El Naranjo
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The development of the microfinance solution Humanos created in December 2015 by researching the community of El Naranjo, Nicaragua.
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El Naranjo
- 1. Microfinance E l N a r a n j o , N i c a r a g u a Humanos | Global Brigades | 2015
- 4. Empathize
- 7. Income POOR Coffee labour MIDDLE INCOME Land ownership + Small supplemental jobs “RICH” Land ownership & employment + Secondary job OR Salaried job
- 10. Financial Literacy Perception of income flow Purpose of loans Saving money in beans
- 11. Budgeting for yearly expenses Planned borrowing & investing Bank shopping & comparison Financial Literacy
- 13. Caritas TRUST SUCCESS FACTOR BARRIER TO ACCESS
- 14. Insight Summary FEAR LACK OF KNOWLEDGE ACCESS TRUST SOCIAL STATUS Insight SummaryBarriers to Savings INABILITY TO SAVE WEAK FINANCIAL CULTURE Barriers to Borrowing
- 15. Define & Ideate
- 16. USER + NEED + INSIGHT problem statement point of view
- 18. 33-year-old father 3 children Seasonal harvest work Carlos Stability (to make ends meet) Security (in choices and risk) Wants empowerment, self-confidence and dignified life for him & family Feels he has everything to lose, not something to gain USER NEEDS INSIGHT
- 19. Carlos I need help, but is there anyone I can trust to get help?
- 20. 45-year-old father 4 children Middle class Steady work Pedro Stability & security Ease of mind about missed opportunities Worried about losing his hard-earned accomplishments Proud, but insecure that he hasn’t achieved all that life has to offer yet USER NEEDS INSIGHT
- 21. Pedro Have I done everything I can for my family?
- 22. How Might We…? …broaden Pedro’s scope of opportunities while making sure he doesn’t lose any of his hard earned work – building a home and family and life? …give Carlos the stability and security he needs without him feeling he has to risk losing everything?
- 24. Final Solution
- 36. Prototype & Test
- 40. What worked? What could be improved? Questions? Ideas! What about… - Confusion with multiple services - Trouble with conceptualizing charlas and community bank - Need clarification on who is in charge - Pigs are too difficult to raise and have low turnaround time - Possibility of chickens being eaten - Need to clarify who is in charge and ensure it someone trustworthy - Discomfort with group loans - Chickens are easier to raise and have a quick turnaround time - Baking workshops could turn into a bakery that will bring money into the community - Trade school, especially with skills for both men and women - Benefits of charlas - Benefits of bank in the community (higher interest rate OK)
- 42. One more thing…
- 43. Trust
- 45. Yes, a co-operative is needed. This meets functional needs for financial inclusion. to make the co-operative flourish as a sustainable community solution, we need to meet deeper, psychological needs around trust. This begins with a community center. And,
- 47. Thank you, for all that you do.
Hinweis der Redaktion
- Empathize (Stami) Define & Ideate (Matt) Prototype & Test (Justina) Final Solution (Pablo) Final Words (Niels) 45 mins?
- We had an amazing, life-changing week in Nicaragua, thanks to Global Brigades. Although working under the Microfinance umbrella, we set out to put aside all agendas and assumptions to get to the heart of El Naranjo. How did we do this? We employed human-centered design.
- What is human-centered design?
- EMPATHIZE Empathy is the centerpiece of a human-centered design process. The Empathize mode is the work you do to understand people, within the context of your design challenge. It is your effort to understand the way they do things and why, their physical and emotional needs, how they think about world, and what is meaningful to them. Empathy is the foundation of a human-centered design process. To empathize, we: Understood. Learned more about user context through desk and external research. Observed. Viewed users and their behaviour in the context of their lives. Engaged. Interacted with and interviewed users through both schedule and short intercept encounters. Immersed. Experienced what the user experiences
- Observation and Inference The key point of insight is digging beneath what is easily observed. During our interviews, people communicated to us through words and body language. This external observation helped us skim the surface, but the real insights came from our efforts to dig deeper with the question WHY. WHY did they say that? WHY did they do that? WHY do they live like that? WHY do they feel this way? We ask these questions because
- The insights we gained demonstrated differences in attributes between the HAVES and the HAVE NOTS. Differences in: Income Ambition Financial literacy Our study of these differences led us to insights about financial inclusion in El Naranjo.
