I’m currently in Tbilisi, Georgia renewing my Azerbaijani visa and traveling a bit around the region. Hence the “gamarjoba” instead of what’s becoming a regular “salamu alaykum”.

During training for the Kiva Fellowship I heard it mentioned numerous times that taxi drivers in Central Asia (but specifically in Azerbaijan) were the least demanded loans on Kiva. Their loans took the longest to get funded and expired most often. I was not surprised. After all, “Transportation”, being at the end of the Sector list on Kiva also competes with attention-grabbers like “Agriculture”, “Food”, “Housing” and “Retail” that precede it. What’s more, Kiva’s lenders prefer loaning to women, a fact supported by the percentage of Kiva loans that have been made to women entrepreneurs, which currently stands at almost 82%. Thus, taxi drivers raising funds on Kiva are at a justifiable disadvantage considering their entirely male demographic. I gave some more thought to this trend and came up with a few possible causes for it.

Taxis waiting outside a hospital in Baku

Kiva Lenders are really passionate about alleviating poverty. It is then understandable why Sectors more essential to a person’s survival are preferred to supporting industries: one cannot survive without food but can carry on without private transportation.  Unless one lives in a place without any type of public transportation, and taxis are the only way of getting around, loans to taxi drivers can even appear to encourage a service of luxury.

“Transportation” sector is one of the few on Kiva that is not good-centered. That is understandable as economies in developing countries are generally driven by the production of goods, while in the developed countries services account for a much higher percentage of the GDP. Industrialization certainly defines developed countries but it is the high servitization of products within the developed world that separates it from the world still developing. Therefore loans to taxi drivers might also come off as loans to persons in more developed developing countries.

But why are Central Asian taxi drivers less popular than their South American or African counterparts? The area that comprises the former Soviet Union is relatively more developed than other regions on Kiva. After WWII USSR made it an objective to build up the infrastructure and industrialize as much of the country as possible. A lot was accomplished in 40 years until the communist superpower began crumbling and the Gorbachev-initiated perestroika devastated the region. Countries of the former USSR were left with an infrastructure in collapse, industries discontinued and most of the population struggling to survive.

Since then there has been an economic resurgence in the region, but poverty remains a big problem. However, poverty in Central Asia is not comparable to poverty in Africa. The poor in latter are much poorer than the poor of the former, especially if you compare the average standards of living, the purchasing power parity and the GDP per capita of these regions. As a Kiva Lender it makes sense to me to loan to the entrepreneur who will benefit most from my $25.

Bearing in mind the causes (whether justified or not) of Kiva loans to taxi drivers in Central Asia being in least demand it is important to remember that poverty should not be a popularity contest, but a world-wide effort without undue partiality. To fund a taxi driver in Central Asia click here.

In Part 2 of this blog pose I will provide a bit more detail as to why the supply of “Taxi loans” on Kiva and the demand for them is so mismatched. I will also give some background on taxi drivers in Azerbaijan, their profession, and my experiences with them.

Nakhvamdis da didi madloba! (“Good bye and many thanks!” in Georgian)

Ivan Ledyashov is a Kiva Fellow working with AqroInvest Credit Union and Komak Credit Union in Baku, Azerbaijan. Please helpfund entrepreneurs in Azerbaijan!

On November 8^th AqroInvest received new capital from an existing partner, PlaNIS, and an entirely new partnership with Microenterprise. AqroInvest is one of Kiva’s two Field Partners in Azerbaijan. It is important to note that microfinance institutions, such as AqroInvest, depend on new partners and capital for growth. That Monday also happened to be my first day at AqroInvest. At the end of the day the entire staff and I celebrated with champagne and cake, making toasts to AqroInvest’s bright future, and my anticipated contribution to it. It was a very joyous occasion. I left work comparing my experience in the corporate world in New York, where celebration of any caliber were pushed until the end of the week (and Mondays consisted of extinguishing fires that began on the weekend with little time for anything else but breathing), to AqroInvest’s celebratory timeliness. Little did I know that an organization that commemorates its successes very seriously also takes its work that way.

