Meeting People
Medha Wilson: Giving hope not handouts to female entrepreneurs in Southern Africa
In 2012, Mrs Mkonde borrowed £13 from the MicroLoan Foundation to expand her business (a single tomato stall) to help feed her eight children and pay for their education. She received training and business skills. Today she is an employer with a maize mill and ambitions to fulfil larger orders through warehousing and transportation.
This is one example of over 450,000 female borrowers who have been empowered to reach a family base of 2.3 million people. I sat down to talk to the MicroLoan Foundation's CEO, Medha Wilson, to learn more about microfinance, its scalability and some of its challenges as well as the broader causes of poverty. There is much grandstanding in the West about female empowerment but nowhere have I seen more impact than from the efforts of organisations like the MicroLoan Foundation. I learned a lot from this conversation and hope you enjoy it as much as I did.
You can learn more here: https://www.microloanfoundation.org.uk/
In 2012, Mrs Mkonde borrowed £13 from the MicroLoan Foundation to expand her business (a single tomato stall) to help feed her eight children and pay for their education. She received training and business skills. Today she is an employer with a maize mill and ambitions to fulfil larger orders through warehousing and transportation.
This is one example of over 450,000 female borrowers who have been empowered to reach a family base of 2.3 million people. I sat down to talk to the MicroLoan Foundation's CEO, Medha Wilson, to learn more about microfinance, its scalability and some of its challenges as well as the broader causes of poverty. There is much grandstanding in the West about female empowerment but nowhere have I seen more impact than from the efforts of organisations like the MicroLoan Foundation. I learned a lot from this conversation and hope you enjoy it as much as I did.
You can learn more here: https://www.microloanfoundation.org.uk/
Hello and welcome to Meeting People with me, Amol Pandey. Meeting People is a podcast where I have long conversations with adventurous, rebellious and sometimes courteous free spirits. Maida Wilson, thank you so much for joining. Thanks for sparing the time.
Speaker 2:Not at all.
Speaker 1:Well, look, I know you're an incredibly busy woman and a very important woman, so let's get straight into it. I thought I'd open by asking you about Mrs McConday and 13 pounds. To get us going, can you just tell us a bit more about Mrs McConday and 13 pounds?
Speaker 2:Yeah, mrs McConday is actually an incredible woman woman, one of the many clients that we serve in Malawi, and she sort of joined micro loan foundation which is the organization I work for in 2012, I believe. No, 2002, sorry.
Speaker 1:Wow, yeah so over 22 years ago. Yeah.
Speaker 2:And you know where we operate. Where Microloan Foundation operates is very much in the remote rural parts of these countries, in Malawi.
Speaker 1:So she's from Malawi. She's from Malawi.
Speaker 2:She sort of lives in the outskirts of the capital city which is Longue. So, even though Longue is a capital city, which is Longway, so even though Longway is a big city, to put things into context, you know, when we talk of the outskirts, when you go and visit some of those areas where these clients live, it's very, very rural. We're talking about dusty roads, ditches that we sort of drive through, etc. So Mrs McConday is a woman who lives there in the outskirts of Longway. So she joined Microloan Foundation as a client in 2002, as I said, she had an ambition to grow her business. She initially had a tomato stall Right to grow her business.
Speaker 2:She initially had a tomato stall Right and she had, you know, an ambition to expand that to something at that point in time.
Speaker 2:So she was selling tomatoes on the roadside, or in a village, on the roadside, yeah, and she had children. She had about eight children, I think, if I'm not mistaken and she wanted to send them to school. And she just wanted a loan to get started, to expand that business, to grow in income and to send her children to school and to be able to feed her family. So she started out in 2002. In 2002. Today, I think, she has grown that business to a little more than a tomato stall. You know.
Speaker 2:Initially, with the first launch, she was able to expand that tomato stall to include other products such as groundnut and maize, which is quite a common staple food in these regions. And over time that became a mill, you know, much larger mill, where she employed other members in the community, including men, and that's quite powerful, you know. And she's been a client of Microloan throughout this period and with every cycle cycle she's been able to get a larger loan amount because her ambitions have grown, her needs have grown. But she's also equally demonstrated that she has been successful in investing that money into that business, growing that business so she's credit worthy now, absolutely and that's part of how we operate.