- 3 levels of income- POOR, MIDDLE INCOME, RICH Land ownership: usually owns land for farming or animals; farms the land themselves and may hire extra help Small supplemental jobs: secondary jobs at a smaller, less stable level Secondary jobs: security guard, repair, machine service, sewing, baking bread, making cheese, pulperia Salaried jobs: Costa Rica, teaching, construction, NGO, Global Brigades INSIGHT Rich have diversified income stream and diversified risk, less vulnerable
- Money flow in agriculture is not stable, so understanding and budgeting finances is crucial to maintain stability at home. Alternating income Dependent on environment Prices change
- There are two types of people, those who: SURVIVE: Save money and build a house (at the same time). Once built, stop saving money and spend on necessities/consumption as money flows in. Continue adding parts and pieces to the house if there is extra money. GROW: Save money and build a house (at the same time). Once built, continue the saving money momentum and use towards other investments- buying machinery, land, labour, further education for kids, animals, etc. INSIGHT: the gap exists in mindset- GROW people have a long-term mindset, SURVIVE people have a short-term mindset
- This need for financial literacy draws out differences in the community. UNEDUCATED Assume that $ income at a frequent rate is always < than $$$ lump sum Require loans from family/friends or even banks to cover necessities; unexpected loans Saving money in beans, selling only when necessary
- EDUCATED Budget enough to cover yearly expenses Plan ahead for when a loan will be required, for harvest or other investment “I plan on getting a loan in the 3rd month to prepare for planting on my land”
- Community issues caused by external factors affecting everyone Agriculture No crop rotation No irrigation system Drought in the past 3 years Transportation Unreliable Costly Chicken Mourenia disease Not enough job opportunities
- We decided it would be important to interview a local micro-financing institution to see how the lending process was managed from their end. We made this decision once we realized that several families were aware of the different microfinance institutions available but for varied reasons they were not interested in taking loans. We also found that other few families had indeed taken a loan from a microfinance institution. However, the information we were getting regarding interest rates, terms, collateral and group requirements was varied and at time incoherent. We had to go to the source. CARITAS have a rigorous selection process centred around trust Have a lean record Must be a local community member Group loan model of 3 or 5 Have a conversation with Carita’s representative, where he is approved (used to measure trust) Have a good reputation from the perspective of community members Loose collateral requirement (rarely claim on default and not always proportional to the loan) STRENGTHS 4% default rate High accessibility through low interest rates GAPS People are unable to form loan groups (no trust!) Collateral requirement prevents accessibility for the poorest of the poor INSIGHT Trust helps them have low default rates, but trust is a barrier Traditional loan models don’t reach the poorest of the poor Conclude that trust as a barrier is much greater than interest rate or size of fund as a barrier
- ORDER OF REVEAL Trust Lack of knowledge Access Fear Social status Financial culture Inability to save Our study of these differences led us to insights about financial inclusion in El Naranjo. Differences in income, ambition, and financial literacy have shown us the why behind what they do, say, think, and feel. LACK OF KNOWLEDGE No formal education Lack of awareness (options, ROI, process/terms, conditions) Limited business exposure FEAR Losing home Everything I have Dependency Inability to pay back Unknown Uncertainty Consequences Socially Worse off TRUST Myself Self-confidence Self- image Bank Lower power position (information/resource asymmetry) Community Weak solidarity Financial façade SOCIAL STATUS “I am different, not as good as…” Awareness “I can’t move up” “I am poor” ACCESS Physical Time Transportation Financial Fees Deed
- DEFINE: POV, personas IDEATE: How might we?, brainstorming
- What is a POV?
- With these community insights, we have been able to identify differences, mainly in ambition and income. The spread of the community with these two measures shows clusters in Poor + Survive and Middle-Income + Grow. We sought out to define a persona of each category in the next step of design thinking. We intentionally leave out the rich here by focusing on these 2 personas, because we want to focus on their needs at this particular time.
- Carlos, a married 33-year-old with 3 children who only owns a simple house and works seasonally harvesting beans, struggles, to make ends meet to feel empowered and self-confident enough to provide a dignified life for him and his family, but surprisingly for him, taking a risk to achieve in life means that he has everything to lose instead of something to gain.
- Pedro, 45-year-old father of 4 children is a very proud, self-made man with a steady tradesman job as well as a plot of agricultural land inherited from his father. He succeeds in life by trusting himself more than he trusts others. He feels he lacks knowledge, thus he worries that he may be missing opportunities that will secure and sustain growth of what he has already achieved.
