Not Ready for Credit

Programs like Chemen Lavi Miyò are called “graduation” programs. Participants spend eighteen months with us. Then they graduate. We hold a celebration, and we hand out certificates. Then the women move on to bigger things.

We are part of Fonkoze, a large microfinance institution, and while finding customers for our banking operation is not our goal, we do encourage graduating members to join Fonkoze’s credit programs if we think they could benefit. And we believe those programs can help many of our graduates continue their struggle to lift their families out of poverty.

So while we were planning the graduation of 347 families in December, we worked hard with our partners in the banking side of Fonkoze to arrange for loans. Case managers recommended approximately half of all graduates for credit, and most of them received their loans right away.

Case managers don’t decide by themselves whether a woman should join the credit program. Their recommendation emerges from conversations they hold with each CLM member in the months just before graduation. CLM members need to understand what it takes to succeed with credit, and they need to want to take the risk that comes with a loan. They also need to be clear about the difference between credit programs and CLM. The fact that Fonkoze provides both can lead to unrealistic expectations when they leave CLM to join credit. Finally, the case manager needs to be convinced that a prospective graduate will be able to manage a small business that can absorb the extra capital that the loan provides. Unless it can borrowed money will be more of a useless burden than a helpful tool.

Miraclide is a recent graduate from Niva, a large swath of farmland just south of Mirebalais. She made enormous progress during her 18 months with us, but did not decide to take on a loan when she graduated. It’s instructive to see why.

She lives with four children along the paved highway that runs from Port au Prince, through Mirebalais, and then on to the north. When she joined the CLM program, she had little that she could call her own. She had been forced to sell the one goat that she owned in order to rent the room they slept in. As her year-long lease was expiring, she wondered what she’d do. The father of one of her kids would send her about $1.50 a day, but it was all she had to feed all of them. She was pregnant at the time.

Shortly after she joined the program, she found a spot nearby that another neighbor was willing to rent to her for five years. Her case manager helped her figure out how to assemble the money she’d need to make her payments. So with the program’s support she built a small house and a simple pit latrine on the land. She started to care for the livestock we gave her – two goats and a pig – and they multiplied, despite the epidemic of Teschen Disease that was sweeping through the region, killing many of the pigs.

She also started a small commerce, and it began to take off. At first, she sold cosmetics: soaps and shampoos, perfumes and lotions. She would place them with a series of saleswomen who already had stands that they sold from along the highway. They would make a small commission on the sale. She might give a woman $10 or $20 worth of merchandise, with payment scheduled a week or two later, after it was sold. Her merchandise moved well, because she didn’t have much competition. Local merchants who were selling cosmetics were mostly selling hers.

But there was a problem. The women who were making the sales wouldn’t always pay her on time. Each delayed payment would affect the amount of new merchandise she could purchase, so her business began to shrink.

Fortunately, she and her case manager were quick to identify the problem. Leaving her merchandise to be sold on consignment meant giving up too much control, because she couldn’t know when she’d be paid. She decided to sell off her cosmetics business and try earning money another way.

By then, she had given birth to her second child, and because she had her baby on her hands, she couldn’t choose anything that involved a lot of time out of the house. That’s why she decided to sell basic food products – like rice, oil, bullion cubes, sugar, flour, and tomato paste – out of her home. Neighbors would come to her when they weren’t able to make it to the market in Labasti or Mirebalais, or when they just needed a few ingredients to make a simple meal.

Once again, her sales started out strong. But her difficulty collecting the money she was owed persisted. Women who sell out of their homes face enormous pressure to sell on credit. Their closest neighbors come by, asking for a cup of rice or a measure of cooking oil. Something they need to feed their children. They promise to pay the next morning or the next week. It’s difficult to say “No.” She’s your neighbor. You’re around her every day. And her children, the children your own children play with, may be hungry.

It’s also difficult to collect these debts. You can go a customer’s home, and make a lot of noise, but Miraclide was unwilling to make ugly scenes. And even an ugly scene might not help. The woman might simply not have the money when she said she would have it.

So Miraclide’s business continues to stumble along. She earns enough to keep herself and her children fed, but her income shrinks and then grows again as the amount of money she has in her clients’ hands increases and diminishes. When the school year is over, she’ll be able to use her older girl as a babysitter, and then move her business to the market. That will help. People who come to the market expect to pay cash. But it will only help for a couple of months. When her girl goes back to school in the fall, she’ll be stuck again. As long as she has to stay with her baby, she won’t be free to invest herself fully in the business she needs to make herself and her girls prosper.

If you ask her how she feels about the progress she’s made, she gets excited. “I had nothing. I was living in someone else’s home. I remember what my life was like, and I’m determined to manage my livestock so I can continue to move forward down the road.”

And she hopes to be able to join Fonkoze’s credit program some day, but right now a loan seems like a bad idea. She doesn’t feel confident that she’d consistently be able to make her payments. It would always depend too much on the women who owe her money. And she doesn’t want to have to sell off livestock – the only insurance that she has –to pay off a debt.

So she’ll wait. She’s young and her little girls are young, too. She’s learned that she can run a business, and she’s confident that she’s be able to flourish as soon as she’s free to really get to work.