Dien Bien Phu: Updates

We have been working in Vietnam for more than 1.5 years and we have been providing loans to women in Dien Bien province for almost 8 months. Our program in Dien Bien province, 'the Chi Em Project' has an outreach of more 500 clients as of April 2008. We are working in 41 villages in 3 communes in Dien Bien District, serving ethnic minority women through the Women's Union.

We are well on our way to exceed our loan portfolio projections and performance. However, it is not these numbers that count. We are trying to focus on the impact that our small loans have on our clients and their families. As of now, it is still quite hard to measure and evalute how beneficial these loans have really been for our families. We have implemented a poverty assessment tool to measure several poverty indicators over time among our clients - but this should only be revealing after several loan cycles in 1 - 2 years time. In order to improve our community developmenta and training services for our clients, we have hired a new Agricultural Officer from Hanoi Agricultural University to help us launch our small scale farming and debt alleviation program and to develop our skills training programs.

As of April, we had 50 Women's Union staff and 4 external staff exluding Nathalie and myself. In June, we will hire a Program Officer in Dien Bien, a Program Officer in Hanoi and an Accountant in Dien Bien. Our team is stong and committed...

Dien Bien Phu: A new model for Huoi Pung

In 2007, we set the groundwork for a debt relief pilot in one case study area, Huoi Pung village.
In the late nineties, consecutive failed rice harvests prompted the entire population of Huoi
Pung to borrow from private rice lenders who charge interest rates of up to 50 percent per
season. A cycle of debt ensued.

Rather than providing cash loans, we have developed alternative loan products with farming experts from Hanoi Agricultural University (HAU). HAU experts will develop, train and support partners in small-scale farming activities and Chi Em will loan material inputs such as animals, food and medicine. Partners will sell their product to repay the Chi Em loan in cash. We call our clients, 'Partners,' to demonstrate that our relationship is less of a Bank - Client but more of an assistance program devoted to provide all both financial and non-financial services for these partners and their families

The program will include technical training and support from HAU experts to selected key farmers, who will subsequently serve as trainers to other farmers in the community who want to take part in HAU’s small-scale farming activities. HAU will organize members of the community to assess the impact of these new farming activities and to assess the HAU trainers. We will launch our loans to more than 15 households in the beginning of June.

Perhaps what makes us most cautionary is the response we have received from the households in Huoi Pung. For over one year, we have proposed solutions from community centers, to electricity to rice storage centers, but coming up with and financing the right solution has been extremely challenging. Therefore, our partners in Huoi Pung are reticent about our program and our intentions and we need to prove to them first and foremost, that we will do what we say we will do. As we launch the program and spend time in the target village, it is disheartening to feel that we, who have spend so much time and money, developing the perfect solution, are not appreciated...but then I put myself in the shoes of those we serve and understand perfectly. While I hope that we are not developing an assistance program for target households who do not want that assistance, I think that we need to be both reactive and perseverant. Reactive to the needs and will of our beneficiaries and perseverant to prove that we can implement what we say we intend to implement so as to gain back the trust and co-investment of our partners.

Dien Bien Phu: Weather and Food Crisis

The coldest temperatures in the past 40 years killed farmer’s livestock and destroyed rice harvests, leading many farmers to request loans to purchase seeds to replant their crops in hopes of ensuring a May harvest. While the farmers have not yet benefited from elevated rice crop prices (as harvest does not occur until May), their household expenses have skyrocketed with elevated food and oil prices and inflation. In response to the weather crisis in Dien Bien and the elevated food and oil prices, EDM has experienced steady growth with 85 new clients in January, 79 new clients in February and 178 new clients in March.

Thank you to the 12 individual donors who raised $3,000 in loan capital in response to our request for loan capital funding amidst the weather crisis in early 2008.

DIen Bien Phu: Success Story

Lo Thi Phuong, a 32 year-old Black Thai from Hung Yen village, was one of Chi Em’s
first clients. Phuong took out a 570,000VND loan (€24) to invest in her small fish raising
business. Every year in November, she spends 1,500,000VND (€54) on 2,000 fish. And seven
months later, Phuong harvests the fish to sell to a local trader in the Ban Phu market or, if
the fish are big enough, in the Dien Bien Phu city market. Each year, her net profit ranges
from 3.5 to 4.5 million VND (€147-189). Her fish pond is especially successful because it is
so close to the stream.

Recently Phuong has faced hardship. Within one month of joining the Chi Em program her
grandfather died and her grandmother became gravely ill. As Phuong now cares for her grandmother, she has no time to sell vegetables in the market so she is happy that she was able
to invest in and rely on her fish business, which requires less physical labor. Phuong likes Chi Em because she received a loan very quickly without needing collateral required for state bank loans. She enjoys the responsibility of acting as a Cluster Head because she likes guiding other members and learning about bookkeeping.

New York: Fundraising and Chi Em NYC Benefit Party

In November 2007, EDM held a fundraiser party in Soho, NYC with the support of GOOD Magazine and the Pure Project, enabling us to throw a free-drinks high energy fundraiser for less than $200. More than 100 people attended and we raised $1,500 in cash proceeds and more than $1,500 in checks. We also held a microfinance cocktail party at NGO Unitus' headquarters in New York where we discussed our new pilot and rationale for fundraising: debt relief initiatives for families that can not access microfinance given their cyclical indebtedness.

Since our first fundraising events in Washington DC and New York City the fall of 2006, we have raised over $42,000 from private individuals in the U.S. More importantly, we have been able to generate ongoing interest, establishing a group of invested donors following our progress over time. We also secured approximately $36,000 in funding for our Vietnam operations from two international non-governmental organizations, Boudoux (France) and Trickle Down (U.S).

Dien Bien Phu: Not sure they like our loans?