Speaker 2:You know clients come in. One loan of 13 pounds is not going to change their lives, but it's that sort of consecutive growth that you see with loan amounts and us measuring that impact that it's having on clients that leads to long-term change.
Speaker 1:So can I ask, is it even a challenge for a lot of these people to even know that they can get a loan, that a loan as an option exists? Because I'm guessing a lot of it is part of education, part of the challenge where you know, I want to get out of this rut and what do I do? How does she know that the option of a loan existed at all and that she would even be? You know, a lot of people have sort of what we call here in the West kind of imposter syndrome, right.
Speaker 1:Where why would I even be? I run a tomato store. Why would anyone give me any money? Is that part of the challenge? Is kind of making people feel comfortable with approaching you absolutely.
Speaker 2:I mean, you've hit the nail on the head in these countries. You know we're talking about gender equality, um the stats for gender inequality in these countries is pretty grim so you only lend to women just to clarify yes, so to, we lend to women.
Speaker 2:That's very much our mandate and our mission. But that's driven by the fact that women are less likely to be able to get a loan from a larger financial institution. They're more likely to be illiterate, they're more likely be engaged in unpaid labor and so therefore, with the eyes of formal financial institutions, less credit worthy. So if you think of a traditional bank, you know you and I as customers of a bank the customer goes to a bank. But if you think about microfinance and the context that Microloan Foundation operates in, we go to the customer. Yeah, so it's a very labor-intensive process. Of course, you know, with the advent of tech and all of that, you know we're changing some of the time.
Speaker 1:The cost of loans is coming down.
Speaker 2:Yeah, the cost of operating is coming down, which is a positive thing, but we have what is very much a high-touch, high-tech approach currently. We don't want to lose that high-touch aspect and that's because there's a lot of education, training and getting to know the client that goes in before onboarding them as clients of Microloan Foundation. So when we go into these villages there's a series of sessions that we conduct with the community. These villages work with a traditional village head. We work with the village heads to introduce what Microloan Foundation does and we explain our services not just to women but to others, and we also say why we lend to women. We can get to that later, but part of these training and information sessions is really about telling women that you do not need to even have an existing business to access a loan. We can help you in taking that first step Right.
Speaker 2:And if you do have a business, we can give you a business loan to expand and grow your business. And we talk about how we operate as well, because, if you think about it, this concept is probably very new, especially to the women who've had no exposure to the outside world. So we lend to women in groups of five and that's very much keeping with the traditional norms and the community model that already exists in these areas exists in these areas. So we're saying you don't even need a collateral to take on a loan which traditional financial institutions would have asked for. So we're saying you don't need a business, you don't need a collateral, what you need to do is borrow in groups of five, so each of the five members guarantee each other.
Speaker 1:Right.
Speaker 2:And that is essentially the collaboration that gives you redundancy as well.
Speaker 1:Yes, and I guess there is a kind of what's the word I'm looking for A peer group pressure of some sort to kind of enforce repayment. Well, not enforce, but encourage repayment.
Speaker 2:Exactly. Amongst the borrowers Borrowers yeah, so that works very well and that's translated into really high repayment rates. I mean, we're talking about 97, 98%.
Speaker 1:Wow, okay, I would have thought they'd be much lower, so that's interesting.
Speaker 2:I don't think many commercial banks can boast of such high repayment rates.
Speaker 2:And I think it's a combination of the group model and these training sessions, because we're providing financial literacy and business skills training to these clients, like I said before, onboarding them. But we reiterate these concepts at every repayment cycle, so every month. So it's done frequently enough for them to understand these concepts, to become familiar, because reiteration is really, really important when concepts are new and it's about repeating that process over and over again and that's what leads to them taking, you know, having a little more confidence in themselves. A lot of women, to your point, deselect themselves because they think we're not creditworthy, because, I don't know, we don't own a mobile phone, because we get a, you know, loan now using mobile money or, uh, we've never run a business.
