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HOME DIARISTS' DATA CORONA VIRUS LIFE DAY-BY-DAY CURRENT STATUS FINANCIAL DIARIES ORIGINS OF THE PROJECT PUBLICATIONS LINKS
The page is designed to reveal the full story of MFI lending section-by-section, but you can also use the index on the left to move to items of interest
The latest additions (on 8th November 2022) are at the bottom of the page
We begin with a sketch of the borrowers, the MFIs and the loans.
We begin with a sketch of the borrowers, the MFIs and the loans.
Then we move on to some of the most interesting questions, such as
why do the Diarists borrow these loans? and what do they use them for?
The borrowers
The borrowers
The borrowers are drawn from our 60 Financial Diarists, each from a household living on the outskirts of a medium-sized market town in central Bangladesh.
40 out of the 60 became Diarists in mid to late 2015 and have been so ever since. Another 20 became Diarists in mid 2017 and have been so ever since.
Of these Diarists, 47 (78%) have taken one or more loan from an MFI since they became a Diarist.
15 Diarists (a quarter of them) are extreme poor, living on less than $1.90 per person per day
15 Diarists (another quarter) are poor, living on less than $3.20 per person per day
Almost all the remainder are moderately poor, living on less than $5.50 per person per day
The MFIs (microfinance institutions)
The MFIs (microfinance institutions)
The loans were issued by 27 MFIs. They include Bangladesh’s biggest and most famous ones (Grameen Bank, BRAC, ASA, BURO, for example) and a host of mid-sized or small ones. Because it has had a branch in the neighbourhood longer than any other, Grameen Bank has by far the biggest share of the loans taken by our Diarists (see chart on the right for the share of all MFI loans for some of them). Most of these MFIs offer loans annually, repaid in 40 to 50 weekly instalments. A few offer monthly repayments, some with terms of 2 or even 3 years.
The loans
The loans
The Diarists have taken 317 loans from MFIs. The loans range in value from 500 to 150,000 taka (about $5.25 to $1,580 at mid 2022 market exchange rate), with a median value of 30,000 taka ($315). The total disbursed value of the 317 MFI loans comes to 10,724,187 taka ($112,886). Diarists have taken fewer loans since the corona-inducedlockdown and closure of MFIs in 2020. - we explore this reduction in more detail below.
The reduction in the number and value of loans taken
The reduction in the number and value of loans taken
Before the corona pandemic, our Diarists, between them, took about 60 MFI loans a year. In 2020 a lockdown in April-May was followed by government-ordered closure of MFIs for some months, and the number of loans taken shrank sharply, as the chart shows. But although the MFIs re-opened, the economy recovered, and life for our Diarists got back to something like normal, the number (and value) of loans taken per year has fallen to half what it was before the pandemic.
In September 2022 we surveyed all our Diarists, asking them 'why do you think you and others are taking fewer MFI loans?' More than half of them agreed that their own MFI loan-taking has fallen. The main reasons they gave are shown in the chart. Nervousness about their ability to make loan repayments came top of the list, easily.
Our team of data collectors, who conducted the survey, asked follow-up questions, and on the basis of these surmised the following. The break in their contact with MFIs in 2020 caused many of them to rethink their use of of MFI loans. Many thought 'actually I don't need so many - I was taking them more out of habit than out of need. Loan repayment is troublesome. Maybe I should take fewer MFI loans'.
Of course, Diarists have other sources of loans. The two charts below show the shares taken from Banks, MFIs, Co-operatives, Clubs, interest-bearing Private Loans, and Interest-free loans (the latter known locally as howlats).
Howlats dominate the number of loans taken. They have a median value of just 1,600 taka, reflecting the fact that many are small short-term loans made by households helping each other out with their daily lives. But they are still responsible for almost a third of the value borrowed. They are often used to make MFI loan repayments when money is short. We recorded 1,247 howlats.
By Private Loans (of which we recorded 79) we mean loans taken in the locality from private people (usually better-off people rather than 'moneylenders' per se), on which interest is charged (though not always paid in full).
MFIs have the biggest share of the value of loans taken, at 44%: their median value was 30,000 taka.
