Working with a Credit Center

Kòray is an area covered by mountainous woods that overlook the coastal town of Belans. It’s also the home of the most distant of the credit centers that Fonkoze’s Marigo office serves. A two-hour motorcycle trip takes you to the entrance to Belans, and then you turn uphill for another hard 45-minute ride. The center in Kòray has 64 members, divided into thirteen solidarity groups.

In one respect, it is one of the better-functioning credit centers that we work with: Though there are some delinquent loans, none is yet so far gone that it must be written off. We’d like to be optimistic about this center. It was founded when members of the community came all the way into Marigo to request that we bring credit to their neighborhood, and it’s hard to imagine what alternative borrowers in Kòray have to Fonkoze. Though there is a small savings and loan association down in Belans, such associations do not deliver loans to their borrowers’ doorsteps the way that Fonkoze does, and Belans is a long, steep, difficult hike from Kòray.

But there are problems with the way the center is functioning, and they are similar to the ones that are everywhere in the Marigo branch. Borrowers are irregular about coming to meetings. The meetings are held twice each month. At one, a borrower will pay her monthly installment on her loan. At the other, there is a discussion of issues related to their loans, their businesses, their community, or generally their lives.

Fonkoze requires attendance at both meetings. In a country where all forms of communication at a distance are unreliable, it is essential that we regularly see all our borrowers face-to-face. What’s more, doing banking transactions in a center meeting if front of all a center’s members is a key piece of ensuring the transparency of the process. All exchanges of money take place in front of multiple witnesses. Finally, and perhaps most importantly, collecting repayments in the center gives members the chance to ask for and receive each other’s help. A member who is short can go to other members for a loan to complete her repayment and, so, avoid a lateness penalty.

But many of the borrowers in Kòray, like those elsewhere, have settled into the belief that the meetings are optional. If they are not receiving a loan and they have no repayment to make, they don’t come. Even if they do have a repayment, they might decide to send the money with someone else.

This is neither dishonesty nor laziness. It’s not that they are failing to live up to their agreements in any blameworthy sense. It is, rather, their sound business sense, shrewd and hard, looking at the immediate consequences of various ways they could choose to manage their affairs. These women make the money that feeds their children by taking to the street, buying and selling sugar or shampoo or cabbage or sandals or charcoal or perfume: whatever it is they each deal in. Many of the women at a center like the one in Kòray are only intermittently even at home. Their businesses have them traveling between Kòray and Port au Prince, and they might spend more time in the capital than in the place where they nominally reside.

Though we at Fonkoze know that, over the long haul, regular attendance at meetings is better for all of them if it ensures that their center is strong, it can hardly seem that way to them. At least at first. Leaving their business twice a month must initially seem like a loss. They might eventually come to understand the value of the meetings. Many Fonkoze members, in fact, do. But it’s a recognition that can take a long time. Meanwhile, it makes perfect sense for them to stay with their businesses as much as they can.

And there is nothing merely officious about insisting on center attendance. Fonkoze has a lot of experience that shows that even centers where members are regular about their repayments quickly degenerate if attendance is poor. Microcredit lives or dies with the discipline of the process, so the key to saving centers like the one in Kòray will be reintroducing the discipline that should already have been there.

The Marigo staff is to blame for way that things have degenerated. Though there has never been a lack of talk about the importance of meetings, it has remained just talk. Haitians have a proverb, “//Tande ak wè se de//.” That means that hearing and seeing are two different things. Fonkoze’s Marigo’s members have heard Fonkoze expectation, but they have not seen it at work. Credit agents and branch leadership have done nothing to show that the expectation is real except say it loudly, sometimes even angrily. Members understandably ignore such talk as long as it is only talk.

So my work with this center began last week when I was studying a request for new credit by three of the solidarity groups that had finished repaying their loans. The members were requesting between 10,000 and 12,000 gourds – that’s about $250 to $300 – after having repaid loans of about half that much or less.

The first things I looked at were their repayment records and the center’s attendance book. I saw two things. First, though they had repaid their loans fully, they had been late with some payments along the way. They hadn’t been able to keep to the strict repayment calendar they had agreed to. Second, most of them were very irregular about their attendance, having missed half or more than half of the meetings that fell during their repayment period. So rather than approving loans of 10,000 to 12,000 gourds, I approved loans of 3000 to 6000 instead. Borrowers with the worst attendance records got loans of only 3000 or 4000 gourds. Members will begin to see that required attendance is really required.

The second step we took involved the way we would disburse the new loans. The total disbursement would amount to something around 60,000 gourds. But the credit agent brought much less than that sum to Kòray. He was scheduled to collect over 45,000 gourds in repayments from other center members, so he brought only 15,000 gourds. We would only be able to make a new disbursement if scheduled repayments came in.

When we got to the center, we found only about 20 members. Those in attendance had some information about those who weren’t there, but of others they said they just didn’t know. Some of the absent were, we were told, in Port au Prince. They hadn’t been able to leave their businesses to come to the meeting. Others were at home. One, for example, was busy doing laundry. Another had a sick relative.

I hate to preach to the converted. The members in the center were, of course, the ones that had come. But I had to talk to them. Only they would be able to help me get out the word. So I told them that Fonkoze would cut the loan amount of members with poor attendance, and eventually cut of their credit entirely. The reduced loan amounts I had approved for the credit we were scheduled to disburse that day would be proof that I was not making an idle threat. In fact, the repayment we were scheduled to receive was short, so we weren’t able to make any new loans.

These strategies must be applied with care. The most important motivation for repayment that Fonkoze borrowers have is the prospect of getting new and larger loans. If they start to believe that they will be blocked by problems they cannot control – like difficulties that might interfere with their coming to meetings or problems that other members have repaying their loans – they could choose non-repayment as a way to ensure that their businesses don’t get too short on cash. We could end up making loan repayment worse than it already is.

But we have to take this risk. The branch cannot continue as it has been functioning up to now.

March 25 2009