Speaker 1:So it's also increasing that sense of confidence and agency that we see over time so let's take a step back then, because obviously people listening now will be quite clear that you work in microfinance uh, what is? What? What is microfinance to you? Where is it? Uh, what is good microfinance and what are you know some misinterpretations that may be out there about it that frustrate you, and what is your interpretation of it and how you practice that?
Speaker 2:Okay. So microfinance to me is essentially providing access to financial services and non-financial services, such as the training that we talked about, to people who would not have access to traditional forms of finance, so to the underserved, to people who are typically not, you know, on the radar of big banks and other financial institutions. And I think that's been the primary goal when microfinance you know this term was created and coined. That was essentially how we looked at it. Over the years microfinance has evolved. You know. It started very much from donor-funded to now very commercial. You know, we are seeing, we've seen the whole spectrum here, because we have NGOs operating in the space, but we equally have publicly listed companies doing microfinance, especially in the Asian, Latin American markets that are a little more mature. So there are misconceptions, but also there are models of microfinance that have failed the end borrower, because there's been significant mission drift, largely driven by, I want to say, commercial capital, which has led to these decisions being okay, we're serving some of the most underserved clients. But now, because we have an investor demanding X amount of return, we need to now move our focus to something more lucrative Lending to a person down the street in the capital city or an urban city like Le Longueuil or Blantyre in the Malawian context, is easy. It is much harder to go and reach these rural clients and, like I said, it's labor intensive, it's more expensive. Yeah, so, ultimately, I think you need to do what you say on the 10, basically. So if you say we're here to serve the underserved, then you need to do that. But there are other forms of microfinance who want to serve the urban population and there is a need for that too. Um, but you have to be very, very clear as to what you stand for.
Speaker 2:And we have seen microfinance institutions, you know, engage there's been a lot of, I think, negative press about it in the last couple of years where we have seen that actually microfinance has failed the end borrower.
Speaker 2:You know it's caused more over-debtedness. You know client protection principles have not been adhered to and microfinance institutions have been just pursuing higher returns. We're not saying this is untrue, but we're trying to say let's segregate this and look at the data. And actually there was an exercise maybe I want to say two years ago now by this organization called 60 Decibels, which we participated in last year. In their index they created the first ever microfinance index where they listen to the voices of clients. So it's an independent organization going and listening to voices of clients and hearing from them as to how that's impacted their lives and overwhelmingly we found there was a lot of positive noise being made about microfinance and how that's actually led to better outcomes for clients. So we really need to understand the context when we look at this. You know it's not like a blanket approach where you say microfinance is very good or very bad and there are different models that exist out there.
Speaker 1:Well, I think you know charity, for example. There's good charity, there's bad charity, it's a broad brush. Ngos there's plenty of scandals happening with NGOs using funding badly to kind of enrich themselves, and I think I'm sure that bad practices will exist in a sector that's as burgeoning and flourishing as microfinance. It sounds like if the start of microfinance is the history from what you're saying, it was a kind of philanthropic thing and then it's commercialized over time and part of the challenge is that as you get more and more commercial, you get more and more stakeholders that need kind of incrementally larger returns, and so you, you get a bit of mission drift and start placing safer and safer bets.
Speaker 1:But the thesis, as far as I understand it, is you've got a cohort of people who are very credit worthy. They just don't know it and the only access to capital they have is informal, through money lenders, money like bad people you don't want to borrow from and they're and they're, they're unserved by formalized banking because it's just not as developed or um. So you guys are coming in and effectively you know finding credit worthy people and it's also it sounds like once you've got a customer, their repayment rates are good and they can scale. So the customer acquisition might be high cost but actually over time they become the lifetime value of that customer. You know, in startup world they call it the ltv cac spread.