Banks are responsible for a tiny number of loans taken by our Diarists (just 9) but because those loans are large they have a 9% share of the value of loans. Their median value was 200,000 taka.
The total disbursed value of all loans of all types came to 24,723,837 taka ($260,251), of which the MFI share was 44%. The total inflows of all kinds received by Diarists came to 182,989,411 taka ($1.93m) so the share of all inflows represented by loans of all types was 13.5% (and that of just the MFI loans was 5.9%).
Diarists also take shop credit (known in Bangaldesh as baki). We have recorded tens of thousands of examples and we do not include them in this analysis. Nevertheless, they are a very important source of short-term essential credit. Get in touch with us if you want to know more.
How do we know all this?
How do we know all this?
Each day, 7 days a week and 52 weeks a year, our Team of 4 Data Collectors, based in the centre of the research area, make personal conduct (almost always face-to-face, rarely by phone if necessary) with our 60 Diarists and take a note of all the money that has flowed into and out of their hands that day, transaction by transaction, and covering the whole household. Our Manager enters these data to a database which is sent daily to the Project Director (who lives in Japan) for interrogation and cleaning. The Team also keeps tabs on the events that occur in the households. More detail of our methodology is available on the Publications page.
What were the loans used for?
What were the loans used for?
What MFI borrowers spend their loans on is a matter of great interest to many MFIs and their observers. Microcredit pioneers believed that by using loans to establish or expand businesses poor households would be able to escape from poverty. Others thought that loans would help to smooth consumption. Some were suspicious of MFI loans altogether.
But knowing for sure how MFI loans are used turned out to be difficult, for many reasons.
The Hrishipara diairies offer a rare opportunity to examine this question with some confidence. The charts below show what we found. However, some of the categories used in these charts overlap with others, as we discuss below. First, though, we explain how we constructed the chart.
How we assessed the use of each loan
How we assessed the use of each loan
We used two kinds of data to arrve at the uses depicted in the chart above.
First we have the numerical data about all the money transactions made by Diarists over many years, stretching both before and after the taking of the loan. We looked especially carefully at the transactions up to 3 months before and up to 6 months after the loan was taken, looking for likely matches between inflows (like the loans) and outflows (like spending that may have been made possible by the loan). Quite often there were very clear 'matches' of this sort. For example, among the 317 loans there were 102 cases where the single biggest expenditure in the months surrounding the taking of the loan was made on the same day that the loan was received, and in another 70 cases, within a week of receiving the loan.
Second we have our records of the conversations that our staff have with the Diarists. The staff are trained to keep up to date, through friendly chats, with the Diarists' evolving aspirations and plans. Whenever a loan is taken staff make sure they listen to what the Diarist says about the loan - why they took it and how they'll use it.
By combining these two sources of information we usually have a high level of confidence in our conclusions about how the loan was used. Examples that we will provide later on this page will illustrate the process.
The categories of loan use: discussion
The categories of loan use: discussion
Repay debt is the category to which we assigned more loans than any other (roughly a third of all MFI loans). But the debt that got repaid may itself have been spent on some other category, such as business, or buying an asset, or migration. Indeed this is quite common. MFI loans are often disbursed as soon as the previous loan is repaid, rather than when the Diarist really needs the loan, so Diarists often borrow elsewhere (howlats or private loans, for example) and then repay that source when the MFI loan comes along. Arguably, then, such MFI loans might be categorised as 'refinancing loans'. But this doesn't apply to all the 'repay debt' loans: many are used to repay debt to other MFIs, a 'debt trap' that several of our Diarists have fallen into, especially common among small shopkeepers. Sometimes, the MFI loan is large relative to other debts, and the Diarist will wait until the MFI loan arrives and then use it to repay several different creditors.
Liquidity management is the second-biggest category by number of loans and third by value of loans. It too has ambiguities. A few Diarists like the security of having cash at home that can be used in any eventuality, and among them are some that deliberately take MFI loans for that purpose: they are the 'purest' examples of MFI loans taken for liquidity management. But more often, this category arises because of the disbursement timing of MFI loans. Bangladeshi MFIs have conditioned their clients to renew their loans as soon as they have completed repaying the previous one, so many Diarists take their MFI loans for no other reason than that the loan happens to be available. In some such cases we see our Diarists placing the loan money immediately into a savings account, sometimes at the same MFI that issued the loan: this accounts for the saving category in our charts. But in most such cases the loan goes into the ordinary daily spending stream of the household.
