|Old Marimba entrepreneur group (18800) in Harare, Zimbabwe|
You may have been reading various headlines recently about the impact of El Niño in several countries around the world. El Niño is a global weather phenomenon that affects rain patterns and temperatures around the world, and can cause drought and food crises in countries reaching from Papua New Guinea to South America to Ethiopia. One of the latest countries to be badly affected is Zimbabwe, which has announced a state of disaster following the severe droughts that have recently devastated harvests and caused food prices to soar. We at Lendwithcare asked Henry at our microfinance partner Thrive just how the country, and in particular Thrive’s borrowers, have been affected:
“Traditionally in Zimbabwe the harvest time starts mid-February in early season areas, going through to April/May for the main maize crop. This usually means that from this time maize prices go down, and continue to do so until June/July. As it stands, our borrowers who buy and sell maize say that the price of maize has remained high and is expected to go even higher. This confirms that the harvest is really bad, at a time when household maize stocks would have run out. While rainfall has been less of a problem around Harare, where the majority of Lendwithcare borrowers live and run their businesses, many of the lower-lying areas are facing almost complete crop failure. We expect that this impact on poorer households will worsen over the coming months.
This creates additional pressure on our borrowers in two ways. As their customers have less money to spend, this affects our borrowers’ livelihoods. Furthermore, they are being called upon to support family members in drought-affected areas.
All this is set against a background of decreasing levels of economic activity, as well as low levels of confidence. At Thrive, our level of bad debt has been increasing steadily across the last quarter. While they now seem to be coming under control, it’s still too early to say. The number of groups with outstanding repayments is very high at the moment, and so is the rate at which we are rescheduling loans. Whilst our overall numbers of bad debt are still very good, we are investing more time and effort in supporting our borrowers.”
|Eagle entrepreneur group 18636 (Harare, Zimbabwe)|
Henry went on to say: “Demand for loans is very high at present. Again, it is difficult to ascertain the cause, as the market is becoming more and more aware of Thrive and our products. It may also show the extent to which people are desperate and trying to get perceived relief in the form of a loan. We have deliberately increased the level of our due diligence to ensure we are not giving out loans to people who cannot afford to repay them.
At present, the tools we use to measure social impact do not really measure food sufficiency at a household level. If we had an index tool to measure progress out of poverty, we would be able to comment more confidently on the exact status of our borrowers’ food sufficiency. We would even be able to compare their position with that of the rest of the country, to determine if access to credit can better prepare people for unforeseen occurrences like droughts. In this regard, the work with the University of Portsmouth to track changes in poverty levels will be particularly important, as will the initiative to develop a country-specific Progress out of Poverty index.”
Lendwithcare has partnered with the University of Portsmouth to design and implement a long-term research project that aims to monitor the changes in borrowers’ lives over a prolonged period of time, in order to assess the impact of microfinance on their living conditions and state of poverty. Last year Nancy and Ajaz visited Pakistan to conduct interviews with borrowers there – you can read more in this previous blog. In March, Nancy and Tracey will be travelling to Zimbabwe to extend this research to Thrive borrowers. We will post more in the future about their insights and findings.