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7 Questions You May Have About Microfinance Answered

OneSeed plays a small role in the big world of microfinance. Here's a run-down of some of the most important questions and issues within microfinance.

1. What exactly is microfinance?

Microfinance is the term used for the provision of financial services to the working poor. Currently, microfinance loans are aiding 160 million people around the globe. For all the visual learners: Check this video out!

2. What is the difference between microfinance and microcredit?

Getting a loan from a bank can be extremely difficult for someone with little cash income. Microcredit is a loan to the microentrepreneur by an MFI (microfinance institution). Microcredit is one component of microfinance.  Other growing services include microsavings, microinsurance, and financial training programs offered by a number of MFIs.

3. Why are the interest rates so high?

Microfinance interest rates vary greatly by region and market and average 35% globally. This might seem crazy; however, there are a lot of unseen risks and costs of sustaining an MFI.

  • Because the loans are typically for small amounts, MFIs need to charge interest to cover administrative costs. If you think about it, giving a $1,000 loan requires the same amount of employee attention as a $25 loan. Giving a large number of small loans is time intensive with smaller returns and administrative costs are around 10-25% of the total loans given.

  • MFIs take on risk by giving collateral-free loans. Well-established MFIs still lose about 1-2% of their loans. Without physical assets to secure the loan, there is no guarantee and the interest rates help to compensate for that risk.

  • Inflation and currency exchange rate fluctuation also plays into this problem. For example, in Nepal, the rupee has slowly been losing value against the dollar while annual inflation rates can reach double-digits. Each subsequent month the borrowers pay a portion of their loans, its value decreases against the currency in which may MFIs receive funding. In order for an MFI to grow, the need for additional operational margins (around 5-15%) to compensate for the losses incurred by inflation and currency exchange fluctuation.

Here is a video created by OneSeed’s founder Chris Baker about a field visit in Nepal to follow up on the impact of OneSeed's microfinance loans.

4. What is an MFI?

An MFI is a microfinance institution that provides the microcredit and financial services to microentrepreneurs.

Learn more about our partner MFIs: WEANFINAM, and BPW.

5. Are all MFIs non-profit?

Many MFIs began as a non-profits, however, a for-profit sector has developed more recently. For-profit MFIs have drawn on large investments which allow them to distribute more funds by (at times) more efficient means. The challenge for many for-profit MFIs is achieving a balance between financial sustainability and the poverty-alleviation mission of the microfinance sector. At OneSeed, all of our partners have been carefully selected because they meet our criteria and they all also happen to be non-profit MFIs.

Here are some of the most prominent global MFIs and organizations furthering the mission of microfinance:

  • Grameen Foundation was an expansion of the Grameen Bank, which began in 1976 in Bangladesh. The foundation remains non-profit but the bank has converted to for-profit.

  • BRAC is the largest MFI in the world aiding 126 million people with its non-profit services.

  • Compartamos Banco is based in Mexico and is most known for is success after converting from a non-profit to a for profit. Its share price increased 22% in the first day of trading. However, the bank has received criticism surrounding the extreme profitability of the company and its interest rates of up to 90%.

  • Truelift is designed to rate how well an MFI serves those living in poverty. They give their ‘Pro-Poor Seal of Excellence’ to MFIs who meet their standards.

  • Cerise is a network for MFIs to share and learn from one another.

6. What are some of the risks or controversies?

The provision of financial services is neither without risk nor controversy. As the field of microfinance has grown and evolved, predatory lending practices and a lack of risk management by a small number of MFIs have raised important and fundamental critiques of lending practices.

  • Although similar movements have occurred in other Latin American countries, the “No Payment Movement” in Nicaragua is a prime example of one of the risks with microfinance. In 2008, several thousand people occupied an MFI in the city of Jalapa. The protesting turned violent and the leaders of the movement demanded that Congress accept a 10 year amortization period with 8% APR or less for all loans. This movement has put many MFIs at risk and therefore reduced the available microcredit in Nicaragua.

  • In India, there have been cases of suicide due to unpaid microcredit loans. When interest rates skyrocket and borrowers are unable to repay their loans, a cycle of debt can result in personal financial ruin.

OneSeed works with carefully selected MFIs that meet our criteria of low-interest rates and high social performance. While microfinance is an important tool that aids millions of people, we recognize the importance of supporting best practices that support the poverty alleviation goals of OneSeed and our partners.

7. What happens to the 10% after my trek?

In the subsequent month after your trip, OneSeed sends the money to partner MFIs in all over the world. The MFIs disburse the loans in local currency and begin to pay back OneSeed the following month in that currency. While our partners charge an extremely low interest rate compared to the national average (BPW: 10%, WEAN: 15%, FINAM: 30%), OneSeed does not charge any interest. We receive exactly what we gave (minus the inflation rate).

Interested in learning more?  Check out the resources below:

Books:

Websites:

Videos:

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¿Cachai?: A Guide to Spanish and Chilean Slang

Has it been years since your last Spanish class? Have you never taken a Spanish class? Not to fear! We are here to give you a quick refresher as well as introduce you to some Chilean slang so you have all the right things to say on your next trek.