The most 'impure' examples of these liquidity management loans occur because of malpractice by MFI staff who put unwonted pressure on their clients to borrow. Sometimes they plead with the Diarists ('I'll be in trouble with my boss if you don't take a loan') but more often they threaten to discontinue the Diarist's saving account at the MFI (MFIs have become the best deposit-takers for poorer Bangladeshis because they offer easy-to-use monthly-instalment saving schemes that pay a good rate of interest). We recorded 10 cases where Diarists told us this had happened, and there may have been more.
The categories of acquiring assets, construction (mostly of homes), businesses (mostly small-scale retail), and migration (to work overseas) are a bit more straightforward. In almost every case we see a large outlay for these categories within days of the loan's being taken. These are the categories that may be somewhat under-represented in our charts because some of the repay debt category loans were really refinancing these categories. Note, however, that in many case only a fraction of the loan goes directly to this category. This is often because MFI loan values are based on how long the client has been borrowing and the quality of their repayment record, than on the amount of money needed for a particular expenditure. So some of the loan money spills into the daily spending stream of the Diarist (that is, it gets used as liquidity management). When we allocate a loan to a use category, we are saying 'all or most of this loan went to this category...'
On-lending of MFI loans is very common in both directions. Our Diarists may take an MFI loan and on-lend it to someone else, or they may borrow an MFI loan issued in someone else's name (in which case we include the loan in our analysis of MFI loans even though it is technically a private loan from the actual MFI borrower). Commonly, the sub-borrower gives the weekly loan repayment and interest dues to the real MFI borrower and will often also donate the small weekly compulsory savings amount as a way of expressing thanks for the use of the loan. (As many observers have noted, a kind of 'on-lending' often goes on within households, because MFIs prefer women borrowers - whom they find easier to manage - even though many women hand the loan to others in the household (often men) to use. This is often though not always true among our Diarists).
There are a few other categories with a small number of cases which we have not highlighted in the charts. One of them is consumption. In a few cases Diarists deliberately took MFI loans for consumption - they may be preparing for a marriage feast, or want to stock up on rice. These are the 'tip of the iceberg' cases of using MFI loans for consumption. Much more consumption spending is captured under the liquidity management category and, as we have seen, fractions of loans mainly used for other purposes also end up being used for consumption.
How many loans did each Diarist take?
The chart alongside shows how many MFI loans were taken by each of the borrowing Diarists, and is colour-coded to show which income quartile each Diarist household belongs to.How many loans did each Diarist take?
The two Diarists who took the most MFI loans (32 and 23 loans) are from the highest-income quartile: in a later post we shall look at them in detail. We will also be looking in detail at why one of the poorest Diarists, from the lowest-income quartile, took as many as 15 loans.
MFI loan-taking was most prevalent among the highest-income quartile and the 3rd quartile Diarists. 13 of the 15 Diarists in the highest-income quartile took 129 loans between them, and 14 of the 15 Diarists in the third-quartile took 109 loans between them.
By contrast, only 8 of the 15 second-quartile Diarists took MFI loans, taking just 31 between them, while 11 of the 15 lowest-income quartile Diarists took 47 loans between them.
To understand the big differences in the number of loans taken we will look at individual cases, and examine whether they fall into a set of 'typical' patterns. We start, in the next section, with Diarists who took MFI loans in the way that the microcredit pioneers hoped they would.
Microcredit's early norms
Microcredit's early norms
The Bangladeshi pioneers of microcredit offered their clients (whom they called 'members') loans that were repaid over a year in small weekly instalments. These loans grew in value a little each year in rhythm, it was hoped, with growth in the small women-owned businesses that loans were intended to finance. Each pioneer hoped that its members would be loyal to them, and loan officers spent time explaining to their members why taking loans from more than one MFI would be risky and should therefore be avoided.
