Bloomberg Businessweek - USA (2020-12-07)

 FINANCE Bloomberg Businessweek December 7, 2020

27

○ Theworld’spoorestborrowersare

strugglingtokeepupwiththeloansthat

fundtheirlivelihoods

tendtobefor-profitfirms,whichoftenborrowfrom

biggerinstitutionstomakeloans.“Covid-19has

reallycreateda probleminmanycountries,because

obviouslypeoplecan’taffordtorepaytheirloans,”

Batemansays.“Thatmeansthemicrofinanceinsti-

tutionscan’taffordtorepaythebanks.”

Somegovernmentshavetriedtointervene.India

puta moratoriumoncollectionsforsixmonths

throughtheendofAugust.InNigeria,where4 mil-

lionpeopleoweonaverage$110,thecentralbank

gavemicrolendersapprovaltoextendrepaymentor

suspendinterestorprincipalpayments.Butgetting

customerstorespondandagreetothenewterms

isn’teasy.“Wedealwithverylow-incomeearners,

thoseatthebottomofthepyramid.Theirbusinesses

areveryfragile,”saysShikirCaleb,executivesecre-

taryoftheNationalAssociationofMicrofinance

Banks.“Ifwesenda messagetothemtocomeand

discuss,theythinkwe’reinvitingthemtocomeand

paytheloans,sotheydon’tcome.”

InGhana,whereabout22%ofpeoplecarrysmall

loans,tailors’businesshassloweddownbecause

ofrestrictionsonpublicgatherings,andtaxidriv-

ersaren’tearningcommissions.“We’retalking

abouta classofpeoplewhoonlymakeincomeby

goingoutona day-to-daybasis,”saysTweneboah

KoduaBoakye,executivesecretaryoftheGhana

AssociationofSavingsandLoansCos.Someborrow-

erswholendersbelievedweresafearedefaulting.

Thatdoesn’tbodewellforinclusionofthepoor

PeterManuwasa microlendingsuccessstory.For
a dozenyears,byborrowinga fewhundreddollars
ata time,he’dbeenabletobuychildren’sshoesto
sellinthecentralbusterminalinAccra,Ghana’s
capital.Withtheproceeds,hepaidhisdebtsand
hadenoughleftovertoprovideforhistwochil-
dren.ThenAccra’sschoolsclosedinresponseto
thecoronaviruspandemic.Foottrafficinthebus
terminaldriedup,andsodidManu’ssales.He’s
switchedtohandbags,butthingsarestilldifficult.
“Ican’teventakecareofmykids,”hesays.Norcan
hemakepaymentsonhis2,000cedis($343)loan.
Themicrolendingmovement,whichenvisions
smallloansasa levertoraisemillionsofpeopleout
ofpoverty,hasdrawnbroadsupportfromgovern-
mentsandsizableinvestmentsfromforeignfinan-
cialinstitutions.Thesmallloanscanhelpthepoor
buywhattheyneedtomakea living,andtheycome
fromanarrayoflendersincludingspecializedbanks,
localcreditunions,andpartnershipsbetweenbanks
andnongovernmentalorganizations.Inthe15 years
sinceMuhammadYunuswontheNobelPeacePrize
forhisworkontheconcept,thenumberofmicro-
loanborrowershasballoonedto 140 million,with
$124 billioninloansoutstanding.
Buttheeconomicfalloutfromthepandemichas
decimatedsmallborrowers’abilitytopay.Thecur-
rentcrisiscompoundsreportsofabuseandaggres-
sivecollectiontacticsinsomecountries,including
Cambodia,India,andNigeria.“Whena microloan
clientmissesa payment,theyarealmostalways
contactedbya creditofficerwithina coupleof
days,” says Naly Pilorge, a human-rights advocate
in Cambodia, where 2 million borrowers owe micro-
lenders about $4,000 on average. “The pressure var-
ies, ranging from reminders to repay, to abusive or
threatening language, to direct threats of involving
local authorities or police, to threats of selling the cli-
ent’s land without their consent,” Pilorge says. Kea
Borann, chairman of the Cambodia Microfinance
Association, says such accusations are “obviously
overstated” though there are “isolated cases.”
Part of the problem is that the promise of micro-
credit relied on local, purpose-driven lenders who’d
be forgiving of delinquent borrowers, says Milford
Bateman, a visiting professor of economics at Juraj
Dobrila University of Pula, in Croatia. Today, lenders

○ Yunus

Covid

Microcredit

 A salesman at Accra’s

Tema bus station