In December, we adapted to the demands of our clients by modifying the repayment schedule of the loan principal, interest and savings of our loan product from bi-monthly to monthly. However, given the prevalence of the government subsidized banks that offer low-interest (0.65%/month), large ($300-$500), long-term loans (3-5 years) with principal and interest repayments at maturity, we are encountering difficulty promoting our loan products that are higher interest rate (0.94%/month), small ($60-$100), short-term loans (6-12 months) with monthly principal and interest repayments. We engineered this loan product as a complementary loan to the government loans for short-term cash flow needs with loan features tailored to low-income households’ repayment capacity as it is easier to pay small amounts over time then one lump sum at the end. However, we are currently improving our marketing strategies by hiring local women with experience paying similar microfinance loans to help promote our products and by offering an additional loan product that may be more tailored to our clients’ business activities.

Dien Bien Phu: Client Training

We accompanied the first loan release with business training on simple accounting techniques and skills training for our clients. This skills training is an initiative that hires local entrepreneurs in Dien Bien province who share their skills as well as insights about starting small businesses in the region. Our first skills trainer was Tran Thi Le, a vegetable grower who presented to a small group of clients on the Sunday afternoon before loan appraisals. This was particularly effective because the local entrepreneur was attuned to the local environment and challenges that our clients will face. The clients felt inherently comfortable, as Mrs. Le spoke to them as a trustworthy neighbor. We presented Mrs. Le with an Entrepreneurs Certificate to hopefully increase her confidence as small business owner and encourage her to continue guiding our clients in their economic initiatives.

Hanoi: Binh Minh and SEDA

During 2007, EDM partnered with Binh Minh to extend microfinance to poor households in the peri-urbain regions surrounding Hanoi. Due to regulatory issues relating to Binh Minh’s status as a company, Binh Minh has set up a local Vietnamese organization called SEDA. Through SEDA, Binh Minh can continue to expand their microfinance operations, while they evaluate their next steps to transition from Binh Minh Company into Binh Minh Microfinance Bank.

By supporting local partners with successful microfinance operations, EDM has been able to offer financial services to more low-income families in Vietnam. DM has enabled SEDA to commence their microfinance operations in Bac Ninh province, a semi-urban region outside Hanoi. Over the course of 2007, EDM has provided $30,000 of financial support to SEDA, consisting of $10,000 in operational expenses to set up SEDA’s first office (computers, furniture, equipment etc), pay for salaries for staff for first 5 months, and train credit officers and (b) $20,000 in loan capital to support SEDA’s loan release to clients. SEDA recently established a partnership with Kiva Organization to secure 0% interest funding for future loan needs. In October 2007, SEDA launched its microfinance program and serves 134 clients as of December 2007. In return for our support, SEDA provides technical assistance at a very low rate to our Chi Em microfinance project in Dien Bien province.

Dien Bien Phu: 34 new clients in November

Photo: Nathalie talking to clients at loan release

EDM has successfully launched a microfinance project, ‘Chi Em,’ in Dien Bien Province, near the Laotian border of Vietnam. While we had 100 women initially signed up in our loan program, only 34 women actually took our loans as our first loan release coincided with the October harvest season, a time where our clients are relatively rich compared to the rest of the year. Partnering with the Women’s Union (WU), EDM has hired and trained a small management team from the WU in Dien Bien District consisting of 1 project supervisor, 1 accountant, 1 credit supervisor, 1 communal credit officer and 5 cluster heads at the village level.

Dien Bien Phu: Signing ceremony with the Women's Union

We signed the official agreement with our local partner, the Women's Union today...

After 8 months of negotiations, we finally have come to an agreement and more importantly, a finalized budget and workplan...

Dien Bien Phu: Training for credit staff and first clients

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Photo 1/2: View from Nathalie and Katharine's home in Dien Bien Phu.

Photo 3: Nam from Binh Minh providing training to our

credit staff in our home.

Photo 4: Our credit staff going through the project book-keeping in

preparation for loan application day.

In the past week, we have trained our credit staff and finalized our loan documents including client book detailing loans and savings, loan application form, book-keeping documents for commune and village level as well as promotion documents about our loan products.

Binh Minh, our local consultants, have helped us provide training on the operational procedures for loan distribution and book-keeping methods. Next week, we will provide businesss training to our clients on basic accounting for business activities as well as skills training to provide new ideas for potential businesses (cut flowers and vegetables).

On Thursday, our credit staff will be advising our clients about potential loan products to meet each client's capital needs during loan application day. Our Credit Supervisor will then perform loan appraisals to determine whether we will lend to each client and how much we will lend to each client based on their ability to repay. Our loan products for new clients will be 6 month maturity, approx 1% monthly interest, ranging from 200VND ($12) to 1,500,000 VND ($90). The loan principal and interest are paid in bi-monthly installments during the course of the loan so at the end of the loan, the client has already repaid the loan and interest. This is easier to manage.

To understand our client's cash flow, we perform a simple calculation to assess net income. We try to determine their annual income, which is relatively easy because they have 2 harvest seasons during the year. Often it is harder for our clients (or anyone in fact) to assess their annual expenses. We therefore, ask for weekly expenses for food, monthly expenses for electricity, annual expenses for education.

Once we have this information, our credit officers use this formula:

1. Annual income from harvests + other income during year less annual expenses = annual net income

2. Annual net income /25 = bi-monthly net income

3. Bi-monthly net income * 50% = ability to repay per installment

In EDM's program in Cambodia, we use 25% as a maximum leverage for our clients. In Vietnam we have decided to use 50% in our pilot case as we think 25% may be a little conservative, especially for our clients who have very limited cash flow (and would not be able to access loans beyond $50 using the 25%). That being said, the repayment ability is very hard to assess, and we understand that this is a rough estimate and may need to be updated as we progress in the project.

On October 24th, we target loan releases for the first cycle of loans in our first three target villages. Loans should range from $60 to $90 for the first cycle.

Dien Bien Phu: Peoples Committee signature in Dien Bien

On Tuesday, we were thrilled to hear that the government officials (Peoples Committee) in Dien Bien approved our project, enabling us to commence our lending activities.

