On Empathy

Let’s discuss a topic rarely covered in economics. Feelings!

People across the world have been drenched in emotions as of late. The collective energy resonating through recent GOP debates could have brought Regan back from his grave.
Underemployed college graduates took to the (Wall) Streets of New York City with fervor better spent on their senior theses pleading for the US Government to impose higher taxes on the rich.

much easier than the real world

Although the connection I’m making will take a bit of maneuvering, David Brooks’s recent Op-Ed piece entitled, “The Limits of Empathy,” can explain much of how people can convolute themselves to such petty, close-minded opinions. Of more importance, however, I believe expanding upon his insights on the limits of empathy allows us to move beyond our limitations that keep us from progression.

I’m a fervent believer that without the necessary tools and experiences, people are lacking in the foresight needed to best utilize their time and resources. In a perfect world, game theory could perfectly explain human interactions; people could make decisions based on perfect information and impeccable foresight, giving them the ability to capture all the benefits and internalize all of the externalities of their actions. Unfortunately, that isn’t the case. Although I know the tenth beer will surely put me over the edge (and at $6 a pint, put a dent in my pocketbook), I’ll nevertheless succumb to the tempting whispers of Dionysus.

Ramblings aside, empathy is just one tool at our disposal to keep us from remaining in our comfortable bubbles, ignorant of the interconnectedness of the world we live in today. Having empathy for a friend, a cause, or even a stranger is a necessary step to immersing yourself in their shoes, but self-interest (come on, I’m an economist) always seems to rear its head to prevent action. As Brooks points out, “you may feel the pang for the homeless guy on the other side of the street, but the odds are you are not going to cross the street to give him a dollar.”

If empathy isn’t enough, then what is? I think everyone needs a little shove to reveal that putting ourselves in new, uncomfortable experiences is the only way to grasp the extravagance of issues we face today. For example, an Economist briefing cautions against the unintended consequences of taxing the rich, an externality worth considering when blindly protesting for higher taxes on the rich.

One way in which people and corporations are moving towards a higher understanding is through what many today call “impact investing”. Essentially, impact investing is a form of investment which seeks social returns in addition (or in lieu of) financial returns. For some investors, this is the nudge needed to a better understanding of the world. Although excessive usage of buzzwords is one of my pet peeves, the ideas behind impact investing are nothing to scoff over.

There are many forms of impact investing today. Some of my favorite examples include:

• Acumen Fund – A non-profit venture capital (sounds ironic, doesn’t it?) which employs its talented team and vast amounts of capital to invest in global initiatives which not only seeks financially-accountable but also socially-responsible results. In addition, the stories that the organization recounts inspire thousands of people to take the time to reflect on the world we live in today.
• Grameen Danone – An initiative initially developed to produce cheap yet nutritious yogurt to fight malnutrition. In order to fund the initiative, the Danone Communities Fund was developed so investors to Danone could opt to invest in the cause, knowing they would not receive a financial return on their investments.

what's cheaper than cheap labor? free intern labor!

As for myself, a mixture of an urge to go abroad, an interest in finance, and of course, empathy helped motivate me to immerse myself in Atorkor a Summer ago. While my journey only lasted two months, I believe I took away just as much (if not more) than I contributed to the people I interacted with. Pulling fish nets all day helped me discover how people in developing areas get trapped into their poorly-paying jobs. Interviewing clients showed me that finance wasn’t all about credit-default swaps and derivatives.

I’m by no means advocating for everyone to spend time in a far-away country as a way to gain insight into global issues. I do believe, however, that having empathy is just one step in developing a holistic understanding. Everyone needs a nudge to break through their bubble. What will yours be?

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We’re all awake in a Fake Empire

Here are some statistics from the 2010 U.S. Census to chew on:

• Real median household income in 2010 declined 2.3% compared to 2009.
• America’s poverty rate in 2010 increased for the third consecutive year to 15.1%, up from 14.3% in 2009. This accounts to 46.2 million American citizens. Of note, the poverty line for a family of four in 2010 was $22,314.
• The number of people without health insurance in 2010 rose to 49.9 million, up from 49 million in 2009 (as a percentage of total population, this change is negligible).

