Tag Archives: Credit

Different Time Zones

For approximately eight months of the year, the U.S. and Nicaragua are in different time zones.  During the rest of the year, we’re in synch.  Nicaragua seems to prefer the “natural” order of the clock, whereas we in the North have always favored the annual tinkering with time.  The time zone difference, when it’s in effect, really has no impact on WPF or on me personally; I simply have to have it in mind while I’m there when calling home in the evening, or catching a plane to or fro.  But there does exist a difference of another sort, a sensitivity and appreciation of  time which does make a big difference, and I have experienced it now twice over the past several weeks.

In the course of our work, funds are periodically transferred from a bank here in the U.S. to whatever banks our partners have indicated to us in their project requests.  When a project has been approved for a disbursement, a wire transfer is executed to the recipient bank.  At some time after the transaction has been completed, the bank’s central office initiates a follow-up call to WPF for the purpose of verifying both the intent and the details of the transfer.  Only then can the wire be sent to the Nicaraguan bank for receipt.  Technically, that’s the point at which WPF can alert the partner that the funding is on its way.  The process works pretty well, most of the time.  But then, there’s the matter of time.

Several weeks ago, a transfer confirmation could not be made on a Friday afternoon because I used a telephone number which was unfamiliar to the bank.  Despite having all of the security codes and passwords and identifications in order, I was not identifiable.  In the time that it took to authorize the number, the bank was closed for the week and the transfer was delayed until the following Monday.   Two days for a U.S. banker only constitutes a weekend; for a Nicaraguan farmer, it could mean the difference between a crop and a loss.

Time, in the more recent case, had to do with the logistical process that most of our partners must follow in order to access the funds which have been sent.  The banks are primarily located in Managua, while most of our partners reside in the more remote sections of the country.  In order to claim the transferred funds, partners must (most likely) board a bus in the early morning hours, ride for hours (shoulder-to-shoulder with endless stops), wend their way through the city to the bank in question, present their identification documents, and then turn around to take the same trip again in reverse.  That is, if time allows.  By this time, the day may be quite late, indeed, and a traveler from the far north may require a night’s stay in the capitol city before the journey home.  All in all, one  or two days’ time is required for the relatively simple task of making a bank withdrawal.

That reality, as harsh as it is, does not suggest that banks in the U.S. have any  influence over the inconvenience; rural peasants just happen to live far away from centers of commerce.  However, in a transfer made this week, I encountered an ignorance of time which dramatically caught my attention.

After a full 24 hours had elapsed since the completion of a wire transfer, I received a message from the U.S. bank, seeking “more information” about the wire.  After a couple of “telephone tag” misses of each other, the bank rep and I finally connected.  He had some fairly straightforward questions needing clarification and our exchange probably lasted only five minutes.  But he opened the door to further conversation by asking whether I had any other concerns or questions to pose since we were on the line.

I seized the opportunity to express my concerns about delays in wire transfers, that his call indicated to me that the wire had not yet been sent , even though the wire confirmation had been completed the previous day.  Given the additional time requirement for sending and receiving transfers, I could easily envision our partner waiting at his bank for a transfer that had not arrived.  I attempted to paint a picture for the bank employee, of peasants interrupting their lives for a day or two just to access these funds.  I stressed the importance of funding to these very rural Nicaraguans, and how even a slight delay might affect their ability to successfully produce their crops.  I described the difficulty which a peasant would encounter if required to stay overnight in a major city without plans to do so.  I thought that I created a fair portrayal of the extreme inconvenience and/or discomfort that could be incurred through a wire transfer delay.  And I hoped for an empathetic understanding of the importance of timeliness.

What I received in return was something less than that.  Beyond a cursory, “uh-huh,” the value of a Nicarguan farmer’s time seemed to carry little importance to the administrator of bank protocol.  I didn’t even receive a promise for the matter to be checked out.  It seems as though our understanding and appreciation for the value of time is still filtered through a singularly North American filter, even in a so-called global economy.