As time went by, these 'norms' were eroded. The growth of the microcredit industry gave clients many MFIs to choose from (as we saw above, today there are 27 MFIs serving our 60 Diarists). The clients got cleverer at dealing with the MFIs and the MFIs had ever less time and ever less need to enforce these norms: they settled for repeated borrowing with good repayment rates and turned a blind eye to multiple accounts and 'inadvisable' uses of loans.
Among the 47 MFI borrowers in our sample, none conform fully to the early aspirations of the lenders. Although 29 of them borrowed from only one MFI, 10 of the 29 took only one loan and a further 4 took only two loans. Only 7 borrowers borrowed each year from a single lender, and among them most used at least some of their loans for other than business purposes, or did not increase the value of each succeeding loan.
In the next section we take a look at the Diarist whose loan-taking was most similar to the early norms of microcredit
A loyal client
A loyal client
Diarist 32fuf, whom we'll call 'Fuf', is the widow of an illiterate rickshaw-puller who died in 2008 and is herself unschooled. Since then she has worked as a day labourer and then took a job in a garments factory in late 2021. Her household falls into the lowest-income quartile of our Diarists. She has a married daughter, and two sons, one of whom, a barber, lives with her along with his wife and child. They are Hindus. She didn't use MFIs, fearing that she wouldn't be able to make the weekly repayments on time, but in 2014 her son persuaded her to open an account at ASA, Bangladesh's third-biggest MFI. We got to know her in November 2015 since when she has taken an ASA loan each year, as shown in the Table. She has never borrowed from any other MFI.
This record looks like the raw material for one of those heart-warming stories, loved by MFIs, about the power of microcredit. "Fuf, taking a fresh ASA loan each year, was able to repair her home, bring safe drinking water into her house, set up one son as a barber and another as a rickshaw driver, and is now working on the marriage of her second son. Asked whether her life is better than before she started taking ASA loans, she smiles in agreement..." But such 'Juanita stories' (named after the pseudonymous heroine of many such tales) depend on isolating loan-taking from the rest of life. You may have already wondered how was she able to buy a 50,000 taka rickshaw with a 25,000 taka loan. And what's this about an account at a Co-operative? Our diary data enable us to dig deeper.
Although ASA is her major lender (responsible for 89% of the value of loans she took and 94% of the loan repayments she made since we started tracking her), her borrowings were much smaller than her savings. For every taka that she borrowed and repaid at ASA she saved and withdrew three taka elsewhere.
Fuf has two main savings partners. She is a life-long member of her community's Annual Savings Club (or ghoreya), and she has been saving at a local Co-operative since it opened in 2002.
At the Savings Club members save a small amount each day and at the end of each year take back their savings, a practice which keeps the club honest, since if members didn't get their savings back they would abandon it. Since we started tracking her in late 2015 she has saved 31,320 taka there, and withdrawn 42,930. She earns interest from members who borrow the money, an entitlement she has never herself used. The local Co-operative offers a daily saving facility and Fuf has saved most days since it opened twenty years ago, her total savings there since late 2015 amounting to 443,028 taka and her withdrawals to 312,400, leaving her, along with accumulated interest, a healthy balance. Again, she can borrow from the Co-operative but has never done so.
To see how her ASA loans relate to her savings, we will review our account of the spending associated with each loan as shown in the Table.
Sometimes, the link between the ASA loan and a large expenditure is strong. For example, the first two loans in the table (20,000 taka in July 2016 and 22,000 taka a year later) were taken with house repair firmly in mind (as Fuf told us) and were spent quickly on building materials. That doesn't mean that ASA loans financed all the household's house repair spending: there were other substantial outlays funded from income as it came in and from savings withdrawals from the Co-operative. Nor was house repair the only big project Fuf had on her hands at the time. In mid-2017 she was still juggling the costs of her first son's marriage, which had taken place back in 2015. Just after she took the 22,000 taka ASA loan in 2017 her son's father-in-law finally paid 21,000 taka of the dowry he had promised them, which allowed Fuf to retire a long-standing and worrying debt that she had at a local jewellers for gold ornaments given to her daughter-in-law.
