Micro-Credit Day

Hello, Friends!

Hope everyone is doing well. I'm tired from staying up late last night to watch the Manchester United vs. Barcelona game with the ex-pat (motley) crew last night. David, my co-worker, told me to root for Barcelona, and they won two-nill. Coincidence? My host dad is a Man U fan though, as well as a lot of other Kakamegans, so he was disappointed with a capital D this morning. Hah! It's funny how much Kenyans follow UK footie. It was like the Superbowl for them.

It's unfortunate that I'm exhausted because Steve, the IGTS (Income Generation Training and Support) Coordinator and I have a full agenda today. We're going to visit existing loan clients in to see what they're up to (and hopefully collect some payments), do a needs assessment for a new women's group that wants to apply for a loan, and lastly, Steve is going to teach his weekly small business management class to about 15 'community learners'. After they finish the course, they'll have the opportunity to write a business plan and apply for a loan. Since funding is so limited this year, not many of them will get one.

Our loans are a little bit strange though—they're more grants than loans. Here's how it works for individual clients. We have four groups too, which I'll write about another time:

1. Applicants attend a once-a-week small business management class at one of our four community learning centres (CLCs) for 10 weeks. We use the classrooms after the regular students have gone home for the day. Steve covers topics like risk & reward, competition, bookkeeping and customer care.
2. At the end of the course, interested applicants fill out a business plan and loan request form. If the student doesn't speak English or can't write (yikes!), Steve translates and fills it out for them in English (All official business in Kenya is conducted in English).
3. An ACCES panel reviews the applications and short-lists the best ones. I think I'm going to be leaving Kenya right before this happens. Boo!! I’d really love to be part of it…
4. Steve visits the short-listed applicants' proposed business sites to check them out. For example, if someone wants to set up a kiosk to sell used shoes, he'll check out the site to see how much foot traffic it gets, if the people around seem like they have money to buy shoes, if there's secure storage, etc.
5. With the additional info from Steve's site visits, the panel decides whom to give the loan-grants to.
6. The recipient gets the money, and sets up their business. They have a one month grace period before they start paying it back.
7. The first repayment goes to ACCES to cover admin costs and the nine subsequent payments are made to KES, Kakamega Entrepreneurs Society. KES is a savings and credit co-op (SACCO) which we partner with. We are not licensed to make actual loans, so basically the client is putting money into a savings account (as far as I understand things.)
8. Steve visits each client every few months to see how they're doing: if they're making a profit, having problems and maybe reconcile their deposit receipts with the amount KES has down as them having deposited. KES keeps track of account balances on an Excel spreadsheet, so I’m sure mistakes are made.
9. In theory, the client "pays back" the rest of the balance over nine more months.
10. Once the client deposits 10,000 shillings (about $120) in their KES account, he or she gets to keep the money, and, in theory, use it to expand their business.

So I guess the point of giving our entrepreneurs "loans," then having them pay them back, then turning the money over to them at the end, is to (1) get them in the habit of saving/paying off a loan and (2) to establish a relationship with a SACCO to be able to take out real, bigger loans in the future.

It seemed pretty strange to me at first, because when you think about it, we’re basically giving out money. However, in light of the reduced funding at ACCES, as well as the dismal individual repayment rate of our clients, I think the IGTS program is headed toward providing loans vs. loan-grants for groups (since they do better repaying), and agricultural support for individuals. We’d subsidize individuals buying goats, chickens, banana plants, corn seeds and the like.

Switching from grants to loans will help a lot in terms of general program sustainability too. But it will mean we'll have to be a lot stricter on payment collection. (We're anything but strict right now.) And "real" loans will mean we'll have to introduce all sorts of complicated things like guarantors, collateral and default collections. Not fun. Or maybe we'll just do the small business training and support part and let an actual MFI handle the loan part.

Hugs,
Katy

P.S. Will has been home for a week now and is doing very well. Though his mom just left today to go back to NYC. ;-( Though it was so wonderful of her to stay as long as she did to provide moral support and home cooking. Anyway, drop by to say hello to Will if you're in the Los Feliz area.

P.P.S. I guess I should tell you how the teachers are doing on their reduced salaries — they're hanging in there. No one has quit yet. Many of them are taking loans from the teacher welfare group they're all members of to make ends meet for now. If you're the praying type, pray that our CIDA grant gets renewed!