Advice from People Smarter than Me

Last week I posed a question in the form of a blog post: What advice, if any, can be given to those of us interested in donating to small, unproven charities without the resources to evaluate their programs? I was unable to answer my own question, so I reached out to people smarter than myself to help me find out what to do.

Looking through the responses I got, I realized I made two false assumptions that led me to pose this question in the first place: One, that small charities do not have the capacity to evaluate in any way, and two, small charities inherently need more resources than large charities.

Saundra Schimmelpfennig, over at Good Intentions Are Not Enough and Charity Rater, made the point that it would be absolutely ridiculous if a non-profit did not evaluate their programs even on a minor scale (all of the following quotes are from email exchanges):

Even lacking the money to do a large scale assessment of their [the charity's] impact, they should still be regularly assessing their work. This should include regular chances for beneficiaries/recipients to rate the assistance they receive and provide suggestions for improving their work. This could be something as simple as a questionnaire sent to the parents at the end of an after school program or feedback from group discussions.

Holden Karnofsky at GiveWell agreed that small-size does not necessarily mean charities aren't able to assess their projects. He pointed our that Village Reach is their top-rated charity but only has a budget of $1 million. He said that "[i]t's rare for any charity to have demonstrated impact, but I'm not sure size is the major factor there." So small and unproven are not synonymous. A large charity can be unproven, just as a small charity can be proven.

Schimmelpfennig also noted the importance of creating a needs assessment before expanding or creating programs to ensure there is no unnecessary duplication of work. This seems essential to any organization regardless of size and should be able to be done relatively low cost. The resulting assessment could serve as some proof that the organization's work is needed.

Karnofsky also called out my assumption that a donation matters more at a small charity. Some small charities are over funded, while some larger, established charities could use more funding for program expansion. He also made the distinction between a donation mattering more "to an organization" versus "to the people you're ultimately trying to help." Stop TB, another one of their top-rated charities, is a large organization, but he said your donation will go a long way in helping the communities the organization serves. This distinction isn't something I had thought of before. I think looking at how far a donation will go in a community is a better starting point rather than how far it will go in supporting an organization. (Although don't get sucked into being concerned about an organization's overhead.) 

So, after analyzing these two assumptions, I realized that criteria for evaluating small non-profits is the same as for any non-profit: Look for efficiency, transparency and effectiveness. Organizations like GiveWell, GuideStar or Charity Navigator are great places to start evaluating, but they don't cover everything. To evaluate on your own, use things like the Charity Rater (which I erroneously stated was only for aid organizations in the previous post; it has now been updated and is applicable to all non-profits) or New Philanthropy Capital's "How I'd Analyse a Charity in Two Hours" (pointed out to me by Sean at Tactical Philanthropy). Also GiveWell's Giving 101 is a great guide.

Commentor Mark and Karnofsky at GiveWell both brought up the idea of venture capital and the different stages of growth for non-profits, which I will attempt to tackle in another post.

Which one of these things is not like the other?

It's time to play a fun new game! It's called "Guess which one of these passages opened up a recent New York Times article on the AIDS epidemic in Africa?"

Is it #1?:

On the grounds of Uganda's biggest AIDS clinic, Moses Nsubuga, a D.J. known as Supercharger, rehearsed his troupe, the Stigmaless Band, composed entirely of teenagers on AIDS drugs.

One of their songs is “America, Thank You So Much.”

Karen Morgan, an American who runs a laboratory at this clinic, said: “Just today, a patient came up to me in the parking lot and said, ‘Thank you, American.’ I said, ‘For what?’ He said ‘For my medicine. You care if I live or die.’"

This once strong support from the American government and international organizations for AIDS initiatives has been waning in recent years. Beleaguered by the high cost of treating and combating the epidemic, donors have started to focus on child killers like stillbirth, pneumonia, diarrhea, malaria, measles and tetanus. Cures for those diseases--which kill significantly more people than the AIDS epidemic--are more cost effective, ranging from $1 to $10.

 Or is it #2?:

On the grounds of Uganda’s biggest AIDS clinic, Dinavance Kamukama sits under a tree and weeps.

Her disease is probably quite advanced: her kidneys are failing and she is so weak she can barely walk. Leaving her young daughter with family, she rode a bus four hours to the hospital where her cousin Allen Bamurekye, born infected, both works and gets the drugs that keep her alive.

But there are no drugs for Ms. Kamukama. As is happening in other clinics in Kampala, all new patients go on a waiting list. A slot opens when a patient dies.

“So many people are being supported by America,” Ms. Kamukama, 28, says mournfully. “Can they not help me as well?”