- How might we? is the design challenge. “How might we broaden Pedro’s scope of opportunities while making sure he doesn’t lose any of his hard earned work – building a home and family and life?” “How might we give Carlos the stability and security he needs without him feeling he has to risk losing everything?” We then generate several How Might We statements that will define the scope of our brainstorming. These HMW questions directly address the persona’s needs and insights, challenging the problem from different angles. We pick one HMW question, and at this point, we begin our brainstorming session. Using our post-its, we start sharing ideas with our team, writing them down, and posting them on the wall. At this point in the stage, we are focused on being creative and generating a lot of ideas - we stay open and don’t worry about how realistic the ideas are yet.
- Pedro and Carlos’ prototype came together under one roof to create our final solution. It will be called a Cooperative or “Cooperativa” for legal reasons as well as a better understanding of ownership among the community. WHY Bring community together to tackle the trust issues Get people working together for collective growth The physical presence will be a reinforcement of the notion of community HOW The building will be manually built by the community Funded by GB and Humanos donation UNKNOWNS Will people actually go to the building to enjoy the company of others? What is the incentive to “hang out” there?
- Under this cooperative, there are 4 main services: Trade school Chicken loan program Community bank Financial chats (charlas)
- WHY Provide families with the opportunity to learn new professions Tool to build a better life Help the community learn together and do business together HOW Work individually or collaboratively to open a business Train people to produce goods for selling, not just consuming Top workshops we identified Baking Tailoring Carpentry Possibly leveraged to form relationships with local colleges where students can provide the training UNKNOWNS Who will provide the training? Length of training program?
- WHY A vehicle for GB to train community members and smoothly introduce key principles of borrowing, saving, and long-term mindsets/long-term financial planning to the poorest people in the community An education through the use of tangible assets (chickens) to increase interest, attention, and effort If these principles were introduced with no context that community members could relate to (chickens), the effectiveness of the program would be jeopardized Attractive program as it is perceived as a great opportunity to get chickens for a low price on convenient terms (human desirability) HOW Selection Anyone in the community can apply, however the families with the lowest incomes should be the focus of the program Special option offered to the poorest families where they will receive food & money every 3 months as an incentive to prevent eating the chicken Distribution: All the families selected to participate will meet at the community center to meet other families involved and to receive 10-20 hens depending on needs & space 1 rooster Best practices on raising chickens and preventing diseases Logistics Hens to lay eggs, incubate eggs, and raise chicken in order to sell chicken and increase number of hens Once hens are sold, community members have to pay back in cash the initial cost of the chickens Remaining profit should be reinvested into buying more hens/feed and a small amount should be saved at the cooperative Terms 0% interest Collateral for the loan, such as land title, electronics, or other animals Coaching A GB rep will come every 2-3 months to make sure things are okay, show support, and reinforce the concepts of long-term investment, goal setting and the objective of the chicken program (financial growth and stability, not personal consumption) Repetition is essential to achieve change of mindset UNKNOWNS Will require the help of a specialist in chicken, specifically in terms of laying eggs, growth cycle, type of chicken, etc. How to ensure participants of the program remain committed if we are not asking them to pay an up front amount (like 10% the cost of the hens) Potential answer: build commitment through accountability to other families, charlas training, and GB support
- Revenues Repaying the original cost of chickens in cash Buy more hens Save money in savings account (intro community bank)
- WHY To meet dire needs for financial resources To provide a secure holdings place for savings HOW Cooperative will offer loans to anyone who needs them as well as the option to save money The community should be brought in to discuss the main purposes of the cooperative. The more collaborative the process, the higher the chances of adoption and success. Loan terms Begin with individual loans, maybe introduce group loans as community trust increases Suggested interest rate of 3.5% Collateral of any asset type Customized & mandatory financial training program Savings terms Interest rate higher than inflation rate, comparable to banks, and provide a good loan : savings rate for business sustainability Communicated and encouraged in conjunction with charlas and chicken loan program ISSUES Process for electing executives for administration Length of service for administrators Process for making key decisions such as setting of interest rates for borrowing and saving, who qualifies for special programs, how to deal with default, etc.
- WHY To meet dire needs for financial resources To provide a secure holdings place for savings HOW Cooperative will offer loans to anyone who needs them as well as the option to save money The community should be brought in to discuss the main purposes of the cooperative. The more collaborative the process, the higher the chances of adoption and success. Loan terms Begin with individual loans, maybe introduce group loans as community trust increases Suggested interest rate of 3.5% Collateral of any asset type Customized & mandatory financial training program Savings terms Interest rate higher than inflation rate, comparable to banks, and provide a good loan : savings rate for business sustainability Communicated and encouraged in conjunction with charlas and chicken loan program ISSUES Process for electing executives for administration Length of service for administrators Process for making key decisions such as setting of interest rates for borrowing and saving, who qualifies for special programs, how to deal with default, etc.