We may never experience a delayed wire transfer ever again.  I may never have to call from the “forbidden” phone ever again (though cell phones have been known to go down).  Claimants may never be required to withstand the ignominy and embarrassment of arriving at a bank and claiming funds that do not yet exist.  But a pronounced lack of urgency, vision and empathy has underscored the vast differences that sometimes exist between our two time zones….


Credit Where Credit Is Due

Ever since Winds of Peace first began its microlending practices in Nicaragua in 1994, it has struggled with the balance between making resources available to those organizations in greatest need and the desire to maintain a high rate of repayment.  It’s a difficult balance, because often those in greatest need have the least experience and the toughest obstacles to surmount.  While we have been blessed with a very strong repayment history from our partners over the years, we also have lamented the fact that there did not appear to be any means for effectively researching a group’s credit history, either good or bad.  Sometimes we might be able to speak with other funders, if we knew that they had supported an organization in the past, but such opportunities were few and far-between and often the information offered provided limited insight as to future credit performance.  The result has been to the detriment of both the members of the funding community, who have had to take on greater risk based upon their singular assessments of a group, as well as to the field of potential borrowers who must generate their funding requests under a generic cloud of suspect accountability.  That may be changing.

WPF has recently subscribed to SinRiesgos, a credit bureau servicing the entire country of Nicaragua.   While this organization came into existence in 2004, it began independent operations in 2006 and has really become an active and sought-after service in the wake of the No-Payers Movement in recent years; there is nothing like a period of defaults to get the attention of lenders.  As a result, the database has been expanding with new entries and the users have grown from a few big lenders to now include individual cooperatives seeking to evaluate potential new members.  The service currently serves more than 230 institutions, including banks, microfinance institutions, and cooperatives.

The presence and growth of an organization like SinRiesgos might seem like an unremarkable development to some.  Service companies such as this are common in North America and throughout Western-style economies.  But its presence in Nicaragua marks a threshold of importance for that country in at least two respects.  As an operating tool for use by the credit industry, the service represents a major advancement.  Lenders in Nicaragua have long been hampered by assessing loan-worthiness in the dark, relying on word-of-mouth representations, written proposals which may not always contain accurate credit histories and occasionally personal interviews which can be highly subjective.  The result has been that many lending institutions which once operated broadly across Nicaragua are now much more restrictive in their presence or have left the country altogether.   But there’s a second benefit that carries an even-greater potential, the creation of an accountability tool for the borrowers.

Accountability is often found in the personal character of leaders, those who speak on behalf of their cooperatives or associations.  Their word is their bond and one may rely on that with confidence.  But such reliability is not universal and in any case it is usually difficult to assess in advance.  For hopeful borrowers, the challenge has become not only how to convince a lender of the importance of loaned capital, but also their trustworthiness to receive it. With the credit service, they now have a tool to demonstrate their reliability, something by which to measure the the performance of their words.  And that is an asset to the poor and poorly-connected worth a great deal.  It is measurable credibility.

There is yet another benefit to the emergence of the credit bureau service.  It is in the form of an attitude.  When most people are faced with an objective, there is an inherent desire to achieve it;  it might come from pride or self-satisfaction or self-respect.  But there is also an external drive to accomplish it, emanating from our  knowledge that the people around us are paying attention, and for most of us, that’s a powerful motivation to “measure up.”  If the detriment to defaulting on an uncollateralized  loan is that one can simply walk away from it and on to the next funder, no one is well-served.  The original lender has lost the loan, the borrower has failed to repay and that is the end of the story.  Such a minimal consequence actually harms the borrower when the default is without meaning, without impact.  As a consequence, the lesson learned is that defaulting is painless and therefore not to be taken too seriously.  But if the outcome creates an effect, a cost, an impact- in the marketplace, the community and in the psyche- then a transition is possible.  The essential outcome is not simply that default is painful; the true lesson is that successful performance builds confidence, self-respect and a foundation from which to dream.  And that is what SinRiesgos has the capacity to do for its participants.