The answer increasingly is no. Uganda is the first and most obvious example of how the war on global AIDS is falling apart.

If you guessed #2, you're right! Unfortunately.

The first one, written by myself, uses information and phrases, almost verbatim, taken from the article. (Excluding my shameless editorial cut-away phrase "which kill significantly more people than the AIDS epidemic," which is true.) The second, actual opening, follows the guidelines of "How to Write About Poor People" and "How to Write About Africa" as if they weren't a joke. The juxtaposition of these two alternate  articles show how the media portray the continent as dark and troubled, while ignoring or burying any positive aspects of a story.

Now, I'm not trying to say that the AIDS crisis is anything but, or that problems aren't getting worse (and I certainly wouldn't want people to think that I support a Bush foreign-policy initiative). I just mostly feel bad for the Ugandan woman, Dinavance Kamukama, who was caught on probably the worst day of her life and exploited to draw readers into a story, only to have her identity dropped a few lines later and her image transformed into a representation of all African women through phrases like "pregnant women and young mothers like Ms. Kamukama" or "[f]amily members like Ms. Kamukama."

The outlook of the AIDS epidemic is surely bleak, but there is no reason to make the picture any worse. Both of these passages deliver the same information--funding is shifting--but the first goes against stereotypes while the second reinforces them. Readers might want the latter, but I'm hoping we'll put up enough of a fight that that kind of language will go the way of Joseph Conrad.

Small and Effective

Over this past year working for a small non-profit, I've been thinking about how someone could reasonably make a social investment in a small organization without much capacity to prove its impact, or without a established history to show the changes its made in a community. It's easy to make a donation to one of these smaller organizations, but harder to see how your donation (and by extension, the organization) is making a difference.

To do this, one needs data. Most small organizations do not have the resources to evaluate, making it difficult to know if you will ever see any returns on your social investment. GiveWell lays out some pretty good criteria that need to be met before a donor should donate to a small, unproven non-profit (abbreviated here):

1. The donor has significant experience with, and/or knowledge regarding, the nonprofit’s client base and the area within which it’s working...
2. The donor has reviewed whatever information is available about past similar projects and about the assumptions underlying this project. If similar, past projects have failed, the donor has a clear sense of why they failed and what about the current project may overcome those obstacles.
3. The donor has a good deal of confidence in the people running the nonprofit, either because s/he know them personally or because s/he has an excellent sense for their previous work and past accomplishments...
4. The donor feels that the organization is doing whatever it reasonably can to measure its own impact over time. The donor is confident that– within a reasonable time frame – if the project succeeds, it will be able to prove its success; if it fails, it will see this and it will fold. Until impact is demonstrated, there is no need for the kind of scale that comes with taking many donations from casual donors... [Emphasis in the original]

As you can see from the last sentence, this is not advice for the casual donor. Following these steps is a lot of work for someone who only wants to give a small donation. For the microphilanthropist social investors, it might make more sense to donate to a larger charity with proven impact, rather than risk wasting our money on a small non-profit with nice stories but not a lot of data to back up the smiling faces on its website.

However, there are many non-profits who have made it out of the initial stages of growth, but haven't made it to the level where rigorous impact evaluation is possible. These organizations have been around for a while, have somewhat sustainable funding sources, but are constantly looking for new funding to ease the financial tension that comes with being a small non-profit. For these organizations, small contributions can go a lot further than at larger organizations which aren't as strapped for cash. It is also these small organizations that do not have the resources to prove their impact as well as the larger ones, or decide not to spend time on rigorous evaluation because it will disrupt the flow of services. Unfortunately, because of this, small organizations can usually only offer potential donors nice stories and smiling faces.

So, I don't really know how to offer advice to those who want to invest in a small organization while also ensuring whatever organization chosen will have a real impact on the population it serves. One way goes off of GiveWell's point #3: Actually knowing the individuals who work there and having an extensive knowledge of how the organization works. Another piece of advice I can think of is to use Charity Rater, which guides you through the evaluation process for a non-profit you choose. Besides those, as much as I hate to admit it, all I can come up with is to find one you have a good feeling about and support capacity building efforts to help it prove its impacts.

Each of these options has drawbacks--most casual donors are not intimately involved in a non-profit, Charity Rater is set up to evaluate aid organizations and (most significantly) a small donation can't go far when it comes to supporting evaluation techniques. But I'm hesitant to admit defeat and say that these are the only options out there for those of us interested in choosing a small, effective organization, but without a lot of time or money to put into our investments. There has got to be more guidance out there, I just can't think of them.

Thoughts?

