August 12, 2008

The Loan Shark

I’ve shared this news with the audience of my monthly e-mails but not with this audience. We’ve recently launched a small micro-credit program in Itipini and, after several months of design, several weeks of interviews and education, and a few bouts of doubt and wonder if anyone in Itipini would ever repay money, on Monday we lent 7000 rand (a little less than a $1000 U.S.) to nine women who are eager to make a go of earning their own money.

The business ideas are varied - one woman is going out of town to buy chickens wholesale, bring them back to town (in a mini-bus taxi), and sell them at a mark-up of R25 per chicken. A few others want to sell airtime for the pay-as-you-go cell phones that are used here. One or two want to open “spaza shops” (little convenience stores) in their shacks in Itipini and sell staples like corn meal and paraffin and other assorted goods. One woman is making and selling dresses, which she already does on a limited basis. Our loan is helping her expand her business.

I have been working alongside Unathi, a young woman we hired as a part-time social worker. She has been a wealth of information and business ideas. She will also be overseeing this program (and the all-important repayments) in my absence and hopefully taking on more responsibility if and when it comes time to expand to other borrowers.

A word about the title of this post: while we were discussing this idea, one of the first things I said was, “I’m all for it but I do not want to become a loan shark and have to hunt people down.” Those of you familiar with the idea of micro-credit know that its high repayment rate is attributed to the fact that borrowers form groups and mutually support each other towards repayment. This was the hardest part of the idea to translate to Itipini and we sort of faked it in a number of way that I hope will show us to be clever and not foolish. Unlike other micro-credit programs, we had long-term pre-existing relationships with all of our borrowers before we even thought up this idea and I think that will help us get our money back. (The wish being the father of the thought…)

Both yesterday and today, I felt a bit overwhelmed by the sheer volume of people who came to me asking for money. They saw some people walking out of a meeting with me yesterday with money and assumed they could get some pretty easily. What they didn’t see is the weeks of meetings that led up to the transfer of cash. I had no more than the usual sympathy for them - this is an idea we have been talking about very publicly for more than a month and if they missed all those announcements, then, well, I can’t be made too care too much. I’ve told them all to submit their ideas and when we start getting some of our money back, we’ll be able to make more loans. Hopefully, this waiting list will generate so more pressure on our first round of borrowers.

Unathi, translating for me.

Some of the crowd who came for one of our education sessions on some basic business principles. (“For the love of God, only spend your profit, not the capital we give you.”)

Counting the money to make sure it is all there.

Off to buy some chickens.

One of the shacks that will soon be a spaza shop.

A few concluding thoughts. I heard from a friend involved in a Christian micro-credit organization that her organization had never tried anything in South Africa because it seemed like it would be difficult to get people to trust each other. That was not exactly comforting but, again, I’m hoping our pre-existing relationships will help out. This is not a program I would have felt comfortable launching last year at this time. It has taken me a full year just to get comfortable enough to feel like this could be a success.

The sermon on Sunday was unaccountably in English and at one point the preacher began railing against the system of grants, for single-mothers and people with disabilities (including AIDS), that the government has implemented since 1994. He said the grants were destroying people by taking away their will to work. (Easy for a guy with a guaranteed salary to say. The chorus of “Amens” began to fade at this point.) Obviously, a hand-up is better than a hand-out, to resort to the hoariest of development cliches, but I hope he is not so right that the will to work of our borrowers has already faded and they see the money we gave them today as just another grant.

Only time will tell.