The key to straightening out the portfolio here in Marigo is to straighten out the solidarity that Fonkoze’s credit depends on. Fonkoze loans require neither co-signers nor collateral in any traditional sense. Borrowers just deposit 15% of the value of their loan value into their own savings accounts, and agree to serve as guarantors for one another.
That is, a group of five women takes a loan together. The five are called a “solidarity group.” Their loan is then divided among them in portions they’ve agreed to in advance. Fonkoze counts on them to help and encourage one another, even to pressure one another to ensure repayment. When the whole loan is repaid, the group as a whole becomes eligible for a new loan.
This has led to the creation of a precise new meaning for the phrase “showing solidarity,” or its Creole equivalent. At Fonkoze, the phrase has come to mean contributing towards paying off someone else’s debt. By helping with your fellow member’s repayment when she has a problem she can’t solve by herself, you can facilitate on-time repayment of your group’s loan and, so, ensure that you get your next new loan on time.
At least that is how it is supposed to work. And it does work that way in the many Fonkoze offices that function well. Borrowers can have all sorts of problems that we barely hear about because members handled them through internal loans within their solidarity groups or their centers.
It doesn’t work that way in Marigo, however. Fonkoze members here have shown a hard reluctance to solidarity. They don’t want to help each other out. I was at a meeting at the center in Ravin Nòman, and we were talking some about solidarity. One of the women said, “My mother carried me for nine months, and I wouldn’t pay off her loan. So I’m not paying anyone else’s either.”
A striking sentiment. I admire the honesty. But examples of the problems it creates are likewise striking. Our most distant center is in Koray Lamòt. The first time I visited it with Jean Claude, its credit agent, one of the members was 20 gourds short on her repayment. 20 gourds is a pittance for most of our borrowers, less than 50 cents. Normally, her solidarity group would handle that easily with an internal loan. But none of the other four members of her group showed up at the meeting, and the members of the credit center who were present wouldn’t come through for her. Since she wouldn’t have another chance to pay off the 20-gourd balance until Jean Claude returned in two weeks, she was stuck with a 120-gourd lateness penalty. Ridiculous.
So we don’t really think we can repair the Marigo loan portfolio unless we can recreate at least part of the protection against inevitable bumps in the road that solidarity is supposed to provide. But it’s not easy. It’s like pouring spilled milk back into the carton. Generally, you just wipe it up instead.
And the way the Marigo portfolio has been managed for about a year only makes it harder. Early in 2008, Fonkoze decided to try an experiment in several branches, Marigo among them, where the repayment rate on loans was poor. We would try to address the needs both of borrowers who were falling behind in their repayments and of the members of their groups who were ready to take new loans by separating them, on paper, into distinct groups. A solidarity group of five members might thus be divided into a couple of loan contracts: one contract restructuring debt for those whose loans were delinquent and another contract getting a new loan to one, two, or three members whose loans were fully repaid. I wrote about the initiative at the time. (See: New Structure.)
One key aspect to the approach was supposed to be that the separation was to be on paper only. Solidarity groups would retain their importance. Groups of five would remain groups of five.
In Marigo, however, this part of the message got somehow lost. When Fonkoze’s more capable members discovered that we were giving them new loans on the basis of their individual performance, they understood themselves to be receiving individual loans. For many of them, this meant solidarity be damned. Every woman for herself. And, of course, for her family.
It’s understandable enough. Though they entered Fonkoze solidarity groups with friends and neighbors they had chosen by themselves, their goal had not been neighborhood development. They had joined to improve their own lot. They are businesswomen trying to increase their earnings, fighting to lift their families out of poverty, and are right to choose the route that seems to them the quickest. We tell them that if they help their friend today, she will be able to help them tomorrow, but they tend to be so unfailingly optimistic that it’s hard to convince them that they might someday need the help. Even when the evidence seems clear. Haitians say, “We live in hope.”
And the problem that these new individual-seeming loans create is even greater than one might imagine. In the old groups of five, each woman put up 15% of her loan as collateral. If one woman has a disastrous inability to repay, her loan could be written off, and Fonkoze could take her savings and the collateral from the other four women to offset the loss. Since the percentage of write-offs has tended to be very low, Fonkoze had generally found itself to be well protected. But these new loans are individual on paper, and so they are secured by only the one woman’s 15%. Losses can thus be quite significant.
The core issue for management is thus to take steps towards recovering as much of the principle of solidarity as can be saved. We need to help the women see the advantages of solidarity and to get as many women back into the groups that offer Fonkoze the protection it needs.
Ideally, I’d like to meet with each solidarity group individually, but there are hundreds of them. So I have to attack the problem another way.
I decided to begin my approach by acting in the sphere where it is easiest for me to have the biggest effect and move outward from there. I mean: I would start by working with the three credit agents whom I’m with more or less every day. I would move together with them to re-educate the center chiefs, the elected leaders of the forty or so centers the Marigo branch serves. Finally, the credit agents would work with the center chiefs to re-educate solidarity-group leaders and the groups themselves.
The work with credit agents has been proceeding well. I’ve been spending almost all my time with them since I came to Marigo, and it appears to have paid off. They had become undisciplined in their work. Just to cite two examples. First, they had ceased entirely to collect penalties for late payments. In the three months since I arrived, they’ve collected almost four times the penalties collected in any other branch.
Second, they had been allowing borrowers’ loan amounts to increase much too significantly from loan to loan. A member who would get five-six thousand for her second loan would get 12,000 or more for her third. Members were getting more credit, much more credit, than they could manage, and that was pushing them almost directly into trouble. They latest round of loan amounts they’ve proposed have shown only small increases, and these increases have only come to borrowers who have closely respected the conditions under which they get their loans.
More importantly, when I see the agents with our member/borrowers, they are firm but friendly. They listen. They advocate for the women in front of me. They show every evidence of wanting to do things right.
Our next step is to begin re-educating the credit agents’ most important partners, the women whom credit centers elect as their chiefs. This work has begun already, but will intensify and accelerate over the next month with meeting that the agents and I organize for groups of five-ten chiefs at a time. After that, the agents and chiefs will work with group leaders.
So the work of putting the branch’s work on a stronger, more orderly foundation is well under way. But the goal is not to set up a branch that seems to operate well, but one whose members make sustainable progress out of poverty. Their progress is what will eventually make the branch’s operations sustainable, and this will in turn enable us to serve more women in the long run. And it is much too early to say whether the apparent results of our work are leading to real results in the impact we have on women’s lives.
But, we live in hope.