Speaker 1:I don't know if you use it in microfinance, but the lifetime value of a customer has to be greater than the customer acquisition cost, otherwise you don't have a viable business and it sounds like actually, um, that is possible, but you've got to kind of stay small. Is there like a? Is there a scalability problem, in a way that if you were starting out as a microfinance lender, the temptation is just to go bigger and bigger and bigger and then forget the initial and make safer loans to people in the city? Is it a scale issue or do you think you can do this scalably whilst retaining that kind of core mission?
Speaker 2:I think scale is really important and I'll get to why that's important in a minute.
Speaker 1:But I just wanted to give you and also is what I said complete bullshit. So you can correct me on any of that as well.
Speaker 2:So scale is really important to us. Our mission is to serve the underserved, so the more we can do that, the better it is, the better we're fulfilling our mission. So I think if you look at Microloan Foundation and where we started, it was Peter Ryan, who's our founder. When we started it was essentially a man, a loan officer, on a bicycle going to a village giving a loan to a group of five women. It worked and over time now we have close to 90,000, 100,000 active clients across three countries. So it's been a journey. Countries, so it's been a journey.
Speaker 2:We have quadrupled our total assets in the last four years, which has been a significant achievement for us. And what that scale has enabled us to achieve is resilience, because we work in some of the most fragile economies, very volatile markets. I mean Malawi, zambia, zimbabwe. These are not easy markets to work in and that's why you can't really compare microfinance in the market like India and Cambodia to some of the sub-Saharan African markets which are extremely tricky to navigate. But what scale has offered us is a little bit of resilience, because when you grow in size and you have these shocks, you're able to withstand those shocks better and ultimately you're able to serve your clients better.
Speaker 2:The demand is significant in these countries. So when we're talking about scaling, you're not saying I don't think we have a problem or shortage of clients needing access to finance if that makes sense at that bottom of the pyramid level. So we don't necessarily have to go looking in larger cities because there's plenty to do in the areas we operate. You know we've barely scraped the surface. In the countries where we work in Malawi, zambia, zimbabwe close to 70% or 80% in some cases of the population live below the international poverty line of $2.50 a day. I mean we're talking 18 million, 19 million population in each of these countries.
Speaker 1:I mean that itself is a big customer base.
Speaker 2:It's a big customer base, so we don't have to go looking for larger loans, or more what we call small and medium enterprises, which are one step above, to get that scale. We can get the scale just by operating within our existing branches. Having said that, though, if you look at the case of Mrs McConday, who we talked about when we started this conversation, she's somebody who's been with us for over 20 years. She's grown with us. Her loan today, her loan size today, is roughly around $2,000. So she started off with 13, sorry, 13 pounds.
Speaker 1:So now it's about you know, depending on what the exchange rate is, Many multiples of 13 pounds, let's say so.
Speaker 2:There is an argument to say has she outgrown that traditional group of five model and is she now in a position because she's now set up an enterprise, a flour mill, in that little village outside of the Long Way where she employs other people, it does become more like a small and medium enterprise SME as we call it in microfinance, and this is something that we're grappling with at the moment to say does the institution also grow with some of these clients, because there's not a ready-made market where we can hand her over to where?
Speaker 2:we say okay, can this bank now take her on? There's still that missing middle.
Speaker 1:And you've done all the work. You know the customer. You've done your KYC.
Speaker 2:Absolutely and be a real shame if we now left her in the lurch to go look for a loan and she can't find one because she still doesn't, you know, take the boxes of a traditional financial institution. So we are actually piloting, you know, different products where we can perhaps adapt to the needs of our clients as they grow. Our core business, however, is going to be like I said, there's plenty in the bottom of the pyramid, there's plenty to be done with $25 loans or $50 loans, $100 loans, and that space is still the demand is very, very high. So that's always going to be our core mission, at least for the foreseeable future. But there is now room for us to think about. How do we evolve, you know, with some of our clients as they grow in size and scale?
Speaker 1:So one of the problems that you alluded to with the microfinance industry or sector is this shift away, this commercialization challenge. So do you see yourselves as lenders, or as a for-profit commercial institution that happens just to be lending to a certain part of the market? Or do you see yourselves as philanthropists?