Hiring our Hanoi partner, Binh Minh, as our external consultants in Dien Bien was instrumental. Because of who they are culturally and in the field of microfinance, they were able to present our proposal to the Womens UNion and the Peoples Committe with the credibility and political authority that is necessary for making changes within governmental structures such as the WU.

The WU agreed with our proposal to centralize the operations and the PC signed our memorandum of understanding enabling us to work in our proposed target communes.

We are training our accountant in Hanoi utilizing Binh Minh experts and intend to conduct loan applications next week. We should release our first loans to 100 women within 3 weeks.

Very exciting news!

Dien Bien Phu and Hanoi: Positive momentum

Following up on my previous post of 'frustration', I must say that in the past few months, we have won many mini-battles and have a number of little accomplishments to be proud of. I have just been so focused on getting our loans distributed that I have not celebrated every tiny victory...

- We finalized our memorandum of understanding with our microfinance partner in Hanoi, Binh Minh, so that we are supporting the creation of a credit office in Bac Ninh Province (30 minutes from Hanoi.)
- We received an operational permit from PACCOM enabling us to work in Vietnam as a microfinance operator!
- The Director of EDM, Franck, came to Vietnam last month and helped us to improve our approach, generating endless solutions for us in just 5 days! The women in Dien Bien still talk about Mr. Franck who they discovered was not drinking his rice wine at the officials welcoming meeting and who was pouring the rice wine on the floor so he would not get too drunk at 9am in the morning!
- We spent 1 month living in Dien Bien revising our long term vision, determining our loan products and conducting a subsector analsysis with the help of a Vietnamese agricultural expert / volunteer from HAU University (Mr. Khanh) and a business consultant/intern from Stanford Business school (Matt)
- We finalized our budget with the Women's Union and hired 3 women (Yen, Hue and Dung). We have fired Yen twice now from our project but are required to work with her nonetheless. Each time we fire her, we have to hire her again, generally during the same meeting, so we have to laugh and squeeze eachother like we are old friends!
- We analyzed the clients’ basic income generating activities so that could offer more dynamic loan products that were tailored to the clients’ business cycles which would provide more income to our clients. For instance, a client can now access a $30 loan which will allow them to purchase a piglet at 10kg, raise the piglet to 65kg, sell within 4-5 months for a net profit of $90, and reimburse our loan in the 6th month. Offering the flexibility of loan size and loan maturity in addition to business development training is a huge value-add to the market place and it is also a feature that we could not have offered without fully understanding the demands of our clients. So bravo to Khanh, Matt, Nat, Franck and team!
-We have come up with new solutions for Huoi Pung, our version of the forgotten village. The village is indebt by at least 6,000$ to one rice lender at the bottom of the hill, Mr. Bien. Traditional microfinance would not work here. Instead we will forge on and find debt alleviation solutions to give this village a chance at exiting debt and becoming a sustainable community. We are setting up a rice shop in the village where we lend rice loans (as the village uses rice instead of money and are charged 50% rates for reimbursement).
-We have toyed with the idea of moving to Dien Bien and living in a Black Thai Stilt house. Nathalie and I are looking for houses in the rice paddies. We will use this house as our office as well. More to come from our upcoming trip in one weeks time..!

Dien Bien Phu: Still waiting....

Well, with all this positive momentum, it makes sense that now is the long waiting period that I have heard about...the period where we are ready to operate, we have a team ready, we have products to offer, we have money to lend, we have the time to do so...YET we do not have permission. While we have received permission as an NGO to operate in Vietnam (from PACCOM), we are waiting from the permission of the Peoples Committee (the govt and party), the police, the Women's Union, the Dept of Foreign Affairs...etc.

It has been hard for me to write this blog, continue with the newsletters, correspond with donors because it seems as though we have no progress to be proud of. I was hoping that we would have started our loans by now. Yet we are in the toughest period of negotiations - the moment of truth where we are negotiating the budget, the payments, the long-term ownership plan... I will admit that there have been many times in the past month where I have considered dropping everything and coming home...but with highs, there are lows..and with support, there is responsibility. I am responsible to the donors to make good use of their money, I am responsible to the women we have promised to help, I am responsible to EDM as they have given me this wonderful opportunity and I am responsible to myself. We just have to be patient....

Dien Bien Phu: smiling woman with fake leg

Today I was reflecting about the curious nature of my work. How would I explain or describe the highs of such work? It may be best to put yourself in a crowded NYC subway train. Body after body crammed into the car, packed like sardines. You standing there, thoughtless, breathless, indifferent. Next to you stands an elderly woman holding a child. As you lock eyes with the child, you see eyes full of wonder, happiness, curiosity. The child laughs and smiles. For a quick second, your mind flashes back to your backyard when you were a child. You are surrounded by your brothers involved in a heated game of kickball. You smile, the train halts, the child leaves. You turn around and smile at the man behind you who is sandwiched between the Wallstreeter and the homeless man. I think that split instant where you feel immense warmth of emotion from a stranger's smile can describe alot about the highs of this job.

Dien Bien Phu: the final negotiations

The microfinance project in Dien Bien is FINALLY starting to fall into place! We are at a very exciting point in which we are finalizing our working agreement and budget with the Women's Union and preparing for the loan application process in July. The co-Director Nathalie and I tend to spend one week out of every month up in Dien Bien (only a 35 minute flight from Hanoi). During our 8 day trip in May, we were accompanied by two young electrical engineers, Tho and Vong. The engineers are going to build us hand-held generators (fueled by streams) for the distant target village with no electricity. This village is located on the top of a mountainous hill and takes 45 minutes to climb up. It is possible to reach by motorbike but the roads are treachorous and more than one buffalo has fallen off the roads, so we decided to walk. On the day Nathalie, Nhu and I were visiting this village, it was a torrential storm, making our trip rather colorful. During our walk, we were accompanied by many women who joined us along the way to see what we were doing. Upon arriving, we met twenty women who had convened on our behalf to talk about potential business ideas for loan use. We walked from straw hut to straw hut talking with the women and hearing their personal stories. We were pretty surprised that two out of the four families that we interviewed had heroine addicts (or X-addicts) in the family. Evidently, opium was a problem 20-30 years ago and now heroine seems to be more of an issue that we first thought. Setting up a microfinance project in this particular village will be a challenge. I think we need to develop the villages agricultural process and access to markets before offering loans to these potential clients. The majority of the clients are already indebted to the rice vendors at the bottom of the hill. More so than the other 3 Black Thai villages that we are working in, this ethnic minority Kho Mu village is remote, very poor and totally undeveloped (no electricity, no access to markets, less education). Chi Em has taken on this village as a challenge to try to see if we can develop this village that has been totally marginalized and excluded from state-run projects, other ngo donor funds etc. The key will be to develop access to the village's access to markets before any capital is provided.

