Hello everyone –
I wanted to share some thoughts about microfinance in the Dominican which haven’t been apparent to me until recently through observation and conversations with other interns. I see two major issues which are preventing microfinance measures from being as effective as they otherwise would be. First of all, I see a distinct lack of specific, well-thought out goal setting by associates. Quite simply: many cannot tell me why they got a loan, beyond saying “I want to grow my business”. The answer to the follow-up question “And why do you want to grow your business?” draws empty stares more often than not. Secondly, I see an oversaturation of certain businesses. Many borrowers settle for selling new and used clothing, making a colmado (small corner store which has various small food items, drinks and other goods). Let me develop these thoughts a little bit more.
First of all, I am extremely troubled by the lack of goal setting that many associates demonstrate. All of us working and who read about microfinance hear about its ability to assault poverty by allowing people to work their way into a healthier income, better housing situation, more food and education for their children. I have my qualms with some of these claims, especially with how great the affect is, but we’ll leave that to the side for now for the sake of argument. It just worries me that these borrowers don’t have a clear idea of why they are taking out a loan. I have to give very leading questions, referring to their children or capital improvements to their homes, in order to get any sort of long-term picture. Even then, the answer is somewhat forced and it seems the women and men are asking in their heads “why is this question being asked to me? I don’t understand why this is so important.”
Given, some of this may be due to a language barrier, and I may perhaps be asking the questions incorrectly, but I don’t feel that’s the case. I think its more likely that people either a) haven’t thought about the question or (more likely) b) have future goals, they just haven’t fully articulated them. I see this as a problem. There is a need for people to have a well-articulated idea of how exactly they want to apply this loan to their life and family.
Why is this important? I am still attempting to articulate this fully, but I feel there is an inherent value in having a specific goal in mind when undertaking a project as serious as starting a business. A goal will allow the women and men here to seek encouragement when looking at their business. It gives them a concrete example of how a growing business is helping their family. They can point to the extra food on the table, their child taking university classes, or their brand new concrete floor and use this as motivation to continue seeking to grow their business. This is my only concrete idea to answer this question – in reality, I’m struggling to articulate why I find this so important. I may have more ideas about this in the future. For now, I wanted to at least put this thought out there, and let you know that more will be settling with time.
Feel free to comment something about this! I’d love to hear any of your thoughts. I’d love to know, also, if you think this isn’t something important. Thanks!
Secondly, I want to address the oversaturation of business choices of the associates here in the Dominican. I have a much more concrete idea of this issue, and this one is quite concerning. Microfinance allows the borrowers to choose their own business – and much of the theory is built upon the idea that borrowers inherently know their community, and know what sorts of businesses would be most successful. After all, nearly all have lived in one area their entire life, they know their neighbors, and therefore know what items are in demand, what sells well, etc.
Unfortunately, in the Dominican we aren’t seeing this put unto practice with any real regularity. Many women settle for just two types of businesses: colmados and new and used clothing. This has caused what seems to be an oversaturation of these businesses. In a single bank of 20 women living in a small neighborhood already full of such stores, quite easily 10 or more of them will start such a business. This simply cannot be good for sales.
Again, I may be totally off-base and ignorant in this observation. I allow for the thought that these women truly do know what they are doing, and that another 10 colmados in a neighborhood is one of the most profitable businesses they can get into. However, I am certainly not convinced of this. I would be surprised if someone were to show me that the colmados formed are equally or more profitable than rarer businesses.
The thought myself and some other interns have is that the women, instead of choosing the most profitable business for their family, are going the route of least resistance. It is far more comfortable to start up a business such as a colmado or clothes sales when those are stores they see everywhere, and they see their friends in that market. They might know less about other businesses, and therefore instead of looking into that other type, follow their friends.
Regardless of the reasons for starting colmados or clothing businesses, it seems fairly clear that there is an oversaturation of these businesses. I would love to someday see someone go and collect data regarding these businesses and their profitability. If it turns out these businesses are not receiving the type of profit that other businesses are, I’d argue that Esperanza should considering helping associates think of alternative businesses. I have met some women who recognized this oversaturation and chose less-common businesses, such as working as town veterinarians and selling cleaning supplies, and are currently very successful.
I am not arguing that Esperanza somehow force people to choose other businesses; I don’t agree with that at all. Instead, I think it would be valuable for the associates to see that their family may perhaps benefit more from a different type of business, and then choose between all the options. In some cases, surely a colmado is the best choice; and in some it may not be. I see no harm and potentially a lot of good (and profits!) if the associates begin to choose from a greater selection of businesses.
That’s really all I have to write for now. Sorry if it seems somewhat scattered – I have a lot of thoughts bouncing in my head and I just wanted to get them on paper to help me process them.
Please do let me know if you have any thoughts about any of this – I’d love to hear from any of you.