CASHPOR: The Importance of Risk-Management Tools

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November 24, 2010

Kimberly Davies is a Program Associate for the Microsavings Initiative, which is part of Grameen Foundation’s Solutions for the Poorest program. This is part three of Kim’s blog series. If you haven’t yet, we recommend you read part one and part two of her blog post series.

Ranie's sixth loan, equivalent to $218 USD, allowed her to buy buffalo. She sells the milk in her rural village

While I like to plan ahead, one overcast day in Varanasi, India, I quickly learned that you can’t always anticipate what comes your way. Upon leaving the offices of CASHPOR (our microfinance institution partner) with our project manager, we were faced with a drizzle that quickly turned into buckets of pouring water. The busy streets became increasingly chaotic as everyone scurried for shelter, forcing us to pull our motorbike over to wait for the rain to stop. As the road began to flood, we became concerned about the laptops, cameras, and mobile phones in our backpacks, and realized that we needed to get out of the rain quickly to shield our things. We hopped into an auto-rickshaw as our only alternative transportation. Since the rickshaw did not have doors, the rain streamed into the car. The engine began to stall as it flooded with water, but somehow we made it back to my residence. This delay forced us to cancel a call that evening, even though it had been scheduled for weeks. What would have just been considered a heavy rain in Washington, was a flood in Varanasi, and prevented people from necessary travel and daily business.

The unanticipated ordeal opened my eyes just how many unknowns there are in developing areas that prevent the poor from predicting what obstacles will hit them down the road. This uncertainty is why we see a need for the poor to have access to risk-management tools, especially access to savings products, to act as a shield against shocks.

In India, as in most developing areas, women are working extremely hard to improve their financial situation. As I visited the women in their residences, I was amazed at their entrepreneurial spirit and their ability to create business niches such as repairing old cardboard boxes with a staple gun or creating tiny plastic bottles with a manual machine. CASHPOR’s clients struggle not because they lack a work ethic, business sense, or intelligence, but because they happened to be born into an impoverished area and do not have access to enough risk-management and incoming-generating tools.

Cashpor clients gather weekly to repay their loans. In this meeting, they learned about the importance of only taking small loans to ensure easier repayments and discussed how savings would soon be offered at CASHPOR.

Due to the regulations in India, savings are not yet offered at CASHPOR. However, I firmly believe that these women have the right to the same tools that we have to manage our own finances, which is why we have people working around the clock on this savings project. Through an innovative approach, we are on our way to finding a feasible business plan and a new strategy to provide the first savings products at CASHPOR to improve the lives of its clients.

Comments

in my opinion we destroy the poverty in many ways,
1. to create many many works for different levels.
1.1. low level (non educator ones )
1.2. middle level (able to write and read)
1.3. high level educated ones who have no where to ably what he learn t

2. to reduce the import of the basic needs

3. to reduce the export which isn't needed

in my conclusion when the people become same level then there will be a time to learn them how to save it and make more profit .

4. to get dooners which help the people who have an idea to create work but have no money.

I think there are many ways to apply Risk Management to help poors. But we have to distinghish between:
- catastrophal events like flood, enviromental disasters, earthquakes, epidemies, illness and similar
- financial needs as a consequence of the first point or simply beacuse for some reasons products or clients are no more available
A Fund should destinate, in my opinion, part of the resources/profits to:
a) respond to natural emergencies
b) respond to financial crisis of micro activities
Saving can sove little and short temporarly matters but can not give appropriate answer to a huge disaster such those we regulary see in certain areas of the world like India, Bangladesh, Haity non to mention war zones like Iraq or Afghanistan. Emergency plans should not only be charity but helps to restart economy and in particular "micro" economies like the ones Grameen takes care of. This kind of risks can be insured (if we know the number of financed people potencially involved and how to reach them) and this is risk transfer. Insurance should be on Fund shoulder and not on financed people: the scope is to protect from losses but realty is a way to refinance a restart.
Another approach is to help this communities to protect themselves from natural disasters or other catastrophal risks including epidemies/illnesses and invest to give them protection or teach them prevention.
Their saves must be "saved" to help them to grow. Risk management must be a tool to protect themselves and their micro-activities.

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