Kristin King and Kate Brubacher are founding members of Liberian Widows Initiative (LWI), an organization to aid women devastated by the Liberian Civil War. LWI provides small business loans and savings accounts to members of the extreme poor — Liberian refugee women who struggle to feed their families and send their children to school. LWI was an outgrowth of Brubacher’s residence in West Africa during 2004-2005. Brubacher is now at Yale Law School and King is a second year MBA student at Wharton. King and Wharton management professor Keith Weigelt talked to Knowledge at Wharton about the challenges of running a grass-roots microfinance initiative several thousand miles away. An edited transcript of the conversation follows.

Knowledge at Wharton: Can you tell us about the Liberian Widows Initiative?

King: Sure. It’s a non-profit that was started about two years ago as a result of seven months that were spent in Ghana by my best friend Kate. She went there to document the stories of Liberian refugees. In 1990, the United Nations made an agreement with the Ghanaian government to start a refugee camp outside Accra in order for Liberian refugees to flee there.

It began with about 5,000 people originally. There are now around 40,000. So the camp is stretched. Kate spent seven months there, meeting with widows and documenting their stories. The majority of them have seen their families killed in front of them. While she was there I spoke with her literally every day.

When she returned, we determined that there was no reason why we couldn’t help from here. We started fundraising and decided that microfinance would be the most effective tool to help these women. We have a contact [in Accra] whom we trust. We pay him a monthly salary and he runs a program for us on the ground. He collects applications from women. If we deem the project feasible, we will fund a business. 

Knowledge at Wharton: Where do you get the funds?

King: It’s from a variety of ways….It comes from a collection of grants, from family, friends, from wealthy donor, from a lot of it is just from getting the word out and from people just believing in the cause and seeing the direct need.

Knowledge at Wharton: None of it is from the government?

King: None

Knowledge at Wharton: What kind of projects have you been funding and could you tell us a little bit about the volume of activities that you have carried out so far?

King: Sure. It’s pretty simplistic, the kinds of projects that are being funded, but they are the result of direct need. The camp itself is rather self-contained. There is a mini-market environment there, if you will. There is no running water, there is no plumbing and there is no electricity within the camp. Something as simple as purified water is a basic need.

Several of the most successful projects have been women who rent tanks and buy purified water and then sell it, or else meet trucks out at the road, buy purified water from there and sell it. Other things have involved rice stands or just produce in general. Oil for cooking has been big. There have been a few clothes stands, as well, with second hand clothing.

Knowledge at Wharton: You term this “microfinance” because by definition these are very, very small loans to very poor people. Is that basically why you are using that term?

King: Yes, it’s a lending process. We have a group loan system in place. The women must apply in groups of five; they have weekly meetings to discuss issues that they run into. It’s an opportunity for community as well. It’s a unique endeavor because it’s post-conflict microfinance. That’s how we think about it, in terms of these women having lived through heinous crimes. And part of it is the rebuilding of community and rebuilding their self-esteem. Weekly payments are made during these meetings.

Knowledge at Wharton: Obviously you have studied Muhammad Yunus’s microfinance efforts in Bangladesh and this is modeled basically after his program?

King: That’s right.

Knowledge at Wharton: How big, typically, is a loan and how many loans have you made so far?

King: Loans range anywhere from as small as $20 up to about $200. That has been our largest loan. Right now, we have about 45 loans that are outstanding and we are in basically our third round of loans. We have reached roughly about 150.

Knowledge at Wharton: With Muhammad Yunus’s Grameen Bank, the repayment of the loans is extraordinarily high — more than 95%. What has been your experience so far?

King: I would note that his rate was not that high when he first started. But right now, in our current round of loans, it is about 60%. It’s much lower than we would like it to be. Our goal is 80%. And part of that just has to deal with the nature of who we are loaning to and where it is happening.

You have many different kinds of risks. You have a group of people who have been used to receiving aid as their primary means of existence. So there’s the issue of defining loans versus aid. And then there’s also a flight risk — people repatriating to Liberia. That’s only happened a few times. There are different risks and the people who have been our donors are aware of that. They don’t expect a 95% repayment rate.

Knowledge at Wharton: How do you manage this from here?

King: It’s difficult, but we set up a pretty strict set of rules with our contact there. We employ a man named Isaac. He is very good in terms of bookkeeping. He sends us bi-weekly reports that are detailed in terms of payments made by specific women. I maintain the Excel spreadsheet here that keeps track of it. We speak to him on the phone and email him regularly.

Knowledge at Wharton: So this is really grass-roots microfinance?

King: Very much so.

Knowledge at Wharton: What would you say have been some of the biggest challenges that you have faced so far and how have you overcome them?

King: Of the things that we have just talked about, trying to manage it from here effectively. Both Kate and I were in Ghana for a little while last summer meeting with the women. It’s incredible, in terms of just having the physical presence. Repayments jumped right after that. There was just a lot more activity. The physical presence I think helps a lot, in terms of morale. So, that’s a challenge.

The other challenge is the dependency syndrome in terms of: Is this United Nations aid? Is this a hand-out? Or is this… we are giving you the opportunity to support your family, to make a difference and to take your life into your own hands. So before the loans are made, we require that the women meet three times, discuss the terms and repeat them back. It should be very clear.

