I’m not gonna start off this entry by pretending to understand the business of loans in Africa from sources that I’m still not entirely sure of the origin of. There were a lot of acronyms that I feel I never got a definition of and I just kind of accepted it. I just now googled what an MFI is and it seems to be a MicroFinance Institution. Seems about right. I honestly processed so little of the information I read because I just do not understand the complexities that go into why people of low-income Asia would or wouldn’t take out a loan when they stay below the poverty line without the additional help. I know Duflo and Banerjee did their best to explain it to me but after 70 pages worth of information that I had what felt like only a little context beforehand, I wasn’t willing to go back and reread it. Please give us less information to research, or, at least, give us more specific page numbers so that we can find the necessary evidence without sinking two hours into skimming pages before discovering the data necessary to complete this blog post.
Duflo and Banerjee in chapters 8 and 9 spend a lot of time talking about things while not alluding to why they’re talking to them. That’s what it felt like anyway. I saw the terms “Microcredits” and “Microloans” a few times, but not enough to know that that’s what they were talking about, so I’m assuming they were because that’s what this post is supposed to be about and those were two of the chapters assigned. It seems the rate of return for many business is too risky for many small firm owners to confidently go into considering the loans that would need paid off and the work necessary to build their businesses. And after you put in the amount of work necessary to maintain your new and improved business, the amount of money you’re now making may not be worth the trouble of taking that loan out in the first place, regardless of the size.
That said, there’s plenty of examples of businesses working out successfully after that loan has been put to good use. There’s the lady that went all-in and bought a sewing machine versus some saris to resell, then taught a bunch of local girls how to use it, then they got their parents to buy them their own machines, then began a business tailoring clothes for everybody around. The issue is that not every business has the money to even invest in a larger loan that would put them above the much-coveted S-curve that leads to marginally higher profits.
On top of that, there’s a pretty high amount business owners that aren’t interested in even taking out a loan in the first place. My favorite example of which is the cattle farmer that has enough cows to provide for his wife and three children. He could buy more cattle with a small loan and turn over notably higher profits if he would, but he doesn’t have the land necessary to support the extra cattle. They wouldn’t have the necessary amount of acreage to graze. And he’s not particularly interested in buying more land for his venture in capital because he makes enough money as is to provide for his family. I just really like the way he looks at things.
Microcredit transactions in South Sudan seem to be a particularly huge disaster thanks to the amount of hope people had going into the founding of the country in 2011 and the civil war that broke in 2012, according to Chrystal Murphy’s Microcredit Meltdown. Six years after takeoff of the loans that went into the funding the country’s foundation, some 80,000 participants were left basically fucked before the microcredit industry in the world’s newest country before it was even fully constructed.
“Yet the over promising and under-delivering commercial microcredit was not isolated to South Sudan or even post-conflict settings. The Juba microcredit story is an instance of the broader global shift toward the commercial microcredit model. Initiated to get badly needed capital into the hands of poor people, instead the focus became sustaining a lending program.” states Murphy’s abstract on her website. So it seems there still seems to be a larger sense of capitalizing on those who need it versus the sense of charity and hope that their money finds its way back, which would certainly be a more helpful outlook in a situation this bleak.
I have, however, found a charity that goes toward micro financing women of South Sudan’s Magwi County, which asks for $30 donations to train the 200 local women in business and management.These being the women who recently returned home after being displaced for some years. W4.org states as follows:
“Upon completion of these courses, the women form small groups of approximately 20 women borrowers. These groups hold weekly meetings and are a crucial component of the project; they serve both to provide support and solidarity for the women in their small business endeavors and to help ensure loan repayments, thanks to borrowers’ mutual oversight.
Each woman is provided with an annual microloan of $125 and makes monthly loan repayments of $10.42 (a 20% interest rate funds the complementary training and a revolving loan fund to provide loans for more women). The women use their loans to start small businesses such as bee, poultry and vegetable farms, grocery shops, handicrafts, or tailoring boutiques.
<https://www.w4.org/en/project/empower-women-returnees-south-sudan-with-microloans/>
There are a decent amount of funds and charities made to micro finance citizens of South Sudan even after the disaster that was/still kind of is civil war. Most of which don’t seem to have released information about how the efforts are going, but instead listing the goals of such efforts. Although, plenty of operations such as the Kiva fund for instance, began in 2011 and have since closed their doors, sadly accepting the fact that “all 118 loans worth $26,279 have been defaulted as of January 2017, and the partnership is now closed.” It makes sense that a sizable amount of the funds made to help the citizens build their own businesses are now charity-based. I agree with the limits given that the country remains in a state of instability. Money isn’t the answer to their problems right now when the government is still fighting itself.
