Sewing Machine. Corner Store. Fabric. Seed. Trees. Donkeys. Fertilizer. Blanket weaving. Brick pressing. Statue Making. Pottery. Ice ream Making. Vegetable Trading. Utensil Making. Electrical Repair. Steel Smelting. Juice Shop. Welding.
The 2.5 million members of SKS are using their loans to start and expand over 160 different types of businesses. Of which, the ones listed above are a sample. Part of the elegance of this method for supporting development is that we did not ask any of our members to start these businesses. They chose. No aid agencies swept in to enforce their version of economic development on a community. While micro-lending lacks the coherence of an integrated community development plan that a government body or multi-national development agency might attempt to implement, this model provides each interested community member a resource to implement their own family development plan. I don’t mean to suggest a community should have an either/or decision between long-term, integrated development or individual, small scale income expansion. I wish these were yes/and choices. Unfortunately, both options are rarely available.
Until three weeks ago (this was meant to be posted earlier), I had never seen micro-lending actually happen. I was worse than a pretender. I had no experience with how women really used their loans and I had lingering doubts about whether or not interest rates tended towards the usurious. More specifically, I was concerned that, if the relatively educated, average US consumer can’t figure out how to say no to the fourteenth sliver of plastic promising low introductory rates, our members would be unable to price the “cost” of our loan. During my first visit to a center meeting (this is where a group of 30-50 women meet to pay their weekly interest and determine if anyone else should get a new loan), I wanted to understand how our members thought about their loans, the interest rate, and the value of the loan to them.
An overview of how our meetings work (photos follow each step, when included):
1) The group assembles under the lead of a Field Associate. The operation is quite efficient and respectful. When we showed up a bit late to the center, we had to pay 5 rupees to the center. No one gets away with being late / disrespectful.
2) Each member’s passbook and weekly interest payment is collected. Should someone not be present, their interest must still be paid by the other members of the center (I have seen this group responsibility in action at a number of centers and am still impressed that the center adheres to this principle). Collective obligation to pay the loan is the lynchpin of our model, which is based upon the work of Dr. Muhammad Yunus, founder of Grameen Bank.
3) Usually a few other members of the community show up, whether children from around the area who are surprised to see folks like myself or children of our members, who sit suprisingly placidly through the meeting.
I met with one of our members after the center ended and she introduced me to her newest source of income, provided in part by a loan from SKS:
After speaking with her, my concerns (perhaps you could call them paternalistic concerns) about our members being able to price the full cost of our loans declined. She shared this thinking with me, though I have added a few additional calculations and clarifications. Her figures were not this precise, but her train of thought and explanations were.
She had decided to purchase a water buffalo, which cost ~30,000 rupees. She had Rs 10,000 in savings that she was willing to put towards the purchase of the buffalo. She would match this with a loan from us to complete the purchase. To determine if our 20,000 rupee (425 USD) loan, paid over a one-year term, was worth it, she calculated the following:
1) The cow would produce 4-6 liters of milk per day, which she could sell at Rs 15 – 18. Let’s call this Rs 75 more in daily income or Rs 500 per week, for simplicity’s sake.
2) In six months time, the cow would become pregnant. During this period, she would only be able to get 2-3 liters of milk per day. Or Rs 40 per day over the gestation and calf rearing period.
3) If the pregnancy was successful, she would be able to raise the calf for a year and then sell the calf for up to Rs 20,000.
4) She hoped to repeat the successful pregnancy at least twice more over the next four to six years.
The interest on her loan came out to Rs 5,000 on a principal of Rs 20,000. So, on a weekly basis, she was expected to pay back Rs 500 (Rs 60 in principal and Rs 15 in interest per day) per week. Consequently, for six months, if everything went okay, she would just be making her interest payments with the additional income from the milk sales. But, from then until the end of the loan repayment period, she would need to find money from somewhere to service the loan. She and her husband had decided that he would take on extra work to cover this shortfall.
She explained that she was confident that they would be able to pay the loan back over the course of the year and that, after this time, the cow would earn for the family more than the cost (interest) of the loan every four months or so.
Pretty sophisticated, in my opinion. Moreover, this was not a canned meeting. This was just one center member with whom I happened to ask a few questions. While this story seems to be a success, thus far, I know that plenty exist of these plans breaking down. I just offer this as a basic illustration. I am sure, if my conversation had gone quite differently during my time in the field, the tenor of this post would be quite different.
In the background of this photo, you can see the side of one of the community’s small shrines. If you want to see the visualization of what an angry god might look like, you’ve got it. Forgot to pay your tithe to the church? Missed that opportunity to help that old lady across the street? Forget to pay your Netflix bill? Put that pre-paid envelope in the mail, now. Include the check.
Here are a few more photos from that field visit:
Out for a morning stroll. Here’s looking at you.
A roadside Ganesh.
The Party is alive and well. I see these bits of party propaganda all over the place – from Andhra to Orissa to Tamil Nadu.
Our whole bus got in on the tank refill process. The guy in the white shirt was getting a bit frustrated with our advice.
Venkat took me on the field visit. When someone had asked him why he chose to work at SKS, he said he wanted to help as many people as he could before he died. No qualifiers or anything else. Damn.
Then he stuck me on the back of this. We passed more than a few shocked truck drivers to see this pasty, white person accordian-ed into the back of the ‘rick.
I woke up to this view of Hyderabad that morning. We were on our way to the field by 5:30am. A nice start to the day.