Coming to you from 37,000 ft.
12 February 2009 at 23:06 Drew Loizeaux 4 comments
After months of preparations and planning I am finally on my way. As I write this the map on the TV screen tells me I am currently over Pueblo, Colorado on the first leg of a three part trip from New York, USA to Phnom Penh, Cambodia. I will be in Phnom Penh for five months as a Kiva Fellow and will be working with Kiva’s partner agency HKL.
While I am very excited to listen and learn from both the staff members at my host MFI, HKL and the borrowers they serve I have a certain amount of trepidation concerning the affect the global recession will have on the local economy. During our Kiva Fellows training a few weeks ago the subject of how microcredit repayment rates would fair in the coming months and years was brought up. Since then, I have been thinking about what this in the context of how it will affect Kiva Borrowers in Cambodia. The first question I had was how are the lives of people selling fish, firewood or growing food connected to bankers in New York and London? While at first this boggled my mind, after thinking about it for a little while, the connection became very clear and very scary.
My train of thought went something like this: a bank in New York lays off a worker … that worker then buys fewer things, (clothes included)…the clothes store that particular banker used to buy from now has less business and has to close a few stores and orders fewer products from its suppliers … its suppliers in Cambodia are getting fewer orders in so they also have to lay off a person … that person’s spouse, who had previously used their small loan to sell fish as a second income is now the sole provider for the family … they can’t afford to payback the loan that they had previously had no problem repaying. Four quick steps and we go from skyscrapers to people like the borrows on Kiva’s website. This interconnectivity, both positive and negative, that our global economy has given each and every person in every country constantly amazes me.
While I am by no means a microcredit expert, I do know that one of the reasons that repayment rates are so high is that many of the loans are a once in a lifetime opportunity for people to lift themselves and their families to a better life. This means that if repayment rates start to slip in the microcredit industry it is not because people are out buying things they shouldn’t, it most likely means that their financial situation has become really bad and that they have no other choice. I think most of us have been in situations where we hit a time of financial trouble, weren’t able to pay all of our obligations on time and needed just a little help until we could make the needed adjustment and get to the light at the end of the tunnel. For many, this help could come in the form of a bank, family, or a second mortgage. Unfortunately, for those who have been borrows at microcredit agencies, this type of help usually is not an option. So in times like these, I want to keep lending on Kiva because the positive effects of $25 loan from New York can be just as easily felt in Cambodia and across the world as the negative effects of a bank in New York.
I look forward to sharing my experiences and all that I learn in the the coming five months!!!
Join HKL’s lender team here and show your love for my host MFI!!!
Entry filed under: Cambodia, Hattha Kaksekar Limited, KF7 (Kiva Fellows 7th Class). Tags: Cambodia, kf7.
1. howard | 26 February 2009 at 07:33
Hi Drew,
Your thoughtful analysis of the world financial situation effect of poor borrowers seems right on. The world will recover eventually as it always does but we can’t let these ‘financially stretched’ hard workers slip through the cracks in the meantime. If we have to cut back a little on our spending temporarily, we lenders can’t let Kiva be a part of that cutback. For my part, I plan to lend a little more to Kiva rather than a little less during this crises. The updated flat screen or refrigerator can wait.
Keep up the good work.
2. milena08 | 17 February 2009 at 03:48
My last placement was in Bosnia, where there were a lot of defaults related to the crisis. This is what I figured out:
The women who take the microfinance loans can usually pay them back with income from their business. But the “global financial crisis” is leading factories to lay off workers. When the husbands of the borrowers get laid off, the women shift their income from loan repayment to covering the basic needs of their families.
Sad.
I hope you are enjoying Cambodia!
~Milena (KF6 Kenya)
3. Unilove | 13 February 2009 at 23:24
Thank you for posting. You provide much-needed color to plain text. As lenders, we try to learn more as we lend more… post often!
4. nmcutler | 12 February 2009 at 23:48
You raise a great point about the effect of the global recession on our host countries. I asked the same question here to a few Vietnamese folk and they said so far it seems to only be hurting the tourism industry. Hopefully your very possible scenario is avoided here and in Cambodia! Good luck Drew!