When MFIs emphasise, in their stories, how loans promote businesses, they may understate the role loans play in non-business but vital household and health management. For example, we noted that Fuf had paid a rent advance on a barber shop from the 22,000 taka ASA loan in 2018, and indeed she had justified her loan application to ASA by stressing this business use. But the rent advance was only 5,000 taka and on the same day she paid 7,000 taka for medical tests for her son and daughter-in-law.
The part that the 25,000 taka ASA loan of December 2020 played in the buying of a rickshaw for the second son is a good example of how loans can be used to boost reserves held in savings accounts. The spending need that Fuf had on the day she took the loan was for another rent advance for the barber shop, this time of 10,000 taka. She paid that and a week later put almost all the balance of the loan into her Co-operative savings account. She then waited until the younger son got a final wage payment from his old job (as a window installer) before withdrawing 65,000 taka from the Co-operative and paying, in all, 68,000 taka for the rickshaw. Fuf had successfully used her ASA loan to further her savings-led goal of buying the rickshaw.
Dreaming about money
There is one more tale about Fuf we'd like to tell. One day in March 2018 she reported that she had had a dream in which her deceased husband was calling her. She interpreted this to mean that she didn't have long to live. Her first thought when she woke up was about the money she had saved between 2010 and 2015 when she had regular work repairing mud roads, money that was still tied up in a pillow and hidden in her house. Should I die, she thought, the money might get overlooked or stolen. She discussed the matter with her astonished son, and they decided that she'd better deposit the money in the Co-operative account, which she did, in four tranches over the next few days. In all, there had been 100,000 taka, by far the biggest single sum of money we have ever seen her handle. Dreaming about money
There remain some mysteries about Fuf's behaviour. If she had such large reserves of cash at home, why did she fret about her debts - as she did, for instance, over her debt to the jeweller? Was it perhaps simple loss aversion? Did the pain of letting go of her savings outweigh the gain of release from her debt?
The story is chastening for us, too, as Financial Diary practitioners. We had spoken to Fuf every day for well over two years before we learned about her biggest financial asset. But her son, who shared a home with her, didn't know either.
The photo shows Fuf outside her repaired home, with our Data Collector Shamol
A very different kind of MFI client
A very different kind of MFI client
Fuf handled her MFI loans much as her MFI, ASA, prefers. She opened an account with no other MFI, took one loan a year, repaid on time, and used some of her loan money for 'income generating' uses (the barber's shop, the rickshaw). Our second case study is of another illiterate woman from a poor background, but whose relationship with her MFI has been quite different.
Diarist 20rof, who we'll call 'Rom' is now in her mid-fifties and runs a household that includes her husband and her truck-driving son and his wife and baby. She is shrewd, streetwise, energetic, sociable and ambitious, and dominates her family. Twentyfive years ago she opened an account at the MFI Grameen Bank where she has been extremely active. Indeed, we can tell much of her story by looking at her history with Grameen. The chart shows all the loans she has taken since we started tracking her in mid 2015.
In that time she took 54 loans. 20 of them were 'howlats' - interest-free loans taken from neighbours and relatives. Most howlats in our data set are small, but Rom took unusually large ones, averaging 34,000 taka and ranging up to 100,000. This is because she rarely took howlats to cover small expenses, focusing instead on household projects like sending her son overseas, arranging her three daughters' marriages, farming, buying land and building a home, buying livestock and, most often, buying saris that she resells around the village. Twice only she took informal loans on interest: 25,000 to help send her son overseas and 100,000 via a 'paddy loan' - a device through which rice farmers finance their sowing by selling the crop upfront. Most often she took MFI loans, and like Fuf she favoured just one partner - in her case, Grameen Bank. She took 32 loans, worth a total of 1,402,725 taka, from Grameen, most of them in the years before the pandemic. On those loans (and on a couple she took before we started tracking her) she has repaid 1,670,270. Rom, like Fuf, is a good repayer of MFI loans.