Useful Spanish Phrases

With about 400 million native speakers, Spanish is the second most common native language in the world. Although Spanish is the national language of Chile, there are a handful of other indigenous languages spoken including Quechua, Rapa Nui, Mapudungun, and Huilliche.

  • Hello – “Hola”
  • How are you? – “Cómo estás?”
  • Very well – “Muy bien”
  • What is your name? – “¿Cómo te llamas?”
  • My name is – “Me llamo (insert name)”
  • I am from – “Soy de (insert city)”
  • Nice to meet you – “Mucho gusto”
  • Good Morning – “Buenos días”

Chilenismos (Chilean Slang)

Chilean slang is notoriously famous for being difficult to understand and spoken incredibly fast. But we are giving you a few words and phrases to look out for so you will be talking like a local in no time!

  • Bacan – “very cool”
  • Hueón – “idiot,” but also used to call a friend
  • Buena onda – “good vibes, cool”: literally “good wave”
  • ¿Cachai? – “do you understand?”: literally means “catch?”
  • Al tiro – “Right away” literally “at the shot”
  • Echate al pollo – “Get out of here”: literally mean “throw it to the chicken”
  • ¡Que choro! – “How entertaining”

Review this list before you leave and keep your ears alert to the people around you. Remember: don’t get discouraged and your language skills will improve quickly!

¡Buen Viaje! – Have a great trip!

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नेपाली: A Guide to Nepali Language

Worried about the language barrier? Don’t sweat it! All our guides speak English and Nepali and can help you find anything you need. But if you’re ready to take on a challenge, here is a crash course on the languages of Nepal as well as a few phrases that you can put to use.

Nepal is one of the most linguistically diverse countries in the world. There are 126 languages spoken across Nepal, which is about the size of Arkansas. The official language is Nepali, which is spoken by about 2/3 of the population.

Devanagari

The written language is called Devanagari. It is one of the most common scripts because it is also the written language for Hindi and is used across India. Like English, Devanagari is written left to right but rather than individual letters, it utilizes consonant-vowel units (e.x. प = pa).

A List of Useful Phrases in Nepali

  • Hello/Goodbye – “Namaste”: This literally means “God is in you” and is typically said with the hands in prayer position and the head bowed forward

  • Thank You – “Dhanyabaad”

  • My name is – “Mero naam   (insert name)   ho”

  • How are you/How are things? (informal) – “thik chha?”

  • I am well/Things are good – “thik chha”

  • See you again – “pheri bhetaula”

  • I don’t understand – “maile bujhina”

  • I’m full – “pugyo”: It is considered rude for a guest to leave hungry so use this when you have had enough

Afraid you might pronounce something wrong? Try it! People will be excited that you are making an effort and willing to overlook it when your grammar isn’t perfect.

Shuba-yatra! (Have a good trip!)

What should I do if I arrive early to Santiago?

If you’ve pulled the trigger on joining us for one of our Chilean expeditions, the good news is that you’ve already got a lot to look forward too. The better news is that you’ll be flying into Santiago, Chile’s inspiring capital city.

While you’re sure to have an unforgettable journey with OneSeed, Chile and Santiago have a lot more to offer then we’ll have the chance to show you. Just in case you choose to visit the Santiaguinos a few days early, we’ve put together a brief list of sights and experiences to help you get into that travelling spirit!

Hot Tips, Cool City

Although Chile is famous for the diversity of its landscapes and climates, the capital city of Santiago has plenty of variety of its own.

  • The Plaza de Armas is a great first stop. The bustling city square is home to the Governor’s Palace, the Former National Congress Building, the National Library, the Municipal Theatre, and a laundry list of other cultural attractions. For more info click here!
  • For a better look at the modern side of Santiago, spend some time in the Barrio Bellavista neighborhood. Full of innovative art galleries, trendy boutiques and fresh eats, this is a great place to get to know a side of Chile you’re unlikely to see from the trail. The Lovin’ Life blog has a nice piece on Barrio Bellavista (don’t worry, there are pictures).
  • For a less traditional tourist stop there’s the Chilean National Zoo. Located near the heart of the city and within the Santiago Metropolitan Park, the Zoo and has dozens of rare and endangered species native to Chile. With great views of mountains and city skyline combined with easy access via public transit the zoo is an unexpected travelers treat. You can learn more at Santiago Tourist.

Sunshine, Sea Breezes, and Vino

If you’re lucky enough to show up more than just a day or two ahead of time, you might want to roam past the reach of Santiago’s public transit (excellent as it is!).

