I started this blog on a scrap of paper during a group visit. I started writing because, well, I felt uncomfortable. I wasn´t quite sure what my place in the conversation should be or even what my facial expressions should be. And this wasn´t the first visit I felt uncomfortable on that day.
I wanted to give Kiva lenders updates, journal postings, on a couple of lenders that had fallen behind in their payments…way behind. And now, the loan officer, the operations manager and I were at their homes or their places of business trying to figure out why this had happened, and how they could get back on track with their payments.
The conversations were almost formulaic, and all of them were very difficult. One of the borrowers´ kids had fallen ill, and she had ended up using the loan to pay hospital bills. Another made a bad investment with a family member and ended up losing her store. All of them had fallen into hard times and now were faced with a loan that no longer was a way out of poverty, but now (to them) an almost insurmountable debt that they had to repay. As a Kiva lender myself, I wanted to somehow forgive the loan: tell them, “I know you have done your best, so we aren´t requiring you to repay the loan”.
As Americans, we have a paternal (and arguably good) instinct to help those in need. However, this paternal instinct has deteriorated into a downward cycle of aid (if further interested read Dead Aid by Dambisa Moyo). Microfinance, and Kiva, in particular, have begun over the last few years to facilitate a transaction—a loan—between peers. Through lending, we—as Kiva lenders—are able to give people half a world away a helping hand, and the borrowers in turn are able to escape poverty with honor and dignity: on their own esteem.
By submitting to my previous desire to “bail out” these borrowers, I would be stealing two things: the first, the borrower´s dignity and ability to repay the loan on their own, and the second, the microfinance institution´s credibility to receive repayments. A decent number of Kiva´s partner institutions do not require physical capital and because of the absence of this barrier, many of the poor are able to receive the credit they require to run their businesses. The loan guarantee usually takes the form of co-signers and the client´s word that they will repay. As such, it is difficult to get clients to repay if they realize that other clients have not and have not suffered any consequences.
Being an eternal optimistic, I wanted to see the good side of these conversations. But, dealing with late payments and with delinquent loans is difficult. It is important to realize, however, the preventative steps that many institutions take to avoid these conversations (my institution runs background checks through a local microfinance credit bureau to ensure that the borrowers do not have any other outstanding loans and helps borrowers compile business plans to ensure that the profits from their business can cover their costs), and to remember that these loans are only a very small part (generally less than 2%) of an institution´s loan portfolio.
At the end of the conversation, the loan officer and operations manager set up a repayment schedule with the client: a repayment schedule that had more frequent and smaller payments. Payments that the clients could begin to met. Being able to repay the loan is an integral part of microfinance client´s ability to receive credit in the future, and finally, I saw the bright side: that Kiva´s partners don´t just work for a bottom line, but they work to really, truly improving the lives of the people they serve.
Eric Burdullis is a wandering Kiva Fellow in Guatemala working with FAPE and ASDIR. He is currently stationed in Aldea Nimasac and enjoys delicious tamalitos and plantains in his free time. His afternoons are mainly occupied with a good book and avoiding the torrential downpours that roll in off the pine covered slopes.