By Kate Bennett, KF16, Peru
When I arrived in famous Nazca, Peru last week to complete some borrower visits, my mind was not on the celebrated and mysterious Nazca Lines but on the mystery of Caja Rural Señor de Luren borrower Gaby, who repaid her entire loan a mere month after disbursement.
I was checking in on Gaby’s loan as part of my borrower verification (BV) for Kiva Partner Caja Rural. The borrower verification item on a Kiva Fellow’s workplan always has us feeling anxious. One of the BV’s key objectives is to ensure transparency of loan repayment from Kiva Field Partners and potentially unearth any foul play within the Kiva partnership. Obviously, most of the time this is not the case; Kiva works with accredited and trustworthy microfinance institutions whose missions selflessly aid in the betterment of clients’ lives. But nevertheless, when I see something as rare as full repayment on the first repayment date, I can’t help but wonder.
With our meeting scheduled in the afternoon, Caja Rural’s Kiva Coordinator and I spent our morning touring the legendary Nazca Lines. The Lines are actually a series of ancient geoglyphs (or designs etched into the earth) created by the Nazca people somewhere between 400 and 650 AD sprawling across the Nazca Desert. Nearly unrecognizable from ground level, they were discovered the 1930’s when spotted from an airplane flying North to Lima (they’re hard to miss from 20,000 feet). Expressing calculated artistic design, the Lines are not simply lines in the sand- but are designs of spiders, monkeys, fish, sharks, orcas, llamas, lizards, and hummingbirds (the hummingbird on Caja Rural’s logo, in fact, is from the Nazca Lines)- a number of which were not native to coastal Nazca, but of the inland and areas far North and East.
But the true mystery of the lines is their sheer immensity. The lines cover an area of nearly 190 square miles and the largest figures span nearly 890 feet. The Nazca Desert (part of the Sechura Desert that encompasses Southwestern Peru) is one of the driest on earth and maintains a temperature of about 77 degrees Fahrenheit year round- a climate primed for preserving the lines. And yet, despite my interest in the mystifying creation of these lines 1,700 years ago, I was more distracted that morning by a loan disbursed in August 2011 to a woman named Gaby.
On the way to Gaby’s house, Caja Rural loan officer Brian talked about helping her navigate through the loan process for the past several months. Gaby is a first time borrower from any bank. Her loan was disbursed in August this year and she repaid in full during her first scheduled payment. Brian noted that Gaby was one of the most cautious borrowers he has ever worked with- it took two months of deliberation and careful thought before Gaby finally committed to her loan.
Gaby’s hesitancy to borrow is not without good cause. The microfinance market in Perú is heavily patrolled. Once a borrower falls into arrears on a single loan, this stays on their record forever. And by ‘record,’ I mean a sophisticated national index shared by all the banks in Perú. Before disbursing a loan, every microfinance institution (MFI) checks the national index for shaky credit histories.
This practice can be considered both a strength and weakness of microfinance in Perú. It is completely rational and evenhanded for MFI’s to take a client’s credit history into full consideration before lending. In fact, in the case of Kiva clients, this represents even more accountability to lenders. However, one of the strengths of microfinance is that institutions can tailor their services to the handicaps of certain borrowers- those lacking collateral, a credit history, or other obstacles to the traditional banking industry. Theoretically, through a properly administered and monitored microfinance loan, allowances can be made for someone with either a shaky or nonexistent credit history. Small loans over time can help build a strong credit history and a habit of repaying. Nevertheless, this is not the case in Perú, and this may be why Gaby gave her loan such excruciating excruciating consideration leading up to signing the papers.
This, to me, seemed like good news. While an MFI certainly does not want borrowers to fear the microfinance sector, they do hope experience can establish a working knowledge of personal accounting and instill a keen sense of responsibility to repay loans on time. Gaby proved to have no shortage of either quality.
