By Karen Buxton, KF10, Liberia
Liberians have many expressions that make me smile. Rather than saying, “How are you?” they ask “How da body?” and respond “Body fine-o!” Rather than “Don’t use your loan for personal expenses – use it for your business,” they encapsulate the notion into: “Don’t eat the money!”
Don’t eat the money is an important concept that is essential for microfinance to work effectively. Over the past three months, I have observed loan officers at the Local Enterprise Assistance Program (LEAP) consistently emphasize to borrowers the importance of using the loan for its intended purpose. At a client training last week, LEAP Loan Officer Momoh Johnson asked a group of clients, “Is the money to be eaten?!” “Nooooo!” was the boisterous reply of the group. After the training, I asked Momoh how common it is for LEAP borrowers to eat the money. He said that it’s not as common for clients who are on their first loan cycle because they want to impress LEAP. But once clients have gone through a couple of loan cycles they are more tempted to eat the money, which is one of the reasons clients are required to come back to LEAP for a 2-hour training and refresher course each time they take out a new loan.
Momoh said it’s important to appreciate how tempting it is for clients to eat the money. Clients have so many competing demands – children, spouse, other family members, children’s school fees and medical issues are just some of those demands. Momoh tells the clients at training, “The money should be used for the business, not for clothes, not for school fees, not for house rent, and not to put food in your stomach. Use your profit for these needs, not the loan.”
Because eating the money can be so tempting, Momoh identified five main strategies that LEAP utilizes to address this issue:
- Educate clients on proper and improper loan utilization
- Train clients about smart business skills, such as how to price products and how to interact well with customers
- Conduct effective monitoring – visiting clients one time per week unannounced, if possible
- Initiate a warning if a client is found to be eating the money. Tell them that if they don’t abide by the rules and regulations governing the loan and they keep eating the money, they are at risk of not receiving another LEAP loan.
- Terminate the relationship as a final step, thereby barring the client from receiving additional LEAP loans. Momoh says, “You’re putting the institution at risk if the client is eating eating eating.”
Momoh believes that LEAP is minimizing the number of clients who eat the money, and I’m happy to see that LEAP is taking a proactive stance to address this tempting trend.
As I wrap up the last days of my Kiva Fellowship, I have reflected on coming to terms with the fact that microfinance has many opportunities as well as many pitfalls, and it is certainly neither a fool-proof nor the sole method for alleviating poverty. As Kiva Fellows we have the opportunity to get to know the nitty gritty sides of microfinance. Even though we’re told that microfinance is not going to be rosy and beautiful prior to arriving in the field, this reality didn’t fully hit me until I was immersed in it first-hand. Microfinance is dirty. Microfinance is complicated. Microfinance is not perfect. And at the same time, microfinance is providing people in Liberia with opportunities to build their lives by obtaining micro-loans that they would not have been able to obtain or qualify for from Liberia’s formal banking sector. The more that microfinance institutions thoroughly train their clients on key principles such as don’t eat the money, the more success microfinance will have at alleviating poverty throughout the world.
Karen Buxton is just finishing her Kiva Fellowship with the Local Enterprise Assistance Program (LEAP) and will miss her LEAP colleagues dearly!
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