Vojtěch Jochim

Microfinance, whose modern origins date to the 1970s, has allowed for lending money to the poor who had previously been excluded from the lending market. This is due to the application of innovative features such as the group liability or gradual timing of lending, which help to overcome market inefficiencies. Whilst facing some criticism for failing to bring significant changes at a macro level and sometimes pushing individuals into debt distress, it has also resulted in many individual success stories.  

Earlier this year, I had an opportunity to conduct monitoring and evaluation (M&E) for a small microfinance provider called Maendeleo (meaning ‘development’ in Swahili), specialising in lending money to farmers, with about a hundred clients in Southeast Tanzania. 

Mitigating rural poverty

After arriving in Mswiswi, a small but bustling town, one can only continue by motorbike. The road crosses numerous tiny rice fields, filling a seemingly infinite green plain. About five miles from each other, there are little villages, inhabited by several hundred small scale farmers, living mostly in modest, one-roomed dwellings.

Life is not easy there. During the agricultural season, people spend up to twelve hours a day working in fields, sometimes living off only a scoop of rice per day. There is no time for leisure. Without capital, education and time to invest, they seem to be firmly locked in the trap of rural poverty.

These are the clients of Maendeleo. Forming groups of approximately eight, they join its local partner organisation Wakulima (‘farmers’), which runs its day-to-day operations. Each season, these groups receive collective loans, bearing a shared liability. The money allows them to borrow machines, rent more fields or buy better quality seeds, which helps them to increase their returns. 

They also get education from local tutors on agriculture and financial literacy. For instance, it has been shown that simply teaching people how to plant rice seeds in lines, and not randomly, has an immediate effect on increasing farming output. Also, forming groups, rather than operating individually, facilitates mutually beneficial cooperation. They can sell their rice together to a wholesaler for a higher price, or set up various business activities during the dry season.

Careful listening is essential

Despite having regular reports from Wakulima representatives, it is necessary to personally check that everything works properly at least once a year. The most important part of the monitoring was visiting the participants to check how the project impacted their lives.

In such a rural setting, just arranging these meetings and travelling to attend them is very time-consuming. During the rainy season, even traversing a few miles can take hours. I constantly found myself having to push my motorbike out of muddy water. Also, the area still lacks an electrical grid connection. When I need to see the clients urgently, often the only way to contact them is to catch them at home or to search for them in the fields, which may easily take the whole day. 

I then took a semi-structured interview, which involved the following points: 

Firstly, it is essential to ensure that the clients didn’t have to undertake a major sacrifice, such as selling their house or giving up essential food, to repay the loan. Equally as important is to verify that there are no other problems that may be left unobserved by simply looking at the repayment rate. For example, it is typical that women might have profits seized by their husbands.

Secondly, it is imperative to check the relationships within the groups, including whether all members repay equally.  Despite the fact that farmers automatically tend to look for responsible colleagues to form a group with, we once encountered a treasurer of a group attempting to flee with all the funds. Clients are usually more than willing to share these stories but must be given the voice.

Thirdly, even if the system works as expected, it still does not necessarily imply that the project improves the lives of the participants. Not even a reliable record of the clients’ rising living standards is sufficient to prove causality – as Tanzania has experienced a decade of economic boom, living standards of the clients should be rising more sharply than of the other local farmers. 

Furthermore, in areas with a relatively high share of the informal economy, people’s income is not a reliable measure, for it represents merely a part of the total income, varies throughout the year, and is almost impossible to record. Arguably the most effective method is using a weighted index measuring the equipment of the households, such as whether they have thatch or sheet metal roofing, or own any machinery. This requires just a simple observation. 

Finally, it is important to explain how this progress is linked to the project. This includes examining how they invested the money, the ways in which it benefitted them, what they were able to buy as a result of it, etc. Understanding this enables us to analyse the economic behaviour of the clients, and thus improve the project’s mechanisms.

Power of relationships

Building relationships with the community is also crucial. For me, this involved living in the villages we operate: not just learning to speak Swahili, but also visiting local politicians or tribal seniors and organising events for the community. This is the case due to several reasons.

Firstly, to secure our operations, locals must not perceive us as intruders – which, in highly homogeneous societies, can indeed happen easily. A few years ago, hostility towards foreigners ended up in the arbitrary jailing of a volunteer worker from another NGO.

On the other hand, a good reputation can attract new members and strengthen an organisation’s position. For example, a local chief I met remembered that we donated a well to the village. With his support, I could visit some farmers after sunset, which would have otherwise been unthinkable due to a high threat of mugging.

Moreover, in an environment with insufficiently developed formal structures, getting contacts may be crucial for obtaining everything from a motorbike to the permission of the tribal head. For instance, after organising a gaming afternoon for the local children, suspicious looks were replaced by hearty greetings and finding clients or reliable motorbike drivers suddenly became easier. Having plenty of hands around makes the work an entirely different experience.

Finally, understanding the local environment improves an ability to properly assess and resolve any unexpected troubles. Despite coming to a meeting perfectly prepared, you may not even be let in, because some people may be too bashful to talk to a stranger or be prevented from doing so by tribal customs. 

Gradually, I found out what to (not) do, which improved my working performance. For people in charge of the project, this also helps to set its conditions with regard to the specific local factors.

Through intervention to independence

Above the groups lies a superior body with a treasurer, secretary, and the chairwoman, recruited from the most reliable and competent farmers. This body is inspected by four independent supervisors sending us regular reports.

This body has been bearing an increasing number of responsibilities, which is part of a long-term strategy to make Wakulima fully independent. Initially, its representatives were fulfilling only the tasks that could not be effectively done from abroad, such as choosing tutors for educational seminars or distributing loans. 

Gradually, they have become real managers, setting the size of loans, eligibility conditions, or timing of the distribution. Occasionally, they even come up with new ideas to improve the project’s system. For example, as relations and common interests between the growing numbers of groups started to weaken, they proposed creating chambers, partly autonomous clusters of groups, to achieve more flexibility. 

But they are yet to learn practices of accounting, such as creating financial reports. Thus, scrutiny over proper documentation processes, such as whether all the necessary information is collected and whether these records are consistent with my observations, is important. Also, new practices, including, for example, advanced techniques of working in MS Excel, can be taught to gradually transfer the system into clients’ hands. Finally, any other urgent or general problems can be flexibly discussed, which I include in my report to overseas for further discussion.

Fieldwork requires adaptability 

These three responsibilities together keep the project working. Visiting clients and checking the Wakulima’s body provides us with a better idea of how our system works on the ground while building relationships maintains our status and facilitates further growth of the project. 

Some of the local conditions may today seem surprising. But despite the rapid electrification and infrastructure building that have been inevitably changing the face of these areas, this is the way that the most remote parts of the LDCs still live, which is necessary to take into account while planning any operations there. A lot of time is consumed by solving basic logistical problems.

This requires adaptability and a high degree of independence. Moreover, since microfinance does not deliver an immediate impact as opposed to some other forms of development assistance, and one can find themselves spending days solving seemingly endless chains of troubles, a positive spirit is essential.

Vojtěch Jochim holds a bachelor’s degree in Development Studies from Palacky University Olomouc, Czechia, where he specialised in development economics, writing his dissertation on microfinance. His current research focuses on conflict and development. He works for a microfinance NGO and has experience as a conflict journalist.

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