Over the next couple weeks I will be posting on several of the most salient lessons I’ve learned while living and working in Kenya over the past year. These lessons will be skewed toward what I am currently able to articulate and write about. Certainly many of the most profound lessons will be realized in later months and years.
The more I learn about the world, the more I find myself saying, “I don’t know”.
This lesson is, perhaps, half due to reading a book (Aid at the Edge of Chaos) and half from experiences.
The book should be an important book for anyone interested in a career focusing on international issues. It’s influence, however, may not be as wide as it deserves. The book, particularly the middle section, is kind of a slog. Ben Ramalingam introduces the rich but young history of complexity science, the study of complex systems such as ecosystems, traffic patterns, deep-sea oilrigs, epidemiology, etc. Ben’s point is that not only are political and economic systems categorically complex, so are the aid and development systems of providing information, aid, assistance, knowledge, and resources. His conclusions are important, I recommend the book, but only if you are seriously pursuing an ID career.
Saying the world is complex is almost cliché now a days. This lesson, however, bypasses the cliché, as a complex world is now a ‘jumping off’ point for me rather than a landing area. One story encapsulates this well:
One of the components of the program I was a part of was providing loans to groups of borrowers. We had $25,000 to loan out during a one-year period. Due to the experimental nature of our project we chose to give out loans on a term of 6 months. This would allow us to make adjustments halfway through our time with the money.
The first round was complicated by the nightmare that is the global money transfer system. Due to several mistakes along the way by accountants entering faulty routing and account numbers, it took about two weeks for the money (when I say money, I mean numbers recorded in a computer) to travel from the United States to our bank account here in Kenya. After we had the money we had to transfer chunks of it to several groups of borrowers who have their own bank accounts. Again, accountants made mistakes entering account numbers and two of the transfers were reversed. One time the money was “lost” in cyberspace with record of one bank initiating the transfer but no record of the other bank receiving it. All this eventually was ironed out, but delayed the lending by another two weeks.
The second transfer has just recently occurred. In the weeks leading up to the loan application deadline, I found myself sitting with several of the leaders of the savings groups. They explained to me why taking a 6 month loan starting in July is a less than optimal option for them.
For those who would use the money to invest in farming, the seeds are already planted and harvest will not begin until November. Any investment in farming at this point is not financial.
Due to this, and because Kitale is primarily agricultural, the majority of the other businesses from a medical laboratory to a women’s clothing boutique are currently in a season characterized by low sales numbers. Not generally an optimal time for investment for individuals who often provide for their family and run their business out of the same pile of money.
Furthermore, there is an added dynamic of group lending. We lend to several groups, which are officially registered and have a set list of individual members. These groups then provide financial services to their members. The groups all have different methods for loaning money, but generally individuals will not take a loan until they are ready to use it. One group leader told me he’s worried that if his group takes a 6 month loan now, the money will simply sit in a bank account for 5 months until the harvest season begins and then the group will be required to repay the loan (with interest) before the majority of their most productive season has completed.
There are so many surface level conversations about loans being inherently ‘good’ or ‘bad’. The fact is, both of these opinions are right and both are wrong. More money does not necessarily mean more money. In what season was the money given or loaned? What are the terms? Is it one time transfers or multiple smaller transfers spread out over a longer period of time? Group lending is often considered less risky than individual lending, but what are the dynamics of the group? How did the group itself originally form? More generally, what are the other options for credit available in the area? How does the ‘market interest rate’ compare? What are the terms and conditions of the ‘competition’?
This is why, the more I learn about access to capital, microfinance, and financial products for the poor, the more I find myself saying, “I don’t know”.
One of my favorite movie quotes points to this idea of ‘the more you know, the less you know’.
“Conviction, as it turns out, is a luxury for those on the sidelines…”
– A Beautiful Mind (2001)
I do not consider myself to be Hayekian, nor do I generally sympathize with Austrian Economics, this quote by F.A. Hayek, however, is really quite good:
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
– Friedrich von Hayek