Importing ideas from one country to another without properly examining the social factors of the country will only lead to failure. Micro finance banks have become the rave in developing countries to reduce poverty due to the success of the nobel laureate Yunus Mohammed in impacting the lives of rural women in Bangladesh. His success has become a model being duplicated all over the world.
In my recent trip for to Nigeria I was pleasantly surprised to see two micro finance banks in my village in Zonkwa in the heart of Nigeria. Curiosity led me into one of the banks and I wanted to find out if they were actually giving loans and what the process was. I opened the door and was greeted by a teller who inquired about the nature of my visit, I told her I was interested in getting a loan and wanted to know what steps to take. The loan officer was not in but she gave me a check list for loans which asked for things like land CFOs, bank history, etc. I also remember thinking as I left why the bank was empty even though it was next to a booming market.
Weeks go by and I am in Kaduna a town of 4 million people visiting James a friend who was having a bad day because a local businessman derailed his plans for the day. I inquired more on what happened and he told me helped sell 2 generators for the local business man for a commission and cashing the check turned out to be an adventure. The check was written in the man’s name but he did not want to go to the bank with Mr. James, he only wanted cash and asked James to return the check and collect money. They went back and forth and in the dialogue james learnt the businessman had not been to a bank before and did not have an account. My friend volunteered to take to one. When they got to the bank it became a hassle for the man to physically enter the gate of the bank, it took time and convincing before they could enter.
This incident shed light to me about hidden hindrance to the success of micro finance banks in developing community. I was surprised to learn that the business man has been in business for over 20 years and her has never been in a bank before, not only has her not been in the bank before her does not see it as an institution that can help expand his business and bring him wealth, her sees it more as something that could possible cause harm to him. What is the source of this institutional fear?
People in developing countries have not seen institutions serve them, instead institutions have been a source of exploitation. This maybe the cause of institutional fear, others include language, identity, and documentation. Language is a barrier because it is a hindrance to communication when information and literature that promotes services are written in a language the average client does not understand. So in Zonkwa the local merchants inability to read and speak english affects their understand of what a micro bank does and how they could benefit, as far as they are concerned it is another large building that caters to the elites. Identity is an issue because there is no legal representation of one’s self in any governmental form. This is accomplished in America through social security number, driver’s license, or passport. In developing countries the only form of identification indigenous people have is themselves. Documentation may be the worse barrier because it provides proof of legitimacy and reliability. The businessman had his store for 20 years but there is no proof of registration, there is no land title to his store location, and he had no ledger documenting his business activities for the last 20 years. These items where on the checklist of the micro finance bank.
Examining these issues and coming up with solutions to these barriers will go a long way in making micro financing successful in more places and improving rural communities in developing countries.