Hanoi: Chi Em for profit business venture

We are trying to think of ways to complement the microfinance lending project. Once the clients have access to capital, how will they be able to leverage their local resources to increase their income? What are other business development ideas? When we were looking into the prices that the farmers receive from their rice production, we realized that they get paid below market prices and the rice is sold at levels 3 x what they receive in markets in Hanoi. So one idea is to eliminate the middleman who is reaping all of the profit. Using a business visa, Chi Em intends to set up a for-profit business venture that purchases specialty rice from our clients in Dien Bien at elevated prices and sells the rice to Hanoi merchants and restaurants. With the goal of poverty alleviation without direct charity, Dien Bien farmers will be paid an above-market price for their crops, thereby eliminating the middle-man and increasing their income. The idea is to act as a facilitator to establish direct purchasing relationships between Dien Bien farmers and merchants and restaurateurs in Vietnam.

Bobby Chinns, the hottest restaurant in Hanoi, has already expressed interest in purchasing our Dien Bien rice and adding it to their menu! Check out the restaurant : http://www.bobbychinn.com

Dien Bien Phu: Dr. Chris

Photo 1: Dr Chris with the village nurse; Photo 2: Adorable baby getting bathed during WU mtg

Our March trip in Dien Bien Phu was particularly exciting because we were accompanied by Chris, a talented young Harvard Doctor who is working in Saigon for several months. Dr. Chris helped us to perform an overall health assessment of the areas in which we will work. We met with the village Drs and nurses of the villages and interviewed the women during group meetings. Several people asked to be seen by Dr. Chris in private. It was amazing to see how helpful it was to have a Dr. on board and how appreciative everyone was to have a Dr. all the way from the USA. Of course, we introduced him as a Dr from Harvard, but that really didn't seem to be very meaningful to people..

A very gentle woman in her late forties took the Dr aside to show him her scalp which was red and crusty. Dr. Chris examined the woman and told her that she suffered from "psoriasis", which is an autoimmune disorder where the immune system attacks the skin for reasons that they still haven't discovered. A certain type of tar shampoo helps to calm the immune system down. You can not imagine the look of relief on her face when she found out that she did not have lepracy. Here is a woman who would not have had the chance to see a Dr. due to how far she lives from the town center and perhaps also due to the lack of available knowledge about such diseases in the town center. This woman who had probably prepared herself to live a life with lepracy (and somewhat marginalization) was now able to treat her symptoms. Thanks to Dr. Chris, we will be able to bring up some special shampoos for her from Hanoi on our next visit.

Hanoi: Chao Chi Oanh va Chi Suot

Photo 1: Ms. Oanh, her husband and son
Photo 2: Ms. Suot and her Doctor

Two of my friends from Middlebury College, Annie and Sasha, were recently visiting Hanoi. Sasha has recently joined EDM as our USA representative helping with the fundraising efforts in the USA and Annie has helped with numerous fundraising efforts this past summer in New York and Washington DC. I wanted them to meet our local microfinance partner Binh Minh, and to get a feel for what we do here, so we spent the morning meeting the Binh Minh team and visiting clients. We met two clients with rather memorable stories.

Who: Ms. Oanh, husband, two daughters and one son
What: Rice production, dry tea seller, wholeseller
Where: Dong Anh (client of Binh Minh)
Ms. Nguyen Thi Oanh is 44 years old with two daughters and one son. When we walked into the one bedroom thatched roof and cement wall home, we were kindly greeted and were asked to sit down on the matted table. Ms. Oanh has been a client with Binh Minh since its creation in 2003. Ms. Oanh and her husband were discussing their daily schedules with our translator (the accountant from Binh Minh) when we were taken surprised by the abrupt movements of what appeared to be a medium-sized child in a cot in the corner of the room. Ms. Oanh told us that this was her eldest daughter, who is 16 years old and brain damaged, evidently coming down with Japanese encephalitis as an infant. When asked how she supports the childs needs, she said that the Red Cross had visited her and they provide VND 100,000 – 450,000 ($8-36) quarterly but this is not enough. When asked how the loan from Binh Minh has helped, Ms. Oanh said that she can invest in her inventory by buying goods directly (not on credit) and by storing goods in her house. She sells dry tea and is a wholeseller for other traders. Overall, she would prefer to borrow based on demand and finds that the scheduled loans from Binh Minh are too restrictive. However, she smiles saying that her life has gotten a little bit better because of Binh Minh loans and that counts.


Who: Ms. Suot and her husband Mr. Thuc, two daughters and two sons
What: Rice production, pig seller
Where: Dong Anh (client of Binh Minh)

Our next encounter was Ms. Suot, a 53 years old woman with 2 daughters and 2 sons. Ms. Suot has been taking a loan since the creation of Binh Minh in 2003. Ms. Suot told us a rather extraordinary story about how she had recovered from brain disease using traditional medicines. We met her Doctor who showed us pictures of Ms. Suot when she could no longer walk. It seemed to all of us to be quite a miraculous recovery. Ms. Suot had used the loan for pig raising and had taken advantage of the emergency loan to use for medicines.

Hanoi: Sticky Rice Cafe?

