Embassy, March 29th, 2006
The Bank of Last Resort
It isn't easy making a bank for poor people that's why the big banks don't do it but Jamii Bora Trust, in Kenya, is helping poor people as it discovers an entirely new kind of entrepreneur.
By Sarah McGregor, NAIROBI, KENYA
The waiting area of Jamii Bora Trust is a tent where white plastic chairs seat a motley cue of reformed street beggars, thugs, petty criminals, drug pushers and addicts, alongside refugees and the terminally ill.
Inside these financial headquarters, bank manager Ingrid Munro explains with a straight face that the world's poorest people are her prime target market. "If people treat you like garbage in the street, then you'll feel that way," observes Ms. Munro. "I think we're managing to restore dignity and self-respect."
Microfinance institutions like Jamii Bora offer tiny low- or no-collateral loans to the impoverished. The idea is that a small amount of seed funding can fill a capital shortage for would-be entrepreneurs in the developing world.
Traditional banks, on the whole, cater to well-heeled clients. The basic presumption is that people with hardly any income and no assets cannot repay debt. Erratic regulations and endless streams of red tape in many developing nations are also barriers for the poor to access financial services.
Ms. Munro says the creditworthiness of her members is first-rate. "Normal banks focus on collateral," she says. "We focus on the person and their value."
Living testaments to the reach and achievement of micro-lending sit outside Ms. Munro's ground-level office window.
Take Claris Adhiambo. When a fifth pregnancy produced another son but still no daughter, her enraged husband tossed Claris to the curb where she languished.
By good fortune, Claris met Ingrid who, for her retirement project, was assembling 50 poor ladies in a compassionate savings and loan scheme. Ingrid laid down the rules. She required each woman to set aside 80 cents weekly. Ingrid stored their coins in a bag that bulged to $130 in one month. The ladies decided who among them would get a loan and for how much money.
"I thought it would be like a club," says Ingrid, who at the time six years ago had recently retired from a career as a United Nations housing expert.
Claris saved $16 and borrowed twice as much to open a food stall selling fried fish. She had become a restaurant owner. Subsequent loans gave Claris the capital to buy land and erect a modest rooming house. She then became a landlord.
In total, Claris has re-paid 11 loans, and is servicing another valued at $3,200. "I don't consider myself poor anymore," she says. Claris accuses the mainstream financial sector of "discrimination."
Or consider Beatrice Ngendo Jomo. She once seriously contemplated serving rat poison to her 12 orphan grandchildren. Their parents -- including all eight of
Beatrice's children -- died over several years from what Beatrice had first blamed on witchcraft, but has since accepted as AIDS. "I was continuously going through shock and disbelief. I'd look at myself with self-pity and couldn't stop crying," she says. Her first loan of $33 led to a half dozen others, which have financed nine new businesses, including a hairdressing salon and small shop in one of world's most desperate slums, Mathare, where she lives. Claris says she counts her blessings that the future looks bright for her grandchildren.
Small Lending, Big Business
Since its launch in 2000, Jamii Bora (which means 'Better Families for a Better Life', or 'Good Family' in Kiswahili), has expanded to 61 branches in almost half of the country's districts. Membership, on an upward curve, hit 112,000 in 2005. Total assets of the Nairobi-based microcredti outfit, including fixed investments in water projects, a children's home, a housing project and stock, is an impressive $10.5 million.
A philanthropic investor, Unitus, a non-profit, donated a $1.2 million line of credit and $232,000 for staff training and the establishment of a computer system that will digitize bookkeeping, which has been in some cases paper-based and shoddy. Jamii Bora personnel -- from the branch managers to the tellers -- is almost entirely comprised of borrowers.
The average micro business loan is a little more than $100. Borrowers have almost one year (50 weeks) to repay their debt at a simple interest rate of 0.5 per cent per week along with a minimum weekly principal payment of two per cent. For instance, on a $100 loan the principal and interest payment for the first week is $2.50, diminishing every successive week as the principal is reduced.
For poor entrepreneurs no amount of upfront capital is too negligible. Fruit and vegetable vendors expand stock, shopkeepers buy refrigerators to cool drinks, or small-screen cinema owners equip theatres with generators so that frequent power failures no longer cancel the show.
New members must set aside at least $4.80 in a bank account prior to requesting a loan, and are eligible to borrow up to twice the amount of their savings. The only transaction cost is a one-time $1.60 start-up fee.
Default and repayment rates are hard to verify, but Ingrid says the Trust factors in a three per cent annual loan loss "just to be safe. But we've written off less than one per cent in six years."
In the past, defaulters had typically taken ill -- unable to work and scrambling to pay high hospital fees -- or died. It made business sense for the Trust to introduce health and life insurance.
Jamii Bora offers related services with its own business academy that charges rock bottom prices for courses in home economics, management, computers and literacy. In addition, Jamii Bora tackles the conditions of poverty with a bevy of counseling programs. Loans are also available for housing and school fees.
No one expected such a success. "The strength has always been that we started without planning to be a very big organization," says Ingrid in a soft voice, looking every bit a devout Christian with her fine white hair tied back, and her flowing ankle-length skirt. Members refer to Ingrid by the endearing name "Mama." Originally from Sweden, Ingrid's lived in Africa for 20 years and has an intimate Canadian connection.
Her husband, Bob Munro, was born in St. Catharines, Ontario, and was once the director general of the national Department of Housing. That may have been a factor in convincing then-Governor General Adrienne Clarkson to visit Jamii Bora members in the potentially dangerous and unsanitary slums of Nairobi. "She did it with grace and they embraced her," recalls Ingrid. "We instill in our members that the head of Canada came here because she is impressed by their talents. We didn't ask her for a handout." Melinda Gates, the spouse of wealthy Microsoft founder Bill Gates, visited Ingrid this year, opening up a whole world of possibilities through the couple's multi-billion namesake Foundation geared at reducing inequities in rich and poor countries.
Ingrid explains, again with a straight face, that her next initiative is to build a town. Rising urbanization has led to a housing crisis in Nairobi, with an explosion of slums and squatter settlements. But her plan is being met with fierce resistance.
The carvings of a dusty road and a few storage buildings dot the 293-acre parcel of land that Ingrid calls Kaputei Town, nearby Nairobi, Kenya's capital.
The government has suspended construction over complaints from self-proclaimed conservation groups that the site is an animal migratory route. Ingrid
launched an appeal at the National Environmental Tribunal, saying the stoppage is politically motivated. She says these groups and local politicians want to block the extremely poor from living in the area. A decision is pending.
Jamii Bora isn't solving all of life's problems. Some members use funds for unintended purposes. And the culture of living hand-to-mouth is hard to penetrate. "Many still think like beggars," says Ingrid. Overall, economic progress depends heavily on good government policies, state resources and donor funding.
But Ingrid says Jamii Bora is a catalyst. "Our whole philosophy is that people can make it themselves. It involves hard work and the opportunity to show your talent, but we all have it within us," she says.