Jin Kuwata, Erin Joyce, and Cyrus Luhr
Research Report
October 8, 2007
Introduction
"The Value of a Dollar"
How much is a dollar worth? Can it be compared to basic staples of our lives such as
food, clothing, and shelter? Can a dollar buy us an education, health, a career? In short,
can a dollar provide us with security and ultimately, happiness? In the US where our
standard of living is in the upper percentile compared to the rest of the world we may find
the use of a single dollar difficult to imagine. Yet all over the world, people live on less
than a dollar or two a day. A sustainable source of a modest income can afford people
the kind of opportunities we take for granted. With opportunity, also comes the chance
for empowerment and improvement of quality of life on a local level.
Microloans are a relatively new concept that gives people these opportunities to sustain
their lives. As such, we believe it is important to raise awareness of this concept and the
benefits that result from successful microloan programs. To do this, we are in the process
of designing a game intended to increase knowledge about microloans and to persuade
people in donating to NPO organizations involved in the microloan phenomena.
In order to do this, we felt it was necessary to understand the facts and figures revolving
around microcredit as well as understand the opportunities and changes that a dollar can
make in the personal lives of microcredit recipients. Our goal is to blend the right
amount of hard facts into the algorithms used within the digital game to present a
challenge reflective of real world obstacles faced by recipients as well as tell a story
about the recipient so as to paint a full picture of what support for this movement can
possibly achieve.
Thus, in this document we have reviewed many domain based research questions that
have shaped some of the structure of our game.
Domain Questions:
1a. Why is our game important?
We believe that our game will pursuade players to better understand the microloan
system, and in the process, be more compelled to donate to a microloan NGO. Microloan
programs in general are an important initiative to support, as they directly attempt to
alleviate the problems associated with poverty in emerging regions. The following
excerpt from a speech given by the Director of the Microcredit Summit Campagin
provides a more personal account of the importance of supporting microloan initiatives:
"On Sunday, I read a harrowing article in the New York Times titled, “Africa’s World of
Forced Labor in a Six-Year-Old’s Eyes,” about children sold by their parents to work for
fishermen in Ghana. It was all the more harrowing when I thought of my own five-yearold daughter Sophie and eight-year-old son Micah.
The article reminded me of a question I asked Nobel Peace Prize winner Muhammad
Yunus, many years ago, it might’ve been 15 years ago, “What was the first thing a
woman does with the proceeds from her loan,” I asked him, expecting him to say, “They
put their children in school, they buy more food, or they fix the roof, so it doesn’t rain in
any more.”
“Very often,” he replied, “the first thing they do is bring their children home.” Professor
Yunus explained that all too many very poor families in rural Bangladesh cannot afford
to feed their children, so they send them off as young as five and six years old, to work
for others cleaning houses and the like and when they get their microloan and start
increasing their income, the first thing they often do is bring their children home." --Sam
Daley-Harris, Director of the Microcredit Summit Campaign
(http://www.results.org/website/article.asp?id=2453)
1b. What is a microloan?
While answering this question didn't necessarily influence any changes to our game
design, we nevertheless felt it important to understand the history and methods of
microloan programs (so as to better direct more indepth questions later on).
Microcredit is the extension of very small loans (microloans) to the unemployed, to poor
entrepreneurs and to others living in poverty who are not considered bankable. These
individuals lack collateral, steady employment and a verifiable credit history and
therefore cannot meet even the most minimal qualifications to gain access to traditional
credit. Microcredit is a part of microfinance, which is the provision of financial services
to the very poor; apart from loans, it includes savings, microinsurance and other financial
innovations.
Microcredit is a financial innovation which originated in developing countries where it
has successfully enabled extremely impoverished people to engage in self-employment
projects that allow them to generate an income and, in many cases, begin to build wealth
and exit poverty. Due to the success of microcredit, many in the traditional banking
industry have begun to realize that these microcredit borrowers should more correctly be
categorized as pre-bankable; thus, microcredit is increasingly gaining credibility in the
mainstream finance industry and many traditional large finance organizations are
contemplating microcredit projects as a source of future growth. Although almost
everyone in larger development organizations discounted the likelihood of success of
microcredit when it was begun in its modern incarnation as pilot projects with ACCION
and Muhammad Yunus in the mid-1970s, the United Nations declared 2005 the
International Year of Microcredit. (Wikipedia)
Microfinance has helped more than 13 million Bangladeshis improve their lives over the
last 30 years, the World Bank found in a recent study.
(http://www.nextbillion.net/newsroom/2005/10/27/micro-loans-help-worlds-poor-makemoney-too)
2. What types of loans are there?
In order to design a representatively realistic in-game world, we needed to learn about the
range of microloan types. In order to reduce game complexity (which may cause
confusion to the player), we chose to focus on "income generating or micro-enterprise
loans." A longer explanation of the four major microloan types follows below:
There are four types of loans given by the Grameen Bank, each with a different interest
rate:
1. Income generating or micro-enterprise loans
20% interest rate (declining basis).
Average loan size is US $ 317.
There is no restriction on the loan size.
1a. Housing loans
8% interest rate.
Maximum amount given for housing loan is US $ 219 to be repaid over a period of 5
years in weekly instalments.
2. Education loans
5% interest rate.
3. Loans for Struggling Members of Society
0% (interest-free) loans for Struggling Members (beggars)*
Among the beggars there are disabled, blind, and retarded people, as well as old people
with ill health.
All interests are simple interest, calculated on declining balance method. This means, if a
borrower takes an income-generating loan of say, Tk 1,000, and pays back the entire
amount within a year in weekly instalments, she'll pay a total amount of Tk 1,100, i.e. Tk
1,000 as principal, plus Tk 100 as interest for the year, equivalent to 10% flat rate.