Chi Em is exploring innovative community development ideas that could help the clients generate higher profits. Chi Em would like to enable the clients to supplement their agricultural incomes with diversified business activities. One idea is to purchase the communities’ specialty sticky rice at above-market prices and market the rice as a gourmet specialty good and a socially responsible purchase to justify an above-market price. Chi Em could sell the sticky rice at consignment at upscale joints in Hanoi. With the goal of debt alleviation without direct charity, Noong Het commune farmers will be paid an above-market price for their crops.

The rice grown in Noong Het is “8th Fragrance” grain or “ER-64.” This rice is grown in other parts of Vietnam, but the earth and elements in Dien Bien make its taste particularly fragrant. There are two harvests of regular rice annually, in May and October. The sticky rice is grown dry on hillsides and has one annual harvest.

We are aware of adverse effects from intervening in the local market and understand that it is important to tread lightly in the market without crowding out private sector suppliers. We hope to promote contractual relationships among faciliators and providers, as vague as that may sound, its a work in progress...

Dien Bien Phu: Widespread debt in the villages….

When we met with the women in the three Black Thai villages (Dien Bien Phu), Nathalie and I asked questions about their current economic situation.

Most of the women already have experience with governmental loans. In terms of previous microfinance experience, the state bank generally used is the Vietnam Bank of Agriculture and Rural Development (VBARD), though some families qualify for Vietnam Bank of the Poor (VBP). Loan sizes vary from 2 million to 5 million VND ($125-$314). According to villagers, VBP has a monthly interest rate of 0.65% to 0.7% (answers varied) and VBARD has a monthly interest rate of 1.25%. Discussion between husband, wife, family, and friends is used to determine a good loan activity. Ultimately, however, women are in charge of the household economy.

Microfinance has led to widespread debt. Borrowers have invested in animals which have died, thus causing them to find alternate means of income (deforestation, temporary labor, selling land, selling buffalo) or to other loans from private money lenders (3-5% interest rates). Private money lenders are usually ethnically Kinh. Once in debt, the actions taken to get more income often lead to further indebtedness. Debt has been a chronic problem, but was aggravated in the last year because of avian flu and other diseases. There is a need to deal with this issue of debt before initiating another loan program to avoid using new loans to pay off old debts.

Still, general sentiment is that the economic situation has ameliorated. In the nineties, people often did not have enough to eat. Now there are seasons which are more difficult than others (March-April of the regular calendar), but the standard of living has increased in part because of government-sponsored programs such as free healthcare, animal vaccinations, and education. Most households, however, survive on sustenance farming and have no savings. As such, it is difficult for villagers to rise above their current standard of living.

Dien Bien Phu: A closer examination of the daily activities in the villages

Photo 1: Nath, Kat, Ms. Huong (Loan Officer from Women's Union), Ms. Dung (WU accountant)
Photo 2: Villagers during the Women's Union meeting

Nathalie (the Co-Director of Chi Em) and I asked questions from our poverty assessment survey while Phoung and Nhu helped to translate. We quickly learned that this commune lives off of sustenance farming. Farmers grow mainly to survive, rather than for commercial sale of their products. The main activity in this commune is rice production, which makes up 98% of economic activity. The other 2% is small trade. The commune head states that production has benefited in recent years from increased literature and educational campaigns to promote good animal husbandry and agricultural practices. Villagers voiced a need for capital to expand their market. Villagers also voiced a lack of business diversity and ideas for income-generating activities. Chi Em strongly feels that research and training focused on innovative community development ideas are crucial. The integrative strategy of offering both credit and community training on new income-generating activities would benefit target villages.

Many younger people (teenagers – twenties) rent themselves out temporarily for work in other parts of the district. This work is either road construction or agricultural during harvest season. Although mostly men rent themselves to work outside of the commune, women also participate in this activity.

Dien Bien Phu: Black Thai villages

Photo: Nathalie (second one in on the far left) and Katharine (in the middle)

On Tuesday, Nathalie arrived in Dien Bien and we visited several villages in Noong Het Commune. This commune was chosen by the provincial officials as a good starting point for a microfinance pilot because it has never had an NGO operate there before and it is relatively accessible (10 kilometers from Dien Bien Phu City). The three villages, within the commune, Noong Bua, Hưng Yên, and Hưỡi Lẽ were chosen by the commune leaders because they are below the standard of living of the rest of the commune. There are 24 villages (1,829 households and 7,809 people) in the Noong Het commune, which spans 1,295 meters squared. There are 5 ethnic minorities in the commune, but the greatest two ethnicities are Black Thai (unrelated to Thailand) and Kinh (the ethnic majority of Vietnam). The three villages that we visited were Black Thai communities. With the help of the Women’s Union at the District level, we were able to organize group meetings with the 50 households in each village. We introduced our project to the women and tried to understand how this project could help to improve their daily lives.

Dien Bien Phu: The Temple of Doom

I have come to refer to the meals at the very local restaurants as the Temple of Doom, a play on the 1984 Indiana Jones film. Before moving to Vietnam, I was somewhat of a picky eater, reserved to eating only chicken and fish, repulsed with the idea of red meat (since the age of 12). In my first visits to the third world, I quickly realized that I would have to kick this first world bourgeois handicap...I found myself funneling down hairy meats and tough muscular objects suppressing my gag reflex as politely as I could. Eating with very poor families can be a very humbling experience. When a family who may only eat meat on very special occasions serves you the choiciest parts of pigs ear, you must eat happily and thankfully. The Harvard Dr. Paul Farmer talks about such meals as the fifth food group. You can see what he means....

Dien Bien Phu : First official visit

Photo: Chi Em Co-Director Nathalie and her mother Nhu; Kat with villagers
On Monday, February 26, I returned for the second visit to Dien Bien Phu with the intention of visiting several villages and formally introducing EDM (Entrepreneurs du Monde) and our microfinance project (Chi Em) to the officials. I arrived with my co-partner Nathalie’s mother, Nhu Miller, who is Vietnamese and who serves as the PR adult face of our project. The Foreign Officials representative Mr. Phuong and the District Women’s Union Vice Chairman Ms. Yen met us at the airport with a large bouquet of flowers. After a short lunch where Nhu and I were cordially excused from drinking several rice shots due to our travels, we met with the provincial level officials. That evening, we were not so luckily excused from the rice shots and were joining many such rounds to toast the success of the project.