Thanks to Mark for passing along this post idea.

The Armchair Microfinancist Moves Home

A few weeks ago, the New York Times brought some disturbing news into the homes of armchair microfinancists across the country. Then, the Washington Post delivered another shock to the traditional microfinance narrative: Microfinance was coming to the United States.

Well, actually, the article reported on Grameen America expanding into the nation's capital on top of its operations in New York and Omaha. Also, Kiva started loaning to US entrepreneurs a few years ago and other person-to-person loaning sites have US options. One focuses exclusively on people form the US. And if you've read Muhammad Yunus' autobiography, Banker to the Poor, he talks about his partnership with Bill and Hillary Clinton back when Bill was governor of Arkansas.

So, this news isn't that shocking. Microfinance has been in the US for a long time. But even though microfinance has been proven to work domestically, there might still be some lingering questions for the armchair microfinancist.

Besides the person-to-person connection, microfinance is appealing because it doesn't  take a lot of resources on the donor side: Big change can be made from small amounts of money. This might not be the case back home, as $25 cannot go nearly as far in DC as it can in San Ramon, Nicaragua. You typically see about a $200-$800 figure for most loans on Kiva (with some exceptions, to be sure), but the US loans are significantly more, some reaching $10,000. And when comparing purchasing power parities for countries, it's clear that  money in the developing world goes a lot further. On top of this, the poverty in the US is not as extreme as those living on less than $2 a day in the developing world.

But chucking out domestic microfinance opportunities based on this reasoning alone ignores the fundamental purpose of microfinance: Giving credit (or savings) to people who don't have access to it. In a country like the US with a bank every few blocks or so, it may seem like there's a plethora of financial options, but people here are still left out of the domestic financial market.

While working with a microfinance institution in Iowa, I was shocked to learn the poverty levels in my immediate surrounding community. Poweshiek County, where the organization is based, has about a ten percent poverty rate and the state of Iowa overall has about a 11 percent poverty rate. Looking deeper into these numbers, myself and others from the MFI talked with community leaders and learned that people in the county suffered from loan sharking and pay day loans, sometimes paying exorbitant interest rates because they didn't have good enough credit to take out a traditional loan. Others were forced to rent their household appliances like a dishwasher or a dryer at high interest rates because they didn't have the money to buy it and couldn't find someone to make a small loan to help them with the purchase.

At the time, the MFI was focused only on making loans abroad and when this local issue was brought up to the membership, there was some hesitancy at first to expand domestically. Many people cited the issues I outlined above, among others, as a reason to stay focused internationally. (I also hesitated to fully commit to a domestic program for the same reasons.) But then when we were approached formally by several community organizations encouraging us to create a domestic loaning program, we decided to do it. We've already made our first few loans to local community members and the project has been met with great enthusiasm.

These issues of poverty are not limited to rural Iowa. In researching for this post, I learned that the US as a whole has a poverty rate of around 13 percent. I found this shocking. About one in ten Americans lives below the poverty line and many more hover around it. This is the reason that Yunus expanded operations into the US so early on and why other organizations like Accion have domestic programs as well. A focus on global poverty is a good strategy for all the armchair microfinancists out there, but I hope they won't forget the domestic poor in their decisions. The US is not excluded from that globe in "global poverty," after all.

Profit From the Poor

No longer, it seems, is microfinance the go-to feel-good story for the news cycle. The New York Times, which first brought microfinance into the homes of millions Americans, has now torn it a new one.

The article, released last week, exposes the extremely high interest rates of some microfinance institutions. There have been a few deliberations over what this means (and even how accurate the end conclusion is), but the responses to this article, I think, miss the main question it brings up for the average armchair microfiancist: Is it ok to make money off the poor?

Before I get into that question, I will first tell a story. It takes place at a new student activities fair, where I was promoting a campus microfinance group. We had run out of candy, so no one was stopping by our table. I started calling out "Want to give loans to poor people?" to the passers-by, which didn't help the cause much. One bright young mind did wander over and I started to explain to him how microfinance worked. He put down a brochure he'd picked up and said: "I don't want to be a part of this, because I don't think we should put poor people into debt."

I thanked him for his time and moved on to the next potential customer.

While this incident may better highlight activism's general distrust of business and finance, it also raises the question begged by the Times article damning the high interests rates of microfinance institutions: Is it ethical to make profit off of poor people? And if so, how much?

My friend at the activities fair may think any amount of profit is too much, but I think most, when pressed, would disagree. In the case of microfinance, loans with interest may be more effective then no-strings-attached grants.

