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How Does Microfinance Help Low-Income People (ARDY’s Case Studies)

Time:2009-05-15 14:18:34From:ARDY Writer:Li ShiBin (Translated by Jenni Click:
  

Case I: There are no such things as customers who do not repay their loans, only customers with unexpected needs.

Zheng ShangBin from GuangKoLiang Village in SanHe Town had a family of three and owns land about two-fifteenths of a hectare in area. His wife worked away from home, and his only son went to school in the neighboring town. His family was not well-off so, in order to change their quality of living, he borrowed 3000 RMB from the SanHe Branch of ARDY on July 17, 2007. He used this money to open a rock industry (harvesting rocks and selling them) with another partner. For the first two months, the repayments were normal, but later on Zheng ShangBin gradually had delayed repayments. Staff members went to him personally to ask about the delays. He replied, “I no longer have any more money. I have not received my income from selling the rock materials. Furthermore, taking a loan from you is too much of a hassle. Every couple of days, I have to turn in a repayment. In addition, my son needs to go to school and also comes back home every week for money. I just cannot handle all of this.”

After several visits and inquiries, staff members finally understood Zheng ShangBin’s situation. The reason he did not have any money was due to his failure in business management. Because the rock industry was a partnership industry, each member did not have a strong sense of responsibility. They only cared about production and sales rather than urging their customers to pay for their purchases. It was obvious why the finances did not work out.

Thus, staff members returned to Zheng ShangBin and helped him through his difficulties. They explained to him why he was facing this financial trouble, why ARDY does microfinance, why each repayment takes place every 15 days, etc. They encouraged him to put in the effort to plan out his management and arrange the funds effectively instead of following the traditional idea of working only when necessary. Also they clarified that he needed to be wise of his spending especially because he had to repay his loans. Regarding his rock industry, they proposed instructions like paying the deposit when ordering and paying only part of the shipping fee until the shipment is complete. Most importantly, they told Zheng ShangBin to work out reasonable payment plans with his customers and urge for payments in a timely manner. As long as Zheng ShangBin planned properly, he would not have any more problems. After listening to the staff member’s suggestions, Zheng ShangBin felt that they were reasonable and began to think of ways to compensate the two delayed payments.

With the passing of Spring, Zheng ShangBin’s partner decided to break the partnership and go outside to work. After a period of consideration, Zheng ShangBin decided to independently run the rock industry. Unfortunately, he did not have enough capital for cash flow and facilities. Because he had a history of missing his payments, he is unable to receive any loans from credit unions. Even though he felt embarrassed for quarreling with ARDY’s staff members, he still went to find ARDY and described his difficulties.

Understanding rock industry’s costs for infrastructure and rock materials and acknowledging the demand for these rock materials, ARDY knows this business will be profitable in the future. Therefore, ARDY’s staff members patiently explained to Zheng ShangBin the workings of microfinance and the requirements for borrowers. If he was interested in the rock industry, ARDY would support him all the way until his industry became profitable. However, he needed to follow ARDY’s regulations and rules. In the end, SanHe Branch again loaned him 3000 RMB on February 21, 2009. As of now, these two loans have been paid in a timely manner.

When returning his previous payment, he discussed his feelings over this experience, “Your (ARDY’s) idea is very good for you let borrowers feel financial pressure. Before, whenever I have some money, I will immediately go gamble. Now I do not gamble as much anymore because I need to consider how I need to repay my loans every 15 days and my family’s living expenses. I finally understand how to manage my money.”

Through Zheng ShangBin’s case, ARDY’s staff members, especially the new ones, deeply recognized one fact. ARDY is not just about microfinance. More importantly, ARDY is there to be friends with the farmers, to be able to have heart-to-heart talks with them, and to treat their problem as if it is ARDY’s. Only in this way can a microfinance organization develop in a healthy manner.

Case 2: Give a Chance to People in Adverse Conditions

Li BinFeng from LiMin Village in DaYing Town borrowed 3000 RMB from DaYing Branch of ARDY in September 2007. He used this money to buy food to raise rabbits. At first, when we conducted a profile inspection of Li BinFeng, everyone warned, “Watch out. Do not loan to this person because he will not return pay back anything.”