Speaker 2:So there's a little bit of a dichotomy here in our structure, because we were set up as a foundation here in the UK, so charity status but in each of these countries where we operate we are structured as a for-profit entity and the primary reason for that is because we're regulated by the central banks in each of these jurisdictions. When there was a lot of bad press, I think back in 2010, particularly in India, there were farmer suicides and it was called the Andhra Pradesh crisis in microfinance it was almost like a wake-up call to all the regulators to say, hey, the sector is largely unregulated. What can we put in place to improve the controls of how lending is done, what practices lenders are adopting?
Speaker 1:Can you just touch on what was happening in Andhra Pradesh to kind of highlight this? What was the issue?
Speaker 2:It was sort of over-indebtedness problems, so people were getting multiple loans that they were not able to repay and then ultimately, with institutions driving more towards the commercial side of things, they were using very harsh practices for collection methods. When we often say in microfinance there's no bad customer, there's only a bad loan. So most of the time when you experience defaults it's because you, your staff internally, haven't done their KYC, haven't followed due process in approving that loan in the first place. So I think with rampant growth, you know, there was back then there were institutions going for listing on the Indian Stock, on the Indian stock exchange, so the pressures are very different. And then that led to, you know, over indebtedness amongst the borrowers and extreme pressure on repayment when clearly those loans should not have been made in the first place because they were not credit worthy for that size of the loan, for example I really like that.
Speaker 1:There's no such thing as a bad customer, a bad loan, because you know and here's where my kind of biases might come out, but like it seems like you're you know it's.
Speaker 1:If someone offers you credit when you shouldn't have been offered that credit, it's not necessarily your fault.
Speaker 1:And part of the I know from what little I know about India, for example, there's a lot of encouragement of banks, of state-owned banks are forced to lend to certain sectors priority sectors, they call it, you know and there's a it's hard to.
Speaker 1:Borrowers are basically how do I say this sensitively like you know, the repayment culture or the kind of if everyone's throwing money at you because you're viewed as this sort of, and then you've got the charities and you've got the ngos and you've got the government aid, foreign aid coming in as well. How do you create that culture of kind of contract, you know, contractual repayment, commercialization, versus kind of being a recipient of just multiple handouts oh, I'll just get another loan because everyone you know I can repay that loan. And so it almost feels like your biggest challenge to to kind of educating people on a journey of commercial um awareness and then helping them scale and then helping them prove their credit worthiness is undermined by a lot of well-meaning people, whether it's politicians, whether it's charities. So is that your kind of? Your biggest competitors aren't banks or money lenders. It's other well-meaning people who aren't taking that kind of commercial aspect to it.
Speaker 2:Yeah, I think we, I think, as part of these training sessions, is also to inform clients. You know why it's important to repay, why it's important to repay, why it's important to only take on a loan of a certain size and not overstretch yourself, and how do you cope when there is a crisis. So I think we have to put these measures in place and I think with these things, it's translated into better repayments rates that I talked about earlier. But the challenge is, yes, when you know there are, for example, you know, in the market in Malawi, where we operate, there are certain regions which are prone to cyclones, droughts, especially in the southern province of the country, and there's been this typical sort of aid culture where people do get handouts and that really undermines the repayment culture that many institutions such as ourselves have created over time, because people sort of say oh yeah
Speaker 2:uh we're not you know, if a disaster strikes, we're not actually going to take heed and take shelter or move, because we know the money is going to come here and we don't want to be in that place. So last year, for example, we had a pretty bad cyclone in Malawi Cyclone Freddy. But over time, both our clients and loan officers have learned coping mechanisms. You know as to how to deal with crises such as these and we see that they've developed alternative livelihoods. You know they take on less during the rainy season because you know they feel, okay, there could be a natural disaster which strikes, so let's manage our risk accordingly and that is giving them I think that truly is empowering them more than you know a handout which sort of comes when disaster strikes, and then it's not ongoing and it's.
