Are Microfinance Borrowers “Borrowers” or are they “Entrepreneurs”?
Let me start out with a quote I just recently found by Professor Yunus from here:
“If we imagine a world where every human being is a potential entrepreneur, we’ll build a system to give everybody a chance to materialize his or her potential. The heavy wall between the ‘entrepreneur’ and ‘labor’ will be meaningless. If labor had access to capital, this world would be very different from what we have now.” – Mohammed Yunus
Pretty powerful image isn’t it? Just take a moment if you will to imagine a scenario or two – a woman from a village selling her handicrafts in the market comes home from a long wearisome day. She’s lovingly greeted by her children who have all just come home from school, still wearing their uniforms and they sit together around a table, ready to eat the food their mother was able to afford to bring home. Or how about the young man who comes home from a long day driving taxis, managing a fleet that only a year ago seemed like a dream but is now helping him care for his elderly parents, wife, and children as the sole breadwinner. Can you imagine it? Can you taste it? The sweat in the hot sun streaming down your face, as you tend your field that was once a small patch and is now a sprawling plantation? Or how about the dust in the air as you sweep the shop clean of the overnight soot that settled – a shop that without the microloan, you couldn’t stock? Imagine a world full of entrepreneurs, working tirelessly to materialize their ideas, being successful. Isn’t it what makes microfinance attractive to most of us? Or is it? I’ve been a little over a month into my fellowship here in Samoa and during that time , I have been going out to meet borrowers in their villages and starting to see how loans are being used.
During one visit, one lady who had just finished paying off her last loan requested to apply for a loan to help pay her son’s tuition fee. This woman owns a small store that is generating some profit, but still needs the money to pay for her kids to go to school. So it had me questioning – are microfinance borrowers actually “borrowers” or are they “entrepreneurs”? Or are they both? Is this a misleading label or is it a hopeful one?
I think this debate goes back to the purpose of microfinance. As we learned in Kiva Fellows training, and especially the UNDL Microfinance course, microfinance is a tool to give those in disadvantaged situations the ability to have access to credit where they otherwise would not. If we look at CGAP’s definition, it goes even further:
“Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and microinsurance. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks.”
So back to the question – What is microfinance for? What is it supposed to be doing? Are borrowers just borrowers looking for access to financial services, or are they solely entrepreneurs? After training and being on the ground, I see that sometimes businesses are being built slowly and cautiously; that people are learning to save; that people need loans to buy cars and pay fees and obligations to society just like everyone else; that not all business will survive and provide income. I believe while we all want to see the people who borrow money use it for entrepreneurial pursuits, I think we need to realize the reality is such that sometimes people just need money as an income smoothing tool in order to continue surviving and moving forward rather than sliding backwards into poverty or taking capital out of their income generating structures. For example, say if that same woman had sold her car that she could use to transport goods to the market in order to generate the required cash for her son’s tuition, she would be pulling from her income generating resources and I can’t see how that would help her or her future generations. How about in the wake of natural disasters or a poor economy where life still goes on, school fees still need to be paid, rent is still assessed?
I think as a globally enterprising society largely based on capitalistic values, we would like to think that everyone in the developing world who pulls out a loan is doing so in the spirit of a business venture – and its true that there are many who do. But I feel its also important for us to remember those who need the access to credit just like the rest of us do. Microfinance is helping those people to empower themselves and prevent a backward slide into poverty. So whichever label one chooses – borrower or entrepreneur or both – what I have found thus far is that microfinance is a valuable tool… and how great is it to see that in action?!
Tamara Crawford is a Kiva Fellow working with the South Pacific Business Development located in Apia, Samoa. She’s enjoying drinking niu, walking to work along Apia harbor, and learning useful Samoan phrases to use on the field.