But there is a line. No one (I hope) wants to extort the poor. He Who Can Do No Harm, Muhammad Yunus, founder of the Grameen Bank, said in the Times article that any MFI charging a interest rate that's more that 10-15% above the cost of raising the loan is too much. Seems fair.

But when analyzed, as Give Well did, this guideline becomes arbitrary. They say that no interest rate is too high, given that the reasoning behind the rates are transparent. Assuming all information is accessible, then loanees should have no problem making the best decision on where to get their money.

Selling necessary goods and services to the poor can only increase their quality of life. If you look at poverty as a deprivation of services or products (for more on this read Development as Freedom), there really should be no limit on how much can be offered to the poor, and therefore, how much profit one can gain from the poor. If the prices aren't affordable (such as in the case of loan sharks), another MFI can just come in and undercut the price, stealing away their customer base and helping out those people who were paying too much. Ah, the beauty of capitalism.

I think my friend at the activities fair still wouldn't buy this (or any) defense of capitalism, but for you, the armchair micofinancist, do not despair over your money-making endeavors. No consumer market should be exempt from profit. And it might even inspire you to get out of your chair and into the field to grab some of that money for your own profit-making, life-saving idea.

                                                                                                       
If you are interested in going a bit further beyond finance and applying the idea of making profit off the poor to products, I would suggest reading Fortune at the Bottom of the Pyramid, which is essentially several case studies of companies that have successfully developed and sold products to the global poor that help improve their lives. (Edit: Whose author, I just learned, recently passed away.) One book I haven't read, but will when the DC Public Library gets its act together, is Africa Rising: How 900 million African consumers offer more than you think. Also, the Acumen Fund blog always has some feel-good stories on this topic.

Satire Roundup Part 2

Or: D.O.S. (Death of Satire)

Edit: Whoops!  I forgot this hilarious video. I don't know where it came from, but if anyone does, please let me know.

Since my last satire roundup, a lot as changed in the market for humorous blog pieces regarding effective philanthropy and aid. William Easterly was attacked for being too "mean spirited" with his satirical pokes at the aid industry. Easterly took the hint and toned down the snark. Because Easterly is the king of satire and I am merely a jester compiling his writings that fall to the ground, this feature may have limited content from here on out. But, fortunately for myself, some satire has gotten through recently and I thought I'd share it with all of you.  Please note that I am not trying to encourage personal attacks or hurt feelings; merely humor.

• Aid Watch's April Fools joke, "Aid agencies announce they will be accountable to independent evaluators; This blog to permanently close"
• One commentor's response to my stab at satire, titled "Big Corporation Does Less than it Could to Save the World." I think mine was better.
• A whole blog devoted to international aid industry satire, which chronicles the misadventures of one organization, Hand Relief International.
• Funny, and unfortunately true: A time line of celebrity relief to Africa.* 
• This list made me think of "How to Write about Africa" and "How to Write about Poor People," (continued here), two pieces so classic I forgot to post them in the last roundup. 

Needless to say, these were all given to me by Aid Watch. Again, Easterly is king and I but a jester.

*On a side note, this list pokes fun at one Kim Kardashian (I didn't know who that was either) for visiting a diamond mine in Botswana and stating: "I used to assume after watching the movie Blood Diamonds
that diamonds were not acceptable to buy from Africa. However, it is the complete opposite!"

While it is misguided of Ms. Kardashian to assume one diamond mine in Africa is as good as all the others, it is equally naive for Mother Jones, the compiler of the list, to imply that one diamond mine in Africa is as bad as all the others. I visited the same diamond mine as Ms. Kardashian and it was nothing like the stereotyped African diamond mine. Diamonds have done a lot to contribute to Botswana's "African Miracle" and people should not be discouraged from purchasing its diamonds. I only hope Ms. Kardashian realizes the difference between Botswana mines and others, and limits her purchases to conflict-free Botswana diamonds.

Kids and Their Science

I may be preempting the Acumen Fund here, but I wanted to pass along this very cool invention from a team of homeschooled kids from New Jersey. They've invented a treadmill-like sorghum and millet thresher for the world's poorest.

Typically, it would take a person (usually a woman) 3-4 hours to thresh the family's daily sorghum or millet consumption.  This extended labor can actually cost the food preparer more calories than she gains from consuming the food. The machine reduces the amount of time spent on threshing to about an hour, saving expended energy.

The kids say this machine can be made for around $100 USD, all from materials that can be found locally. Obviously, $100 USD is a lot for most of the people who will benefit from this, but the team of kids are looking for investors to bring the machine to production. If you have a pile of money around, or know someone who does, let them know.

Thanks to Tom for passing this along to me.