Just like in our families, where each generation is expected to exceed the quality of life of the prior, it is disappointing to find ourselves on the decline. In a country where we have access to the world’s most pristine national parks, the most prestigious university, and even some of the cheapest Big Macs, it’s maddening to see median incomes go down, poverty levels increase, and quality of health care to decrease. Given these sobering statistics, the United States can no longer hide behind our Fake Empire consisting of flashy electronics, trendy coffee stores, and hip social networks.

Don’t get me wrong; I am in no way advocating for individuals to give up their iPads and smartphones so the poor can get free handouts. Instead, I’m hoping that illuminating the status quo will help informed individuals to worry about the long-term implications of current trends.

It’s no surprise that the economic recovery since 2008 has been sluggish. Recently, Federal Reserve Chairman Ben Bernanke recently admitted to being surprised at how cautious consumers have been in the recent years as an explanation for America’s anemic economy. As a microfinance practitioner, it’s hard to ignore the similarities between “cautious” American consumers and “risk-averse” microfinance clients that I’ve worked with in the past. In both cases, a lack of adequate income forces people to spend the majority of their disposable income on sustenance. Without enough income to sustain insurance or invest, the poor become tangled in a poverty trap, transforming short-term liquidity issues into long-term structural problems.

These long-term problems bear huge societal costs which everyone will have to pay for. We are already seeing these effects, with skyrocketing health care costs, a push for tax dollars to be spent on short-term job creation instead of sustainable institution building, and strikes of disgruntled workers paralyzing the U.S.’s ability to fund a sustainable future.

Regardless of political opinion, I’m sure we can all agree that having an entire portion of America’s population hindering the country’s ability to recover from the financial crisis and prosper down the road is in no one’s interests. It’s time we conceded that our prosperity comes at a real cost to others in the short run, and to ourselves in the long run.

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“You fool me you can’t get fooled again…” Right?

I’m astounded that the some of the brightest economists in the world are seriously considering “Eurobonds” as a panacea to the European Monetary Union’s (EMU) short-term debt contagion.

In essence, debt-laden countries face higher borrowing costs, since their countries are seen as risker. As a sampling of the financial disparity between Eurozone countries, Greek and Spanish ten-year bonds yield 19.48% and 10.76%, respectively, while German and French ten-year bonds yield a mere 1.88% and 2.71%, respectively.

The idea behind a common Eurobond is that more solvent countries (read: Germany and France) would be able to cover the issued debt, allowing the entire Eurozone to borrow at similar, lower rates on average. The way I see it, a Eurobond would mask the risks of subordinate tranches by packaging them with healthy economies. If it sounds eerily similar to what got us into the Subprime Mortgage Crisis of 2007, you’re absolutely correct.

It’s been a mere four years since the financial crisis, so needless to say, I was just as “dumbfounded” as George W. Bush after reading an Economist article outlining the Eurobond ideas bouncing around the econosphere. Here are several striking similarities that I see between the impending Eurobond and subprime mortgage tranches a decade ago:

• A pooling of variable risks which will lead to indistinct credit ratings down the road
• The default of each subordinate tranche (PIIGS) further increases the financial pressures on the remaining countries
• The Eurobond system is a self-sustaining Ponzi scheme; lower borrowing rates are used to fuel a structurally-deficient EMU (countries within the EMU have relinquished monetary policy to the European Central Bank, which is a huge reason why countries such as Greece has become uncompetitive in recent years).
• The institutions are in place for credit default swaps to further fuel the concentration of risk, just as they did in the sub-prime mortgage crisis.

I have to concede that safety valves have been suggested by supporters of the Eurobond. According to the Economist article, Bruegel, a policy think tank, proposed a 60% debt/GDP limitation for all Eurobond members. If countries surpass the limit, a liquidity premium would be charged on them, essentially creating an incentive for the ugly ducklings to get their feathers in order.