Hanoi: TET holidays

On Sunday, I celebrated Tet with Ms. Tuyet (my friend and Binh Minh's Director) and her husband Mr. Chung and 3 yr old son BiBi. Tet, which means the first morning of the first day of the new year, is the Vietnamese New Year. According to the Vietnamese Zodiac, 2007 is the Year of the PIG. Accordingly, Ms. Tuyet had prepared a lovely spread of all pig products for dinner. Meals such as these are always a bit of a challenge because none of the food is recognizable and the visitor has to lead in the eating of each food group. I was so pleased to be included in this intimate event that I was able to happily slurp down the pig muscles and pig 'interiors'....

Preparation for Tet starts weeks before the celebration. Family clean their homes to rid them of bad fortune and paint their homes for the new year. Most people get new clothes and new shoes. It is important to pay your debts and resolve differences between family and friends. Actually, our microfinance clients do not like taking out new loans on TET so they will generally take out all of the loans several weeks before the new year.

On New Year's Eve, a ritual called Le Tru Tich is held at the mid-night hour where there are firecrackers and gongs and other festive items that make loud noises to kick out the old and invite the new. Like the Chinese, the Vietnamese are careful about how they spend the first day of the year as the events on New Year's Day determine your luck for the rest of the year. Therefore, people will go to great lengths to make sure the first person who walks into their door represents good fortune. Sometimes, foreigners will even be invited over as the first guest as they represent wealth and good fortune.

When driving though the streets, it is hard not to notice the New Year's tree called Cay Neu that are placed in front of everyone's homes. The leaves are all removed and the tress is wrapped in red paper. In fact, the red color is said to scare off evil spirits.

(for more info, see www.familyculture.com)

Hanoi: Partnership with Kiva.org

Have you guys heard about www.Kiva.org? Check it out. If all goes as planned, we will be their first Vietnamese partner. So look out for Vietnamese rice farmers from Dien Bien coming up on Kiva...! It should sell quickly. I asked Kiva how they market 1,000 new clients with the same 'at a glance' story - Rice Farmer, Dien Bien, 3-4 children, Hard Worker etc. Kiva told me that there are more donors than clients. In fact, when Kiva sold loans to clients in Afghanistan, the loans were provided for by Internet clients within 30 minutes. Kiva said the same for Cambodia...and apparently Vietnam has got momentum.

Basically, Kiva's concept is to enable MFIs (microfinance institutions) to raise low cost debt capital directly from social investors in America and Europe - using the internet. The internet lender can go onto the website and pick an entrepreneur -they can lend $25 to enable someone to jumpstart their business....the MFIs provide the pictures of the client (as well as a journal) and will wire back the money to Kiva and the internet lender. This is a 0% interest loan for the MFIs. If the client doesn't repay, the loss is borne 50% by the MFI and 50% by the internet lender. If the client repays, the lender can lend to someone else.

What's brilliant about this is the potential behind this concept - first of all, Kiva operates using paypal (for no charge), and has state of the art technology that is user friendly for staff in the field (i.e. can be done in the local language and is easy for credit officers in developing countries to understand how to operate the website - if they have internet access). Secondly, Kiva's operating costs are all supported by donations given by the Internet lenders when the lenders make their loans (as they are asked if they want to provide 10% to support Kiva). Kiva is run by a bunch of late-twenty something guys out of Silicon Valley. Starbucks is setting up a Kiva pilot project. Finally, Kiva's model currently operates with zero percent loans from lenders but Kiva is exploring interest-bearing loan options so that MFIs can offer an interest rate to internet lenders. So eventually you can invest money, earn interest, and look for returns (financial and social). Eventually the internet lender could compare rates for different projects - high risk projects leading to a higher return, etc. I was thinking about this a few years back before I started investing my money. I would be so much more interested to invest my money in socially important concepts that are secure...I think the young jaded-stock market generation would mobilize millions...

Hanoi: The AUTHORITIES

On Thursday, I registered EDM with PACCOM - the authorities in charge of giving permits to foreign organisations. The meeting went really well - ! There are three levels of permits - (i) permit for operation, (ii) permit for project office and (iii) permit for representative office. I applied for a permit for a project office. I believe that EDM will be able to get a permit for operation (enabling me to operate and share office space with my partner) and after 6 months of proper monitoring of our activities, we may be able to get a permit for a project office (enabling me to get a real office with an EDM sign). After two years of activities, EDM can apply for a permit for representative office, meaning that we are legitimate here.

I am trying to go up to Dien Bien in two weeks to do a poverty assessment of our proposed working site so we can propose a new program. In one week, TET begins, which is the Vietnamese new year. Nothing will get done one week before and after TET.

Hanoi: Chao Chi Phoung

Who: Ms. Phuong and her three children
What: Red cabbage business
Where: Dong Anh (client of Binh Minh)
I may have misheard her as she spoke very softly to me. I believe her name is Phoung but I will confirm that when I see her next. I was attending the Binh Minh loan repayment group meeting in Dong Anh when I met Phoung. Perhaps it was because I was a foreigner or because she was happy with her loan, but she sat next to me and squeezed my hand very hard. My Vietnamese is so limited that the most emotional gestures I can make are with my eyes, mouth and hands. I squeezed her hand as she proudly showed me the accounting book. She had a perfect repayment record and was on her 5th loan. I asked my translator, Ms. Hein, to ask Ms. Phoung to tell me her story. Ms. Phoung works very hard. She works in the field in the morning, and in the market in the early afternoon and in the field later in the day. She says she must have two activities in order to pay the weekly repayment. She grows a type of red cabbage which she sells at the market. I couldn't tell what happened to her husband but she was solely supporting her three children as he was no longer around. The loans and the income, she said, have given her a strong voice in the community. Ms. Phoung feels respected and people respect her. Her life has been hard. She said her husband used to work the land, and she was forced to scrape scraps in the market with a broom, earning next to nothing. Her husband became ill, and she took over the land. She had no equipment and no money. At the same time, she heard about Binh Minh through the Women's Union. She likes working and supporting the other women. They share experiences about harvest and children. It is a support network and they take care of her. Ms. Phoung feels optimistic about the future. She is trying to save whenever she can so she can have money in case anything happens. Her daughter now also has a loan. I thanked her for her story. She kept holding my hand. What strikes me about Ms. Phoung and so many other Vietnamese women that I have met here is how hard they work. Sometimes they work from 5am until 11pm every day and they sometimes make VND15,000 - 30,000 a day(roughly US$ 1 - 2 dollars) a day. Something seems to be very wrong with the system....