Speaker 1:It's a sort of strikes and then it's not ongoing and it's it's a sort of yeah, quick fix with no long-term view. A quick fix, and also a quick fix that makes the, the donor, feel good about themselves or make gives them something to talk about in their annual report or in their statement to parliament or the press or whatever. It might be that the unintended consequences of are not measured over the next three, five, ten years. But don't get me wrong. I want to.
Speaker 2:I want you to pause the first leg because I think there is a place for aid. Right, it's not, but it's really important to understand the context. You know, if you're working in war zones and you know where or countries where there's extreme violence, etc. I think aid can be quite effective. It's just how and when that intervention is needed is what is, you know, really important to consider. So the context is very important. Yeah, fair enough. I mean.
Speaker 1:My blanket assumption with aid is there was a great quote from this economist, peter bow, which aid is basically money going from poor people in rich countries to rich people in poor countries, and that kind of highlights the challenge of corruption, which obviously you know. Everyone's got a different definition of corruption. My definition of corruption is effectively it's another, it's a parallel system of contract enforcement, because the government's legal system is so opaque or complicated or convoluted and therefore people don't trust the system, because that, you know, if someone defaults on a contract, going through the courts takes 10-15 years. So why don't we have an informal way of getting things done? That's quicker and more efficient. And so the way to deal with corruption is not to arrest people or lock them up or like clamp down on the symptom, but it's actually to have a better regime of governance where you get a quick access to justice. You've got simple laws, simple contract enforcement through the state.
Speaker 2:Those are not easy things in the countries we work in. So that's, yeah, so that's the question, sorry.
Speaker 1:The question, therefore, is how? How do you see yourselves? And I had a guy, um called frank frank shinford, who worked on the podcast a few weeks ago. He works at a youth club in hackney dealing with underprivileged um uh, kids, you know, after after school to keep them in a safe place, and I asked him, you know, are you a, are you a sticking plaster? And the problem is just, you know, relentless and the issues are more foundational and do you sometimes feel like god, it's never going to end, or are you a solution? So I guess the same question to you is are you there in the field hospital, but the real battle is with kind of good governments, or do you think you're part of that and do you feel like God, it's just relentless, like is?
Speaker 2:there any point? I think there are challenges, like you said, in enforcing some things because of the environments that we work in. But having said that, I think you know. I'll give you an example. We are now expanding to a fourth country, later this year, hopefully. Can I ask what?
Speaker 1:it is South Africa, south Africa. Okay, that is South Africa, south Africa. Okay.
Speaker 2:And so one of the tests that we undertake internally to say do we go into this country or not, is we can't. I think we have to be very clear. We're not there to fight everything, you know corruption, violence, all problems. Our core problem that we're, the core problem that we're trying to solve, is access to finance for the underserved. And so when we go into a country, we want to say, okay, there's all these other things in the periphery which is going to have an impact on our work, but the core is something as basic as, say, what is the regulation, microfinance regulation? You know, is it conducive enough for us to operate? And we're not. You know fighting battles every day. Uh, you'll fight some battles, you know, with a regulator. That's, that's part for the course. But I think if it's a constant uphill struggle, then it's probably not a country that we would like to work in because… it's not ready for you yet.
Speaker 1:It's not ready. There's more work to be done from a central level, Maybe with aid as a… yeah yeah, absolutely so.
Speaker 2:I think that's how we look at it. So it's very pragmatic our approach to say, is there a need, is the environment conducive for us to operate in? And uh, there's no like significant political risk, we go on so can I?
Speaker 1:can I um zoom in on zimbabwe just only because that's no disrespect to malawi and zambia, it's just the one that you know resides in the the mind a bit more? Um for me, and I'm sure many people listening um, I will be having on a guy called Peter Botting, who's from Zimbabwe or he will have just been on, depending on which podcast I publish first.
Speaker 1:So you know, um audience, bear with me, um and what um. What is the challenges in zimbabwe? Inflation is something that I always think about, you know, and there's some news, apparently, about some currency coming out that's linked to gold. Is that encouraging? Yeah um, but what? How does inflation, you know, cause a lot of the problems, um, in of, you know, poverty?
