MICROCAPITAL STORY: Barack Obama, Roots in Microfinance, Ties to USAID, Ford Foundation, Asian Development Bank, Bank Rakyat, Women's World Banking and Chicago’s Shorebank

Elayne Clift, an independent journalist, recently wrote a piece in the The New Nation entitled “The Woman Behind Obama,” in which she describes the life of Barack Obama’s mother, Stanley Ann Dunham Soetoro. In the article she highlights some of the work that Mrs. Soetoro did in Indonesia for the Ford Foundation while she was working on her PhD in anthropology. Mrs. Soetoro had a long career of being a researcher and practitioner of microfinance. She was a consultant for the United States Agency for International Development (USAID) on a village credit program, a Ford Foundation program officer in Jakarta specializing in women’s work, a consultant in Pakistan for the Asian Development Bank (ADB), and joined Indonesia’s oldest bank (Bank Rakyat) to work on one of the world’s largest sustainable microfinance programs, creating services like credit and savings for the poor.

According to Time Magazine, Mrs. Soetoro’s extensive anthropological research into how real people worked helped inform the policies set by the Bank Rakyat Indonesia. Richard H. Patten, an economist who worked there noted, “I would say her work had a lot to do with the success of the program.” Today, Indonesia’s microfinance program is No. 1 in the world in terms of savers, with 31 million members, according to Microfinance Information eXchange Inc.(MIX), a microfinance information platform.

Mrs. Soetoro’s activities in microfinance display a pattern that mirrors the microfinance industry as a whole; she was reaching out to mostly women. Freelance journalist Eric Stone wrote, “Ann would pick out an impoverished village somewhere in the country…spend several weeks getting to know the place, getting to know the movers and shakers in the village, who had the brightest entrepreneurial spirit, the best ideas. About 95% of the time the people she came up with were women.”

Mohammad Aslam, who served at Mrs. Soetoro’s Pakistan office from 1987 to 1992, observed, “She convinced scores of women (belonging to cottage industry) to establish their own businesses and earn while sitting at home. They (women) otherwise could have never thought about establishing and running a business in a feudal society.” Mrs. Soetoro had supervised the implementation of a project for developing the agriculture and cottage industry in the rural areas of Punjab, the most populous province of Pakistan, through microfinancing. Her additional responsibilities included training the mobile credit officers of Pakistan’s Agriculture Development Bank.

Before her death in 1995, Mrs. Soetoro worked in New York for Women’s World Banking, a nonprofit group that supports a global network of microfinance institutions. “She was a very, very big thinker,” said Nancy Barry, a former president of Women’s World Banking. “I think she was not at all personally ambitious, I think she cared about the core issues, and I think she was not afraid to speak truth to power.”

Whether or not an Obama presidency will positively affect the microfinance industry is a difficult question to answer; politicians often promise the world but are unable to deliver results on many of their agendas.

In 2006 Mr. Obama visited Kibera, a district in Nairobi, Kenya, and had a session on microfinance with a roundtable discussion touching on below-market micro-business loans developed by Chicago-based community development and environmental bank holding company Shorebank with the Kenyan microfinance bank K-Rep. He commented that, “Every country that develops, develops because women are given opportunity”. Mr. Obama helped fund the Shorebank program with $14,000 earned from his children’s book deal.

In 2007 Mr. Obama was quoted as saying, “We cannot stand for the freedom of anarchy. Nor can we support the globalization of the empty stomach. We need new approaches to help people to help themselves. The United Nations has embraced the Millennium Development Goals, which aim to cut extreme poverty in half by 2015. When I’m president, they will be America’s goals.”

Beyond Mr. Obama’s words, his published policy on democratization and development has a few programs that, if implemented as described, would be beneficial to the development industry as a whole, and potentially to the microfinance sector as well. The Add Value to Agriculture Initiative (AVTA) aims to bring about a “Green Revolution for Africa” through increased investment in research and development for improved farming technologies and better tools to help poor farmers to succeed in the agricultural market. The policy will also increase training in regulation, quality control standards, finance and financing instruments for rural enterprises.

Mr. Obama also outlines in his policy proposals a fund for small and medium enterprises (SMEs). The policy states that, “The challenge is to build the capacity of communities and countries in the developing world to generate wealth on their own. Building on the growing evidence that micro finance works, an Obama administration will provide initial capital for an SME Fund.” The fund will be administered through the Overseas Private Investment Corporation, an independent U.S. government agency. Government provided seed capital would be matched by a larger portion from the private sector.

Scott Everett, Research Assistant

Sources:

TIME: “The Story of Barack Obama’s Mother”, April 9, 2008

STAR BULLETIN: “A woman of the people”, September 13, 2008

THE NEW NATION: “The woman behind Obama”, October 30, 2008

SF GATE: “Obama’s mother – an unconventional life”, March 14, 2008

NY TIMES: “A Free-Spirited Wanderer Who Set Obama’s Path”, March 14, 2008

MicroCapital article, August 29, 2006, “Senator Obama Visits K-Rep Bank, a Microfinance Institution in Kenya’s Kibera Slum”