Dien Bien Phu: Introduction

Photo: Adorable children and several villagers

January 27, Saturday
I am in Dien Bien Phu with Natalie, her boyfriend Jalel, and our translator Trang. I am commencing a very exciting new microfinance start-up project here. I am collaborating with a Vietnamese-American friend, Natalie, to set up a small pilot project in an ethnic minority village in Dien Bien Phu. Dien Bien Phu, famous for the 1954 battle against the French Union marking the end of the French involvement in IndoChina, is a very sensitive area in Vietnam.

The battle was significant beyond the valleys of Dien Bien Phu. Vo Nguyen Giap's victory ended major French involvement in Indochina and led to the accords which partitioned Vietnam into North and South. Eventually, these conditions inspired American involvement in the Vietnam War. The battle of Điện Biên Phủ is often described as a great victory for a Southeast Asian nation over a modern Western (i.e. colonial) power.

Dien Bien Phu's proximity to the Laos border makes it a priority area to protect from invasion. Since 1975, the government has funneled money and people to build up this city. Dien Bien Phu is comprised of several ethnic minority populations such as the Black Thai, Khomu, Hmong, Tay, Dao Ha Nhi (the majority of those names are in Vietnamese but I am not fluent enough to translate them for you).

Action Aid runs a microfinance project in five villages in Dien Bien Phu. Our involvement began when the old coordinator of this project contacted Natalie’s mother suggesting that this program and this region could use more financing and support to improve the efficiency of their program. The current Action Aid project is being run by the Women’s Union. When meeting with the Women’s Union, we were told about several villages that are very poor where there is very little access to loans. We decided that we would like to start working in a village that is very poor where there are currently no other microfinance operators and very little access to credit. As we did not have the necessary approvals with the government to visit these villages during the weekend (more on the Red TAPE later!), we will come back to perform a poverty assessment survey to better understand the villagers' living conditions and needs. The village we are targeting has 1,000 households and 650 members in the women’s union. The project is small scale (potentially 200-500 loans) but if it runs well, there is the chance to expand the model to surrounding villages and provinces. Nat has raised money from US investors and I plan to allocate the first allocation from the money I have raised from the US donors to fund this project. Here are some pictures that Nat took of some villages in this area.

Hanoi: Binh Minh's annual party

This morning, I went to Dong Anh 930km north of Hanoi) to attend our local partner Binh Minh’s annual party for its clients. The party was held in an auditorium in Dong Anh (a province 40km north of Hanoi where Binh Minh currently operates) and there were 1,000 clients celebrating the success of the program . Binh Minh was giving out gifts to the clients.
I never did figure out what were in those boxes! But the animators did think it was funny to invite me on stage several times to accounce the names of the winners. Of course, I would just mutiliate their names with my terrible toned Vietnamese which was evidently very funny!?

Binh Minh currently has 3,600 clients as of December 2006. EDM would like to help Binh Minh achieve 15,000 clients by 2010. While we are still negotiating our partnership, EDM intends to give technical support and provide loan capital to Binh Minh during the course of 2007 in order to facilitate Binh Minh’s expansion (see blog entry: Introduction) to understand the benefits of a partnersip with local operators). During the year, we will also be preparing for an individual loan pilot project, which will be launched once Binh Minh has achieved financial sustainability (likely January 2008). The idea behind such a project is that there is very limited access to microfinance loans for poor individuals beyond the state bank loans for the poor. While the state bank loans have very low interest rates, they are not very attractive to the poorer populations as the repayments are annual and the borrowers can not always get a second loan after the first loan. It is very hard for a small petty trader to pay back a lump sum at one time; weekly repayment schedules are much more user friendly as the client can pay back the loan over time and can then take out a new loan to continue to support their business. There are only a few NGOs or microfinance operators offering such products but the majority of the products are offered to groups of borrowers (group solidarity methodology). Again, market vendors and petty traders do not necessarily want to join a group of their competitors to borrow money, nor do they want to be responsible for their group members default (as is the case for group solidarity methodology).

Hanoi: Brainstorming The Premise

After 2 months in Vietnam, I am starting to gain a better understanding of how things work here. I came here with the intention of starting up a microfinance project, without knowing how or where to begin. I have spent the first two months learning about the microfinance environment in Vietnam as well as meeting people who could help me set up a new project here. I am still in the ‘envisioning stage’ trying to see how I can make the most impact here – what projects work well, what doesn’t work here, what type of support do the microfinance organizations need, what type of methodology may work well here, how can we be innovative using local resources? Working here is not easy and it is very important to understand how to do things and maybe more importantly, to have the right contacts and strategies. I am currently trying to put together a proposal outlining EDM’s and my activity over the next couple of years. While I am still brainstorming, I envision several sorts of activities. Initially, I intend to support a local microfinance institution named Binh Minh by providing technical support and loan capital and by launching an individual loan pilot project in Hanoi and surrounding regions. At this time, I am also brainstorming the establishment of an innovative job creation project for larger sized entrepreneurs coupled with a vocation training center (more on this later...). As I came here with the intention to start up microfinance activities, I am also very excited about a new microfinance project that I am starting in a very poor ethnic village in Dien Bien Phu.

