The economic crash of 2008 has led educators to wonder how they can teach fundamental lending principles to tomorrow’s banking executives. At the College of Charleston’s School of Business in South Carolina, we’ve found that both undergraduate and graduate students can learn financial literacy through experiential learning programs that revolve around microfinance. And they learn other important lessons as well—about the rewards of socially responsible behavior and the long-term impact of investment in a community.
The College of Charleston’s foray into microfinance began in the fall of 2010, when business students initiated a microfinance club. While many student clubs come and go, microfinance seemed to be a good strategic fit with the school’s mission to develop socially minded business leaders for global opportunities. The school recognized that it could build and sustain interest in microfinance by turning club membership into course enrollment that came with academic credit.
Eventually, all 13 undergraduates who wanted to join the club were required to enroll in an interdisciplinary humanities and emerging markets elective called Financial Intermediation and Latin American Humanities. Fourteen MBA students in the club were invited to enroll, but because the MBA program is a one-year, fulltime program with little flexibility, we did not make it mandatory for them to take the course.
In the three-credit class, students learned to examine and interpret the effectiveness of microlending agencies within the cultural context of Honduras. The course was capped with a trip to a small village in Honduras where students implemented both physical and financial improvements.
LAYING THE GROUNDWORK
Laying the Groundwork In the fall semesters of the 2010– 2011 and 2011–2012 academic years, I led the Financial Intermediation course. Students were required to read Portfolios of the Poor: How the World’s Poor Live on $2 a Day, which framed the context for what microfinance can do for a region or a country if the right opportunities are presented.
Because it was a collaborative course, I also invited an economics and Latin American studies professor to teach cultural insights about Honduras. In addition, students heard from other guest lecturers, professors, and microfinance professionals during the course.
During both academic years, the final project of the class involved students traveling to Honduras during spring break to implement business plans for projects they would undertake in the remote village of El Zuzular. In this coffee-growing community, the average family’s monthly income is US$80.
El Zuzular was chosen for us by the microfinance organization Global Brigades (www.global brigades.org). After students examined the merits of partnering with various NGOs, we selected Global Brigades because it was the most reputable organization that facilitated college-student microfinance trips and because it was well-established in the region we wanted to visit. I felt it was important that students conduct the research on the NGOs because I wanted them to feel a sense of ownership for the entire project.
To help prepare students for their trip, representatives from Global Brigades spoke to the class four times via Skype. They also provided manuals that outlined Honduras’ economic conditions, as well as the limitations and opportunities students would encounter there, and they described the frontier market conditions that exist in the country.
Students further prepared by engaging in fund-raising activities that would help finance their trips. Each participating student, faculty member, and staffer who traveled to Honduras paid $750 to Global Brigades, but most of that money was generated through fund-raising activities conducted beforehand. Some students participated in auctions and raffles; others earned money by tutoring younger business students and working at concession stands that donate a portion of proceeds to worldwide organizations.
Students did have to pay for their own airfare. Faculty plane tickets were paid for with money we obtained from the Dean’s Excellence Fund, which receives donations from the business school’s board of governors and is overseen by dean Alan T. Shao.
Before bringing any students to El Zuzular, I traveled to Honduras with two other professors from the School of Business, Rene Mueller and Rhonda Mack. Between what students gathered from our observations and what they had learned from Global Brigades, they had a good understanding of what the trip would be like and what specific needs they would find in the village.
PLANNING A BANK
During class time, students discussed the potential projects they might implement during their visit. They began applying microfinance principles, as well as valuation and ROI metrics, to the projects they were considering. Since they would be in Honduras for only seven days, they wanted to make the most of their time.
The students’ primary goal in El Zuzular was to establish a small community bank—a caja—that would offer financial aid and startup loans. The students would teach bank and community leaders the basic principles of saving and lending money, as well as how to create simple financial statements for recording income and expenses.
Students believed that once the bank was established, it could have ongoing economic impact in the community by funding other projects. One project they knew they were committed to was the construction of a storage silo that would enable the community to store coffee longer, extend the financial income of households throughout the year, and increase prices in off-seasons.
They also planned for the caja to fund projects that would lead to purified running water, a new elementary school, and private bathroom facilities for village families. In addition, the caja would accept an increased number of loan applications that would bankroll new family businesses and raise the prosperity of the village.
ALL ABOUT THE MONEY
During the school’s spring breaks in March 2011 and 2012, a total of 57 students made the trip to Honduras. As anticipated, they spent much of their time making the caja a reality.
As students began their program of educating villagers about financial concepts, they formed groups of five that included one officer from the caja, members of El Zuzular families, and one Spanish-speaking student or representative from Global Brigades. Within these small groups, students taught caja officers how to measure and track the bank’s financial performance and how to determine P&L on an ongoing basis.
