Microloan mamas

Many of you may be familiar with microloans because they are the development strategy of the moment. For the uninitiated - microloans are small business loans generally granted to women (because they are more likely than men to spend profits on the family’s basic needs and also have a more difficult time accessing capital in the first placed - sorry guys, that’s what the research shows) and often disbursed to a group of women who are jointly responsible for repayment and thus apt to police each other. Grameen bank was the first to do this on a large scale for poor rural women in Bangladesh, and they have seen an enviable repayment rate of over 95%.

The logic behind microloans is that one of the biggest impediments to climbing out of poverty is the lack of access to capital due partly to the false assumption that poor or illiterate people will not reliably pay back loans that were too small for any banking institution to award in the first place. It’s not that people don’t have bright entrepreneurial ideas or the ability to work hard and see them to fruition; it’s just that setbacks like illness and large webs of extended family obligations mean that hey cannot get enough money together to ever get started. Also, the lack of collateral and credit history make them poor loan candidates - if there were banking institutions even available.

Unlike traditional aid disbursement, encouraging the upstart of small ultimately self-sustaining businesses reduces long-term dependency and empowers families to take control of their futures. And it only takes a very small amount of money to make a huge difference. Fifty dollars is enough for a woman here to start a business selling cookies or kerosene. For all of these reasons, so many students and practitioners of international development have become really excited about microloans. And that is why Children Better Way set up a microloan program for 14 women on camp.

The loans (ranging from $40 to $80) were disbursed to these women based on business plans, interviews and recommendation from the head of the program, Amelia. The women have 20 months to make repayments. They are visited by the microloan committee twice a month and required to attend meetings once a month to collectively discuss problems they face and share strategies. Because it is a revolving fund, if the women make timely payments and regularly attend meetings, they are eligible to receive additional loans. Sounds good, huh?

The problem is that providing loans on a camp in which people depend heavily on and are accustomed to receiving remittances from relatives abroad or UNHCR handouts (both technically grants, not loans) means that sometimes the women resent having to make payments. It’s a lot easier to ask someone abroad to send money than to work all day, barely see a profit and then have to use some of it to pay back a loan. A few of them view it as such a great burden that they have some regrets about having taken the loan in the first place. Maybe access to capital is difficult here, but when people do get some it is usually a gift with no repayment attached.

But in actuality the microloan program has been more successful than this context would have predicted. The repayment rate is not exactly the stellar, but they women are trying. Most are up to date with their payments and some have actuality paid several months in advance. But considering the culture of surviving on handouts and our inability to send a repo man to confiscate goods or threaten them with a poor credit report, it is amazing that the women make the payments they do.

So, what keeps the women making their payments at all? A lot has to do with social pressure and pride. We visit the women every two weeks to inquire about their business and nag them about late payments. We hold monthly workshops to discuss issues like “how to save for emergencies” and “how to attract more business”. So, they form relationships with their creditors making it more difficult to avoid or cheat them. But a key component is Amelia. Amelia is the local head of the program and she is widely respected by the women. She is a naturally gifted leader and has admirable ability to inspire and encourage the women who seem to seek her approval. They respect her, she has vouched for them and they don’t want to let her down.

This week I attended my very last monthly workshop, and I left feeling such a genuine admiration for these women who are struggling to make something against so many odds, and doing it with such good humor, raw intelligence and grace. The workshops have not always been this inspiring. When I first arrived they were more like little classes where we would lecture them on savings and profit margins. But this was generally done by outsiders and had no real relevance to their lives and it seemed, while not exactly patronizing, not empowering either. So, we changed the format to a group discussion where answers to problems like how to save for emergencies and what to do when their businesses are failing came from the women themselves. These women may not know terms like "profit margin" and "market demand" and some of them cannot even read or write, but in our discussions it was clear that they, perhaps out of necessity, know business. Their advice to one another seemed plucked straight out of an MBA course - logical stuff but ideas that conveyed a keen business savvy. The women suggested anticipating seasonal market trends, increasing advertising, diversifying the product base, increasing exposure by walking around camp instead of staying in one place, and providing a discount if a customer is likely to bring in more business.

This week we talked about how and when to say "no" when your neighbor or family relation comes to ask for money. In this culture it is incredibly hard to refuse these requests (i.e. someone needs money for kerosene or medicine or rice) especially, as the women told us, when everyone sees that you have a business and thus assumes you have the means to help them. This tension between extensive and expensive social obligations and the need to accumulate the wealth required to grow a business is apparently something economists will cite as a real impediment to development around the world. And it is something that is played out as a very real struggle in these women’s lives. There are no easy answers. They cannot refuse to help anyone because they are still poor enough to need to reserve the right to call in a favor of their own in the future and because in a small community the appearance of selfishness can seriously damage one’s standing in the community. But they have to be able to refuse sometimes because otherwise they will never save enough to pay back their loan, provide a cushion for emergencies or better their lives. In our workshop, the women again offered astute suggestions to handle this dilemma, such as setting out guidelines on ‘when to give’ for yourself that you agree not to violate and putting away money that you consider inaccessible to anyone including yourself. This way when a neighbor comes around asking for money for their daughter’s wedding you can say you have none, knowing what you do have is already in a kind of unreachable savings account for your future. They also offered advice for tactful ways to refuse requests without appearing selfish or injuring relations.

None of these are easy issues. And the women struggle with them everyday to scrape by enough money to sustain their families. Amma Cooper has 7 kids and her husband was killed in the war. She has no help from relatives abroad. Sometimes she has to watch her kids go hungry and when they fall sick, medical expenses quickly eat away all her savings. But she is poised and articulate and diligent and proud in the face of all this, and watching her provide well-reasoned and caring business advice to her microloan sisters is simply inspiring. I doubt I’d ever have the strength of any of these women.