The Nuts and Bolts
Part of the reason I signed up for the Kiva Fellowship was to see how microfinance actually works on the ground. You can read all the books on microfinance, but that couldn’t make up for never seeing it in action with your own eyes. After getting an understanding of AMK’s operations from their nice air-conditioned central office (where I just finished making them an Excel macro to keep better track of their Kiva loans), I knew I had to see the loan officer in action to really understand the pros and cons of microfinance.
Saphanith, Elena and I stopped by Au Village, the home of two Kiva entrepreneurs, Mrs. Kim Eng and Mrs. Eak Maong. Both entrepreneurs received their loans recently (which is why my journal updates on them are rather meek). We went to their village bank meeting. Here’s a quote from AMK’s website that describes the village bank:
AMK’s flagship product is the solidarity group loan product, which offers flexible repayment terms where clients can borrow and repay at any point during the cycle. AMK’s end-of-term repayment product is delivered to members through a solidarity group lending methodology. These village solidarity groups are called Village Banks (VBs) and constitute the group loan delivery mechanism; they are in effect a “Village Association” or “Village-level client group”.
The potential clients self-select themselves into solidarity groups of 4 to 6 members and these, in turn, are organized into VBs of 4 to 12 groups (or 20 to 60 clients). Being part of a self-selected solidarity group entails that three to five other villagers trust the loan applicant to let him/her join their solidarity group. All loans are guaranteed by the respective group members and appraised and approved by AMK’s Credit Officer (CO) and the Village Bank President (VBP) before the disbursements take place in the presence of the group members and AMK’s Area/Branch Manager.
As I mentioned in my last post, each village bank has a president who is elected by the villagers and facilitates the functions of the village bank. When we showed up at Au Village, Ly Chandara, the loan officer was busy collecting payments from many of the villagers. Most of the loans were end of term loans, so the loan officer was collecting mainly interest payments. Nevertheless this took a lot of time. All the clients did not come at the exact time, after they came he had to calculate how much was paid and how much interest they owed. Once they paid up, the loan officer had to do a lot of counting because they mainly gave him small bills 100, 500 and 1000 riels (worth 2.5 cents, 12.5 cents and 25 cents respectively).
The village bank meeting was very close to Mrs. Kim Eng’s little shop, so we stopped by for a visit. We saw all the goods that she was able to buy with her loan. She told us about her husband’s death. He had gone to Angkor Wat, and when he came back he became really sick. She thinks that he probably died of food poisoning. She was pregnant at the time of his death, which was ten years ago. Despite all of this she is able to support her family and I wish her the best of luck!
We then went to Mrs. Eak Maong’s residence. She showed us the new pigs that she bought with a Kiva loan and a gigantic pig that she was getting ready to sell. Her pig breeding business has been doing very well, and she hopes to increase her profits with the pigs she bought using her Kiva loan!
Before we left, Saphanith and Elena also got lessons from another Au Village bank member on how to make Num Thnot cake. Num Thnot cake is made out of palm fruit and plam sugar. It is wrapped in banana leaves and then steamed. The first step is to make a box out of a strip of banana leaf and a toothpick. This is what Elena and Saphanith tried to learn.
I don’t want to rush to make any conclusions, good or bad, about microfinance based on my two visits into the field, but hopefully after spending some more time (and learning some Khmer!) I will get a better sense of what microfinance, AMK, and Kiva are accomplishing and what they could improve upon. In the meantime, here’s another animal picture for KivaFriends members.