Micro-finance at home


In the aftermath of the 2008 credit crunch, I remember gaining the impression that the crunch was a largely western problem. That the families affected were of those whose countries had highly developed economies with risk taking banks. There was a melancholic atmosphere as if someone had passed away, a real watershed moment. Living in the UK in the years prior of what we can now nostalgically recall as the good old days, I remember a regular flow of junk mail through the letter box from several banks offering us loans. My mother would always warn us “guys NEVER take a loan from the bank”. It was a lesson I did not understand well. Loans were inevitable, in a few years I would be applying for a student loan myself. How could they be so bad? However after 2008 when the letters stopped coming everything began to change.

Debt was a national issue and the scenes on television said it all too well. Over the weekend a millionaire had killed his family and then himself before the collectors came in on Monday. Queues of people lined up outside banks and ATMs to withdraw all their money, riots in central London. Families all around were finding it hard to make ends meet. The Government was changing its strategies fast, damage control influenced policy. Distrust became a culture people inherited in the aftermath.

I was born in Uganda and was raised in Kampala for the early part of my childhood. For the most part the city holds fond memories. However the rest of it is rampant in poverty and victim to slow development. I suppose it’s for the slow development that I always return to an almost mummified state, where nothing really changes. However two years after the events of 2008, I went home for the summer holidays to discover something new, something different. On arrival I was quick to notice a familiar rhetoric playing on the radio and on television stations. There was constant advertisement of loans. House loans, car loans, wedding loans, and sofa loans, all sorts of loans were available and playing to catchy jingle.

In a country where inflation was at a continuous high and the average income was barely enough to feed families, I became quickly suspicious of the authenticity of these schemes. How did these banks expect their customers to pay back such loans?
At lunch on the dinner table the topic came up. Why were people taking out loans for things like their weddings? If you could not afford a big wedding it seemed reasonable to hold a smaller one. However this reaction was not customary of us Ugandans. Weddings for one thing were a big deal here and people were growing into the habit of enjoying “the good life” if it meant acquiring a loan. I came to learn of others further down the poverty line affected by these same issues.

Micro-financing an increasingly popular method of tackling poverty all over sub-Saharan Africa, by offering loans to small business owners was now itself a growing business in the villages, and it was a certainly a growing problem in the homes where my parents grew up. Aggrey a relative from my mother’s side explained, it all involved a courageous businessman who acquires a loan in Kampala at say 15% APR, takes the money to the villages where he offers smaller loans to the village people at 25% interest, reaping the benefits.
Those taking out the loans rarely handled real money, holding value in their crops and land. They eventually fell back on their payments as they could not match the interest and the banks weren’t accepting sweet potatoes. When they completely failed to pay back the sums they had borrowed, a group of debt collectors composed of strong and threatening local men from the same surroundings would arrive at their doors to collect what is owed. This generally involved heated arguments as the collectors repossessed property in land, cattle and other live stock, in essence their livelihood.

Back at the table Evan offered an anecdote of a rich farmer (a name that sounded familiar) he once worked for in Mutonto. He recalled the masses of land he owned and the fine breed of cattle that grazed on it. The land had been passed down a generation and the farmer had done a great deal in increasing his wealth, introducing business strategies into the farm, acquiring more land totaling roughly 200 acres. He was a grand employer, requiring many hands to tend the land and offering jobs in return.

I could picture it. Mutonto with its green hilly terrain and the farmer’s house sitting tall on top of a hill opposite my own family’s farm visible from afar. He’d been trying to expand his already established business. This meant taking out loans in order to build better storage, and buy expensive machinery. He had maintained several loans, finishing one and starting another. However paying off loans and interest had cost him some of his land. With a dwindling inheritance, it became even more difficult to complete all his payments.

The climax Evan described was when the debt collectors drove up to his farm house demanding he vacate the property he spent all his energies building. The numerous eviction signs that had been put up months before, illustrating a devastating scene, one Evan described as the fall of a great man. He said he had locked himself in his house among his things refusing to leave. After many warnings the door was slammed down and he was dragged out into the compound along with his tables, cupboards and chairs.

I began to see similarities of what was happening at home to what had been happening in places in the West. Debt was a problem everywhere. People were losing their homes, their whole life’s work through unfair schemes and it was not unusual here either.
On one their visits back to my mother’s village in Buremba (in the western part of Uganda), my brother and sister encountered a somewhat comical situation. In welcome of their return all the neighbors and distant relatives living nearby came round to see my mother, brother and sister. There was singing of praise to God – a chorus line my brother described as erupting every few minutes along with hugging and holding hands.

As everyone was preparing to go home my mother took out the camera to take pictures, with people she would not see for another couple of years. Group photos with sad smiles, showed the deep knowledge that on the next return, some of these people might not be around anymore. The next day however an old lady returned with an unusual request. She asked my mother to delete the picture she had taken the previous night. Naturally astounded my mum asked why, and the old lady explained she was scared they would use her picture to go open up a loan.

We came to understand that this was not unusual. Photographs were accepted as viable ID to acquire loans. However anyone could use your photo to open up a loan. Additionally fraudsters who had seen the cracks could secure loans by taking a picture of them self standing next to someone else’s property and use that property as a down payment for their loan even without land titles. This led to a suspicion of cameras and the people holding them. This of course became a problem when the collectors came to reposes the property which in fact belonged to someone else.

My summer so far was a learning experience. The changes taking place in Uganda were unnerving. Poor people acquiring loans hardly felt like a step forward in the right direction, my mother’s warning had become real. We talked about my cousin’s Kuhinjiira, a traditional wedding (prerequisite of a church wedding) that had taken place the weekend before in the village where my Father grew up as a child. It was a lively and comic affair with what seemed like a turn out from the whole village.

One of the village leaders a bank owner came up to give a speech and asked those in the audience who had loans not to run off at his sight (as they often did at these events) and stay enjoy the ceremony. It was memorable evening and summer too.


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