About Me

My name is Sarah Blair, and I am a student at Boston University. As part of the University Honors College program, I am currently enrolled in a class called SM101 – The Secret Lives of Corporations. As our final assignment, class members have each created a webpage targeting a specific issue of social concern over corporate behavior.

For my project, I chose to create the blueprints of a nonprofit organization aimed at helping Mexican maquiladora employees to find a livelihood after leaving factory life. My webpage is still a work in progress, but I invite you to take a look around. Any thoughts, suggestions, or feedback is greatly appreciated!

Microfinancing 101

Kiva, the world’s leading microfinance organization, defines microfinance as such: Microfinance is a general term to describe financial services to low-income individuals or to those who do not have access to typical banking services.

In today’s socially stratified world, it is becoming increasingly difficult for one born in poverty to lift his or herself out of poverty. A hardworking individual with a spirit of entrepreneurship can do very little without starting capital, yet without any assets they cannot borrow from traditional banks or financial institutions. That’s where microfinancing comes in.

In June of 2004, the G8 (France, Germany, Italy, Japan, the United Kingdom, the United States, Canada, and Russia) endorsed what is known as the Consultative Group to Assist the Poor. The group places a strong emphasis on microfinancing as the future of financial aid for the poor. It lays out the following basic tenets:

1. Poor people need not just loans but also savings, insurance and money transfer services.
2. Microfinance must be useful to poor households: helping them raise income, build up assets and/or cushion themselves against external shocks.
3. “Microfinance can pay for itself.” Subsidies from donors and government are scarce and uncertain, and so to reach large numbers of poor people, microfinance must pay for itself.
4. Microfinance means building permanent local institutions.
5. Microfinance also means integrating the financial needs of poor people into a country’s mainstream financial system.
6. “The job of government is to enable financial services, not to provide them.”
7. “Donor funds should complement private capital, not compete with it.”
8. “The key bottleneck is the shortage of strong institutions and managers.” Donors should focus on capacity building.
9. Interest rate ceilings hurt poor people by preventing microfinance institutions from covering their costs, which chokes off the supply of credit.
10. Microfinance institutions should measure and disclose their performance – both financially and socially.

I believe in microfinancing because, in its very basic principals, it makes sense. Microfinancing is a way to end poverty and to lift good, hardworking people out of difficult life situations they were born into. It gives opportunities to those who had none, and all for small loans that are hardly a setback for the donor. I believe that microfinancing will play an important role in the future of the fight against poverty, and I believe that it will change the world for the better.

Read more about microfinance at Kiva and at CGAP.

Maquiladoras 101

The Maquiladora system as we know it was born in 1965, when the Mexican government instituted what it called the “Border Industrialization Program.” Instituted in response to the vacuum created by the termination fo the Bracero Program, the BIP offered huge incentives to foreign corporations that built factories in the border areas of northern Mexico. The intentions were not bad, for the program was designed to alleviate the high unemployment rates in the region. However the situation quickly turned sour.

Maquiladoras spew pollution into New River between Mexicali and California, which is said to be the most polluted river in the world. Most maquiladoras lack proper waste management facilities, and therefore dispose of toxic chemicals illegally. Mexican law does nto require industries to publish environmental data, so the maquiladoras can continue their operations with impunity.

The environment aside, maquiladoras project a sad and difficult life for the people of northern Mexico, as well. Today, over 1 million workers – the majority of whom are young women – labor long hours in over 3,000 maquiladoras along the United States-Mexican border. They work for $1-2 an hour, which is barely a living wage in the relatively high-cost towns of northern Mexico. The job situation is highly unstable, and women are often forced to take birth control; if they get pregnant, they are fired.

Sadly, there does not appear to be any movement for reform in the near future. Maquiladoras account for over 40% of Mexico’s exports, and provide US corporations with labor for 75% cheaper than they would pay in the United States. While the 1994 adoption of the North Atlantic Free Trade Agreement by Mexico, the United States, and Canada has to some extent increased labor standards in the maquiladoras, it also created a stronger relationship between the border economies of the United States and Mexico – in effect, giving strength to the maquiladora program itself.

Without the public’s interest, the maquiladora program is not going alter itself for the better. Legislation is difficult, and corporations are unwilling to change their practices. However, by uniting behind a common cause, we can make a difference – one laborer at a time.

Getting Started

While I do not intend to actually implement the proposed CSR Microloans program at this time, it is something I plan to look into in the future. I do believe that it is a feasible – albeit ambitious – endeavor. If and  when I to begin the program, I know exactly where I would start: with the progressive ambition and sheer force of number of the American youth.

College campuses around America are filled with young, visionary students willing and ready to make a difference. The main impetus for CSR Microloans would be clubs and student organizations on college campuses across the country. In order to create the program, I will follow a few relatively straightforward steps.

1. Find a group of reliable friends and fellow Boston University students with an interest in microfinancing, maquiladora issues, or human/labor rights in general.
2. Brainstorm. The founding members would create a mission statement, a constitution, and a plan of action. Additionally, research would be done to find out which American corporations engage in the maquiladora industry.
3. Register as a club with the Student Activities Office.
4. Spread the word, through Facebook, fliers, and events. Begin recruiting new members and raising money.
5. With CSR Microloans firmly established at Boston University, spread the word at other schools. Use Facebook or pre-existing connections to find leaders interested in starting their own chapters of CSR Microloans.
6. When CSR Microloans has a strong presence in an assortment of colleges and universities, register CSR Microloans as a recognized non-profit organization by following the rules listed here.
7. Contact Kiva, or existing microfinancing programs. Find out what works in terms of field workers and loan application assessment. Create criterion for loan applicants, and if possible hire experienced field workers to help start off the process.
8. Begin contacting corporations involved in the maquiladora industry, emphasizing the CSR benefits of the program as well as the broad backing by college students around the nation.