Unfortunately, history has shown that the Eurozone lacks the authority and will to enforce such measures. The Stability and Growth Pact, signed by the 17 member states of the European Union in 1997, stipulated that member states must adhere to an annual budget deficit no higher than 3% of GDP and a national debt lower than 60% of GDP (sound familiar?). Although my college professors would berate me for doing so, I’ll point you to a Wikipedia article which illustrates just how “well” the Eurozone countries are doing at maintaining their Pact.

Needless to say, fiscal austerity is not one of the Eurozone’s strong points. To add fuel to the fire, the EMU’s structure, which forces member countries to relinquish monetary autonomy (no sovereign central banks to control interest rates) will continue to plague the region with a disparity of global competitiveness.

Unlike the financial crisis of 2007, we have the foresight to not expose ourselves to the hidden risks involved with the plethora of financial tools at our disposal today. A Eurobond will indeed sooth the region’s infection in the short-term, but we cannot afford to turn our heads while “financial experts” implement a plan which will guarantee a much larger loss in the future.

LinkedIn: the 21st century’s cure for early onset arthritis

Allow me to step onto my soapbox for a second. For the past four months, I have been counting down the days until the completion of my undergraduate career. With thousands in student loans, along with a desire to get into the world of investing (oh, did I mention becoming an “adult”?), I have written countless cover letters to complement the myriad of resumes I have sent to potential employers.

As an economist, I sympathize with recruiters. Finding a balance between setting the barriers to entry low (which results in a huge inflow of junk resumes) and setting the barriers to entry high (deters qualified people from applying) is key when recruiting new employees.

What I can’t wrap my head around is, though, is the need to enter personal information, which is already present in my cover letter and resume a third time. I cannot bring myself to empathize with recruiters this time, as the unnecessary process of entering data brings no benefits to any party involved.

The current solutions to my personal quarrels with the laborious job application process are dismal at best. One of the most prominent recruitment systems that many companies use has been designed by Taleo. While I am not an expert in the legality of such matters, it seems ridiculous that Taleo’s systems fails to recognize me as a returning applicant after gathering my information from the previous 20 jobs I’ve applied to. It’s almost as if I were reliving 50 First Dates.

Another solution that I’ve come across has been the “upload your resume and it will populate the required fields” method. While I’m marginally impressed that the system is usually able to correctly spell my name in the required field (many humans can’t…), I am usually forced to check through and change many fields even after submitting my resume.

So how does LinkedIn come into all of this? I believe LinkedIn’s recent IPO does not represent an impending tech bubble, nor is its current valuation of $75.05/share is overvalued. Companies need to bring real value to society in order to reap profits. LinkedIn has already been established as the “professional world’s Facebook”. Despite its lofty title, I’ve often found myself neglecting my account, as social networking just isn’t as dynamic in my professional versus personal life. Having said that, I believe LinkedIn’s future prospects is one of the major reasons to be optimistic about its valuation.

As I have noticed, LinkedIn is becoming more than just a networking tool among professionals. I recently used LinkedIn’s job search service for the first time, and found it amazingly easy to find relevant jobs and apply to positions. The personalization aspect of LinkedIn (creating a profile, uploading a picture, etc.) draws its customers back, but the centralization of information when applying to jobs is the kicker.

While cover letters and resumes still need to be sent to employers, gone are the days of incessantly entering personal information which can be already found on the application. I believe this is LinkedIn’s biggest advantage over social networking and job aggregating competitors. As employers continue to flood in to post applications on LinkedIn, applicant will find the process much easier, allowing for a quicker hiring process overall. Furthermore, LinkedIn has already begun to monetize its job search services, by differentiating “premium” accounts and charging for the ability to directly email recruiters. As the company matures, it will surely hone its monetizing techniques to better fit the demand of consumers.

Even if LinkedIn’s future isn’t as rosy as I imagine, accept this as my statement of gratitude to the company. I’ll still probably grow old with arthritis, but it won’t be from the excessive typing of my name and address to potential employers.

