So, what is discussed in these repayment meetings?
By Thomas Gold, KF9, Dominican Republic
I am quite a picky person when it comes about writing. I really make it a point to write as properly as possible, even in a non-native language. Therefore, when I am writing an entry for the Kivafellows blog, I use to plan it, prepare a draft, then write it in French (my native language), spend a lot of time trying to translate it in English, and then I hand it to Gemma, another Kiva Fellow, who corrects my English text and make it look like if it had been written by a native speaker. However, this time I felt like I would try to write in English directly, without taking too many looks at dictionaries and losing some spontaneity in the writing and translating process (I hope it won’t hurt the language purists in my kind!). I must say that I was also incited to do so as I read the articles of Kanae, Kiva Fellow alumni, who wasn’t a native English speaker either and wrote excellent blogs.
For the last four days, I couldn’t help but thinking that the group meeting I had attended last Friday was a perfect example of all that I have learned about microfinance, since I started my fellowship with the MFI Esperanza, and thus I would have to share it. Here is a short video shot during this meeting and sent as a journal update.'
So let’s draw the setup. I was planning to meet a group of borrowers, funded on Kiva, to realize some Kiva work (journal updates for some, and verification for others). The group meeting was taking place in Boca Chica, a pretty famous touristic place of the Dominican Republic. Boca Chica is quite far from the nearest branch office and loan officers’ schedule are really tight, so I had to manage to get to the town on my own. After a one hour long ride bus, and asking the bus driver to stop when I thought I was getting to the place I had been previously described (bus have no official stops in the country, you just have to ask the bus driver to drop you off), I met with Alejandro, the loan officer, who took me on his motorcycle to get to the group meeting.
One can hardly believe that the community where the group was meeting is in the same area as the tourism resorts that stand not too far. Dust and muddy roads, houses made of wood and tin roof, which look like they are about to collapse, garbage everywhere and kids playing around … I am not trying to make you have pity for the borrowers, because as I start talking with them, I often find out that living conditions are not as bad as they look form outside and people often find very smart ways to cope with the situation, but the difference between the borrowers’ community and the luxury resorts always strikes me.
Six groups of five borrowers were meeting this day to pay one of their loan installments. As it happens many times, and especially with large groups whose loans started a long time ago, not all borrowers were on time at the meeting. During the two months I spent here, I have realized that although borrowers are quite excited about the first steps of the loan (getting the money of course, and paying the first two or three installments), their motivation decreases, and their participation and attendance is much less regular towards the end. However, Alejandro (loan officer) is just unbelievably committed to his task and puts a lot of energy to remotivate the groups, and have them be responsible and supportive to one another. Esperanza’s policy is that loan officers do not leave the community until they get a complete repayment from the group (otherwise the installment is counted as defaulted for the whole group) and I have happened to stay almost five hours with a loan officer, waiting for a group to find a solution to get a complete repayment. However, I noticed that the best motivation for a group to fulfill with its payments on time is when all the members are planning to request another loan. That has been the case of about 80% of the borrowers I have interviewed, which also demonstrates in my opinion both successes and limits of microfinance (Borrowers have found it profitable to borrow so they want to do it again, but they still don’t manage to break the cycle of borrowing money to develop their activity)
Eventually, all members showed up, or sent someone to give the repayment. Some had just had a hard time gathering the money for a repayment. As most of borrowers’ businesses work on credit, the meetings that take place just before the day when administration employees and construction workers get their paycheck are always the most difficult ones. Other borrowers simply had commitments that made it hard for them to get on time (like this pre-school teacher who came with five young children). When asking the borrowers what they like and dislike with the MFI Esperanza, I have been told several times that it is not convenient for them to attend these bimonthly meetings, even if they take place in their neighborhood. This is one of microfinance realities: When you are paying back a loan from a commercial bank, everything is digitalized and you don’t have to worry about anything. At most, you need to make a bank transfer or send a check…but try to imagine if your banker was coming to your place every two weeks, gathering other clients living near by, and led a two hours long meeting for the only purpose of paying one of the several installments scheduled for your loan! However, these meetings are a fundamental part of the microfinance process. The lack of technological means to process the bank transfers is not the only reason: in environments where people are not used to be given responsibilities, and might be appealed to use the loan amount for other purposes, borrowers often need to be reminded that the only way to make this opportunity profitable for them is to invest in a business activity (be it formal or informal)
Considering this last point, Esperanza, as certainly many other MFIs, strive to make the most of these indispensable meetings to provide other services to their clients, on both social and financial fronts. During this reunion, several borrowers came to talk to the loan officer about requesting a housing loan (Esperanza has a special loan product for housing purposes, with longer terms and lower interest rates, along with construction council), requesting an individual loan (for clients with a good repayment history) or asking to repay their loan earlier in order to take a new one. Some social services are also provided: It is not uncommon that loan officers ask about the borrower’s health and give them a ride to a partner clinic where they have free access as members of the MFI.
However, not every borrower draws benefits from their loan. Most cases of delinquency, often results of either life uncertainties, unfortunate events, or a misuse of the loan: the money was not invested in a business, sometimes lent to another family member, or it was not invested in a profitable way, and the borrowers stay with the burden of paying the installments every two weeks.
Religion is also very present during these meetings and in Dominican life in general. Once all members have gathered, a short prayer is tol commitments to the institution (Ed, often followed by a religious song. Religion is a vector of unity within the group and reinforces borrowers’speranza is a catholic institution). Entrepreneurs grant their repayment success to God, and for many of them, the whole process of getting a loan and try to carry out a business in order to support their family, only makes sense when considered under the point of view of religion.
Going back to the sequence of events of this particular meeting; Alejandro, the loan officer eventually collected all the repayment vouchers form the borrowers, at the exception of a few repayments made by cash. For the groups of borrowers living far from the branch office, and with an easy access to a bank, repayments are collected through vouchers, in order to make the loan officer’s job safer. Alejandro, as several other loan officers has been attacked and robbed once after a meeting.
We were then able to head to another community, where a group was having the last step of the training that will enable them to take a loan. This last session is a review of all the aspects of the loan, future Esperanza members are reminded that the loans repayment consist of capital, interest, insurance and savings. They are also taught basic advices for their businesses, and their commitments as a group. This was my first time attending a training session, and it made me realize how a lack of basic education can be a bridle for people to gain control on their life.
I don’t mean to insult anyone’s intelligence. When I am interviewing them, I have sometimes felt amazed by some borrower’s open-mindedness although life opportunities seem limited in their environment. However, I must say that the training session mainly looked like an elementary school class. Alejandro, who learnt basic Creole as he has been in close contact with group of Haitians borrowers, had to repeat the same things tirelessly, both in Creole and Spanish, so that the future borrowers would remind it. He also provided very basic but indispensable advices about the necessity to sell their products at a higher price than it was purchased, and to consider other expenses such as transportation.
The group was eventually reviewed by the branch office manager, and their last step to the issuing of the loan could take place: the group committee where members discuss the loan amounts that each of them is going to receive. As they are bound to pay back together, these committees serve to put limits on the loan amounts for members who may not be able to handle too big repayment installments and put the whole group at risk. I was curious to witness one of these committees, and as I could expect group members where not really eager to put limits on other members loan amounts. Once again, the loan officer had to put a lot of energy (I know I am repeating myself, but the video speaks for itself) to explain the aim of the process and make it constructive. Experience shows that these committees actually become constructive when groups have already taken several loans and gone through difficulties.
After a last visit to another group of borrowers, I was on my way back to enjoy a nice weekend in Santo Domingo.
Esperanza has a lending team! Help us reach the threshold of three members, by end of 2009 !!!