Tuesday, 31 January 2017

How do you know your Lendwithcare loan is doing what it says on the tin?

Have you ever wondered what actually happens when a member of the Lendwithcare team visits one of our Lendwithcare countries to check that everything is working as it should?

In November 2016 I visited the Cambodian Community Savings Federation (CCSF), our partner in Cambodia for the last six years. Usually it would be our Senior Microfinance Advisor, Dr Ajaz Ahmed Khan, who would conduct a monitoring and evaluation visit. However, as I was taking part in a sponsored cycle trip, along with 20 other supporters, which was culminating in a visit to some of our Cambodian entrepreneurs, it made sense for me to conduct a mini evaluation during the same trip.

As with any visit, the thing I reminded myself of through was our overall objective, which is "to improve the lives of poor communities by providing access to appropriate financial services, particularly the ability to access credit to start or grow a small business."

Before we even begin a partnership with a microfinance institution - the local organisation that administers Lendwithcare loan to entrepreneurs - a lot of desk research is undertaken in the UK before we then visit two or three prospective partners in country. There are 10 criteria that any Lendwithcare partner has to meet before we begin the partnership, and on each subsequent annual visit we ensure that all these criteria are still being met.

In addition to checking that the criteria are still being met, I also wanted to:

Make sure the partnership is working for both CARE and for the microfinance institution, and discuss any difficulties the partner has been having with the Lendwithcare system.

One of the things we discussed was that many of the loan requests are for similar things - namely to buy land or seeds and tools for rice farmers. An interesting learning point that came out of the discussion was that although CCSF do lend to other types of business such as market stall holders, these type of business owners are reluctant to have their photograph taken, which is required for a loan to be posted on Lendwithcare. Apparently this is because in a village, people are concerned that other villagers will assume they are being photographed because they have unpaid debts, which would create a stigma. CCSF does still lend to this type of business but they use non-Lendwithcare funding for these types of loans.

Something else that was discussed was the increasing size of the loans being requested, as many are for land purchase. I wanted to make sure that we are still fulfilling our objective of lending to poor people and not those who are better off. I learned that land purchase is becoming more and more common because relatives are moving to Thailand to take up jobs in factories and their land then becomes available for purchase. As the price paid by traders for the villagers' rice has fallen, they need to buy a bigger plot of land so they can grow enough to earn a living. On meeting those who are using Lendwithcare loans to buy land, it was very clear that they are still among some of the poorest people.

Minimise the risk of lenders' money being used for something other than what is stated on the loan profile.

I visited one of the branch offices and asked to see a random sample of the entrepreneurs that feature on the website and their original loan agreements. I then compared those loan agreements to what has been uploaded to the Lendwithcare website. I then asked to meet a smaller section of those entrepreneurs in person and visit them at their business. After sitting for half a day looking through paperwork and another day visiting the entrepreneurs, I am satisfied that the loan profiles do match the Lendwithcare system almost entirely. Any slight differences were easily explained as most of the time the entrepreneurs have multiple income-generating activities to take into account the seasonality of their income.

Observe the loan officers' relationship with the entrepreneurs they are lending to and confirm there are systems in place to ensure the entrepreneurs understand whether they can afford to take a loan and make the repayments.

You can tell an enormous amount just by watching how the loan officers are greeted by the entrepreneurs. For example, do they greet each other warmly and with mutual respect? We also observe any training that is given and whether the entrepreneur understands how much they will repay, over what period and what would happen should they fail to meet their repayments.

Collect case studies and photographs of some of the entrepreneurs who have been supported by Lendwithcare.

I was lucky enough to be accompanied on this trip by two of our most long-standing lenders, Gary and Michelle Nicol. Gary and Michelle have become more and more involved in Lendwithcare since they undertook our sponsored cycle ride from Vietnam to Cambodia in February 2015. I sent Gary and Michelle off with a CCSF staff member and they spent time talking with some of the entrepreneurs and gathered photographs and stories, which you can read here.

At the end of the visit as always, I was reminded - despite the availability of technology that allows us to talk over Skype and make conference calls - how important it is to meet people face to face if you are to really understand the reality on the ground of providing loans to entrepreneurs, which can really help them work their way out of poverty.

Gary, Michelle and I with the staff of the community-based microfinance institution in the Ek Phnum District

Tracey Horner
Head of Lendwithcare

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