The Tale of a Power Struggle in Wisconsin

Let’s set the tone for what’s been happening in Wisconsin as of late:

Wisconsin Governor Scott Walker’s emergency budget repair bill has been at the center of debate for several weeks. While Walker and his supporters affirm that the budget bill is necessary to fix Wisconsin’s $137 million deficit, Representative Hintz’s diatribe on the bill’s supporters exemplifies the problems arising from proposing such a radical change in legislation.

While the 144 page bill has been amended several times with changes in rhetoric and policies, the main disagreement has arisen from the bill’s proposed action against state employees. While all parties involved have agreed that concessions must be made by state workers (such as increasing state payroll contributions towards pensions and health insurance), the main argument has been over the proposed limit on the power of state-employee unions to negotiate contracts and rights.

Although it is clear that the argument over union power is ideological (24 states already either have limits or bans on public-sector unions), I think it’s important to understand the economic benefits both arguments support in contriving an opinion on the subject matter.

First, what are the costs and benefits of allowing state employees to unionize? In general, unions increase the bargaining power of individuals through collectivizing the incentives (higher wages, better benefits, work stability) of individuals. In doing so, unions technically create labor monopolies, as they are able to influence the price and quantity supplied of labor. In terms of costs and benefits, monopolies captures consumer surplus (in this case, the state budget, as the state is “consuming” labor), and also results in a deadweight loss. As a result, union members are able to increase their bargaining power to improve their income at the economic expense of the state.

While economic textbooks may stop its analysis of labor unions at this point, I believe it is equally important to step out of the economist’s utopian society and see why removing unions may not be such a wonderful idea. Although monopolies (labor unions, in our case) usually get a bad rep for the economic costs stated above, it is important to notice that the state acts as a monopsony in terms of demand for public-sector employees. Just as unions increase the bargaining power of labor suppliers, governments are able to influence the price at which they pay for labor.

Even though the argument between unionized laborers and free market adherers has existed for centuries, what sets this instance apart from the others? Institutional change. Scott Walker’s bill, while in theory will decrease the state deficit through removing unions, oversteps its objectives. While both sides agree that pay cuts are tangible possibilities for reducing the deficit, changing the way teachers and other public-sector employees work and negotiate. By proposing this, Walker is essentially trying to change the “rules of the game,” which will change both fundamentally and ideologically how the state of Wisconsin treats its teachers.

A piece written by Paul Krugman likens Walker’s bill as a method of shock therapy. While Naomi Klein highlights several instances where shock therapy has allowed for the quick implementation of institutional change (see “shock therapy” link), this time, the citizens of Wisconsin have seen past Walker’s motivations for his bill.

In the end, budgets need to be balanced, and concessions need to be made. Here’s to the resolution of a sticky subject through (what Representative Hintz calls) a democratic process.

18 Days Later

After 18 days of protest, Egypt finally overthrew its president of 30 years, Hosni Mubarak. Now without getting into grandiose, macro-focused topics such as the implications of a new Egypt on the United States, effects on global oil prices, or the institutions that led to Egypt’s political structure, I find it interesting why Mubarak decided to stay in office for so long in light of all the protests.

Dictators (who are people too. I know, sometimes I forget too), are utility maximizers just like the rest of us. For that matter, being a dictator of Egypt is a much more lucrative career choice than most others!

I digress.

Just like people, dictators are subject to the constraints given through social, political, and economic structures. I think by using this framework, we can explain to a certain degree why Mubarak’s opposition to the protests lasted only 18 days, not 18 more years.

The first constraint faced by Mubarak was his relative discount rate, or how much he values his future returns from remaining in office today. For the first 30 years of his appointment, Mubarak’s discount rate was relatively low. This allowed him to adopt policies where corruption became more profitable than good ole’ hard work (one reason why the protests occurred). As riots in Tunisia fueled protests in Egypt, Mubarak’s discount rate increased. As such, Mubarak’s value of his future returns of presidency increased dramatically, and was forced to threaten hostile action towards protesters in order to maintain power. As protests continued, his discount rate increased to the point of breaking, when the military threatened to join protests unless Mubarak stepped down.