(http://www.grameen-info.org/bank/GBGlance.htm)
4. What is the average interest rate on a microloan?
Some microlenders have responded by raising their interest rates to reflect the new
political risks. Spandana has moved in the opposite direction and is now issuing many
loans at the much lower rate of 7.5 percent a year. (
http://www.nytimes.com/2006/08/10/business/worldbusiness/10scene.html?ex=13128624
00&en=f61d24534e36d822&ei=5090&partner=rssuserland&emc=rss)
Government of Bangladesh has fixed interest rate for government-run microcredit
programmes at 11 per cent at flat rate. It amounts to about 22 per cent at declining basis.
Grameen Bank's interest rate is lower than government rate.
(http://www.microloanfoundation.org.uk/pages/news/index.asp?NewsID=10 and
http://www.grameen-info.org/bank/GBGlance.htm)
5. What is the average $ amount of a microloan?
The average loan of the Grameen Bank is $130 in Bangladesh, less in India.
(http://www.thenation.com/doc/20061106/cockburn)
According to its website, SKS has provided over $205 million (Rs 835 crores) in loans to
nearly 632,000 clients.
This amounts to about $324 per person. Cost of living is about $2 a day? (From
wikipedia)
Loans can be as small as $50 and be handed out to people with no collateral to back up a
traditional loan. ( http://www.nextbillion.net/newsroom/2005/10/27/micro-loans-helpworlds-poor-make-money-too)
6. What is the average timeline for loan repayment?
Loans are generally allocated for 4-24 months.
7. What % of loans are repayed?
The country's Grameen Bank, established in 1976 after a famine, has lent almost $5
billion in amounts as low as $12 to Bangladeshis to buy such things as sewing machines,
animals or materials to make baskets over the past 29 years. Its 98 per cent repayment
rate far exceeds traditional banks' 80 per cent.
In neighbouring India, the Self-Employed Women's Association (SEWA) Bank in the
western state of Gujarat was founded in the same year with assets of just over $3,700. Its
assets now total more than $22 million, while its repayment rate is 94 per cent.
At MEFL, the repayment rate is 97 per cent.
(http://www.thenation.com/doc/20061106/cockburn)
8. What are the 3 or 4 most common industries started by microloan recipients?
(Micro-enterprise loans): Power-tiller, irrigation pump, transport vehicle, and river-craft
for transportation and fishing.
9. What are the most common reasons why recipients default on their loans?
The 3% failure rate results from several factors, one of the commonest being that the
borrower has died. With life expectancy of only 37 years, a high incidence of HIV/AIDS
and malaria, it is a sad fact of life that some of the businesses will fail because of death. (
http://www.microloanfoundation.org.uk/pages/news/index.asp?NewsID=10)
10. What are the consequences of non-repayment?
If a loan does not get paid back on time it is converted into a special type of loan called
"Flexible Loan", and 50 per cent provisioning is done at the first annual closing. Hundred
per cent provisioning is done when flexible loan completes the second year. At its third
year, the outstanding amount is completely written off even if the loan repayment still
continues. (http://www.grameen-info.org/bank/GBGlance.htm)
11. Who are the loan recipients, where are they living and under what conditions?
97% of loan recipients are women. (http://www.grameen-info.org/bank/GBGlance.htm)
12. How does the loan increase the quality of life for recipients, their families and their
communities?
According to a recent internal survey, 64 per cent of Grameen borrowers' families of
Grameen borrowers have crossed the poverty line. The remaining families are moving
steadily towards the poverty line from below (http://www.grameeninfo.org/bank/GBGlance.htm)
13. What is the value of a dollar?
More than a billion people living on less than $1 a day and about three billion people
living on less than $2 a day. (http://www.results.org/website/article.asp?id=2453)
14. What is the repayment time-table?
The Grammen Bank... "[simplified] the loan repayment procedure by designing a
convenient, weekly repayment time-table"
(www.undp.org.ge/news/Financial%2520Instruments_eng.pdf+microloan+repayment+ti
melines&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a)
15. How does the actual monetary dispersment occur?
"Orientation of the bank activities at rural settlements by providing delivery of financial
services via amobile group of bank employees."
We may be able to use this for more realistic gameply... as in, have a loan officer visit the
avatar at the end of every week.
(www.undp.org.ge/news/Financial%2520Instruments_eng.pdf+microloan+repayment+ti
melines&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a)
16. Do loan recipients work alone?
From a few different sources, it appears that the Grameen bank method relies upon a
group of 5 people applying for loans together; if one defaults, all are cut off from future
loans. Moving forward, we'll need to figure out how (or if) we need to include this
communal element into our gameplay.
Future questions:
What educational theories are we applying?
What currency should we use in gameplay? What are the implications of using USD vs.
local currency?
What are some common business practices of successful loan recipients? (This might be
something we can ask in an interview)
Game Genres to Play/Research:
1. Persuasive games
2. Behavior change oriented games
3. Resource management games
4. Inventory management games
5. Call to action games
Games we are playing/researching: (team: I thought we could post the game and our
thoughts here)
* Ayiti
* Lemonade Stand
* 3rd World Farmer
* Village, the Game
* McDonalds video game (parody) http://www.mcvideogame.com
* Hot Shot Business
* Disgaea
Educational Theory:
1. What theories support attitude and or behavioral change?
2. What theories support a call to action?
Extra Interesting Reads
http://globalguerrillas.typepad.com/johnrobb/2006/05/india_sks_micro.html
http://www.results.org/website/article.asp?id=2453