Microfinance – Go Make It Better

Development happens in a handshake, not a fancy signature.

"This is how Microfinance should be: in united development; a client centered approach."

“This is how microfinance should be: in united development; a client centered approach.”

In many countries, less formal agreements are more binding than formal ones. Think about it: if you want to buy a car or rent something in the US, the standard practice is to sign a piece of paper that makes the transaction legally binding.

Oh, how unprepared that makes us for the rest of the world.

In China, pulling out a paper agreement right away is extremely inappropriate. In Spain, sealing business deals happens afterwards over drinks at the bar. Doing microfinance in Honduras means being aware of the context and understanding these subtle types of informal contracts.

That is exactly what I screwed up, week one.

“Would you like something to drink?” Melvin asked me.

“No, I’m fine really.”

“Would you like a snack or one of my pastries?”

“I really appreciate it, but I am fine thank you.”

“…okay then.” He seemed unsure.

It was only then that the alarm bells started going off in my head, but it was too late. I left without accepting any of his offers and made my way towards Villa Soleada.

Chilo gave me a look and I knew I had screwed up. We talked about it while we walked and I realized I had forgotten the lesson Santi, our first Program Director, had taught me before coming to Honduras: if someone offers you a refreshment, you take it. It is okay. That is how they welcome you and you build a relationship. Take it even if you do not want it.

I owe Santi a great deal. We’ve had good ties with Melvin and Elizabeth since 2013. La Ceiba has built up a strong working relationship with clients; no fees, no penalties, and no charges. We give all of our loans on the basis of relationship collateral. In many ways, we ground our entire business model on friendship and informal agreements.

The cons of this are sometimes obvious, but I can tell you from experience that when clients connect with us – and vice versa – the results are more impressive than any written agreement.

This is how Microfinance should be: in united development; a client centered approach. A foreigner does not get to expect something from you, lest they get to know you in your own context.

This is hard to accomplish, because it means running into the problems like the one I just described. To adapt to another culture, and work in it, we have to look like idiots at first and unfortunately step on a couple toes. I am realizing that development is not a headstrong pursuit, but rather a humble one.

My interaction with Melvin proceeded to bother me for the rest of the day, like a gremlin on my shoulder. I fumbled another interaction with a client and then got rained on going home.

It wasn’t until I got around to writing this blog that I really started to come to terms with it. Informal agreements are important and I have to give them their due attention. I tell myself ‘you just unhinged a relationship, but that is how development works.’

‘Go make it better.’

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