The second constraint faced by Mubarak was his relative bargaining power. As mentioned earlier, running a presidency dictatorship is a lucrative career. People below you make careers out of sustaining corruption. Furthermore, with large oil reserves, Mubarak was able to be financially sustainable in his efforts to maintain power. The political institution of corruption and economic institution of sufficiency through oil revenues were sustainable as long as the majority of Egyptians felt it wasn’t worth acting against. It was interesting to see the progression of Mubarak’s concessions (announcing not to run for another term, handing power to his vice president as examples), as each concession marked a loss of his bargaining power. Once again, these institutions, along with Mubarak’s bargaining power broke down as riots in Egypt caused a shift in power.

Finally, Mubarak was also constrained by his transaction costs, or costs of implementing government policies. I think this point is easier portrayed through pictures. Imagine imposing government policies in these sorts of environments:

While my explanations of Mubarak’s constraints are highly theoretical, I think they retain their value in explaining how presidents and dictators act in the public sphere. For example, a political system such as the one in United States reduces the relative bargaining power of presidents due to the laborious democratic system of policymaking, hence the long journey for healthcare reform. I also realize that many factors also play a role in the decision making process of leaders, so I’ll leave with another hypothesis, one in which I hope none of you have experienced:

Perhaps the reason why Mubarak left office was because it just sucks to live in a country where not a single person liked him?

Let’s be real…

Now that I’m back in Seattle, instead of eating freshly-caught fish, helping pull fishing nets, and learning about how the people of Atorkor conduct business despite having such little access to technology and capital, I’ve been drinking lots of coffee, eating lots of processed foods, and catching up on lots of online articles (a few of them are: New York Times, Slate, Foreign Policy, Esquire, Popular Science, Engadget, All About Finance). In addition to all of the Seattleite activities, I’ve had lots of time to reflect upon my time in Ghana.

In terms of the PPI (Progress out of Poverty Index), my findings resulted in mixed feelings about Lumana’s impact in Atorkor. The average PPI score of the 99 people I interviewed was 51.42. This number means that as a measure of the people in Atorkor, 6% of them are living under the $1.25/day (at 2005 purchasing power parity) international poverty line set by the World Bank (a data set of 99 numbers is hardly statistically significant, but we gotta start somewhere, right?). The PPI score of 51.42 also corresponds to 9% of the people living below the Ghanaian national poverty line.

Having these statistics, we can infer several things about Lumana’s current client base. First, the data shows that Lumana’s current clients are very unlikely to be living in poverty (by the World Bank’s standards). As the field of statistics goes, many interpretations could go with this finding. At first glance, it seems as if the people in Atorkor are much too wealthy to benefit from Lumana’s financial products. One might also infer that Lumana has not been actively seeking the impoverished, who would truly benefit from access to credit.

Although these deductions are worthy of further analysis, I’d prefer to offer a different point of view; one of someone (me, obviously) who became interested in microfinance through grandiose stories told through books and TED talks and yet had the opportunity to witness how the field really operates in practice. Ironically, starting MFOs are very strapped for resources and capital; the exact services that it advertises to its clients and investors. Having such constraints, having a sustainable business model is just as important as having social impact. While giving loans to the poorest of the poor obviously looks pretty good ideologically, without an appropriate selection system (to weed out the people who won’t succeed as entrepreneurs or people who are just looking for a quick break), Lumana would have to charge higher interest rates to all its clients to cover the risk incurred by weaker clients (adverse selection, for you curious cats).

In addition, while the Grameen Foundation has accomplished a great feat in creating the PPI as a measure of poverty, it is far from perfect in analyzing the impact of loans on entrepreneurs. Unlike the United States, where a premium is put on physical labor, labor is in abundance in Atorkor, therefore driving the costs of it down. Despite the fact that a fisherman could make several times the poverty line in a day during high season, it is hard to imagine how anyone would be content with baking in the scorching heat on the beach pulling, cleaning, and fixing nets for just a couple of Cedi ($1=$1.5 Cedi) per day. In this sense, by giving fishermen loans to buy bigger nets and pay his workers to increase his returns seem pretty reasonable.