Grameen, like ASA, normally issues one loan a year to each client. Rom took 32 Grameen loans in 5 years by being aware of some additional loan types that Grameen has introduced, and by exploiting loopholes in the Grameen system. As well as taking an annual loan, she 'topped-up' their balances as often as she could - restoring her outstanding loan to its original value once she had repaid half of it. She also took 'cow loans', shorter-term balloon-repayment loans meant for clients wanting to rear a cow to sell at the Eid festival. These two types of loan were designed for particular uses and those uses are supposed to be monitored, but Rom used them for her many projects, and her longstanding good repayment record meant that the Grameen loan officers were happy to turn a blind eye. Rom is also skilful at taking 'proxy loans': persuading other clients to hand their own loans over to her and in return making the repayments and, sometimes, the compulsory savings deposits into their own accounts. Finally, by sheer force of character, she persuaded the loan officers to overlook another rule and allow her own daughters into the 'Centre' where Rom is registered. The daughters handed their loans over to Rom to use and to repay.
Rom has not been as keen a saver as Fuf, but doesn't neglect her savings. She has an accumulating savings plan at Grameen, started in 2015 and now worth just short of 50,000 taka. As the chart shows, her borrowing has slowed since the pandemic started. She says that she now finds making loan repayments more stressful than when she was younger, and may from now on rely more on savings than on loans to create the lump sums she needs. Like Fuf, Rom knows that she pays interest on her MFI loans but she doesn't know how much she pays.
Loan repayments...
Loan repayments...
Most of the 317 loans taken by our diarists have been repaid (or are being repaid) within the agreed term of the loan - usually around one year but sometimes two years. Repayment is by regular instalments, mostly weekly but monthly in the case of the MFI BRAC*. The instalments include both principal and interest, and are collected along with complusory and voluntary savings deposits. Diarists who borrow try hard to comply with the regular instalment schedule, and often succeed: our typical MFI-borrowing Diarist achieves a 90% or better compliance and a few manage 100% compliance, loan after loan.
This is a remarkable record, especially in light of how the instalment payments are made. Unlike, say, mortgage lenders in developed countries, MFIs do not debit bank accounts held by borrowers. Few of our Diarists own transaction accounts at banks, and in any case MFIs do not offer such a service. Moreover, Diarists (with two exceptions - a government-employed hospital worker and a bank-employed ATM guard) - do not receive regular incomes via bank accounts. Some Diarists get remittance income from overseas via their banks, but these payments are intermittent. Diarist income is typically received in cash and is unreliable and of variable value. They pay their MFI loan instalments, in cash, to MFI loans officers who visit their villages, and managing these regular outlays is just one - though an important one - of the many money-managment tasks that Diarists have to pay attention to.
MFIs have been at work in Bangladesh for more than forty years, and in our research area for more than thirty. This long history has given MFI borrowers plenty of time to learn how to manage regular MFI repayments. Their methods remain simple, rooted both in personal discipline (most Diarists try to keep cash reserves in the home) and in the collective economy of their community (Diarists commonly borrow from each other to meet needs such as MFI loan instalments). In the next section we look at some individual cases.
As we saw above in the case of Rom, Grameen Bank also offers a few loans with three-month terms, a few loans with all-at-once 'balloon' repayments at the end of the term, and also allows borrowers to 'top-up' their regular loans around half-way through the term.
...and loan repayment difficulties
...and loan repayment difficulties
Diarist 10afm, who we will call Alf, breaks bricks by hand for a living, supplementing this with some faith healing and his wife's maid-servant work. For this 5 person household, income is low - as the chart shows. The best month so far this year netted them only 8,600 taka (around $100 at market rates).
Alf has long been in the habit of managing this small income by using MFI Grameen Bank loans, and 'howlats' (interest free loans from friends and neighbours). He is rarely able to keep reserves at home (in 2022 the sums he held have varied between 37 and 7,617 taka). They hold a little savings at Grameen.
We pick up his story when his wife took the latest Grameen loan, of 50,000 taka, in February this year. They immediately repaid 30,000 taka of private debt (mostly howlats) that had accumulated since the last big Grameen loan.
Since then, they have been more or less up-to-date with the weekly Grameen loan repayments, missing some instalments and underpaying some others, and then catching up. To do that they have taken more howlats, often on the day the loan repayment is due. They repaid a little of the howlats after taking a smaller 'proxy' loan via another Grameen borrower in July.