When we went to his home for better understanding, we saw that his rabbit farm had about 60 rabbits for breeding and about 100 marketable rabbits.  Staff members introduced ARDY’s mission and the goals, purposes, and loan policies of the local branch. Li BinFeng then described his shame. He was from another village (FuXinBeiYa Village) and came with his parents to stay with his maternal grandmother. During the construction of his rabbit farm, he borrowed from credit unions and private lenders. Unfortunately, because he invested too much money and had unstable production, his ability to return loans became difficult, earning him a bad name. Now he could not get any loans; yet, he faced the financial burden of 100 RMB/day for feeding and tending to his rabbits.

When he felt hopeless with despair, he received a flier from Hong Kong’s Millepede regarding a local establishment of an ARDY’s branch. Knowing ARDY was devoted to providing loans for the helpless population unable to receive loans, Li BinFeng decided to grasp this only chance. He applied for a loan and promised to pay back the loans on time.

During the inspection of the rabbit farm, ARDY staff members found 80% of the rabbits were pregnant. Recognizing the demand for rabbits in the market and analyzing Li BinFeng’s situation, they felt that giving him a loan could never be more appropriate. As long as he continuously sold his rabbits, paying back the loans should be no problem. Thus, they gave him this chance to change his bad name in the village, giving him 3000 RMB. Yet, to be careful with any risks, staff members constantly kept in contact with his family to understand the rabbits’ conditions, observe his living situation, and strengthen the friendship.

As expected, Li BinFeng never missed a payment. In December 2007, he took out another loan of 2000 RMB for further development. Right now, besides having about breeding rabbits and 300 marketable rabbits, he also has one pregnant pig, 4 100-kg pigs, and 36 ducks. His entire family believes that this microfinance method is good for it allows people to know how to be honest and how to improve their lives. Li BinFeng says that ARDY really allows poor people receive, use, and repay loans. Right now he is working to pay back the loans he has made from credit unions and private lenders, hoping to eventually change what others think of him.

Under Li BinFeng’s initiative, three more households have started rabbit farms in LiMin Village. He plans to educate them on how to raise rabbits so that they can also begin the path away from poverty.

Through Li BinFeng’s case, we think that changing one person can incur changes within the entire community. Giving someone poor a chance may in fact bring along a miracle. ARDY’s staff members believe that, in addition to explaining how to manage a family, educating the farmers about managing and planning financial affairs is just as important. Only through expanding the people’s knowledge can a community really develop effectively.

Case 3:

Luo BangYi and his family of five was engaged in the farming business in TianLiangZhai Village in SanHe Town. His land grew cash crops and just enough food to feed his family. Over the years, he also planted fruit trees such as mandarin oranges, pomelos, pears, loquats, grapes, etc. around his land. Unfortunately, because Luo BangYi did not know how to grow these fruit trees well, these trees bear little if any fruit. Luo BangYi invested quite a bit into these fruit trees but received very little income, causing him to feel panic.

Last August (August 2008), Luo BangYi participated in an activity led by the SanHe Branch. He knew that this organization can provide microfinance services and technique training. Thus, he went to the SanHe Branch to borrow 1000 RMB and to request for training on growing fruit trees. ARDY provided him with relevant data and VCD’s and introduced him to an experienced fruit grower.

During December, he prepared his fruit trees for winter under the instructions of experts and also went again to ARDY to get a loan of 2000 RMB to buy fish to put in his new fish pond. Through time, his fruit trees had reached full yield and bore many fruits. Under Luo BangYi’s calculations, his income from fruits was over 8000 RMB, and he still had some pomelos to sell. In addition, about 1000 kg of his fish was getting ready to be sold in the market, earning him 11,000 RMB at the very minimum.

              

                                         Picked pomelos and fruit trees in the home of Luo BangYi

This year, Luo BangYi once again borrowed 3000 RMB from ARDY to buy animal feed and a motorbike. He said, ”With this bike, it will be easier for me to buy fertilizer and sell fruits and fish. This year I used my income from selling my fruits to buy a television and a VCD to be able to play the CD’s provided by ARDY. Some of the money also went to buying a cell phone so I can call my customers whenever I need to.”