As an industry heralded by its social and moral consciousness, I believe that transparency is important. Hopefully, after reading this, I’ve convinced you that microfinance isn’t a panacea for eradicating poverty, nor is it something that can be completely understood through reading about it in front of a $2,000 computer in an air-conditioned room. Both metrics for measuring social returns and new business models for conducting microfinance are being constantly improved upon to gain a better understanding of the field.

As you know, my experience in Ghana ended about three weeks ago. While I hope that this is only the starting point of my contact with microfinance, there’s only so much I could write about now that I am stateside. Having said that, I’ll be making several changes over the next couple of weeks to my blog. It’ll have lots of new content, along with a new name!

Stay tuned…

Cultural experiences that would make the Jackson School of International Studies proud…

In about a day, I will be on a tro-tro

going to the Accra airport. While I’ve blogged extensively about PPIs, job shadows, interviews, and all things Lumana over the past two months, the work that I’ve conducted only tells half the story of my experience in Ghana. While there are just too many to mention, I’ll miss several things in particular once I’m back to the Seattle.

The thing that I’ll probably miss the most will be the delicious Ghanaian food. Ground nut soup, okra stew, shito (a tomato/pepper sauce), served with banku or kenke (mashed potatoey ball made from corn flour and cassava dough) have all been just as satisfying, if not more, than the best burger that America has to offer. Not only is the food delicious, a filling meal costs around $0.30 in the Volta Region. While the flavor of Ghanaian food is undeniably delectable, what’s more impressive is how much physical labor the women use in the process of cooking. Making banku usually consists of a huge iron cauldron filled with a mixture of water, salt, corn flour, and dough. The process of stirring the unyielding mixture takes a huge amount of strength, a feat which none of us four Americans have yet to master (while Ghanaian women half our size and/or twice our age appear to cook with ease).

Fresh coconuts (obtaining/opening coconuts are more tasks that are labor intensive…) are something else that I’ll miss one I leave Ghana. Although having Ghanaian friends bring us coconuts to enjoy is a treat in itself, what I found most interesting was with how much ease they hacked open coconuts with machetes. While I haven’t garnered the courage to hold the coconut in one hand while wielding a two-foot-long machete in the other, holding the coconut in place by two cinder blocks seemed just as difficult of a task.

Finally, the people and culture is something that I will never forget. Although globalization has begun its influence in bigger cities like Accra, where rich folks drive around in Benzes and BMWs, wear shirts and ties, and eat traditional Ghanaian foods with forks and knives instead of their hands, much of the culture has remained intact in the villages. Instead of plain-colored shirts and pants, people in Atorkor frequent the village in vibrant colored fabrics called batik. Although gender roles are still apparent, it’s hard to not appreciate the balance that’s maintained in the coastal areas as a result of this. Men usually pull in fishing nets, while women help separate the shrimp from the shrub. Although this results in the men having a sense of power (if the men decided to stop fishing, the main economy would be nonexistent), both parties realize the importance of their respective roles.

Although I volunteered the past two months of my life as a way to gain work experience to improve my resume, I’ve gained so much more than just the familiarity with working with Lumana. Ironically, the power went out several times during which I was writing this blog post. Reliable electricity is something that I will be looking forward to when I return to the States.

I was just getting started…

Just two weeks left in Ghana! While I can’t want to return to fast internet 24/7, massive burgers, and beautiful Seattle summer, I’ll definitely miss the delicious (and cheap) food along with the gracious temperaments of the Ghanaians.

As my time here dwindles by the day, I am working hard to finish all of my projects. First, I’ve been continuing to gather PPI surveys to increase Lumana’s portfolio of information on its clients. Currently, I have collected surveys from about 80 clients, and will hopefully talk to 20 more clients before my trip is over. In addition to data collection, having done 80 surveys, I have constantly improved upon the data collection method, and hope to devise a standardized method of collecting data before I leave. Although both Lumana’s current client base and my entire time here to conduct PPIs are both too small to conduct worthy statistical analyses on the data (Grameen suggests 800 data sets in order to satisfy a 95% confidence interval), the lessons learned from this initial pilot will help Lumana adhere to bringing people out of poverty and provide future donors with transparency in investing with Lumana.

