Microfinance isn’t what I thought it was. My understanding was based off of a simple narrative: give a poor person a loan, they use that loan to start their own business, and they lift themselves out of poverty. Embedded is the assumption that loans are positive, and that they should be extended to as many marginalized people as possible.
Over the last two years I’ve changed my expectations, not because I wanted to but because I had to. In the course of my job, I found that several of my assumptions, my expectations for Microfinance, and my ability to change things, were off.
Loans are inadequate in fighting poverty and can lead to negative outcomes. Progress against poverty requires all type of tools and strategies, not just a loan, because poverty is not a simple condition, it affects many segments of ones life from health care, to education, to civil rights… loans are only one of many tools that can be employed.
Loans can cause harm. If a client doesn’t understand the product, if institutional incentives are distorted, if a loan is not applied carefully, it can lead to negative consequences. Missing payments and accumulating debt causes anxiety and loss of self-worth. Clients feel personally indebted to the loan officer and worry about their judgment. Where client protections aren’t enforced, an institution can employ harsh repayment policies that can further impoverish clients.
Loans aren’t for everyone. Many aren’t interested in a loan and don’t need one. Some don’t see the benefit of taking on more debt. Others don’t trust financial institutions. Sometimes a client wants a loan where an alternative would have worked better.
I am not as powerful as I thought. Changing things isn’t naïve if you know what it takes to do so. I was naïve because I didn’t know enough. I thought I could change things if I just worked hard and believed in myself. The reality is much more complicated. The culture and history of Honduras deeply affects attitudes towards credit and foreign intervention.
Hondurans embrace of Americans is cynical. The community never questioned my presence and it was assumed that I had the means to “help.” Association with an American is a sign of prestige. My idea for relationship collateral suffered because I misinterpreted my role and relationship with clients.
I discovered significant forces working against me: lack of economic opportunity, lack of quality and affordable health care, lack of quality education, unsafe streets, an unresponsive government. These are systemic problems whose challenges are not easily met. Many clients fall behind on repayments because of those forces: a fatal illness, high medical expenses, a robbery, large debts to other providers, lack of access to insurance, or poor administrative skills.
My knowledge about the context and culture of clients is incomplete. Categorizing the conditions of poverty, and conducting surveys, cannot sufficiently capture what it means to be a Honduran living in Villa Soleada. That is why it is important to approach MF with skepticism and development work with humility. No matter how much we research MF or immerse ourselves in local culture, we wont know what the best solution is for clients.
Poverty is not emotional. It doesn’t go away if we pity it, it doesn’t disappear when we show it love, it doesn’t care if you give it affection especially from a foreigner. Progress against poverty requires real tangible results. My good intentions are useless if I can’t apply it to something meaningful and impactful. The poor don’t need a friend or a caretaker, they need self-determination, they want the means to decide for themselves, they want to pursue their goals, they want to take care of their own family, and they deserve the means to do so.
Our actions, no matter how small and narrow, lead to unintended consequences. We live in a web of social connection. When we give to some but not all, those on the fringes of the web notice. The people who didn’t receive that dollar or donation, they ask themselves why. They wonder what they have to do to get the same and they change their behavior. And, government institutions feel less accountable because the foreigner is claiming responsibility over their constituents.
It’s difficult to establish honest relationships when the local perception and expectations for your presence don’t match your goals and parameters. Especially when our service consists of giving, we invite a relationship based on what we have and what we can give instead of who we are and what we can learn from each other.
Despite those limitations, I believe that my presence and the tool I chose to offer can lead to change. To do so I’ve had to challenge my expectations and the expectations of those I work with. Change is possible but not in the fashion we imagine. A loan can work if it is designed and applied carefully, but it’s not for everyone, and when it works, don’t expect it to be the silver bullet we were told it could be. It’s on the margins where we find our role. Not as the protagonist, but as the friendly adviser with a short cameo.
Santiago Sueiro, co-Chair of La Ceiba MFI (www.santiagosueiro.com)
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