Love And Rural Finance

Greetings. Happy Valentine's Day.

A few weeks ago I travelled to a remote village of this country, within the central region. I had a discussion with a lady who works at a microfinance institution in this town/village. I gathered some insider information on the economic system in the rural areas of our country, and why rural women need a “Men’s Conference” of their own. My source was a credit administrator at the institution.[1]

In Uganda financial institutions are classified in four tiers; with the top 3 tiers under the supervision of the Bank of Uganda. The tier IV institutions are made up of Savings and Credit Societies, Village Loans and Saving Associations, Money Lenders, plus Microfinance Institutions that don’t keep deposits; they can operate as they please given the limited regulation covering them and the high level of risk involved.

Typically, a rural setting will possess a tier IV institution. The role of the loans’ officers is to get clients that are in need of credit facilities. This particular institution focuses on lending to women. These women are arranged in groups, of about 6-10, trained for about a month on financial literacy and then they are given a lump sum of money with each taking a portion of about 350,000/=. Each individual member is responsible for their own portion of the loan.

What do they do with this money?

A portion of the women start up a business, mostly trading in food stuffs as they earn a profit from which they’ll spare a portion to repay their loan, which is usually made on a weekly basis. It all sounds legit, right. Enter the husbands. Olivia (at least that’s the name I remember), the credit administrator, pointed out to me that some clients have been driven out of their business premises by their husbands; the reasons range from how “the activity is embarrassing to the husband” to “women are supposed to sit at home taking care of the children”.  The irony being that this Museveni economy needs a two-income family to thrive, let alone survive.

There’s a section of the borrowers who spend their money on their husbands; she takes the loan, the husband uses it for some ventures that are supposed to be beneficial to the family. In some cases, this actually works out and the husband does bring the bread home, as well as contributing to repaying the loan. There are cases where the husband has used this loan money to marry a second wife! And the first wife has had to pay back the loan promptly! Bomboclat!

Furthermore, there are cases where the woman gets the loan for the husband because it will secure the marriage. The argument goes. In the initial stages, a woman can qualify for UGX 350,000/= as the maximum amount of money she can borrow. As she grows in confidence and frequency of borrowing, her limit grows to well over UGX 2,000,000/=. So, a husband with a woman capable of borrowing above UGX 2,000,000/= has to forego making his relationship official with a maiden who has just taken her first loan. The opportunity cost on the man is just too high!

Recovering the loan is not an easy process. In the initial stages of registering potential borrowers in a group, the microfinance has to record the details of the borrowers (name, date of birth, national ID number, contact details, etc.). It is a common phenomenon to find women who do not possess a mobile phone, reason being “omusajja yangana amasimu” (my husband does not permit me to possess a phone). So the husband’s number has to be noted down – only for those who are okay with their husbands knowing that they are taking a loan. For those that are not, the loan officer has to contact them through the chairperson of the group. Olivia admitted to me that of her 1,000 members borrowing from her branch, less than 300 have phone numbers! So, to recover their money, the loan officers are strained when contacting their clients.

For the aforementioned group that takes the money to the husbands, loan officers are forced to humbly go to the husbands and politely ask when the money will be repayed!

An overlooked solution

On our journey back, I inquired about the price of land in this town. And I was told one could get an acre at UGX 2,000,000. So, I and Olivia – my sensei on this journey – agreed that if a woman borrowed UGX 3,000,000, she could buy an acre of land, split it into a portion on which to build a residence and the remainder to be dedicated to agriculture. She can be self-sufficient, earn her own income from the agricultural side of the land to pay back her loan.

In the long run she could earn herself a ticket to the “Men’s Conference”; a fictional event designed to help her avoid the financial expenses her spouse expects on Valentine’s Day, forgetting she’s been taking care of him throughout the rest of the year.

Sadly, there are no happy endings here. Olivia admitted they’ve tried this advice before, and the women have agreed to take it on; they’ve abandoned it the moment the money has been disbursed.

Ceteris Paribus

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[1] The name of my source and the microfinance institution shall remain anonymous; I do not have her permission to share this story.