The Mobarak article doesn’t seem unreasonable. It’s certainly not convenient for the people of Malawi, whose urban areas are also riddled with unemployment. As for people of Nepal, they can seasonally move to India, where wages are reportedly much higher (which seems confusing based on everything I’ve read and heard about the large poverty rates in India, but I’m probably not taking every factor into account for that). I think it’s solid idea for those who it actually helps. And in places like Ghana and Nigeria, it looks really promising while not having to make too many sacrifices. In South Sudan on the other hand, the cities are just about as poor as the countries if not more so. So migration within the country isn’t much of an option for better job opportunities, except for perhaps the southwest side that neighbors Kenya, which does a little better in terms of human capital.
But South Sudan has a lot of arable land and water sources that haven’t been tapped yet. Plus the Nile runs right through it, so there’s plenty of fertile land especially in the south upper stretch of the river (right in the middle of the country). And according to one study done primarily by the WPF (the Odero/Hollema pdf document), they also have access to an abundance of cattle and fisheries. If the nation could find peace among themselves, they would certainly emerge at a quicker rate than most. But until then, it seems that the potential the land has won’t be taken advantage of.
As for the last article about all the wealth being stolen from Africa, I don’t think there’s anything to agree or disagree with. Africa’s insecurity has been taken advantage of for years and everything here seems like concrete facts. If there’s wealth flowing out of Africa (which there seems to be) I’d say they deserve justice more than any other place in the world given how the people there have lived for the last few centuries versus everywhere else. I have no evidence that states anything that disagrees with the information provided by Al Jazeera. I wouldn’t want to disagree anyway.
Part B of this discussion leaves us with the last chapter of the book and what side to take: Easterly’s conservative approach or Sachs’s more liberal one. As a leftist myself, I love the idea of repurposing the money we give toward services like the military and the income of domestic bureaucrats and directing it those who really need it both in and out of the country. But it stands that an unstable country is unstable and untrustworthy. This doesn’t come from a place of spite toward any country with a collapsing government, but I wouldn’t give a homeless person more than a couple dollar bills that I have on my person. And if I don’t have singles, I’ll give them a cigarette. But it’s foolish to invest in a country, especially like South Sudan before their government is even intact. At least monetarily. If we had a president like Carter in the White House, willing to go to the middle of Africa to negotiate with the heads of the government, Camp David-style, I’d be all-in and Trump might actually get my vote for reelection if he showed that kind of interest in countries that need help. But to simply throw money and poorly-run social programs at a nation that needs to find peace for themselves I think is to manage money poorly. Once South Sudan helps itself, it will be more than worthy to receive help from anywhere else.
Gertz and Kharas in The Road to Ending Poverty do list South Sudan as one of the “Severely Off-Track Countries”. It’s obvious as to why, I’ve repeated that it’s plagued with civil war between tribes a dozen times through these blogs. This is the obligatory answer to that question.
References:
Dearden, N. (2017, May 24). Africa is not poor, we are stealing its wealth. Retrieved February 17, 2020, from https://www.aljazeera.com/indepth/opinion/2017/05/africa-poor-stealing-wealth-170524063731884.html
Empower women returnees in South Sudan with microloans. (n.d.). Retrieved February 17, 2020, from https://www.w4.org/en/project/empower-women-returnees-south-sudan-with-microloans/
Field Partner. (2017, January 12). Retrieved February 17, 2020, from https://www.kiva.org/about/where-kiva-works/partners/206
Gertz, G., & Kharas, H. (2018, February 13). The road to ending poverty runs through 31 severely off track countries. Retrieved February 18, 2020, from https://www.brookings.edu/blog/future-development/2018/02/13/the-road-to-ending-poverty-runs-through-31-severely-off-track-countries/
Microcredit Meltdown: The Rise and Fall of South Sudan’s Post-conflict Microcredit Sector. (n.d.). Retrieved February 17, 2020, from https://rowman.com/ISBN/9781498577380/Microcredit-Meltdown-The-Rise-and-Fall-of-South-Sudan’s-Post-conflict-Microcredit-Sector
Mobarak, A. M. (2019, July 4). Instead of Bringing Jobs to the People, Bring the People to the Jobs. Retrieved February 17, 2020, from https://foreignpolicy.com/2019/07/04/bring-the-people-to-the-jobs-seasonal-hunger-migration-bangladesh/
Odero, A., & Hollema, S. (2012). PDF. Italy.
Blog 4810 