Dispatch From Abroad: Developments in Beirut

By Bram de Roos

The Mediterranean Coast of Beirut, Lebanon. Photo: Bram de Roos

After studying Arabic for the last academic year and getting a taste of financial management through a course at the Business School, I decided in the spring that it would be good to get some experience in finance in an Arab country. With a background in political science, Japanese studies and anthropology, I figured it would be hard to start managing a Gulf-based investment fund right away. Instead, I decided to look for an opportunity in microfinance.

My interest in international development and base-of-pyramid business models made me curious about this much-praised approach to help ‘the poor’. Especially after setting up a team of Students in Free Enterprise at GW, I was curious to see how other organizations stimulate entrepreneurship. All the while, it would give me an opportunity to test my newly acquired finance and language skills in a new environment.

So I went online, looked for microfinance organizations anywhere in the Arab world (strategically omitting Afghanistan) and send them e-mails offering my services as an intern. Of the scores of messages sent, just a few resulted in a reply. But eventually, I only needed one, so when Al Majmoua in Lebanon asked me to do an Activity-Based cost analysis to look for ways to improve their profitability, my plans for the summer were sealed.

I had already met several people from Lebanon at GW, so I had heard all kinds of stories about it. But when I saw Beirut by night through the window of the airplane, I had no idea what it would be like to live there for 2.5 months. After having been here for about six weeks, I have had all kinds of pleasant and unpleasant surprises.

As I was told, Lebanon is indeed a beautiful country. However, most cities aren’t beautiful at all, and in general the view of the magnificent mountains and Mediterranean sea is spoiled by ugly apartment buildings and excessive billboards (attracting most attention are the large lingerie advertisements with a warning in the top-corner saying “Keep your eyes on the road”). Using Arabic in real life is much harder than I thought it would be, but I finally reached the point that taxi drivers approvingly concede “Ah, btehki ‘arabi” after I’ve explained them where I want to go in their own language.

And then there’s the development part. In a way, Lebanon is always in development. Frequent wars have ensured that buildings are always in need of repair or total reconstruction, and a vast diaspora of emigrated Lebanese spend their dollars, euros and pesos when they come back during summer, generating a large inflow of hard currency. This results in ten-dollar beers in the most popular bars, while many Lebanese can’t afford to spend that amount daily on food.

Working for an NGO that is offering financial services to the poor gives an interesting viewpoint of these different social strata. First of all, it is interesting to see how policy differs from practice when comparing the procedures designed at the head office and the daily routine of loan analysts in the field. When I’m thinking about this discrepancy between management and staff in one organization operating in a small country like Lebanon, I can only guess how hard and inefficient it must be to design a development policy for a country across the ocean from an office at the World Bank or IMF in Washington, D.C.

Another eye-opener was that I soon understood the reasoning behind the reckless mortgage providers that led to the financial crisis. Even if you run a considerable risk, the profit on large loans is so high that it is very tempting to disregard safe lending practices. Which brings me to another dilemma: should a development organization go for the profit, or for the impact? Of course, the organization has to be financially sustainable. Right now, Al Majmoua doesn’t need external funding to maintain daily operations, but it does if it wants to expand. In addition, it might be able to lower interest rates if it generated more profits.

Today I was having a discussion about this with my manager. She insisted that Al Majmoua should serve the lowest-income groups, meaning that it would issue mainly small loans (between $500 and $2000). However, I was proposing to increase both principal and maturity to generate more income and allow for lower interest rates. Eventually, it will be a balancing act to keep serving Al Majmoua’s target group while generating enough profits for expansion. I still have one more month in Beirut to find a way to do this.

Bram was born and raised in the picturesque Dutch town of Beerze before going to university in Leiden. Now a resident of Washington, D.C., Bram is an M.A. International Trade and Investment Policy student, focusing on International Business. He is also the chairman of Students in Free Enterprise GWU.

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