Please Send More Training in Microfinance


Stories from the Northern Malawi

Three weeks have passed and I find myself at the end of my stay in Kamphenda in Northern Malawi. I have spent an incredible five weeks in the field with only one short visit to the office of the implementing organisation, C&S, in Mzuzu since my fist update to gather a few things of appreciation for my host family. I found that time is better spent in the field rather than at an office two hours drive from ‘action’. Furthermore, funerals and fertilizer somewhat disturbed plans. I shall return to this below.

Successful Self-Replication
As off now I have gotten a better understanding of the project which C&S has been carrying out in Kamphenda and the surrounding area, with funding from DanChurchAid (DCA). Something that has caught my attention is the fact that, out of numerous groups found in the area, only a few Village Savings and Loan Groups (VSLA) have been fully trained by C&S staff. The remaining groups are a product of self-replication. C&S is not the first organisation to provide training within the VSLA method in the area, and at the initial mobilization meeting of Kamphenda more than 30 groups had formed. In the light of limited funding only two groups received training in this area. Despite this, numerous groups are now operating, though the aptness of the groups varies somewhat. Nevertheless, it indicates that the demand for VSLAs in this area is high and that self-replication of the methodology is possible. My translator and organisor, Gija works as a volunteer for C&S to provide some training for the VSLA groups and to assist in organising purchase of a box for the money and the individual pass books. The extent to which he is able to assist the groups however is limited in comparison to full training of a VSLA. And many groups are created without the assistance of Gija.

Send Further Training
Despite the apparent success of replication of VSLAs, I have met a recurring plea for more training of the groups I spoke to. The extent to which this is really necessary is hard to determine. The groups seem to work well and are highly appreciated by its members. Perhaps the need arises partly from an expectation that with training follows allowances in the shape of a meal and perhaps coverage of transportation expenses, even though this is actually not common practice, and partly, because the association with a development organisation is believed to be beneficial in terms of visibility of a group. The first must be considered an artificial need of training, whereas the second is more legitimate as exposure can lead to many different benefits. As far as my observations self-replication works and the need for training is more connected to literacy levels and years schooling of group members rather than the mere fact of being an untrained group.

Limitations and Options

What does call for attention is the limited capital of the groups. Since the capital within the VSLAs is only the sum of the members’ own savings and interest rates on loans, the total sum remains limited. One way of accessing larger amounts of loans is to join several groups, which a few members did. One might expect the villagers to take more advantage of this option but possibly the need to also manage several loans puts a limit to its occurrence. Some group-members point to the fact that you need ability to plan well when taking up a loan. Depending on the level of schooling this is challenging and hence poses an obstacle as to join more groups. During the 26 interviews that Gija and I conducted we came across people of this community with severe difficulties in terms of financial managing, and in particular need of training to be able to participate in a VSLA. In all cases, however, the interviewees pronounced a desire to be part of a group as the rumor went that access to a group also means access to money.

To return to the need for a larger capital base, several groups as well as interviewees mentioned the need for links to larger financial institutions. This I find is a particular pressing need, as the group-members seemingly have the ability to develop businesses further as well as manage larger sums of capital, and are mainly hindered by the lack of access to such capital. In terms of delivering these services, however, there seems to be a ‘missing link’ in the area. First, of all the formal banks within reach are not familiar with the demands of the poor, hence, special services may need to be developed to serve this client group. Secondly, the banks that have shown interest in accommodating this, upon request from C&S, require a certain population of interested groups to maintain profitability of such a service. This would be possible because there are many of in the Kamphenda area and beyond. Lastly, further financial training of the groups may be necessary for the members to be able to take up larger loans, not least as these loans are most likely to be taken up by the group, representing collateral, and then distributed to the members. Hence, repayment to the formal institution depends on all members and not just the single loan taker.

Funerals and Fertilizer

The need for large amounts of capital is especially pronounced when it comes to funerals. The social fund of the VSLA, which is intended to cater for instances of death and illness within the closest family of a member, does not even remotely cover the need for capital when it comes to funerals. A number of distant and close family must be feed and housed for at least 3 days, and there is the obvious purchase of a coffin. In the rural areas, however, the whole village and area takes part in the preparations and contributes to financing the funerals either in cash or in kind. Nevertheless, it becomes clear that no family can cover the expenses of a funeral on their own, as all contributors to the funeral are mentioned with gratitude at the actual burial.

What furthermore, makes life difficult in the village is the fact that you must attend all funerals in your area. Due to extended family relations the whole population of an area such as Kamphenda is usually interrelated somehow. Hence, I experienced that my host family had to attend five funerals within only five weeks. First of all, this takes a lot of time away from running your small scale business or working in the field. Secondly, you may have to travel to get to the funeral, which you may be an expense if you cannot reach the place by foot. Also, you are obliged to pay small contributions during the funeral. All in all, there are a lot of expenses and time involved in funerals both for those organising it and for the participants.

For me, doing research, a funeral completely disrupted all plans. It was impossible to get hold of anyone for three days if death had taken place. Furthermore, distribution of subsidized fertilizer was significantly more interesting than a chat with the mzungo (white person). Now, you may think that funerals gets top priority always, but I did understand that the families planning the funerals attempt to accommodate for instance market days, so that the funeral ends in due time for traders to attend the market. But still, reaching the market one hour later than usual may mean a significant cut in your profit. Basically, funerals are one of the largest recurrent expenses for a rural family, an expense that could be catered for by access to larger capital, but which potentially also create problems in terms of repayment of loans. When a loan is spent on non-income generating activities, repayment obviously becomes a challenge. The need to develop solutions to this challenge is apparent as funerals dig into family budgets and hence pose an obstacle to economic improvement. And when funerals are ‘seasonal’, as I was explained by Gija it puts further stress of the family economy during such a ‘season’. ‘You know, when one funeral has taken place you will see the next and the next and so on’, Gija commented to me, ‘It always happens when the rains come’.

And so, I have ended my stay in Kamphenda, a day later than planned, as even my farewell function was postponed – due to funerals.