  • Within a day’s journey of Santiago, spread across the Maipo region, lie dozens of the countries oldest and most famous wineries. Perfect for single or multi-day trips, Wine-Searcher has information on some of the more famous wines, and BedandBreakfast.com has a list of small venues across the large region.
  • At 125 kilometers from Santiago lies the world heritage city of Valparaiso, nicknamed “The Jewel of the Pacific”. With incredible vistas, colorful architecture, and even the world’s most endangered elevators Valparaiso is well worth your time.  For a first hand account take a look at this entry by a Lonely Planet blogger.
  •  If world class wines are on your mind and a 550 Kilometer trek to the north can fit into your schedule, consider the Elqui Valley. With numerous vineyards and more than 300 days of sunshine per year (which makes it Chile’s Colorado  in my eyes)  it’s little wonder the locals at Pisco Elqui warn that visitors often forget to return home.

While there are plenty of options for lodging in and around Santiago, here are a few options that have always worked well for us:

To make sure that everything runs smoothly with your OneSeed adventure, please let us know ahead of time where to pick you up. Until then, enjoy as much of Chile as possible, especially the wine. I did remember to mention the wine, right?

Hiking in the Clouds: What Happens at Altitude

We get a lot of questions about altitude here at OneSeed. We do play in the mountains a lot after all!

Altitude can effect people differently, but some we’ll cover some of the details here:

  • What altitudes each trip reaches
  • How altitude sickness can effect you
  • How to prevent altitude sickness and monitor for it
  • The signs of altitude sickness
  • How OneSeed handles altitude sickness preparation before hitting the trail
  • What happens on the trail if you are hit with a bout of altitude sickness.

Altitude sickness, also known as acute mountain sickness (AMS), can be very serious, but we build in rest days on our trips to allow trekkers to acclimate to the elevation. You can learn more about AMS here.

While you may not get altitude sickness, your tummy may be affected by the altitude and act up a bit, so if you’re feeling a bit gassy, it’s only the alti-tooties. Just call fair warning to those hiking behind you!

Altitude sickness is caused by the “thinner” air at elevation, so you have difficulty getting enough oxygen. For a scientific explanation of what happens at altitude,visithere.

Symptoms can include headaches, loss of appetite, nausea, irritability, loss of coordination, dizziness, feeling weak, and trouble sleeping.

Before leaving for a trek, OneSeed staff will educate trekkers on altitude sickness and the signs and symptoms before hitting the trail. While on the trail, we have built in rest days to allow trekkers time to acclimate before hiking to higher altitudes. If anyone experiences symptoms of altitude sickness, OneSeed guides will stay with guests and escort them to lower elevations until they are feeling better and can rejoin the group.

When hiking at high altitudes, make sure to drink lots of water, even if you aren’t thirsty. Staying hydrated can help reduce the effects of altitude sickness. Make sure to eat well rounded meals. Wearing a hat, sunscreen, sunglasses and layers are important as you are more exposed to the elements and the weather can change quickly. Trekking at a slow and steady pace and taking frequent breaks will help ensure you reach your goal!

For more information, visit the CDC website here.

I arrived early in Kathmandu. Oh no, oh no, what will I do?

Nepal is a great place, so if you forgot about those pesky time zones and arrive early or want more time to explore we’ve gathered some information that will be helpful to you.

While we are excited for you to join us, we are only able to pick you up from the airport and provide your accommodation on the arrival date of your expedition. If you have further questions beyond our recommendations below, don’t hesitate to call us.

Nepal is the land of Mt. Everest and the other ginormous Himalayan Mountains. Everything in Nepal must be at really high elevations that will take time to acclimate to right? Well, not quite. You may think arriving in Kathmandu a few days early to acclimate is beneficial, but Kathmandu is actually situated at 4,600ft, that’s lower than the mile high city, Denver! You will be heading up to elevation on your trek, and time is built into every trek to allow for acclimatization.

Here are some great things to do in Kathmandu if you arrive early!

  • Garden of Dreams: A neoclassical historical garden, the Garden of Dreams was created early in 1920. The garden is comprised of pavilions, fountains, decorative garden furniture and includes European inspired features such as birdhouses, varandas and urns. More information available on TripAdvisor here.
  • Pashupatinath Temple: One of the wold’s most significant temples dedicated to the Hindu Lord Shiva. Only born Hindus are allowed to enter the temple, but there is plenty to view around it. More details available on TripAdvisor here.
  • Bhaktapur: Bhaktapur is the third largest city in Kathmandu Valley and a former capital of Nepal. It is a World Heritage as dedicated by UNESCO for its culture, temples, wood, metal and stone work. Find out more about Bhaktapur here.
  • Durbar Square: Durbar Square is a general term for a square in Nepal, but the one in Kathmandu is in front of the old royal palace of the Kathmandu Kingdom. See what others have to say about Durbar Square on TripAdvisor here.

After all the fun, you’ll need a place to crash. Here are some of our recommended partners:

On the scheduled start day of your trip, we can arrange to pick you up from your guesthouse. Just let us know where to pick you up.

You can do that here.

Kathmandu is a world away from your life in the West, so if you are arriving early or staying late, take them time to stroll the streets and be immersed in the sights, smells and sounds. You never know what you will find around the next corner!

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