AqroInvest's office in Imisli (250 km South-West of Baku)

The ensuing week was not at all about champagne or cake. AqroInvest’s staff doggedly worked the hours of an investment banker’s analyst. Their goal was to disburse the newly acquired capital to the pre-approved borrowers as quickly as possible, so as to minimize the amount of interest it would accumulate. Unlike Kiva’s interest-free capital this money carries an interest rate, which started accruing when AqroInvest received it. Like other microfinance institutions AqroInvest is able to exist thanks to the interest rate split between its average cost of capital and the interest rate it charges on microloans. That is why microfinance institutions like AqroInvest love working with Kiva. It decreases their average cost of capital so they become more competitive. In return that enables them to offer loans to borrowers at more competitive interest rates.

However, one week of working 14 hour days was not enough time to disburse the capital. The staff incessantly worked through the weekend and national holidays. In Azerbaijan Monday, Tuesday and Wednesday of the week of November 14^th are all days off due to Eid al-Adha. Also called the Festival of Sacrifice, it is a religious holiday celebrated by Muslims worldwide. During it a ram is sacrificed and equally divided among the family, relatives/friends/neighbors and the poor. This holiday honors Abraham’s obedience to God in his readiness to sacrifice his son Ishmael. God intervened in time to provide Abraham with a ram to sacrifice instead. Although Azerbaijan is very secular 93% of the population identifies as practicing Islam. Therefore, it is understandable that banks were closed during those first three weekdays.

AqroInvest has developed a very efficient system of disbursing loans and collecting repayments. A borrower simply comes into one of the branch offices, and picks up a check along with repayment slips. This check can be cashed and the repayments submitted at their nearest bank. Picking up a check takes only a few minutes. After that the borrower has no need to visit the branch office, where they applied for a loan, and which might be far away from them. This saves time and money for both AqroInvest and the borrower.

Azerbaijani manat. Excange rate: 1 manat = $1.25

That is exactly how things went until the banks closed for Eid al-Adha. The branch offices could stay open and distribute checks to pre-approved borrowers, but those wouldn’t be cashed until Thursday. This meant that the remaining balance of AqroInvest’s recently acquired capital would keep accumulating interest. On the other hand the pre-approved borrowers would wait even longer to receive their loans. To avoid this situation AqroInvest cashed the remaining capital on Friday. Its objective was to hand-deliver the cash to the branches, which in turn would distribute it to the borrowers.

AqroInvest's CEO signing loan contracts

Early on Sunday morning I set out for the branch offices with the CEO, Accountant and the Operational Manager. We drove through AqroInvest’s three branch offices in the South: Sabirabad, Saatli and Imisli. By the end of the day majority of the capital was in the hands of the borrowers. On Monday the staff finished disbursing it and finally, after 8 grueling days, relaxed. After sacrificing themselves, their sleep, and showing an unmatched work ethic it was time to together celebrate the Festival of Sacrifice.

It was an amazing experience to meet the humble borrowers, who came into the branch offices to pick up their loans. It made microfinance so much more real for me. It was also interesting to reconcile the theory of microfinance with AqroInvest’s work on the ground. I was delighted to have taken part in the Festival of Sacrifice, a community-building event that has few parallels in the world.  However, I consider witnessing AqroInvest’s staff at work the highlight of this entire experience. Philanthropy and interests of the borrowers were surely not their primary motivation to work the long hours. It was their personal ambitions and interests of AqroInvest. There is nothing wrong with that. After all AqroInvest is a for-profit organization. Yet, it was very encouraging to see how microfinance was mutually beneficial to the borrower and the lender in this most haphazard of the situations.

Sağolun (thank you and good bye)!

Ivan Ledyashov is a Kiva Fellow working with AqroInvest Credit Union and Komak Credit Union in Baku, Azerbaijan. Please help fund entrepreneurs in Azerbaijan!

Novruz is also important for Azerbaijan’s small businesses. Many of the Kiva borrowers I visited were making business decisions based on their sales projections during the holiday. One client had pre-shorn three sheep with the hopes of selling them for butcher at a higher price during the holiday. All of the Kiva trading clients had stocked up on inventory for their shops. Some of the special items included small fireworks, nuts, and festive pots of wheat. This is a very enjoyable time to be in Azerbaijan.