Formal Trust, Informal Love
Mrs. Rosario Roca runs a bodega in the front of her house on a quiet street in Comas, a northern suburb of Lima, Peru. After giving an EDAPROSPO loan officer and I Inka Colas (a yellow soda with the taste of bubble-gum, widely considered the national drink of Peru [nonalcoholic, the alcoholic distinction belongs to the Pisco Sour]), Mrs. Roca gave us a snapshot of what it meant to be a small business owner and resident of her neighborhood in Comas. The hospitality gave it away.
She has spent four years receiving loans from EDAPROSPO and this was her first loan financed by Kiva lenders. To receive loans from EDAPROSPO, a person normally forms a group of neighbors and entrepreneurs who become a ‘banquito’ (little bank). From this position, EDAPROSPO lends a large amount to the group, split among the members according to their requests (which is the amount you lent), and the group members then cross-guarantee each other’s loans. This approach to microfinance, stemming back to Muhammed Yunus’ approach in Bangladesh in the 1970s with his Grameen Bank, has the effect of building or, at the minimum, reinforcing trust among a small community of neighbors. Mrs. Roca thrives in this atmosphere of trust and is known as a prompt (and sometimes early!) payer of her debts. While most communities could stand a little boost of the interpersonal trust that ‘banquitos’ give, in Mrs. Roca’s case, it seems more like a natural extension of what the community already does.
On the lefthand side of the front counter of her bodega, Rosario keeps a handwritten ledger of credits that she extends to her neighbors who frequent her store. She says that she has always let her clients pay her when they could; in theory this means that a person will build a tab of 20 or even 50 soles and then pay her in a lump sum when they get a paycheck or have enough money. More often, however, her system of credit has led to very late repayments or none at all; time accumulates, people move out of the area and she is left with having to eat the debt that she extended in trust. The picture, though, is not as bleak as that anecdote makes it out to be. Next to her ledger of customer debts and credits is another sheet with handwritten names and figures. This sheet is a community chest that helps neighbors when a family member gets ill and racks up a hefty medical bill or is kept from work for an extended period of time due to illness. 13 years ago, her husband had a serious injury and her neighbors collected money, each what they were able, and helped them pay for the medical expenses. Now, a neighbor has been bedridden and she is returning the favor; a finely woven web of trust has been spun in terms of medical insurance, without any outside organization acting as an impetus.
Her store, despite the frequent occurrence of ‘eating’ bad debt, continues to make a profit. She uses the profits to re-invest in the store, slowly building her stock of available goods for sale. Her stock of capital has grown to the point that she is considering expanding her store. Rosario’s husband, recently retired, is slowly learning the trade his wife has been perfecting over the past 25 years. He laughs often, still has trouble finding some snacks in the shop, supports his wife in her many endeavors, and seems to enjoy his new role as the helpmate to his wife, the boss. Rosario does not just run a bodega though; she also cooks lunches on request (and there are plenty of requests) and Sundays makes soup. On the weekends and holidays, she cooks hundreds of tamales that her neighbors, passer-bys, and relatives clamor for; she has even been asked to cater for several weddings (which take 200+ tamales). With her husband now available to help run the store, Mrs. Roca is likely to expand in her burgeoning food sales network. For the upcoming Christmas season, Rosario is stocking up on panetones (Peruvian fruitcake), milk, and sugar. She has timed her next loan from EDAPROSPO well so she will get the full dispersal a month before Christmas to temporarily boost her capital for the busy season (she wanted to do this last year, but her group needed experience [in the form of regret] rather than foresight to agree to pay their loans off early to start a new cycle in December rather than February like usual).
The community bond of trust is undoubtedly strengthened in the formal setting of microfinance. However, in Rosario’s case, the bonds existed before the ‘banquito’ even started. Six years ago, an event that could have easily broken the virtuous circle of trust occurred. Rosario had been running low on supplies and needed to go to a discount superstore to stock up on new items. With 1000 soles on hand, she went to a place about thirty minutes away by taxi to buy items for her store. After she had collected all the merchandise she needed in several large bags, she hailed a cab. The cab arrived, she filled it with all of her goods (her store was basically empty so the items she’d bought represented all the capital she had accumulated over many years), and they drove back to her street. The cab driver suggested he back up to her store so she could more easily unload the heavy bags of merchandise. After doing so, she stepped out of the cab and walked around to the trunk to begin unloading her goods. The cab driver then hit the gas and swerved out of the street and neighborhood with a thousand soles worth of merchandise, never to be seen again. When everything is taken, something is returned. Mrs. Roca was financially ruined; the bodega she had been building up for many years- gone – in a blink of an eye. But then something inspiring happened. Her neighbors, not wealthy people themselves, decided to hold an event in the street. With their get-together, they raised enough money to replace everything that had been stolen.
Now I am a believer in the institutional role that microfinance can play in building trust among people; you extended trust to Mrs. Rosario Roca by lending her your money, she built upon your trust by repaying you promptly and in full. The institutional underpinnings of microfinance are rooted in someone taking an initial risk of lending to a person who has no collateral and having that risk met and exceeded (in relation to the rate of their richer brethren) by prompt repayments by the poor. If that trust is not met, then it is very likely that the poor entrepreneur will never get another chance to get access to credit. What I love about Mrs. Rosario Roca’s story is the reminder that trust is not confined to formal relationships. The extension of credit may be taken away but you cannot take away your neighbors. Mrs. Roca’s neighborhood is a cauldron of trust, one where people look out for each other in sickness, in theft, and in poverty. Microfinance offers a path out of poverty by allowing trust to swirl through the field of financial services and into an accumulation of physical capital based on formal relationships. What Mrs. Rosario Roca’s neighborhood offers is a path out of isolation by allowing trust to swirl through individual traumas and tribulations and into an accumulation of social capital based on the necessarily informal relationships of love.