Sorry no real post today but the interviews continue to blow my mind as we come closer to the end of our brief visit in this incredible community. I got hit hard by something this weekend but will spare you the details. If you need me I'll be curled up on our mat with my friends, las pulgas.
Through our research we have begun to uncover some of the creative ways the poor save money. In an unpredictable world with unreliable income it is hard for many people to save up large sums of money that are necessary to pay for large costs such as weddings or even debt. The poor have very little access to financial tools that we use to generate lump sums such as a pension, loans or an education plan. However, the poor are creative with their money and in many places informal mechanisms have been put together to raise the lump sums they need. We have found this to be true here in Guatemala as well.
Anthony, a twenty four year-old hotel worker was part of a savings group tailored to create the lump sum he needed. The group was a collection of twelve employees that all worked at the same hotel, Hotel Kachiquel. Every month each member gave the organizer of the group Q100. The grand sum of Q1,200 was then given to one of the group members. The order that the money was given out was determined by a random drawing of numbers out of a hat. Each member continued to pay the monthly Q100 until every member had received the lump sum of Q1,200. Once the year cycle was over the savings group disbanded and all of the members were happy to get their single lump sum.
This system of saving is known as a “RoSCA,” or rotating savings and credit association. The authors of Portfolios of the Poor found this system of saving all over the world. There are many variations on this method, each slightly different in structure and use but all serving the purpose of creating useful lump sums. A RoSCA is a great tool because it provides pressure from other members that helps the members to pay on time and eventually provides a lump sum without another organization skimming off a profit on the side. RoSCAs are also custom made to meet the needs of the individual’s cash flow because it is created by the members themselves. However, there are certain limitations with these informal instruments. A well functioning RoSCA can turn sour when a member cannot pay on time. Instead of a large organization taking on the risk, the members themselves are directly affected. If you are one of the last to receive the money then you have to hope the rest of your group don´t lose the incentive to pay their part after they already received their lump sum.
Anthony´s RoSCA worked well because all the members received paychecks at the same time each month from the same hotel where they all worked. However, even in this group we found out that the woman who started it had rigged the system by pretending to pull out the number one, when she really had it in her pocket. She did this so she could pay off a debt that she owed at the time. While this did not hurt the other members it does show how corruption is a reality when there is no reputable institution setting things up.
Microfinance has taken this concept of social pressure to pay for a useful lump sum but instead of providing the lump sum in the middle of the payments it provides it at the beginning. This is the same thing as if Anthony was the first to receive the RoSCA´s payment because in essence he is be paying off a loan with his monthly Q100 installments. While MFI´s do charge interest they are also reliable, cover risk of default and can provide varying sizes of loans that can fit the cost of the individuals need.
Yesterday we made our way back to Tierra Linda to do more intensive interviews with the three borrower families that we had spoken to in the first couple of weeks. (For more information on our methodology see Chris´s most recent blog post Research Methodology). Unfortunately, when we arrived at the first two borrower´s homes we found out that no one was home and that both had thought the meeting was for the next day. Frustrated because of the lack of interviews we headed to the third home down the road. We had little hope for this next story because the initial interview had yielded very little. However, this interview turned out to be one of the most eye-opening so far. The difference between the stories that we are getting now and what we found initially is dramatic. Having the time to come back again and again has opened many doors for us.
Ujemia and her husband greeted us warmly and we sat down for a filmed interview under their massive avocado tree. We knew that Ujemia had been borrowing from Grameen since 2007 and that she generally likes the service. However, the interview took a major turn when we began to ask about the recent Hurricane Agatha´s effect on the household. In the last interview Ujemia had said that they had lost a little land. The “little” land turned out to be 75%-85% of their total crop. Due to the torrential rains of the hurricane that happened two months ago, Rio Pana (the major river in the valley) swelled violently, washing acres upon acres of farm land into Lake Atitlan.