The caja’s initial reserves were created when students and supporting faculty pooled a portion of their program fees. Of the $750 each student and faculty member had paid, $100 was given to the caja as seed money. Over the course of two trips, we were able to give the caja more than $5,000 to disburse in loans.
We also used some of our program funding to provide direct assistance or cash donations to families in El Zuzular. For instance, we donated $1,000 to several families to help them purchase agricultural supplies, rather than securing loans. Smaller amounts were given to villagers for specific purposes: $100 went to a family that wanted to start a personal savings account at the caja; $200 was used to purchase scarves and other crafts from village women to help spur their entrepreneurial efforts; and $200 was distributed to individual families who wanted to sell coffee directly, rather than going through the local co-op.
Students also brought more than money to El Zuzular. They had filled extra suitcases with items to donate—such as education supplies for the children, hygiene products, clothing, shoes, toys, and stuffed animals. Like the caja, these items were chosen to improve the quality of life among villagers.
MEASURES OF SUCCESS
Over the course of our two visits, students have helped the villagers put together some impressive achievements. They haven’t just started the caja; they’ve also organized a store and taken steps toward ensuring clean drinking water. And they’re not done yet.
Since the students returned to campus in March 2012, they have set up a fund-raising project to purchase a community vehicle that will allow villagers to transport coffee to other markets. Villagers also will be able to use the vehicle during medical emergencies.
In addition, students and a staff advisor have established an online store that will allow students, faculty, parents, friends, and groups from other universities to purchase El Zuzular coffee. The store is run through Global Brigades, which acts as a distributor. We believe that the online ordering system will improve the financial welfare and income levels of the entire village.
In many ways, the program has succeeded far beyond our initial expectations—and Global Brigades has been impressed by our results as well. The organization invited College of Charleston business students to join Duke University and UNC–Chapel Hill students to share best practices at a national microfinance conference in April 2012. Global Brigades also recruited one of our 2011 graduates to lead its efforts in Honduras. A 2012 graduate was recruited by another NGO to help set up and operate similar microfinance programs.
While we are proud of what our students have accomplished in Honduras, we know it’s critical that they also achieve the specific learning goals we set out for the Financial Intermediation and Latin American Humanities course. We identified five goals we wanted students to achieve: learn effective communication skills; develop quantitative fluency; develop a sense of global and civic responsibility; experience intellectual innovation and creativity; and learn to synthesize disparate elements into a harmonious whole.
Students were assessed on five measures that directly tied to the five learning goals: developing business plans for economic initiatives in the Honduran community, writing final papers, participating in class discussions, planning their meetings and the trip to Honduras, and preparing creative projects that demonstrated the “before and after” impact their projects had on the community.
Equally important, but harder to measure, were the types of knowledge they absorbed during this intense applied learning experience. For instance, students learned that as consultants they had to listen to their clients; they couldn’t just assume they understood what the villagers wanted. And they also learned that financing is essential at all levels of the economic spectrum from the very wealthy to the poorest of the poor.
The Financial Intermediation class has worked so well that we plan to continue offering the course— and the trips—for the foreseeable future. We’ve considered small changes, such as splitting the larger classroom into two small groups. One would return to El Zuzular, while the other one would travel to the Dominican Republic.
I believe other schools could launch equally exciting microfinance programs that encourage students to embrace social responsibility. I’d make these recommendations to help ensure success:
Create a credit course that engages and inspires students. Use coursework to show students how economic development has real-life impact. Make it a class requirement that students go on a trip to a developing nation to see microfinance in action.
Partner with other organizations on campus. These might include the microfinance club, if there is one, or the university’s study abroad program. Such partnerships will help the school recruit interested students and also lay the groundwork for the trip.
Collaborate with reputable international organizations. NGOs that create sustainable opportunities in developing markets can facilitate the trip.
Give students a sense of ownership. Make sure students are involved in every aspect of the course, from choosing the organizations they will partner with to choosing the projects they will implement to participating in fundraising activities.
Identify and enlist a faculty champion. I have real passion for providing creative and relevant learning opportunities for our business students, so I was committed to this program from the start.
Seek buy-in from senior campus leaders. In our case, we made it clear to university leadership how the microfinance program would reflect the mission of the school. After students returned from Honduras in March 2012, they made a presentation at one of the board’s annual meetings. Not only did they describe what they’d accomplished on their visits, they provided freshly ground Honduran coffee to each of the board members, which was an ideal way for the members to see the impact their gifts made on the student learning experience.
I believe that the combination of elements—the founding of the club, the creation of the class, the participation of Global Brigades, and the support of campus leadership—provided an ideal environment for our students to learn about social responsibility, financial principles, the economic impacts of even small actions, and the importance of cultural understanding. And I hope that one day, when students from this course rise to the ranks of senior banking executives, they will remember the fundamentals of lending and spending that they learned in Honduras.
Jocelyn Evans is a professor of finance at the College of Charleston’s School of Business in South Carolina.