In terms of job shadowing, I have been going to the beach several days a week to measure the competitiveness of the market for fish. Although my previous job interviews gave me information on the fishmongering business, I figured that recording transactions would give transparency to our clients’ understanding of the fish market and make up for any factors that were lost in translation throughout the interviews. So far, I have been to the beach for two weeks, and have gathered information on almost 100 transactions. While many more transactions take place every day, the sheer amount of time it takes to traverse the scorching beach each day, along with the time it takes for fishermen groups to pull in their nets and separate the fish from the shrub hinders my ability to collect more information. Not only will the information I gather help Lumana understand one of the major markets it currently invests in, it has also helped me gain an advantage in information while bartering with the fishermen. For Blake’s sendoff two days ago, we decided to buy huge shrimp direct from the fishermen. While the premium price of 10 Cedis per kilogram was expensive, the size of the shrimp (see picture below) more than made up for the price. While bartering with the fishermen (which doesn’t even happen for this type of shrimp), I was offered the price of 10 Cedis for half a kilogram. Having recorded several transactions at a fixed price of 10 Cedis per kilogram, I managed to barter down the price to 5.50 Cedis, figuring that the extra .50 Cedis were a premium for my skin color and the lack of volume for my purchase. Even the seemingly monotonous act of buying dinner becomes more interesting in Ghana…

Petit Poisson, Petit Poisson, Manger Manger Manger…

First of all, sorry for the lack of posting lately. A mix between a GH’d (adjective, referring to the fact that lots of things in Ghana take twice as much time/effort than in the US) internet and a trip to Togo caused this lack of communication.

Last time, I discussed how data analysis from our PPI surveys would help Lumana measure its social impact in Ghana.  Not only am I continuing to work on collecting more data through the PPI survey, I have also been interviewing individual clients about their respective businesses. In doing so, I am hoping to gain a better understanding of different markets (such as fisher mongering or farming) in the Keta district. This information will allow Lumana to better tailor its financial services to clients with different needs, resulting in a more efficient use of our resources.

For example, I am concentrating on analyzing the fish mongering market. One interesting thing about fishmongers that I’ve noticed so far was that they are all women! Although I have only interviewed about 20 individuals, I think it’s pretty safe to refer to fishmongers as female from here on out. Having said that, it’s no surprise that many of Lumana’s clients are fishmongers, which not only allows us to assist in creating healthy economies in Ghana, but also empower women, which is a vision which many MFOs strive to achieve.

A fishmonger (no, not like the ones at Pike’s Place) usually treks to the beach in the morning with empty bowls on top of their heads. After groups of fishermen pull in each catch, she will bargain with designated sellers for the price of the fish. Along with the unpredictable supply of fish, the fishmonger needs to compete with many other fishmongers in buying fish.

Many times, especially during the low season, the fishmonger will go home empty handed due to the absurdly high prices derived from little supply. After buying the fish, the fishmonger will bring back their purchase back home (using their head, of course). Smoking and salting the fish usually takes time, and after preparation, the fishmonger will trek to a local market to sell her goods.

So far, I’ve found that the fishing/fish mongering market drives much of the economic activity within Atorkor. While the sheer volume of fishermen and fishmongers is a direct indicator of this, clients of other trades (such as tailors and hairdressers) have asserted that business is better when the catch is good. Although higher number of competitors within the market suggests a healthy market, the abundance of competition drives prices of fish upward for the fishmongers to buy and downward when they have to sell it. In response to this, some fishmongers have been storing the fish bought from bampa harvest (period of good catches=cheap fish) to sell during low season (less fish=higher prices). Others have begun exporting specific types of fish to Accra, where richer people are able to afford scarce types of fish.

This information, along with others that I’m gathering will allow Lumana to offer tailored repayment schemes, savings schemes, and loan sizes to fishmongers to facilitate for seasonality and other factors. As a consolation to helping expand Lumana’s client portfolio, I’ll also be expanding my food portfolio along the way…