Tierra Linda and the dry river bed of Rio Pana
Ujemia´s family is currently living off savings from their last harvest and occasional work that her husband can find as a laborer for other farmers. If the family exhausts their savings without the future profit of crop sales they may not be able to sow new crops unless they sell off valuable assets. This is exactly what the Portfolios of the Poor speaks about, “Where financial tools are not available, the result can be emergency asset sales; in the worst cases, those sales strip households of them means to earn future income, triggering a downward spiral toward destruction.”
Unfortunately, there are very few financial instruments available to Ujemia and her family. However, Ujemia’s next Grameen microfinance loan of Q4,000, which she will have access to in the next few months, may save them from selling off their most precious assets. With careful planning and budgeting Ujemia’s family may be able to recover from this devastating disaster.
While the intensive interviews have been eye opening they have also been difficult. Delving into the extreme poor´s lives can be an overwhelming process of trying to cope with how much they suffer and my inability to help immediately. Hopefully through these experiences I will learn to harness this feeling in order to devote myself towards finding my own sustainable way to give back.
“The portfolio approach shows the power of well thought out partial solutions… it is not necessary to solve entire problems in order to improve the well-being of poor communities.”
- Portfolios of the Poor
The Portfolios of the Poor and our own research in Guatemala have shown us the power of financial tools such as microfinance. While these are not total solutions to poverty, the poor have an incredible ability to combine financial tools in order to survive. At times it is more important to keep tools simple, reliable and flexible instead of trying to create services that provide comprehensive coverage. This is one of the things that I will take away from my experience here and will try to apply to my future endeavors, be it social business or another area involved in development.
An area that could be further adapted to meet this principle is insurance coverage that is easy to understand, has low premiums that fit the poor´s cash flow and delivers payments quickly. This would be hugely beneficial even if the plan did not provide the full amount needed in an emergency.
Below are some links to great work being done by my favorite MFI´s that are providing health insurance to their borrowers.
We are half way through this crazy adventure and I am beginning to realize that it is only going to get more intense and meaningful for me. These past few days have been a buzz of activity which we have managed to cram into our daily routine. We still have to devote three hours to cooking everyday but for the most part we know what we are doing. Learning to survive is no longer our central concern.
We have also moved on from our initial interviews and have chosen eight families to film and research. The few in depth interviews we have done have already began to reveal a level of complexity and hardship that I have never understood before.
Last Saturday we joined Rosa Cos Bocel at the local elementary school, the same place where we teach English classes during the week. Each Saturday she teaches a class of twenty women over the age of 15 how to speak Spanish. However, it quickly became apparent that no one was going to come that Saturday. Watching her I could tell that she was deeply frustrated and hurt that the women had chosen to forgo the free education that she was providing. We found out later that they had all gone to a meeting to pick up free fertilizer from the government. From watching her I quickly assumed that she was one of the most educated people we had talked to. She clearly had an appreciation of education that few others have in this community.
After the disappointment of the failure of the morning class, we followed her back to her house where we conducted the first of our in depth financial diary interviews combined with filmed background questions. I quickly found out that Rosa, who is a twenty year old single women that lives with her family, had to drop out of school in sixth grade to work.
Rosa´s family is extremely poor. She spoke about times in her life when all they had to eat was salt and tortillas. She explained they were now fortunate enough to have rice with their tortillas three times a week, beans with their tortillas four times a week and chicken once every eight days. When I learned that her brother and father both worked for a construction company I was immediately stuck at my core with a new sense of understanding. For the past four summers I have worked for a local construction company. Knowing from experience how hard construction work is I can´t imagine only eating salt and tortillas. I barely have energy to manage our daily activities in Peña Blanca from our relatively better diet of rice, beans and lard.
However, Rosa hasn´t let poverty get in the way of her dream of becoming a nurse. She has put herself through three more grades by studying on Saturdays and has started teaching the Spanish classes this past year.
She has done all of this while providing her family with the help of a microfinance loan for a weaving business that her and her mother have started. Had the help of this loan come seven years earlier I wonder if Rosa could have graduated highschool on time, like her brother did this past fall? I can only hope that Rosa is able to pursue her passion for education but our interviews are quickly revealing a level of poverty in this community that far surpasses our initial estimates.
