Unable But Willing to Pay
Recently while visiting Naomi, a home brewer in Western Kenya, a customer came by to ask for Ksh 20 worth of liquor. He quickly gulped down his brew and took out a Ksh 1000 note from his pocket to pay. Naomi took the note and told him, “Go look for Ksh 20, then come back for this.” When he left, she explained that many customers come with large bills and she often doesn’t have change. They end up taking the liquor on credit and don’t pay their debts very quickly. She’s learned that it’s better to hold the bills than to accept a promise of future payment.
This got me thinking: In the world of low income Kenyans—a world in which the everyman’s fortunes change faster than the weather—what matters in terms of credit worthiness is not so much the ability to pay, but the willingness to pay.
Ability to pay is hard enough to assess. Certainly, income matters, but few have formal jobs with measurable, stable income. And knowing how much income someone has does not always tell you how much is already spoken for in outside debts or for meeting social obligations. And those social obligations work both ways, also expanding some borrowers repayment ability well beyond what any well-trained credit officer might expect.
Judging willingness to pay can be even harder. Just where will a borrower’s debt to you sit on their long list of obligations, which nearly always exceed their ability to pay? Knowing that this is the question in the eyes of potential creditors, we find our respondents carefully managing relationships to open the door to a credit lifeline.
“Benson” takes part of his salary to his regular shopping spots at the end of every month, using that payment as an advance on the goods he might buy throughout the month. But, the money rarely lasts the entire month. When the advance is exhausted, he starts building a debt that he promises to clear again the next time he is paid. These agreements, now built on mutual trust, have endured many years.
“Valerie” has decided never to buy in bulk, even when she has the money. Instead, she buys her household goods in small quantities, daily at several different shops. She explains that this allows her to create strong relationships and networks with shopkeepers across the community, so that she can get credit from several different sources simultaneously. When they see you every day, they believe you will be back to pay.
The same principle applies to the realm of education—something for which Kenyans, understandably, often reach well beyond the capacity of meager budgets. Demonstrating their commitment to pay, respondents enable their children to stay in school while they, the caretakers, accumulate enormous debts to the school. As one respondent said, “Yes, I can always go and negotiate, but I can’t go with empty hands.”
Where there is no flexibility, for many, there is no service. Single mother, “Emily’s” nine year old son has been suffering with a severe intestinal disorder for six years, landing him in the hospital about once a year and causing him tremendous pain and weight loss. The doctors have recommended a surgery costing Ksh 10,000, an amount that has seemed far out of reach to Emily. While she slowly tries to accumulate the sum through her savings group, her son continues to suffer and to wait, because hospitals, unlike understanding shopkeepers and schools, do not.
Reader Comments (3)
I found Valerie's story the most compelling. She diversifies her shopping just to make sure she has credit options in times of need. How clever. I am sure she also enjoys saying hi to various shopkeepers. This is the interesting part of financial inclusion. We pretend "financial" is separate from social to make us all feel technical. We are just fooling ourselves with our own little pretenses. Most of us don't separate the daily hello from the bank account, unless of course, because the inclusionistas tell us we must.
Fri, January 10, 2014 | Kim Wilson
Thanks, Cate, for that article, and thanks, Kim, for that good comment!
Sat, January 11, 2014 | Paul Rippey
I'm inspired by Cate's story of "Valerie", who does not buy in bulk so she can maintain individual relationships with individual merchants and build trust. Consider this at the community level.
Our town in the US has kept out the "big box" semi-wholesale suppliers: no Walmart, Costco, Target or RiteAide. Instead we pay a bit more to support local farms and the businesses of our neighbors. In return for the loss of big "discounts", we gain a dense web of community connectivity. Since we live in an area of the Pacific Rim vulnerable to earthquakes and tsunamis, these connections, our strengthened local food supply, our growing resilience are far more valuable than saving a few cents today. A few cents for what?
Mon, February 3, 2014 | Carol
NB: Originally published January 2014.