Hanoi: A little bit of due dili in the markets

Photo: Kat with a potential client in Hanoi markets; Kat with Mr. Duc, Binh Minh credit officer, and potential client in Hanoi market

In order to be able to support microfinance initiatives, it's really important to get a better sense of the economics of our clients' business. So for instance, if our goal is to disburse individual loans to market vendors, it is important to understand how the market vendors' business works: what's the average inventory, what's the turnover, how much do vegetables cost, and how much do vegetables sell for? What is the seasonality, what are the daily margins and profits....Sometimes, the market vendors purchase all of their inventory on credit in the morning from money lenders and the vendors must repay the money lenders at 120% at 4pm the same day. So let us take the example of Ms. Lan. If Ms. Lan purchases $10.00 of vegetables (taking $10 credit), she must repay the money lender $12 later the same day. If she were able to sell the vegetables for $12, she has lost her margin. The money lenders are sometimes called 10:12 men (indicating their interest rates). Often a loan as small as $50 would enable someone like Ms. Lan to purchase her inventory for the entire week, avoid the money lender, and make a nice little profit to expand her business....I must be careful around the markets because I am surely taking away some of their margins!

I would like to make this note a bit clearer. It is easier for poorer people (those living on less than $2 a day) to pay back loans in small installments over the period of the loan as opposed to paying back the loan in one lump sum at the end of the loan. Actually, it is hard for very poor people to pay all of the loan back at the end of the loan. A lump sum repayment plan is not a good product for poor people as it is hard for them to have that much money at one time. It is easier for poorer people to pay back the loan gradually over time, say with weekly repayments of the loan (these are called principal payments). The borrower will be responible for paying back the principal loan as well as paying interest. Let us use the example of Ms. Lan again. Ms. Lan has several different options. She can take out a $10 loan and repay it the same day from a money lender, generally paying back the money lender $12. Ms. Lan can take out a $100 loan from the State Bank for the Poor. She would have to pay interest payments (generally 12%, so $12 for the year) and the loan principle in one years time. It is hard for Ms. Lan to ever have $100 on hand. Her rate of potentially defaulting is quite high. A third option would be for Ms. Lan to take out a loan from a microfinance organisation (for instance, Entrepreneurs du Monde). She would pay weekly interest payments of 25 cents (approx. 15%, or $15 a year) and weekly principal payment of $2. After one year of doing this, her loan is repaid and she can get a new loan. She does not have to worry about having $100 on hand. Also, she can use the profits from the business to pay the weekly repayments.

Hanoi: A day in the life of a credit officer

Photo: (left to right) Credit Officer, Credit Officer, Ms. Tuyet and Kat

Photo: Group leader paying weekly repayments and credit officer recording transaction

Like most service related companies, microfinance organisations depend heavily on their staff. Credit officers are responsible for conducting the loan transactions with the clients and for ensuring reliable book-keeping. A Branch office (or field staff office) often consists of one branch manager and two to four credit officers. An average day for a credit officer may consist of preparing the ledger books and cash disbursements in the morning, conducting several group collection meetings at the clients home, disbursing loans to new clients in the afternoon, and recording the transactions in the ledger in the evening. The credit officers may have as many as 400 clients. The credit officers are often from the same neighborhoods as the clients.

Hanoi: Introducing our local partner: Binh Minh

Ms. Tuyet Credit officers recording loan activities at Branch No. 2

Binh Minh was established by Save The Children United States (‘SCUS’) in 2004. Binh Minh

aims to become one of the leading financially sustainable institutions in Vietnam improving the lives of women and low-income households by providing suitable, convenient and friendly microfinance projects by professional staff. The dynamic force behind Binh Minh is Ms. Dinh Tuyet, a young Vietnamese woman who left her position at SCUS to serve as Director of Binh Minh. Ms. Tuyet has recruited a dynamic, young, entrepreneurial and devoted staff of 20 people to handle Binh Minh’s daily operations. Binh Minh currently operates in Dong Anh, a semi-urban province approximately 40km north of Hanoi city center. Binh Minh operates using a group methodology, lending to individual clients, utilizing 5 to 9 members per group. The groups are generally self-selected by the members (or by WU’s cadre) and serve as the ultimate guarantor for each member (‘social collateral’). This means that if one member defaults, the other members repay the defaulted loan before they can continue the loan cycle. The social/group pressure often leads to the high repayment rates (more on the pros/cons of individual vs group lending methodology later..>!) Repayments are collected weekly from the group leader by the credit officer.
Highly regarded as convenient, friendly, and professional, Binh Minh provides financial services at a grassroots level in villages, thereby reducing the cost and time associated with traveling to mainstream banks. Binh Minh offers loans with small, weekly repayments corresponding to cash flows. As the mainstream banks often only offer loans repayable in a lump sum after a one year timeframe, the weekly repayment offers the client a much more flexible adapted product.

Ho Chi Minh City: Introduction to Vietnam

Slums in Ho Chi Minh City

In June 2006, I spent three weeks in Vietnam with Entrepreneurs du Monde’s (EDM) Director and Founder, Franck Renaudin. We met with the key microfinance operators in Hanoi and HCMC as well as with select international organizations. While credit for the poor is currently being offered by several microfinance operators as well as by the Vietnam Bank for Social Policies (‘SPB’), we found the demand for credit to be quite extraordinary and the market to be underserved in terms of complementary training services and savings products. When operating in Vietnam, international non-governmental organizations (‘INGOs’) must work with local mass organizations (e.g. Women’s Union, Labor Federation, People’s Committee). The most effective strategy for an INGO is to set up a partnership to work directly through a local Vietnamese operator. It is critical to find a strong local partner that has a good relationship with the mass organizations and the government at the district and provincial level. Therefore, our first challenge is to establish a partnership with an effective Vietnamese microfinance organization that upholds the same social mission as EDM. During our preliminary evaluation visit in June, Franck and I were both extremely impressed with a particular Vietnamese microfinance operator called Binh Minh Community Development Consultancy Company (‘Binh Minh’, ‘Local Partner’).