Case 4:

Xie SuZhen and her family of four lives in LiMin Village in DaYin Town. Her husband and daughter worked outside throughout the year, while she and her younger son stayed at home and tried to find ways to make their rabbit industry successful to make their lives easier. Last July (July 2008), when she did not have enough cash to use and was at a point of despair, she received a loan of 3000 RMB from ARDY. Her rabbit farm began to slowly improve and develop. Xie SuZhen started to raise pigs and ducks as well.

                

                                                      Chickens, ducks, and pigs owned by Xie SuZhen.

This May (May 2009), she owned about 100 breeding rabbits, 150 baby rabbits, 300 marketable rabbits, 3 200-kg. marketable pigs, and 2 new pigs to sell later. Yet, because of the 5.12 Earthquake, her newly constructed pig shack fell and destroyed her 2 new pigs. Furthermore, roughly 200 rabbits died due to shock. This earthquake destroyed her dream of becoming wealthy; in fact, she lost an additional 20,000 RMB from the recent economic crisis.

Xie SuZhen began to cry and wail. After a bitter cry, she wiped away her tears and reported her situation to the village committee, town government, and ARDY’s staff members, who came to investigate the post-disaster conditions. She became determined to start over with the help of microfinance. Xie SuZhen received 1600 RMB from the post-disaster subsidy given by the Narada Foundation to ARDY. This money that came from thousands of miles away made Xie SuZhen feel very grateful and gave her the courage to begin her life again. She went to the DaYing Branch to receive a 3000 RMB loan and bought 300 baby ducks, 100 baby geese, 8 baby pigs, and 2 female pigs. With these new animals and the other two remaining pigs, her home once again became lively again.

Case 5:

Wang YunXiu lived in TianRanHan Village in SanHe Town. When we went to her home, we discussed incessantly the changes microfinance has brought to her family.

Wang YunXiu had a family of four. Her husband taught at the village elementary school, her son worked outside, and her daughter was in high school. She said, “We live in a mountainous region with inconvenient transportation and ineffective outside communication. Our family relied mostly on my husband’s income. To change our present conditions, my husband bought a motorbike to earn a little money on the side by moving things for people during weekends. Unfortunately, because of a car accident, we did not earn any money; instead, we had huge debts, preventing us from even being able to receive any loans.”

Last June (June 2007), I attended an outreach activity from ARDY and successfully received 1000 RMB. I spend 700 RMB to buy a female pig and the rest on chickens and ducks. I felt that microfinance was a good thing. Every half a month, I would pay back 46 RMB (included interest) so only 92 RMB per month.

                                

                        Newly-renovated kitchen and new processing machine in Wang YunXiu’s home.

Everyday I watched my pig and the price of pigs in the market grow. After a discussion with my husband, we decided to begin to sell pigs because the pig market was good and we had a lot of land that could grow extra food to feed the pigs. Thus, on October 21st, I went to SanHe Branch to get another loan of 2000 RMB and bought another female pig and a fattened pig. This August (August 2008), my first female pig gave birth to 11 piglets, of which we sold 8, giving us an income of 3000 RMB. The other 3 piglets we raised for later. The fattened pig was also sold for 1000 RMB.

Before, the rice we ate had to be carried 2.5 kilometers away for processing, which was a huge hassle. When I sold the pigs, I bought back a small rice-pounding machine, grounding machine, electric windmill, and threshing machine to process the rice.

Originally, we did not have a chimney so there was always a lot of smoke bothering our eyes when we cooked. When ARDY’s staff members came to advertise their project, they recommended us to change our kitchen and our bathroom, which we did. Now our kitchen’s layout is good and our bathroom is very beautiful. My family is very happy with the results.

Through one year of participating in microfinance, I have deeply realized how much ARDY is our farmers’ best friend. Before, I relied on my husband, rented a place to live while leaving my own house empty, and did not cultivate my land. With any money my husband gave, I spend it. I was a very shallow person. Now, I have food and money. I am more independent as well. My family has two female pigs, five fattened pigs, and one pregnant pig. I was going to kill two pigs during New Year’s. Yet, through the financial training, we only killed one pig over New Year’s and sold the other one to earn money for my daughter’s college education.

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