Speaker 2:if that's real. So we entered the Zimbabwe market in 2017. There was a lot of, I guess, optimism at that point in time that things were sort of taking a turn for the better. There is significant demand for microfinance services and we really saw that there was a need. So we entered the market in 2017. But between 2017 and I want to say 2022, it has been a struggle.
Speaker 1:Right.
Speaker 2:Hyperinflation. We talk about hyperinflation. We're talking like 700, 800% in some months, which?
Speaker 1:is Months.
Speaker 2:Yeah, wow. Which is you know? The cost of a loaf of bread was perhaps the highest in Zimbabwe compared to anywhere else in the world. It was close to $. Else in the world it's close to eight or $9. There was acute fuel shortage. Given that we have to operate in some of these remote areas, fuel is very, very key. So operating in Zimbabwe has been very difficult. We've been very fortunate actually to have donors who have supported our work in Zimbabwe over these years and could still continue to do so, but what really changed for us in 2023 was the local currency that existed Zimbabwean dollar, or RTGS as they call it. It's a strange name for currency RTGS. Real Time Gross Settlement.
Speaker 2:But that sort of became the name of the local currency Slowly started getting phased out because the US dollar was the mainstay. You go and buy groundnuts from somebody on the street. You are not going to find local currency it was us dollars that was being transacted. There was a big, thriving black market, um. So what that really meant was that slowly, the regulation also started getting adapted to that change and we actually got approval from the regulator, from the Reserve Bank of Zimbabwe, to say you can now lend in US dollars.
Speaker 1:Amazing.
Speaker 2:And that was the game changer for us, because what that meant was, on a monthly basis, we were not factoring foreign exchange losses, which were only going down one way and very rapidly. So when we talk of devaluation again, it's in, you know, 100 to 100%.
Speaker 1:But how do you even take a long term view of like? You know, I've got a tomato stall and I want to, you know, expand and have two tomato stalls, but the cost of buying a stall is going up every month. The cost of acquiring crops is going, I mean, and this is the breadbasket of Africa, right? So, how do people even want to borrow and take long-term decisions when money just doesn't mean anything? I guess you answer that by saying they switch to another currency and then they just run a parallel currency.
Speaker 2:And, if you think about it, most of our clients are dealing with very basic products, consumption products, which people need to buy day in and day out.
Speaker 2:Staples, staples. So in some way they are I don't know if insulated is the right word Because even though prices go up and down, they've been very quick to adapt to that. In fact, in Zimbabwe is one country where we have 0% arrears. You know it's a much smaller operation, so you're not going to see that level of arrears one would expect at that scale. But it is quite heartening to see. The repayment culture is very good. People are easily, you know they easily adapt to the changing prices with inflation. We use mobile money transactions from day one in Zimbabwe. The average client in Zimbabwe is more literate than the ones we find in Zambia and Malawi. So I think there's something special about a client in Zimbabwe Right cool. And we've seen that they are more resilient because they have just been so used to this over the years. They've just learned to adapt. Yeah, today we're the only social microfinance provider in the country, so the demand is massive, so we can scale up very quickly what we have going for us today.
Speaker 2:Long-term, you talked about long-term view. It's difficult to have a long-term view in a country like Zimbabwe because it is very volatile. You mentioned they've introduced now a new Zimb, a gold-backed currency in Zimbabwe, because it's called ZIG or something for short, which we are not. It doesn't change the day-to-day for us because the dollar is still the mainstay and we had elections last year and the current government has announced that dollar will continue to exist till 2030. So, relatively speaking, that's a lot more certainty that we have for our operations than we've ever had in the past. So what that's meant for us is that dollars, because dollar is now the main currency that's used for transactions we're able to grow, we're not recording losses anymore, we're able to scale, we're able to move to other branches and other areas and, like I said, demand is not a problem in a country like that.
Speaker 1:Yeah, well, I guess. Then what are the constraints? Finding customers, as you've alluded to, is not a challenge. Is technology a constraint? Is um funding access, you know, having a balance sheet to actually lend? Is that something that's holding back? What could you, if you know, if you had a magic wand, what would you like? 10 times more of that you have at the moment that you that would unlock? Is it more, is it better? People on the ground? Is it? Is it human capital or is it financial capital? Or is it better? Technology or is it something else?
