Changing plans

So I've made the first big change in my plans! Rather than studying group versus individual loans, I'm going to give all the loans as group loans, and study how the repayment rates vary between groups that repay weekly and those that repay monthly. I feel much better about this plan! I realized that trying to give individual loans, given the circumstances, was just doomed to fail. Most MFIs that give individual loans, as far as I know, give them to borrowers who already have a business and either have proven themselves reliable in the past through group liability loans--it's sort of a graduation to reward people for repaying responsibly, or have collateral to offer. Individual loans are generally bigger and are given to wealthier borrowers. So to give first-time borrowers who are very poor and are starting new businesses individual loans, without requiring collateral, seems not to be the best idea.

I met with members of Project Have Hope at their weekly meeting on Saturday to discuss the loan program. I had been planning to require weekly repayment installments, since the literature suggests that this yields better repayments. It's hard for people to save their profits, with friends and relatives asking for money when it's available. So while they may have the profits one week, if they don't have to make the repayment for another three, their profits can disappear and they may default. The women, however, said that they would prefer monthly repayment, because that way they can balance out good weeks with bad weeks and be sure to repay. So I think I'm going to divide groups randomly into weekly and monthly repayment groups, and then if the monthly groups repay as well, they can continue with that in the future.

Apart from the loan program, things here are good. Grace offered to let me stay in her home, which is incredibly generous. It's going to save me a lot of money, leaving more for the loans! It's been fun, too, because there are several daughters and nieces in the home who are about my age. I enjoy the company!

Background

Ok, so many of you know a little bit about what I'm doing, but I figure it's probably best to provide some background. Last summer I interned with Kiva (www.kiva.org--they're awesome!) and traveled through East Africa working with different Microfinance Institutions that provide small loans to people who are too poor to receive an ordinary bank loan. While I was in Kampala, Uganda, I met a community in what's called the Acholi Quarters, which is essentially a slum/Internally Displaced Persons (IDP) camp. The Acholi people have been displaced from their homes in northern Uganda because of 20 years of violence involving a rebel group called the Lord's Resistance Army (LRA) and at times the Ugandan government's army, the UPDF.

Members of the community told me that they didn't have access to loans, but that they desperately needed capital to be able to start their own businesses and have some income. Most of them work in the quarry beside the quarters, making about 50 cents a day. I have grant money through the Lang Opportunity Scholarship at Swarthmore to initiate a social justice project. So I decided to return to the Acholi Quarter this summer and start the loan program they were requesting.

I'm working with what is in the process of becoming an officially registered Community Based Organization, called Project Have Hope (www.projecthavehope.org.) Karen Sparacio, a photographer from Massachusetts, started the organization along with members of the community, and it now has 100 members. Karen sells the paper bead jewelry that they make in the Acholi Quarter (that I was also selling to raise money for the loan program) and sends the funds back to Project Have Hope, where they provide many services, including vocational training for the members and school fees payments for their children. I will be offering loans to members of Project Have Hope, as well as other residents of the Acholi Quarter. Project Have Hope is sharing their building and some of their organizational infrastructure with me, and they will continue the loan program after I return to the U.S. in August.

There is also a research component to what I'm doing. I'm going to give some loans under group liability, such that a group of 5 women agrees to be jointly liable for each group member's loan. I will give other loans under individual liability, such that the borrower is only responsible for repaying her own loan. I am going to compare repayment rates and other outcomes between the two types, and this will be the basis for my Public Policy thesis. It is an important question within the microfinance field right now whether group liability, which is one of the hallmarks of microfinance, actually improves repayment rates. I am also interested in the question of how the group liability structure enhances, changes, or worsens relationships and community.

So tomorrow I'm going to attend Project Have Hope's weekly meeting and explain the loan terms. I'm hoping I can start collecting applications next week! I'm posting the only picture I've taken so far--it's Project Have Hope's building, which is almost finished being constructed. Ok, actually I'm not...it's not letting me. Sorry! I'll try harder when I have a more exciting picture.