Final field visit – a reality check

Before actually seeing microfinance field operations from a worm’s-eye view, I sometimes wondered, what’s the catch? How are loan officers actually able to scale up client numbers so quickly? How are repayment rates so high and reliable? How do MFIs actually get through all the client protection and paperwork that they claim they do with poor people in slums? Does it actually function as simply as it’s often advertised?

This summer has satisfied much of my curiosity into the ground-level realities that make possible the seemingly too-good-to-be-true phenomenon of sustainable microcredit. What I found on the field did not disillusion me or surprise me, but rather added a sense of credibility to what was previously only a bird’s-eye view. The ‘catch,’ so to speak, is that with the dedication of Swadhaar’s staff to the social objective also comes an understanding that Swadhaar is a business that needs to make it financially in order to carry on. Swadhaar serves a market that nobody else will for the reason that nobody else will, which makes it all the more necessary to keep a keen business perspective with each decision they make.

On my second to last day at Swadhaar, I made a field visit to the same client zone I went to on my second day over two months before. On my first visit to the zone with loan officer Santosh, we had walked around the slum to visit PAR (portfolio at risk) clients, or those who were late on payments. So my first field visit wasn’t filled with inspiring client stories, but rather a variety of excuses from women for missing payments. It wasn’t disillusionment, but rather a reality check.

Santosh helped me understand the tricks and methods of client interaction necessary for the business to operate successfully. One group didn’t show up on time for a meeting; rather than waiting around even a short time for them, Santosh would come back the next day to make them understand the value of his time and the seriousness of the loan contract they would be getting into. One woman in a joint-liability group was too forgetful, argumentative, and time-consuming; it would not be cost-effective to give her a subsequent loan. Several clients needed to be reminded the consequences of not repaying.

Two months later, I was in the same client zone with Santosh’s replacement trainee and trainer (Santosh left for family reasons) on a day scheduled for a couple of client meetings, the first of which was supposed to be a first meeting of a five-woman group. As we waited in one of the women’s home for the others to arrive, the loan officer’s showed me a standardized checklist of twelve steps that he needed to cover for a first client meeting, many of which entailed him explaining terms and conditions. Unfortunately, we didn’t get past the first step.

After 15-20 min. of waiting, only four of the designated five women showed up. She would be here shortly, they said, and there were other women present to fill in for her. The loan officer, however, strictly followed the rule that the designated woman getting the loan could not be substituted for in the first meeting. Furthermore, one of the five women present was pregnant; pregnant women were not allowed loans on account of having different money priorities during pregnancy.

After we walked out of the woman’s home, leaving behind the four would-be customers with their necessary ID forms still in their hands, the loan officer explained me that those women were too late past the scheduled meeting time, and that if they were given loans, they would likely have repayment problems and become PAR clients. The next chance that group would have for a first meeting to show up on time and follow rules would be several weeks from now. It was a somewhat harsh reality, but I knew the loan officer was in the right.

For the rest of the day, only one meeting was not foiled by similar circumstances of not meeting up to Swadhaar’s rules. It was a group of women in requesting a second loan cycle. The explanation and paperwork took over an hour, and the paperwork was far more extensive then I would ever have thought. Client protection and respect comes first, the loan officer explained me, but this is a company that follows rules. Otherwise, the company faces repayment problems, he said. It is not a charity. It is a business.

I am currently back home in New York, likely to be at a bird’s-eye distance from microfinance for long time once again. Blogs like this one thankfully help me keep some sort of worm’s-eye view to satisfy my curiosity about on-the-ground operations all over the world. Yet, after being in the field, I understand the limitations of this channel for understanding microcredit. There is hardly a substitute for being in the field to really understand what loan officers have to do in order to make microfinance actually work. While this summer was in large part a curiosity satisfaction for me, I am determined to make it an early step in a longer relationship with the microfinance sector, and I thank ACCION International for my most fulfilling summer yet.