This is one of the most common questions I get, when I explain the concept of Kiva to people. And it’s an understandable response: isn’t lending money to individual borrowers, living in poverty thousands of miles away, enormously risky? How do you ever get the money back?
If you look at the Kiva website, you will find what I think is a remarkable statistic: 98.72% of borrowers repay the money they have been lent! At Camfed, the organisation I’m working with in Zimbabwe, the default rate is 0.12%. Banks would kill for credit performance like this.
Achieving it isn’t easy, however. If you look in a bit more detail at Camfed, you’ll see that although few borrowers have failed to repay eventually, a large proportion are failing to make repayments on time. Exploring this was one of the key projects I was given, as part of my fellowship role.
Since Camfed Zimbabwe are about to start issuing some more loans, here is a summary of what I found:
- The primary difficulty for many borrowers in Zim, is climate-related. Harare, the country’s lush, green capital, with its pleasant, year-round temperatures, belies the challenges faced elsewhere. This past year brought severe drought in northern districts, while others faced disastrous flooding. These have destroyed crops and introduced disease, plus also impacted spending power in the wider community. With bridges and roads damaged, the purchase of supplies has been hampered, costs have rocketed and perishable goods have rotted before they reached market.
- Adding to an already difficult environment, is the state of the Zimbabwean economy as a whole. The hyper-inflation of a few years back (it reached 230m% at one stage) has been brought under control, but market conditions remain difficult. Agricultural productivity has fallen, mining revenues have been impacted by falling commodity prices and the country is finding inward investment difficult to attract. With rising unemployment and reduced salaries for key public sector workers such as teachers, small businesses launched with Kiva loans find their core customer bases dropping away.
- At an individual level, many young Zimbabwean borrowers face their own, personal challenges. Often they have significant family responsibilities; many are orphaned and are the sole breadwinners for their family. (At Camfed, around 85% of beneficiaries are orphans, with HIV /AIDS having almost wiped out a generation.) Any family emergency, such as medical bills, puts an unexpected strain on finances.
- And for some, just out of education, it is a lack of business skills that proves to be the major challenge: it will take time properly to learn the ropes of cashflow management, profit and loss accounting or dealing with bad debts. Life as a business owner is new to many of the young borrowers, and it is only through experience that some of these skills will be fully embedded.
All of the above have resulted in Camfed now reporting high ‘delinquency’ rates. But personally, I am convinced even these struggling Camfed borrowers will ultimately repay their loans in full:
- It’s evident to me these young women desperately want to repay the trust that’s been invested in them. They are enormously appreciative of the opportunity they have been given: evidenced, not least, by the unforgettable welcomes I got each time I visited their rural communities.
- Moreover, these women are the epitome of resilience, tenacity and courage. Time after time, I met borrowers who faced enormous challenges but have managed to fight their way through, despite the odds (I’ve told some of their stories on here, and on the Kiva Fellows Blog).
- Camfed as an organisation is providing fantastic support. For example, working closely with local government they are providing training in business management and innovation.
- Finally, and perhaps most significantly, Camfed’s Kiva borrowers operate as a collective ‘sisterhood’. They work together in a nationwide network (called CAMA), which was founded on principles of mutual support and sharing. ‘When you fall, I am there for you. When I fall, you help me up’, was a message I heard time after time, including in the wonderful choruses the women regularly break into during meetings. These women will not let their sisters fail.
I was keen to provide this (very lengthy) background because, as I said, Camfed Zimbabwe will shortly start issuing new loans. So far, over 1,700 young Zimbabwean women have been given the opportunity to transform not only their own lives, but those also of their families and local communities. Having had the privilege to spend time with these women first hand, I can’t describe how passionate I am for Kiva lenders to make it many thousands more.