The cycle they have got into looks as if it will continue.
Diarist 53rkf, who we call Rok, has had less success than Alf in managing MFI loans on a small income. Her cash-flow problems are more acute. Her husband was working in Saudi Arabia and she was using remittances from him, and MFI loans, to pay the debts incurred to send him there. But he had to leave Saudi in May 2019 for lack of a legal work permit. When he came home (to ride a rickshaw that they took another MFI loan to buy) he confessed to Rok that he had many more debts, incurred in a loss-making tea-shop he was running before he went abroad. His health declined as did his ability to earn. They tried to borrow their way out of trouble: Rok has opened accounts in an astonishing twelve MFIs altogether*, some more than once. She is educated, her home looks respectable, and she has had surprsingly little difficulty in getting MFIs to lend to her. Soon after her husband returned, they had debts to MFIs of over a quarter of a million taka.
ASA, BRAC, BURO, Dum Foundation, Grameen, Pidim, Shakti, SSS, TMSS, Valuka, Al Arafa, and Islami.
Ironically, the COVID pandemic helped them. For many months in 2020 the MFIs were closed, by order of the government, and after they re-opened it took them time to recover their old ways. Rok and her husband took advantage of this, and slowed down their instalment repayments to MFIs, or even stopped them altogether - especially at MFIs where they had taken 'proxy' loans in other borrowers' names (instead of repaying such loans regularly, Rok has simply left the legal borrowers to service the MFI loans and has told them she'll repay them whenever she can).
The table shows how the various MFIs fared. We do not show the proxy-loan MFIs since they have generally been repaid by their legal borrowers. We are left with nine MFIs. The big loser is SSS, since Rok has paid them nothing since 2019 but owes them 84,900 taka. Since then Rok has taken no new MFI loans other than 20,000 taka from Valuka in 2021. Valuka is one of only two MFIs with whom Rok maintains transactions, the other being Islami to whom she owes 34,350 but has repaid very little this year. The table's balances show that in all cases other than SSS and Islami, Rok has repaid, since 2017, more than she has taken in fresh loans: this is because the huge 2018 loan of 270,000 taka from SSS enabled her to repay some older loans she had taken from them before 2017.
Diarist 17atf, who we call Ani, is a conscientious woman who struggles to maintain life in a household where her much older husband, and her son, have both been work-shy. Since we met her in 2015, we have seen her try to juggle MFI loans to make ends meet. She joined many MFIs, then closed the accounts when things went wrong, and then re-opened them. Until recently she was using loans from four MFIs - Pidim, Shakti, Al Arafa, and BURO, and she was finding repayment very stressful. She missed many payments and was lectured at by the Loan officers. She often had to rely on her own natal family, taking many cash gifts from her father and from her married daughter.
But enough things have changed to cause them to revise their use of MFIs. Ani's father has been sick and unable to work and since January 2021 has not gifted any cash at all to her. This removed a prop the family had been relying on. Motivated by this and by the need to arrange the marriage of his youngest daughter, her husband has worked harder. In particular, he put more effort into raising cows for sale, and in May of this year they sold one for 120,000 taka, a record for them. And as with Rok, the COVID pandemic had an effect: the closure of the MFIs for several months showed not only that households like theirs could get by without MFIs, but has also cast doubt on their reliability. Her household has become more appreciative of Ani's skills as their money manager, and have supported her efforts to reduce their exposure to MFIs. As a result, she has not borrowed from MFIs since November 2021 and has progressively reduced the number of MFI accounts to just one - BURO. Her repayments on this final BURO loan have been made on time and the loan is nearly paid off.
She hasn't yet told us whether she plans to close the account once the loan is fully paid. So will Ani move to a new MFI-free life? Or will she, as she has done before, re-open another MFI account when some need strikes her family? We shall of course continue to monitor what she does.
Stop press: on 21st November 2022 they took a 20,000 taka loan from MFI Pidim to repay a very old Government-run MFI loan: you can read more about this on the 'Life Day-by-Day' page.
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