The more firmly we grasp the overall picture here in Marigo, the more we can involve ourselves in the details of individual borrowers’ loans. Getting into these details makes small decisions possible that really help women out.

I’m thinking of Ivette. She’s a member of a credit center in Segen, the mountain region above Marigo. I’ve written of her case before, though I didn’t mention her name. She’s one of the few examples of a borrower whose husband I met first. When I first came to Marigo, he was attending center meetings for her because she had just had their first child. I referred to him as “Paul”. (See: Dealing with Men.)

Ivette had taken a regular loan for 15,000 gourds – about $375 – in December, though she was more that eight months pregnant. She probably should not have received this loan. Problems around childbirth are so common in Haiti. Over seven percent of children die at birth, and for every 100,000 births, 523 women died in Haiti, compared to eight for every 100,000 births in Europe. Giving a loan to a woman on the verge of childbirth is a big risk, especially if you know little about the household she is part of.

But she got the loan, and the first thing that happened was that she had a very difficult labor and so had to give up her business and spend her time recovering with her new baby. Her husband took over the business for her, but on a purchasing trip to Port au Prince he was beaten and robbed of everything.

They were thus left with a big debt and very little to repay it with. They squeezed the first two out of their five reimbursements out of their assets, but by March they really had nothing left. They were falling behind, lateness charges were accumulating, and they couldn’t see any way out. Ivette’s husband kept coming to meetings, hoping, I suppose, that we could figure something out. Ivette and her child slowly recovered, but the financial situation was looking worse and worse.

When we finally we able to study the file carefully, we discovered something odd: The loan that Ivette took in December was at Fonkoze’s standard 5% interest rate. At the time, Fonkoze had raised donor support to offer interest-free loan to borrowers in regions that had been struck by the hurricanes last September, and Segen was one of those regions. So Ivette had been eligible for an interest-free loan.

When I asked her why she hadn’t chosen an interest-free loan, she said two things: For one thing, at the time we were offering interest-free hurricane loans, she had already repaid her previous loan. She had understood, wrongly, that only borrowers with unpaid balances were eligible for these loans. For another, the hurricane loans required a repayment in the first month of the loan. Reimbursements for standard loans start in the second month. She thought the extra month to work with the full loan amount would be to her advantage.

In any case, the first thing I did was to go into our data base and retroactively transform the loan into an interest-free one. This immediately made a big difference. The standard interest rate is 5% per month on the declining balance. The effective interest rate is thus 40% annually or 20% for a six-month loan.

This will of course seem high to anyone living in the States, but is very competitive by local standards. Loan sharks regularly charge 50-100% per month. The formal banking sector, whose loans are also expensive, won’t give loans to the poor at all. Other microfinance institutions offer loans at rates similar to Fonkoze’s.

Ivette had owed 15,000 gourds of principal and 3,000 gourds of interest, a total of 18,000 gourds. She had made two repayments of 3600 gourds each, and thus had a balance of 10,800 gourds. Shifting the loan to interest-free immediately reduced her debt to 7,800 gourds.

But there is another important difference between hurricane loans and standard ones: Borrowers are required to deposit 15% of the amount of a standard loan into their savings accounts as collateral. The money remains theirs unless they default. Hurricane loans come with no such requirement. They were designed to get women in debt back on their feet and in business, so all unnecessary barriers were removed. Ivette thus had 2250 gourds on deposit as collateral for her standard loan. I made a withdrawal of 2200 gourds for her and used it to further reduce her debt. She then owed only 5600 gourds.

But the interest-free contracts were for six months, and Ivette’s had already expired. So the last thing I did for her was the same thing we did for every other hurricane borrower who was unable to repay in six months. We rolled the whole balance into a second six-month loan at a subsidized interest rate of 2% per month. Her total debt would thus be just under 6000 gourds, and she would have six more months to repay it.

Yesterday she made her first repayment. She is back in business, and though her commerce is much smaller than it was before her troubles, she’s glad to have the resources to begin to eliminate her debt. In fact, she chose to repay somewhat more than the amount that was due. She wants to complete repayment a month or two early if she can so she can take out a new loan and begin to build her livelihood back up again.