“We have seen that the world of informal finance is accessed through networks based on kin, community, and workplace. That is not always good news… Informal deals are rarely private, and exposure to the public gaze can cause much social discomfort, a nonfinancial cost of informality.” – Portfolios of the Poor
Waking up this morning I had a terrible feeling in the pit of my stomach. If we didn´t draw a high number from the hat we wouldn´t have enough money to buy food at the market. In the past four days we picked dismally small numbers, bringing in an income that just barely allowed us to buy the firewood we needed to keep our cooking fire going. Even with the money we had saved from the last market trip, we still wouldn´t have enough to buy the bare minimum of rice and beans to sustain us for the next three days. If we didn´t bring in some money then we would have had to look to last resort options to tied us over until we could get more funds.
Our only real alternative would be to borrow food or money from the few friends we have in the community of Peña Blanca. I´m sure they would have gladly given us what we needed but even thinking about asking for money left me feeling embarrassed. This experience made me appreciate what it must feel like to lean on family members in times of need. This is exactly what The Portfolios of the Poor authors explained through the stories of the families they followed. While interest free loans from family and friends may seem like an easy alternative, the nonfinancial costs and social discomfort often makes it not worth it.
Luckily, Sean pulled a high number from the hat and we were saved from having to face the embarrassing task of asking for help from our friends.
At times I want to fly home. This urge to return to the friends I love and give up living on a dollar-a-day has begun to hit me in ever increasing waves. This week has been especially difficult but it was the warmth and kindness of our neighbors, Antony and Rosa, that left no doubt in my mind of why I am here. On Wednesday we were invited to their house for lunch on the condition that we would cook for them in return. We had continually reiterated that they should only serve us a simple meal but when we arrived we were greeted with the incredible aroma of a traditional dish they call Pulik. While it may have been one of the best meals of my life it was what it was cooked on and how they got it that made a huge impact on me.
Three years ago Antony and Rosa´s family was cooking on an indoor fire on the ground. With the help of a microfinance loan they were able to purchase a Plancha stove for Q500. This stove both cuts down on the short term cost of firewood and has been shown to have major long term health benefits. The stove pipes the smoke from the fire outside which dramatically reduces the amount of smoke exposure for the family. According to the World Health Organization, “thick acrid smoke rising from stoves and fires inside homes is associated with around 1.6 million deaths per year in developing countries – that’s one life lost every 20 seconds to the killer in the kitchen.” The deaths are especially prevalent with women and children who spend many hours each day cooking or playing near the fire. A study done in a Guatemala showed that Plancha stoves, like the one in Rosa´s kitchen, dramatically reduce smoke exposure.
Not only are Third World kitchens a threat to people’s health but have been shown to be major contributors to global warming. Just before I left for Guatemala I happened to read a New Yorker article on the subject. According to the article, “The average cooking fire produces about as much carbon dioxide as a car, and a great deal more soot, or black carbon. Cleaning up these emissions may be the fastest, cheapest way to cool the planet.” While we can continue to develop better stoves for families like Rosa and Antony that have the capabilities to protect their health and the environment, it is microfinance that can get them into their homes.
Our interactions with the community of Peña Blanca through research or just being friendly neighbors continue to amaze me. I have included the summary of the introductory interview of Rosa and Antony´s family below.
Rosa and Antony - Peña Blanca June 28, 2010
Rosa is 20 years old and is married to Antony who is 24. They have been married for six years and have three children (4, 2.4 and 8 months). Eight people live in the house that they built with the help of their parents (Parents, children and aunt). Rosa´s first loan from Grameen was for 1,200Q in 200 and has received six more, one each six months. With the first loan she bought radish and onion seeds. With the additional loans she bought more seeds and fixed up the house with new floors, windows and the plancha stove. The most recent loan of Q4,000 was used to buy more land to grow their crops.
Anthony has a part time job in Panajachel working for a hotel. He also helps his father and Rosa with the agriculture work.
The family did not suffer any damage in the last storm. Rosa was extremely willing to talk with us and has a good command of Spanish. She invited us back for a second interview with cameras.