Check out this great article from The Cutting Edge News about maquiladoras in Mexico. Included are the names of a few of the major corporate players in the region.

• Delphi, which split off from General Motors and remains a major auto supplier, has 66,000 workers and 51 maquiladora factories
• Lear corporation 34,000 workers and 8 factories
• General Electric 20,700 workers and 30 factories
• Jabil Circuit 10,000 workers and 3 factories
• Visteon 10,000 workers and 16 factories
• Whirlpool 7,500 workers and 5 factories
• Emerson Electric 5,678 workers and 7 factories
• Motorola 5,290 workers and 2 factories
• Honeywell 4,900 workers and 3 factories
• Plantronics 3,600 workers and 5 factories
• Bose 2,900 workers and 2 factories
• Mattell 2,578 workers and 1 factory

Stakeholders as Lenders?

In the traditional microfinance model multiple lenders come together to help one individual, each lender lending a only a small sum of money. For the CSR Microloans model,  the corporations would have to lend out a larger sum. However, with some tweaking, this could in fact be minimized.

One idea I have had for the program is a framework through which stakeholders – not just the corporation itself – could loan money to approved maquiladora employees as well. CSR Microloans and partner corporations could work together to encourage U.S. employees, management, and consumers to participate in the program by creating an online database (similar to Kiva) through which they too can lend, in essence pooling their loans with the larger contribution of the corporation.

Such a system could truly expand CSR Microloans, as well as foster stakeholder interest in corporate social responsibility. Branches of a corporation could easily come together to “sponsor” maquiladora employees, or compete amongst themselves for corporate recognition. Stakeholder participation in microfinancing could truly be a win-win situation: the borrowers will benefit from more available funds, the corporations will benefit in that they will pay less and build positive relations with their stakeholders, and stakeholders will benefit by putting their money into a good, charitable cause.

Going Further

For those of you interested in learning more about microfinancing, there are a few microfinance-related events scheduled for the near future.

• AEO’s 20th Annual National Microenterprise Conference (May 2011. Washington, D.C.)
• Coady Certificate in Community-Based Microfinance (May 2011. Antigonish, Nova Scotia)
• Convergences 2015: Solidarity and Responsibility – Investing and Working Towards the Millennium Development Goals (May 2011. Paris, France)

There are also various websites, books, and past events that you may be interested in.

• MIT Microfinance Symposium
• The Economics of Microfinance (Book)
• International Symposium for Microfinance (World Microfinance Forum Geneva)
• Alvaralice Microfinance Symposium
• MicroCapital.org

Adapting Kiva’s Model

While CSR Microloans is using Kiva as a model for its development and operation, Kiva’s existing practices must be modified for a corporate lender. The proposed steps are laid out as follows.

When a corporation agrees to become a part of the CSR Microloans program, it must pledge to uphold certain obligations. First, the corporation must agree to allow inspectors to ensure that its maquiladoras meet a certain standard. Secondly, it must agree that all workers who quit or are severed from that point forward must be offered the opportunity to apply for a microloan, barring certain situations (e.g. if they are fired on account of theft, violent crime, etc.)

Loan applications will be sent to CSR Microloans representatives, who will assess them for legitimacy and risk factor. Assessments will include investigations by on-the-ground field workers, who will meet with/interview potential borrowers. If CSR Microloans determines that the loan request is reasonable and likely to be repaid, it will approve the loan and set forth the terms of repayment.

CSR Microloans will be responsible for monitoring repayment. If the borrower defaults on their loan, CSR Microloans will reimburse half of the corporation’s loss as a form of assurance that the organization will approve loans  only to responsible borrowers.

Feedback

As I’ve mentioned before, I’m very interested in hearing what you have to say about my project: questions, critique, and comments are all gladly welcomed! I accept comments from anyone (registered WordPress user or not!) and will try to respond as promptly as possible. Please note that your comment will not show up until I approve it – hopefully, I’ll get to it within the day! Inappropriate or extremely off-topic comments will not be approved.

The Incentive

In the 1919 case Dodge v. Ford, the Supreme Court ruled that a corporation’s only purpose is to maximize shareholder profits. As such, it would be difficult to convince corporations to participate in CSR Microloans if there was no benefit for them.

In recent years, Corporate Social Responsibility (CSR) and CSR Reporting have become an increasingly important issue in the business world. Today’s consumers are interested in purchasing products from corporations with responsible environmental and social programs. It is often moderately expensive for corporations to comply with these aims – and that’s where CSR Microloans comes in.

CSR Microloans provides a simple, low-cost method for corporations to improve their corporate social responsibility. In addition to establishing the framework through which corporations can issue loans to their former employees, CSR Microloans will work to promote these corporations—even granting them a special seal in acknowledgment of their participation. As CSR Microloans grows in prestige, this will become an effective form of advertisement that will appeal to consumers looking to buy from socially responsible corporations. Finally, participation in the CSR Microloan program will give companies a genuine, meaningful addition to their Corporate Social Responsibility reports—for virtually no cost.

Update:

“The Solution” Page has been completed! Please check it out for a more detailed look at how I envision the CSR Microloan program will be run. Also, any comments, criticism, or suggestions would be greatly appreciated.