Knowledge at Wharton: It’s [sometimes] afeeling of dependency as opposed to self entrepreneurship?

King: Yes, I think [they need to] understand that this is a different means to supporting themselves as opposed to something just being given to them. Fundraising is also an ongoing difficulty.

Knowledge at Wharton: How did you communicate with the women when you were there?

King: They speak English.

Knowledge at Wharton: Where do you see this program going over the next few years?

King: Our goal has certainly never been to become the next Grameen Bank. But our goal currently is to assist in the repatriation efforts in Liberia. The civil war is over in Liberia and they are going through a rebuilding process, but it’s difficult. Running water and electricity were just reinstated in Monrovia [the capital] not that long ago.

Many other microfinance efforts have not succeeded so far, just because the unemployment rates are so high. There’s just not that much of an economy, but our goal is to continue to operate in the camp and, as people return home, establish a base in Liberia, again very small; like you said this is grass roots. But our goal is to make an impact on a small level. Our goal is not to change the world, but the way we think about is: If somebody was able to send their children to school and to have two meals a day instead of one, it’s a success. If that’s 200 or two million — we’re operating on a 200 scale. 

Knowledge at Wharton: Has it been hard to fundraise, or is the fact that Yunus has been in the news so much lately because of the Nobel Peace Prize made it easier, because people know more about microfinance now? Do you have to explain in depth what you are trying to do or do people get it?

King: I think that people get it in general. And then I think that it’s just a matter, too, of saying, “Look there’s virtually no overhead here.” I took probably 150 pictures while I was there and probably 75 of them were of individual women. People know Kate, my co-founder, and I and, on a personal level and a lot of these people have given to us and they know that we are doing our absolute best with it. So far, this has been the major source.

In terms of grants, etc., that we have gone for, that has been more difficult. Trying to do this in a refugee camp and in a very uncertain area in Liberia [means] it’s not as safe an investment, if you will. And so, people have understood that it’s a different kind of an investment.

But, I would also note that part of the reason why we did this is because it’s just a different level of poor. There are groups like Opportunity International in Ghana that will only lend to already economically viable businesses. You have to show that you are already doing something and then they will kick in. But [our program involves] the extreme poor — less than $1 a day, maybe a meal a day. It’s a different ball game.

Knowledge at Wharton: Do most of these women have children with them?

King: Most do. And most of them have lost their husbands and several, if not all, of their children during the war. But most of them have since either remarried or else have children who have survived.

Knowledge at Wharton: What are you going to do when you graduate?

King: This is a bit of a different twist, but I’m actually going to be an emerging market corporate debt analyst. I’ll still have the tie to emerging markets but on a little bit of a different front.

Knowledge at Wharton: I was wondering, Keith, what is your take on all of this?

Weigelt: I think that it is very courageous for someone to establish an operation like this. And the fact that she took this summer to go there and everything. I have always said that microfinance is the good side of capitalism. I think that we are showing a good side here.

Knowledge at Wharton: In terms of the economic model that Liberian Widows Initiative has, how do you see it compared to other microfinance initiatives worldwide?

Weigelt: It’s probably how most microfinancing initiatives start, with small grants and support. We have seen an evolution in the industry [where] they are just getting off the grant ‘breadline’ and into a ‘for profit’ [model], being efficient and so forth. It’s an evolution beginning across the entire industry.

Knowledge at Wharton: Lately there have also been a number of venture capitalists, such as Vinod Khosla, for example, who is one of the founders of Sun Microsystems. People like that have entered the microfinance arena. Do you believe that initiatives like this can benefit from a greater infusion of venture capital?

Weigelt: Yes — if the venture capitalists don’t want the huge returns that they are generally used to. There is a lot of social good that they could be doing and a lot of them are doing this. But again, there is this huge need and that need is barely being fulfilled. 

Knowledge at Wharton: I don’t mean to suggest that this is a trend or a fad, but microfinance has become a word spoken often in our economy these days, partly because of Yunus. But do you also think that with all of these initiatives that are going on in Africa, with Bill and Melinda Gates and Warren Buffett and other [philanthropists] that maybe this is the time for microfinance to succeed, if it’s ever going to be able to do it?

Weigelt: Well, it’s probably seen more funds thrown into it than it’s ever seen before. I’m just glad that many of these people have taken it seriously and that they are willing to fund it.

Knowledge at Wharton: In your case, Kristin, you are relying on the good will and the efficiency of this one person over there who you are working closely with. In a way, you are fortunate to have made that connection. How difficult will it be to sustain that?

King: That’s an issue that we debate daily. But Isaac has been fantastic thus far. He’s actually been training somebody else as well, who has been doing probably about 30% of Isaac’s work recently, to help Kate and I both. Kate and I met him while we were there. That has helped him get up to speed and [helped] us become comfortable with it. This is so that if we do transition, we will have a base in both places.

And then, going forward we’ve also done a lot of work in terms of [looking into other potential] partnerships. One of the difficulties of living in Liberia is registering with the government, to have an entity there. If you can establish partnerships with existing non-profits, then you can get around some of those issues. Those are some of the things that we think about in terms of having a larger base there.