Truelift – the Microfinance Wonderbra

What is “Truelift”? What pops into your mind? I initially thought it might be a rival to the Wonderbra; a new botox treatment; an elevator for the elderly or handicapped, perhaps?

In fact it is the latest effort to perk up the reputation of the microfinance sector. The inaptly named Smart Campaign was obviously flawed: funded, hosted and managed by vultures (Accion). So they decided to re-brand the idea, and actually make it marginally sillier in the process. The director is a gentleman named John Bergeron, formerly of Kiva and Accion – believe it or not. I am hard-pressed to think of two institutions less suitable for grooming someone to work in transparency and client welfare. Wolves guarding sheep springs to mind, as I’ve discussed before in the context of Smart. But look who else is behind this latest face-saving effort:

The steering committee boasts none other than Isabelle Barres, of Smart and Accion (pure coincidence). Alex Counts of Grameen Foundation USA got a seat for some reason, as well as the usual insiders: the Social Performance Taskforce, CGAP (of course), even Oikocredit joined. Asad Mahmood of Deutsche Bank got a seat despite the chequered history of the fund he manages. This was presumably unrelated to the $150.000 donation Deutsche made to Truelift (another coincidence). Interestingly two rating agencies, Planet Rating and Microfinanzas are involved, but MicroRate is not. It’s potentially a good deal for the rating agencies, as they charge a fee for handing out the certificates. Premal Shah of Kiva is an advisor, apparently. Given that Kiva are yet to work out how to calculate an interest rate one wonders what advice Kiva can offer. However, Kiva are superb at spin and marketing and having an ex-Kiva bod running Truelift will no doubt help Kiva somehow. Sam Daley-Harris, the former head of the MicroCredit Summit Campaign is also an advisor. He ran the MicroCredit Summit Campaign through the Nobel Peace Prize years right through most of the main crises, before handing the baton to Larry Reed. The CEO of the MixMarket – one of the least reliable sources of data of any sector on earth, also offers his advice to this learned body. I can’t help but wonder whether his time would be better spent tidying up the data quality issues on the MixMarket. I’ll blog on the reliability (or lack thereof) of MixMarket data another day.

I wasn’t surprised to see Larry Reed signed up, but expected (hoped) he would have pushed a little harder to make this a professional initiative. He’s the current head of the Summit Campaign and showed some positive signs of competence. Alas he seems to have diluted his initial enthusiasm and has joined a watered-down spin institution, which is sad. He actually had the ability to shake things up, but perhaps trying to induce good behaviour in the microfinance sector was too ambitious a task.

So, what is actually wrong with their latest wheeze? Apart from having a silly name and flawed management, it doesn’t actually do anything. But to understand quite how silly it is we need to look at some history.

First, the Compartamos IPO irritated a lot of people, from Yunus down, and people began to get a little nervous about profiteering from poor people. Accion, one of the main shareholders and beneficiaries of the IPO, was not complaining thanks to a $200m+ payout. But the sector needed to respond to the growing backlash, so Deutsche Bank made the first move to set up some sort of self-regulatory initiative – the Pocantico declaration, in 2008. This expressed some concern that there might be trouble brewing in the sector, particularly as the poor became chronically over-indebted with over-priced loans. Sure enough this was in fact the case, as various crises demonstrated. Deutsche didn’t actually do anything to avoid such crises, merely made a declaration about them, and were well invested in Nicaragua when crisis struck. Obviously the ineffectiveness of Pocantico was clearly demonstrated when the Andhra Pradesh scandal broke.

Pocantico morphed into the Smart Campaign, run by a veteran Accion employee Beth Rhyne. I have been fairly critical of Smart, most recently here. Beth doesn’t like me. The main problems with Smart are a) it is run by Accion, b) it has no teeth, c) it is “endorsement without enforcement” – all you need is an email address and a name to become a member, d) the so-called Client Protection Principles (CPPs) exclude the rights of children despite Smart claiming to be a fair-trade seal of approval for microfinance while all other fair-trade seals mention child labour as a key factor. The latest ILO research on child labour makes for uncomfortable reading for these guys, a blog post for another day.

So, Smart teamed up with Larry Reed to try to establish some form of certification. They came up with the Seal of Excellence, which is actually not very persuasive as it is as vague and nebulous as Smart. Key areas such as extortion of the poor and the legality of the enterprises funded are carefully ignored. There was some fanfare, but it didn’t really take-off, which was dangerous for Larry as he essentially bet his career on it. So, Truelift seems to be the re-vamped attempt.

But, before looking at what Truelift does, and doesn’t do, it’s worth pointing out one effective transparency/client-protection initiative which was ignored. Chuck Waterfield, a veteran microfinance expert, set up, an NGO that publishes the actual interest rates charged by MFIs. Alas this was not incorporated into TrueLift for some reason. One can only speculate why not, as this would have been a golden opportunity to oblige transparent pricing in microfinance. However, look at the people behind TrueLift – they don’t necessarily want transparent pricing at all. Poor old Kiva can’t even state the interest rates on the loans they apparently make to the poor. Would Deutsche Bank want their investors knowing the rates the poor are paying with their philanthropic funds? Accion are clearly not going to reveal the eye-watering rates they charge the poor. And even Larry Reed is probably a bit hesitant to reveal the interest rates he was charging as CEO of Opportunity International (161.4% in Ghana, I did a post specifically on Opportunity’s rather dubious interest rates, and also one on Kiva’s slight “errors” when describing the cost to the poor).

