A Community gathering to discuss loan agreements, interest rates, and group lending
Nsa Nyuse Okubalaba BaSsebo Neba Nyabo! ….. Welcome Everyone and thank you for coming!
I practiced my Luganda phrase as we drove down the muddy road to the Uganda Rural Community Support Foundation community center. I was with Peter Luswata, the founder and manager, in Luninya, Uganda in the Masaka district. Looking up from my notes, I noticed there were over 25 people sitting in the grass under banana trees waiting for us. Today, together Peter and I held an “Introduction to Microfinance” training where we invited anyone interested in participating in a micro lending program to come learn more. We started off with a quick introduction about the “Hear” research we are doing, emphasizing that along with making sure they understand the basics of microfinance, “our main goal is to HEAR (itallics) from all of you – hear your stories, hear your ideas, and hear your concerns.”
All photos on this post courtesy of the lovely Kristen Taylor – see more of her work here!
Discussions of interest rates, repayment schedules, grace periods, and loan agreements were some of the headlines in the next section. While highlighting that this program does have the main intention of helping them grow their businesses, it was important to stress the reason for an interest rate.
Collateral was another one of the more intense topics. Many of these farmers have tried to get loans before only to be told that there land agreements or car titles were not sufficient collateral. Or that they were too old. There was head nodding and several apparent “ah ha” moments as we elaborated on the idea of group lending and why solidarity is so important since you would be each other’s collateral!
As questions began, we had to clarify the difference between interest and insurance, the intention of a grace period, and why we would not require anyone to buy shares. We also had questions about age and death, lending to schools, and interest rate numbers. Some of these required the always hard to say, “I don’t know right now I’ll have to get back to you.” All while ensuring them that even without a solution right now, hearing these concerns was so crucial as we structure the prototype.
What was most exciting were the ideas that were recommended. They mostly revolved around the group structure, since this seems to be what the organization is leaning toward. The second person to talk suggested that each group be given their own group account to put money in jointly. His reasoning was that “there are some seasons when we really have big harvests and make a lot more money so maybe that time they can put more money in the group account.” Then, if there was an immediate need or for a significant purchase, he could go to the group and tell them what he needed it for and withdraw the money he had saved if they approved. A group-monitored emergency savings fund! I was very impressed.
Another unique idea was to have each person’s loan application be looked over by the group members before being sent to the lending organization, so that they can approve the request first. This was one of the last people to talk – a moment where it seemed most understood how crucial solidarity and community are for success within the group lending structure.
The last part of the afternoon included handing out notecards for everyone to write any further or private ideas, questions, or concerns. I’m hoping these will prove to be just as useful and eye-opening as the session, once translated. Finally, groups that had already been formed got together to sign-up for group interviews later this week. I hope they are ready for the tough questions coming, including “what if I gave you a loan for 500,000 shillings (about $200) tomorrow, how would you spend it and when would you be able to start paying back?”