I never thought about such impacts as our company worked with credit services in the United States for more than 30 years; it demonstrates the shortsightedness that we all tend to bring to our respective perspectives.  But the people of Nicaragua, and I, are still learning….

Banking On It

In light of the current status of banks and banking in the U.S. (wretched), I suppose the last institution with which I’d like to be affiliated is a bank.  Central banks and those deemed “too big to fail” contributed mightily to the near-collapse of the U.S. economy several years ago, and their persistent breaches of integrity place them firmly at the lowest end of the scale of trustworthiness.  It’s a bad place for banks to be, when they represent an institution that really should thrive on their customers’ trust.  (Just this week I was prompted to contact one well-known national bank to inquire about when they might be predisposed to distribute a small remainder of my parents’ estate, the bulk of which was settled months ago.  Oh yeah, they replied, we probably can release those funds now.  Hm.  Who knows how long they might have elected to hold onto the funds if I had not inquired.)

Last week, however, I had an entirely different experience with a banking operation in Nicaragua.  I visited again with The Nicaraguan Association for Sustainable Development (ANIDES) and its visionary leader, Gloria Elena Ordoñez Vargas.  This is an individual and an organization that understands what banking is supposed to be like, and it puts to shame most of the other organizations I know that go by the name “bank.”

Winds of Peace has funded ANIDES previously, in an effort to assist the organization with the establishment of five communal banks.  These are small, local banking offices to promote the economic and organizational autonomy of more than 200 women who live in extreme poverty in very rural locations.  Indeed, the offices more often than not are simply the homes of the local leaders.  But what these banks have been able to do, what they have represented for the women members is nothing short of remarkable.

With a very modest funding by Winds of Peace, in a little more than a year ANIDES has been able to establish a revolving credit fund for the 220+ members, establish two business groups to coordinate independent “home” businesses, provide training in the creation of a savings culture, nurture a positive capital growth in each of the small banks established, offer education and assistance to women victims of domestic violence, enhance the access to basic food needs and boost the local economies of the communities served.  This is banking in its most holistic form, integrating elements that are social, organizational, cultural, economic, human, spiritual and environmental in scope.  When was the last time your bank inquired about your social, human or spiritual needs?

What is even more remarkable about this initiative’s success is that it is being achieved with women members who have almost no previous economic experience or training.  Meeting with the women for the first time last September, I was struck by their shyness and humility, but also with their tenacity (many came from miles away on foot) and their outright success: only one of the small community banks was showing deficits by its neophyte members.  Members themselves were providing the tracking, the follow-up and the solidarity with one another to make sure that their borrowing was matched by their repayments.  In other words, the bank existed to facilitate both the needs and the strengths of its members, not to impose onerous conditions that would encourage failure.  What a novel concept for banking.  What an amazing impact on the lives of some very poor people.

The intended extension of this banking project is that the women, who now have softened some of their previous fears about borrowing money, might be encouraged to invest in the improvement of their rudimentary homes and living conditions, including the installation of ecological toilets (some of the best composting toilet are being introduced into the market, recent upgrades in the technology make it easier to consider the option). This amenity- sounding so essential to so many of us- has been considered an absolute luxury by many rural residents.  With the presence of the communal banks to accompany them, such an amenity now seems within reach, and along with it rises the self-esteem of the women who can provide it.  The existence of a small bank can allow these women to take control of their lives in ways they previously could not.

What can a bank do?  Merely channel the empowerment of its members, provide access to credit and tools for investment, facilitate education to recognize and respond to gender oppression, encourage healthy habitat conditions, grow self-esteem, foster economic autonomy and teach people how to take more control of their own lives.  In a world where the future for many banking institutions seems to include implosion, we could learn a great many lessons from these communal banks in Nicaragua.  It might even beg the question, “Who really is the more developed….?”