Truelift have reduced the 7 CPPs of Smart to three principles: “Purposeful Outreach to People Living in Poverty”; “Services that Meet the Needs of People Living in Poverty” and “Tracking Progress of People Living in Poverty”. There are no metrics. An MFI can use any measurements it likes, and as they work their way through the various levels, from aspirant to leader, they have to meet various requirements sufficiently vaguely worded as to be largely meaningless. “Sufficiently meets qualifying standards”, or “good performance and a minimum appropriate score”, etc. In one amusing twist, to reach the emerging status the MFI must meet only 4 of 6 categories, but 7 are listed just to make things a little easier. There’s a self-assessment tool, in case an MFI can’t be bothered to hire a rating agency to tell it whether it’s abusing poor people or not – but it’s not ready yet.

Of course the MFIs have to provide all data to the MixMarket (please do it accurately, it’s such a pain having to reject 50% of the Mix data because it’s flawed), and then get a social rating from one of the rating agencies (for an undisclosed fee), two of which conveniently are part of the management of Truelift. To get the maximum rating the MFI needs to also get a full Smart Certification, so Smart is not dead, yet, merely sidelined. It’s a long process, presumably quite expensive, and the actual certification is ill-defined. For example, there are no levels at which an interest rate might be considered exploitative, and the MFIs are allowed to lend to any manner of illegal enterprises – there is no requirement that the micro-enterprises are even legal, and they do not have to comply with ILO-approved local legislation on child labour, to single out just one element of legality these folk chose to delicately ignore while “protecting clients”. So, as far I can tell, lending to pimps and drug-dealers at 150% per year would not actually disqualify an MFI in the certification process.

For example, on the objective, measurable topic of interest rates, for which best practice calculations are widely available, the Smart criteria state only that rates be “market-based” and fees and penalties “not be excessive”. So, the famous 195% APR at Compartamos would not necessarily violate either of these, thanks to “excessive” remaining un-defined.

It would not be hard to dramatically improve the quality and integrity of Truelift. Many countries (such as Mexico and Ecuador) oblige MFIs to publish their APRs. The certification process could do likewise. The investment companies such as Deutsche Bank, BlueOrchard, Triple Jump etc. all claim to promote transparency, and thus they could publish their investments and the interest rates charged, and allow their own investors to decide whether these are reasonable or not. But the simple fact of the matter is that the vast majority of MFIs are ashamed of the interest rates they charge and would rather these be kept as quiet as possible. Chuck Waterfield is likely considered a nuisance by these people, and when I use his data to expose the actual interest rates charged by the likes of Kiva or Opportunity, I do not receive thanks from these folk despite their vocal approval of transparency. The sector is facing some serious reputational issues, and interest rates of even 50% (low by microfinance standards) will not earn much praise from the general public. Ever wonder why Mexicans pay through the nose for microfinance and US citizens borrowing through Kiva pay peanuts? It’s all to do with reputation.

Thus Truelift has to tread a fine line. It has to be sufficiently credible and well-supported to assuage the concerns of the public and perk up the reputation of the sector. It cannot be too transparent as to actually reveal the more sordid activities of the ailing sector as this would be counter-productive. It must be well-marketed and rely principally on spin and feel-good wording, without too much attention to actual details. In their webinar (complete with background noises, annoying beeps etc) they spend an inordinate amount of time on how they picked the name (no, it wasn’t inspired by Wonderbras), and very little time on what practices are actually deemed unacceptable. Above all, the profitability of the sector must be maintained at all costs.

The logo itself is slightly confusing – the yellow blob represents “the life-giving rising sun and the promise of a new tomorrow”, the purple dome represents “the sky under which all things are possible” (apparently), but the green bit “speaks to the earth, agriculture and growth. Its angled application brings to mind a path or way forwards towards progress”. It reminded me of the Aquafresh toothpaste logo for some reason. Regardless, this all looks pretty firmly like spin-language to me.


Alas Truelift is merely a PR exercise. It needn’t be. If the financing bodies actually demanded certain standards as a condition to obtain funding, effective microfinance could become the norm. But to do so would jeopardize profitability. Governments such as Ecuador actually have the balls to make sector-wide laws limiting exploitation; institutions such as calculate actual APRs with trivial ease; the ILO goes to lengths to identify and define child labour – none of this is rocket-science. The only excuse I can think of to explain why the sector fails to clean up its act is because they don’t want to. It doesn’t serve their interests. Deutsche Bank’s investors would likely be furious to discover how their funds are being used. Kiva genuinely has no idea of the interest rates their poor clients are paying (or the days of the week). Accion do not want to draw attention to the source of their profitability.

Truelift looks nice and wonderful at the surface, but is likely to be disappointing when you peel away the layers. In this regard alone some may argue there is some mild overlap with the Wonderbra after all.

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