Kiva Stories from the Field

We exited the main highway to Jinja, somewhere between Lugazi and Njeri. It’s an obscure and easily missed unimproved road, and not one I would guess leads anywhere. The dirt track is peppered with fissures and ruts and undulations, and winds slowly through countless hectares of banana and pineapple trees. Uganda is blessed with fertile soil and an abundance of rain; here, things grow fast and big – and apparently everywhere. Except for the brown dirt road we followed, there’s nothing but endless fields of tall green as far as the eye can see. I’m riding in back, in the open bed of a pick-up truck, sitting on a bag of charcoal next to a large bunch of green bananas, enjoying the air. I’m thinking how lovely this country is, away from the hustle and bustle of Kampala; that this must be the “real Uganda.” Occasionally, we pass a peasant farmer on foot or on bike, always wearing flip-flops, carrying large loads of palm thatch or bananas or firewood. Back home, this would constitute backpacking or mountain bike riding. No such recreational diversions here. In Uganda, these are just modes of transportation; people serving as their own beasts of burden. I feel guilty whizzing past them in the relative ease of a vehicle.

This is where Pearl Microfinance works. Its niche is serving Uganda’s economically-active rural poor, the most neglected sector of the economy and almost entirely overlooked and excluded by the financial services industry. It’s simply too difficult and costly to deliver services in remote areas like this. Difficult enough on dry soil, I doubt even passable during the torrents that arrive each afternoon. Despite coming here weekly, our driver stops more than once to get his bearings. No road signs, no visual cues – just miles of disorienting tropical flora.

Main Street

I’m joining Pearl’s Jinja branch manager and credit officer into the field to meet some Kiva borrowers to learn how micro loans have impacted their businesses and lives. Grace is also with us. She’s Pearl’s Kiva Coordinator, whom I work closely with in Pearl’s main office in Kampala. I’m excited to hear first hand accounts of real people struggling through the despair of poverty with the aid of Pearl’s microfinance programs and achieving ever-growing levels of new-found prosperity. At least that’s my hope.

That hope soon vanishes. Poverty is like an onion: you peel away one layer only to find many more beneath it. Indeed, the more I learn the less I realize I know. What I learn this day is that the methods of evaluating success sometimes need to be turned upside down and examined from an entirely different perspective.

The perspective I brought with me, the one taught to me in school and reinforced in practice, is that market economies are fueled by consumption, and specifically the growth in consumption. Organizations are valued in great part by how quickly and consistently they produce increasing profit. Investments are intended to spur further growth and are gauged by their ability to create or accelerate growth opportunities. Progress is a measurement of growth, and growth is the intended end to the means. Flat revenue and earnings, therefore, are bad; and if they persist, utter failure.

It’s natural, then, to wonder how small loans to the rural poor have improved the growth prospects for their businesses, personal savings accounts and family lifestyles. This I wanted to know.

Nothing suggested our arrival into the village. No sign, no traffic signal. Main Street is more like a poorly maintained driveway. I wonder if this village has a name or a postal code. I ask my colleagues but they don’t know. It is little more than a one-block strip of mud and block structures cut into the jungle. There’s a hardware store that advertises auto parts and electrical supplies and think it must be in jest: electricity doesn’t supply this outpost and the only vehicles are a few scattered bodas. And I fail to see any value in advertising. It is, however, a nice village, quiet and peaceful and nestled in a pocket of breathtaking beauty. It must see few visitors because within seconds of stopping, we’re surrounded by throngs of excited, laughing adolescents, all boys, wearing orange school uniforms. Most are barefoot. They appear from out of nowhere, and they seem fascinated with…me. Perhaps this is their first encounter with a muzunga. Maybe it’s just that visitors come seldom and white skin marks not only the arrival of something out of the ordinary, but of good fortune.

School Boys

Meeting borrowers is perhaps the greatest joy and privilege of being a Kiva Fellow. Here, I met with four borrowers, all women, each hospitable and gracious with her time. My questions were centered on assessing the financial and social impact of their microloans. I learned that their struggles are not that different from ours, except in magnitude: earning a livelihood, raising and educating their children and managing finances, including loan obligations. In this small village, bankruptcy is not a financial strategy; it’s a certain means to starvation and illiteracy, a punishment far more dooming than a poor credit rating.

My library of potential questions is extensive and explores a range of topics to help me understand the entrepreneur and her business, the context of her life and how the loan(s) contributed to her business and personal ambitions. One of these topics is to gain some indication of growth: for example, was the business constrained before receiving a loan? And, how has financing boosted revenue and profit?

This was not my first day in the field, so I had some hint of what to expect. And this was not the first day the inspirational and heart-wrenching stories they shared with me of deprivation, sacrifice and hard work was tempered by some degree of disappointment. In a majority of the cases, the initial loan(s) did indeed provide an initial shift up in economic status, by helping to establish a business and get it to scale (eg, steady-state operations). But there is often little, if any, noticeable expansion that follows. Further, MFI’s don’t use growth as an underwriting factor when extending subsequent loans (although Pearl and others do have a compulsory savings requirement). Many micro enterprises receive loan after loan; yet never expand commensurately, if at all.  At first blush, it appears to be an endless cycle of debt which leads to no measurable performance improvement.

The problem is that in the context of microfinance, scale is an irrelevant notion, especially in rural villages like this one that are very small, very poor and geographically isolated. This is not an expanding economy and likely never will be, and growing a market is therefore impossible. These entrepreneurs are merely servicing their friends and neighbors with inexpensive subsistence items, and there’s no room for competition, innovation or profit maximization. Money, then, is nothing more than a necessary medium of exchange, more convenient to trade or barter. It’s not an instrument of wealth.

Of course, metrics are not tracked in this sector of the economy. People don’t speak in terms of period-over-period performance, ROE or operating margins. They talk about well-being, happiness, health and self-sufficiency. As we bounced our way slowly back to the highway, I couldn’t reconcile my disappointment. Positive, beneficial things are happening in this remote little village. These women are proud and happy, and their children play as children do. They feel productive and useful and they are contributing meaningfully to their households. There’s dignity in that, and I felt it when we spoke. They talk about their shops, their customers, their loans, the business skills they’ve acquired, what they want to do with their next loan and their vision for their futures, all with great enthusiasm and passion.

So is microfinance working in this poor rural village? I can only speak anecdotally. Every borrower I’ve met so far has told me, in their own words, that they are better off now than they were before. They are happier and they feel more secure. With added income, their families are healthier, less hungry, better clothed and in school – some have graduated college. They’ve built homes and can afford medicines and the occasional luxury. Perhaps they will never climb another rung on the economic ladder and will forever languish level. Perhaps the loans they continue to use will do nothing more than sustain them at a marginally elevated plateau of subsistence. But isn’t that better than the alternative? Isn’t the world a better place because Pearl Microfinance endures the difficulty and cost to drive out to this little village every week to meet its clients?

A joyful...and successful Robinah

I’ve cast my concern and disappointment aside. In this charming remote community in rural Uganda, assessing impact and measuring success have nothing to do with the incorrect criteria I arrived with. I think the individuals themselves are the best judge, not me. I’m just some muzunga with an impossibly different perspective. Robinah summarized it best when she told me, her emotions palpable, wiping tears of gratitude from her cheek, “Pearl has helped me so much. I’m so grateful. For the first time in my life, I can see possibilities for my dreams.”