Why isn’t he smiling?

Just a quick update on the watchman loan situation.

He came this morning, and we had a short chat…mostly because my Hindi is more limited than I’d like to believe. Memo to anyone raising little kids these days: BILINGUAL! Or at least, if you’re in HS or college, study abroad as much as possible and learn other languages. I should re-up on my Hindi classes but that’s another post for another day.

Anyway, I disbursed the 5000 rupee loan this morning, with the following terms (agreed to verbally):
1. Principal-only loan; no interest
2. Repayment moratorium: 12 weeks
3. Repayment schedule: 500 rupees per week for 10 weeks, starting September 9 with full repayment slated to be made by November 11.
4. “Any problems, any delays – just come find me.”

Technical stuff aside, I am also asking myself: why wasn’t my watchman smiling when he got the loan? Simple answer: it’s not a happy occasion. He doesn’t want to have to ask for a loan, and probably not from me. And certainly not to pay his daughter’s healthcare costs. He’s probably a little afraid – what if he can’t pay back on time? What if I tell his bosses or the building society?

It’s tempting to think of lending to the poor in terms of smiling recipients and empathetic lenders. Of course it’s more complex. People need money to smooth irregular cash flows or prevent unexpected shocks from sending them into a poverty trap. Loans to finance a small business are less common than “I need money because I need money.” And these loans may be less fun than entrepreneur financing…but they may be more important, from an anti-poverty perspective.

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About Rob

Twitter @robertkatz
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5 Responses to Why isn’t he smiling?

  1. Ashmeet Kapoor says:

    This is not a very uncommon situation in India if you have house help, but in your case slightly different as the guy is not on your payroll. Otherwise it’s pretty straightforward – take a loan, no interest, set a repayment time and deduct equal amount from the salary monthly.

    A situation that develops often is when you lend a few times for urgent need (in this case healthcare), over time you might be taken for granted. If the same guy comes back to you next time for a loan for something not that urgent, he comes with expectations (you’re the guy who has helped him 3 times now) and it becomes hard to say no. I’ve seen my family face this situation many times. It’s only 5-10k, but I think it’s spoiling more than helping the borrower.

    • Rob says:

      Thanks Ashmeet, for your perspective. I certainly don’t pretend to be unique! And I certainly worry about the spoiling factor. What is your advice for this situation? What would you do? Appreciate any thoughts!

      • Getting to this pretty late… but I would’ve do what you did. Regardless of whether or not the person is lying, I would go with “what if he’s saying the truth”. I don’t want to take not helping a needy guy on my conscience especially when giving Rs 5000 doesn’t affect me.

        But I don’t think if that is the best thing to do. I’ve become more of a skeptic about such situations due to some experiences I’ve had recently while setting up an enterprise in eastern UP… in particular dealing with the more underprivileged in villages. One example – I’ve employed them with a regular income, but at least once a week someone will show me a bill, or a doctors note, or just bring up in conversation how much they spent on medicines this week expecting me to pay, but why should I? These are cheap expenses even from their viewpoint. Then you look carefully into the accounts and someone has pocketed an extra Rs. 100. If this same person is to come to me one day in urgent need of cash, there is good enough reason for me to not trust him. But that “what-if” will probably make me loan him some money anyway.

        I do agree with you that such loans might be more important than entrepreneur funding, but ensuring repayment is the obvious problem (specially if you’re thinking of a scalable/replicable model). Perhaps you make them pay back in-kind like when you need manual labor for some task, or you put them in some supplemental income program and they slowly pay you back. In other words, the loan would be approved when the borrower (or someone from his family) agrees to work x hours in a supplemental income program of his choice. But then I haven’t really thought this through, and I can already see critics calling this bonded labor. Regardless, this could be worth exploring further.

  2. sminer says:

    What, no RSS feed? Don’t tell me I have to sign up via email…. :p

    PS – how are ya?!? Long time, no see. I probably owe you an email…

  3. kiva lender says:

    ah, I see my advice came late… keep us posted on the repay.

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