- WHY Builds a basic understanding of personal, farming, and business finances to help with financial stability Builds confidence in financial matters, with regards to knowledge, taking out loans, and saving money HOW Mandatory for anyone taking out a loan and anyone participating in the chicken program The charlas should be tailored and specific Borrowing Principal Interest rate Terms Collateral Benefits of borrowing other than necessities, making ends meet (like long-term investments) Businesses Assets (chicken, pig, sewing machine, etc.) Return on asset Budget allocation Thinking beyond the short term Savings Return on savings Concept of shareholding Safety of bank How to save money in Cordobas as opposed to harvest (community members tend to keep their saving in beans, only selling when necessary) UNKNOWNS Lengths of charlas Number of workshops Taught by whom (suggestion: local university students) Evaluating charlas effectiveness Monitoring results, ie change in behaviour
- Borrowing Saving Business
- We came up with prototypes for each persona in 2 groups. For each prototype, we had to meet 3 important criteria: Human desirability: will people want to use it? Technical feasibility: is it realistic and possible to implement? Business viability: is it affordable and sustainable? We prototyped multiple times, and every prototype we tested in the community. We introduced it to different families in El Naranjo, specifically ones that fit the persona, and listened to their feedback.
- WHAT Pig program WHY Provide a chance for Carlos to become more financially independent and less vulnerable to unstable income and part-time jobs Provides access to banking and financial culture through a first real life small business experience HOW Participant selection: committee in charge selects eligible participants based on criteria Piglet distribution & selling: participants given a piglet loan; tasked to grow the pig and expected to sell in one year, practicing business and negotiating; use profit to repay the 10% due from principal; remaining profit will be used to reinvest in other piglets Coaching: GB personnel will meet participant every months to check on pigs and provide technique and knowledge to maximize outcomes Financial incentive: financial aid to support cost of supporting the pig to avoid churn during early stages of the program and protect most vulnerable participants
- WHAT Community center, a place where people from El Naranjo could gather and benefit from a number of services WHY Help the community come together, build a sense of solidarity and meet their needs HOW Built by the community for stronger sense of unity 5 main services Information center: for market, weather, bank/FI information Financial training: workshops around financial literacy, budgeting, and negotiation; suggestion of local university students + GB volunteers Agriculture training: building skills, techniques, products, and other advice; addressing drought Trade school: learn a new skill for income diversity; taught by community members or volunteers; hope to create micro-enterprises Community bank: loans and savings for the community; run by elected members; pre-requisite financial training to gain access to the services; group loan of 2 or 3 with 1% interest rate and collateral of any type of asset
- NEW Removed some accessory services and added carpenter & mechanics as options for trade school Took out pre-requisite financial training before using bank services, but each loan program will require mandatory training Regular loans Group loan of 2 or 3 Interest rate of 3.5% Collateral of any asset type Customized financial training program Chicken loan Selection: open to all community members, but financial aid provided to selected people Terms: 9 hens and 1 rooster loan; chicken can deliver up to 17 eggs or more; after growing cycle (6-8 months), pay loan back by giving back the chicken Selling & reinvesting: sell fully-grown chicken in nearby market and pay back the loan by giving back 10 chickens to the community center; continue investing in more chicken Coaching: GB staff will monitor process on a regular basis and make sure chicken aren’t eaten; advisory services to people having trouble Financial incentive: financial aid for selected participants (people who would rather consume chicken) to support the cost of maintaining animal, mostly food, and prevent eating/selling the chicken
- It’s a common theme. Can you tell?
- We recognize a strong desire to implement the well-run microfinance program from Honduras in Nicaragua. However, our first-hand experience in both countries has demonstrated a significant culture difference. Honduras – collaborative, hospitable, and a strong sense of community Nicaragua – small in-groups, cautious around out-group, and a strong sense of individualism
- How a community center meets the deepest need of trust… in others, in self, in the co-operative. TRUST IN OTHERS is accomplished through a community center model, where people meet and collaborate and build relationships. TRUST IN SELF is accomplished through financial literacy and skills training provided through a community center. TRUST IN THE CO-OPERATIVE is only accomplished once trust in others and trust in self are established; once people feel they can trust the community to administer something as delicate as their money and trust themselves to borrow and save.