Could you imagine having to do all your communication in writing, on actual paper?  Or writing a check for every transaction or purchase that you made?  Frankly, I don’t even remember how to write a check!

Anne, former Kiva fellow at SMEP and I shuffle loan forms to choose borrowers to randomly audit for Kiva

Everyday in Kenya, paper loan forms are traveling great distances in order to make microfinance work over a geographically diverse network of branch offices. With 19 branches, and 11 satellite branches all over Kenya, SMEP HQ in Nairobi bears the task of disseminating information back and forth to the branch offices all over the country.  Since I’ve worked in some community-based financial institutions before in the US, I was accustomed to seeing things done electronically.

The Kiva Fellows have explored the various costs of doing microfinance on the blog from different angles and in different countries.  What struck me as interesting about SMEP, is that the whole institution relies on paper to function. The cornerstone of the loan process is the loan form, the instrument through which critical information is disseminated – the loan amount, purpose, information about the borrower, the approval of the group members of the borrower, the acknowledgement of the receipt of the disbursement. The form is it, the beginning and end of the deal.

The life of a loan form at SMEP is long and arduous. They travel all over the country in the courier bags of the “Fargo Courier” that has the task of making sure that all that paper gets to the right place each morning and evening.

A loan form, the contract between SMEP the institution and the lender begins its life at one of the branch offices. An interested client (with the consent of the group that they are in) decides that they want a loan, and a loan officer from the branch comes with the form and the client pays a loan application fee.  At that point in time the loan form begin acquiring the many layers of information that it needs in order for an actual loan to be disbursed to the client.  The officer does a business appraisal, to decide if the client it credit-worthy, and that information goes on the form. Then the entire client’s group – the guarantors of the loan EACH sign the loan form.

Loan forms at the HQ waiting to be put in courier bags

At this point in time, the form is looking pretty full of different scrawls, and has already been to the branch office, group meeting, back to branch office, to the client’s business, back to the group meeting, and back to the branch office for approval by the branch manager.

It seems like a lot already, right? But the loan form has not even left the locality of the branch office, a general radius of up to 50 kilometers from a branch office or satellite office, meaning by this stage the form could have already travelled hundreds of kilometers.  If the branch manager approves the loan, then it’s entered locally into a database at the branch and then shipped off to the Nairobi HQ in one of the courier bags.

The following morning, the loan gets to HQ in Nairobi  and begins a dance around departments and exchanges many hands while being verified. (Driven the entire way, in some cases up to 11-12 hours overnight to reach in the morning).  The accounting department ensures that the group the client belongs to, and the group itself has no arrears. If there are any arrears, the form goes back to the branch office right away and waits for the arrears to be addressed.

If there are no arrears, the form goes from accounts, to check-writing. The check is attached to the form with a pin, and signed by the required two parties, then is sent back to the branch office to be disbursed – while still attached to the loan form!

Loan forms getting put into the courier bags by a small army of staff at HQ

At head office the process begins at about 4 in the afternoon, the cloth bags, with each of the branch locations names handwritten on each one, gets laid out on the grass. Members of the finance office then hand collate hundreds of loan forms, stationary and any other items needing to go to the branches into the courier bags and they go back out into the field.

Are you tired yet? We aren’t done!

The Branch Manager gets the checks, signs for them on the loan form, and then places the loan forms and checks in a safe. Then the required loan officer for the client signs the loan form for the check. Then it leaves the branch office again to get disbursed.

The loan form plus check given to client in group meeting, the check is first given to the group, the group witnesses the disbursement and records the disbursement in its minutes,  and finally the client signs the loan form and acknowledges receipt of the check and the first 1st repayment date written on the loan form.

And then … no, just kidding, the form STILL needs to come back to the HQ via the Fargo Courier. The loan form then goes to the ICT department (the computer guys) – who enter the loan into the financial management software program.

And finally, the form is given to the Kiva Coordinator, who takes the form and enters the information onto the Kiva website so that lenders like you can make a loan to that SMEP client.

Then, ideally, the loan form goes to its final resting place in a file. But usually different people at HQ have to ask for specific forms and the process of retrieval begins, but that’s another blog.

Thousands of kilometers, dozens of pairs of hands, several databases, financial management systems, and even a peer to peer lending website. The loan form is the entire basis upon which business is done at SMEP. The long journey it takes facilitates loans that change lives to thousands of entrepreneurs in Kenya. At some point in time, SMEP will go digital, and these forms will no longer have to travel so far and long for al on as little as $250. But for now this system works, and has never ceased to fascinate me in my two months as a Kiva Fellow at SMEP.

Avani Parekh-Bhatt
Nairobi, Kenya

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