big and a big ego booster for management do not a strong and agile company make.

In the US, small credit unions and micro-finance institutions aspire to be like big, strong, well-run, efficient credit unions.  They do not aspire to be big banks.  In Central America where there are no equivalent models of said credit unions, the model to aspire to is a large, multi-branch bank with lots of marble and mahogany wood, and oodles of minions all with titles.  Clients then think that the institution is safe and secure.  It's a cultural thing that we're constantly fighting.

Where does this all lead to?  Time to pull out our "PLAN B" based on going-it-alone for a few more years VS the OFFER.     

Panama 40 Years Later

It was a glorious week in Panama.  I spent 4 days in my old village, Bella Vista de Guarare, enjoying the company of my adopted family, catching up on 40 years of news, and visiting one of my original credit union projects in the center of town.

When we first started working with the credit union 39 years ago, it had about $5,000 in assets and no manager, just a volunteer Treasurer.  We trained a new manager, the credit and supervisory committees, and the Board of Directors.  I was astounded to see a beautiful new office with air conditioning, the equivalent of any credit union in the States.  I looked over the financial reports and found $16.0M in assets, a solid Balance Sheet and a Profit and Loss Statement to die for.  They are now rated one of the top 3 credit unions in all of Panama.  I should disclose that they have now outgrown the credit union classification and recently change their charter to become a multi-service cooperative.  They can offer wholesale agriculture materials, consumer goods such as appliances, health clinic services, and so forth.  The interest on loans continues to be below 12% (declining balance method.)

Of course food was on my mind.  I stayed in the next door village, at the beach house B&B of a former Peace Corps Volunteer who recently retired and bought the home of her dreams.  Small, with 4 rooms to rent, right on the ocean.  Surrounded by 3 local restaurants that serve the best seafood - fresh shrimps, sea bass, and "patacones" or fried plantains like only the Panamanian can make them.  Better than any French Fries.

The closest regional city, Las Tablas, is still small, but very spiffy.  Clean streets and sidewalks, buildings well maintained and brightly painted, and even a big supermarket in the center of town.  The supermarket has fresh vegetables, the meat section is up to world standards, and a large selection of goods.  All my Panamanian friends are encouraging me to spend more time in Panama - who knows?  I've been suffering from post vacation blues since returning a week ago.

I then spent 4 days in Panama City partaking in all the activities of our reunion.  Close to 100 former Panamanian volunteers showed up.  We did some fine dining, partied at the Miraflores locks as huge ocean-liners went up and down in the giant locks on the way into and out of the Canal.  We had a reception at the US Ambassador's residence to celebrate the swearing in of 46 new volunteers and took in a show of typical Panamanian music and dance.  All in all, it was a super trip and one I'll remember for the rest of my life.  It was a time to renew friendships and to wallow in the success of projects started 40 years ago.

Kiva:  and while I was away, Prisma de Honduras came on-line again with Kiva.  Sorry we didn't hit the June 2008 deadline, but we're listing again as of July 1st.  Thanks to Orbelina our GM and Michelle of Kiva.