In the afternoon, Brian and I set out for the visit. Gaby’s one-room home is made of caña (cane stalks) and chozas (thin weeds), a common construction in arid Southwestern Peru- these houses tend to last around 4 or 5 years before needing rebuilding (for the same reason that the Nazca Lines have been so well preserved). Outside of central Nazca, choza houses begin to emerge from the sands by the hundreds, and on the edge of this cubical maze we found Gaby’s home. Though she was sharing lunch with her 16-year-old daughter, she was kind enough to invite us in and talk about her loan and motivation for promptly repaying.
As a single working mother with no help from extended family, she supports her two youngest children, ages 16 and 12, who still live at home. Gaby herself never completed elementary school and cannot read or write. But she says that providing her children with an education, something she was never able to secure for herself, is extremely important to her. Gaby glowed with pride while she spoke about her 18-year-old son who is currently in university; clearly a major achievement for himself and for his family. Gaby glowed with pride while she spoke about him.
Finally I steered the conversation in the direction of her seemingly-mysterious repayment schedule. In August, Gaby had wanted to use her loan to make improvements to her house. In fact, Gaby took out her loan she had two sources of income in Nazca: her stall at the market, where she sells prickly pears (called ‘tunas’), cheese, and veggies; and the store she has built next to her home, where she sells sodas, snacks, and beer. I learned than Gaby’s painstaking contemplation surrounding her loan with Caja Rural was a function of the delicate balance she strikes between her businesses. Gaby walked me through a basic breakdown of her income and profits and, though she is illiterate, exhibited a masterful knowledge of her two businesses’ accounting.
Gaby’s work in the market is the most trying. For each day at the market, Gaby sells approximately 200 tunas for PE$.5 soles each (marked up from PE$.4) and 50 blocks of cheese for PE$4 each (marked up from PE$3 ). However, the market is only open Wednesday and Saturday each week, or 8 days each month. Furthermore, Gaby must make a trip several times a month to the sierra (or the Peruvian highlands) where she buys the fruits and vegetables to sell in her stall. It is a long, difficult journey, and she does not like to leave her children so long to care for themselves. Gaby’s sales from her market stall are about PE$2400 per month, but her actual profits come out to PE$560 per month. After factoring in the operating costs of renting her stall and her trip to the sierra four times a month, Gaby’s makes PE$419/month at the market each month. To give you a frame of reference, that’s about US$154.04.
Her store’s income is PE$120 soles per working day a month. Gaby works four days a week (she rests on Sundays) approximately 4 weeks per month- so her monthly income from her store comes to PE$1920 per month. Her inputs for the store are PE$1180, so her profits from the store come out to PE$740, or about US$ 272.06. It’s clear that her work in the store shows far more potential. Therefore, Gaby decided to use a portion of her loan to pay for improvements to her store and dedicate herself completely to this business. However, in doing so she loses profits she would otherwise gain at the market. Worried that this change might cause her to fall into arrears in the months that come, Gaby decided that for the time being, while waiting for business at the store to pick up, she should repay her loan in full and not risk her credit history in the long run.
Sitting with Gaby for half an hour and discussing her loan and businesses left me awestruck at the very real accountability she felt towards her loan, her impressive business savvy, and her measured entrepreneurialism. Gaby hopes to take out another loan from Caja Rural next time for 6,000 Peruvian soles (about US$2,200). In the coming months her next loan will allow her to make huge changes to her home and store: she hopes to build brick or cinderblock walls, lay a cement floor, and install lighting fixtures. The size of this loan will prevent it from being a Kiva loan (the funding limit on Kiva is $1,200 for a Individual Loan), but Caja Rural still has the capital to lend to Gaby. Now that she has established a good credit history for herself, she has proven her ability to be successful borrower and demonstrate that despite difficult and seemingly impossible circumstances, the working poor have a very solid grasp on financing their own future.
Kate Bennett (KF16) is thrilled to be working in Ica, Peru with Kiva Field Partner Caja Rural Señor de Luren. For more on Kate’s experiences with Caja Rural Señor de Luren or life in Peru, follow her work here.