Speaker 2:I don't like magic wands because it gets you from A to B without the learnings.
Speaker 1:Yes.
Speaker 2:So I do. I think there is merit in going through that journey, feeling the pains, you know.
Speaker 1:Yeah, getting the scar tissue yeah.
Speaker 2:Absolutely. You know, we always say there's no shortcuts in life, and I think so. For that reason I don't like magic wands, and there's so much we have learned over the years through all the mistakes that we've made and some of the wins we've had. So when you say what are the challenges, I think it's a combination of all of them. It's access to capital to grow faster, but sometimes some people will tell you, some investors will tell you, finding 10 million is easier than finding 5 million. Yeah, so then do we have the absorption capacity for 10 million? Um becomes a question. And how do you get that?
Speaker 2:Absorption capacity is by having adequate people on the ground, having the systems to cope with that increase in size and scale. And human capital is a huge challenge in these countries where we operate, because there is a lot of brain drain, particularly in a country like Malawi, zimbabwe as well, zambia to some extent. In a country like Malawi, zimbabwe as well, zambia to some extent. And there's also compounded to all of that is natural disasters. We now have drought it's been declared a natural disaster in all three countries this year, and Southern Africa is experiencing serious drought. If you think about our clientele, almost 90% of our clientele are smallholder farmers, so they do rely even though they have businesses, they do rely on a farming income at some point in the year. So it's a combination of all of these that makes it quite difficult to scale very quickly. So we have to have a very measured approach to how we go about expanding, how we scale. It's also about having the right systems in place.
Speaker 2:Technology is a game changer, let's be honest. I mean we've seen it in markets like Kenya with M-Pesa. Let's be honest, I mean we've seen it in markets like Kenya with M-Pesa, and it really is. If you think about sub-Saharan Africa or the sub-Saharan African market, there are more mobile phone owners in sub-Saharan Africa compared to anywhere else in the world. So there is a huge opportunity. But it's how we adapt our model to serve the end clientele in a way that actually meets their need is really important. Because if you think about the average client of Microloan Foundation, they're more likely to be illiterate, given that we serve 100% women, given that we serve 100% women. And technology can serve a purpose, but it has to be accompanied with proper training.
Speaker 1:It's a tool. It's a tool, yeah.
Speaker 2:And especially in the rural areas where we work in, having the access to an agent where they can actually go and they receive money on their account using a mobile channel, but everything is still cash-based. You know, if they have to go and buy inputs for their farms or fertilizers, that supplier still wants cash. He's not accepting a mobile payment, so they still have to go to an agent to withdraw cash, et cetera. And that's been a journey for us in all three countries. In Zimbabwe, because most of the transactions have been on a mobile platform because there was no cash available in the market, it's a different scenario. In Zambia, we've seen the technology has really come a long way in the last three to four years, so close to 100% of our repayments are on mobile channel. 80, 90% of our disbursements are using a mobile channel, and that reduces fraud as well to some extent, because there's cash handling but mobile money.
Speaker 2:There are other risks there are other emerging risks that we don't know about, and in malawi the infrastructure, the supporting infrastructure, is less developed. So sorry, I've I don't know if I've answered your question, but you know.
Speaker 1:No, it feels what?
Speaker 2:what were the challenges? I think it's a combination of all of these it's a complex, a very.
Speaker 1:you're operating in a very complex domain where there are second, third order effects from multiple things that you can't even predict. So I mean intuitively, would feel to me that where things have gone wrong you talked about some of the mistakes you've made and some of the things you've learned from them is probably on the people side having the wrong people going in and training, or the wrong people, as you talked about, the brain drain you talk to any small business owner.
Speaker 1:They always say the hardest thing is just getting good people that have a good work ethic and are keen to learn and stick around.
Speaker 2:Yeah, absolutely.
Speaker 1:But what, I guess gives me confidence is that, as you say, there's a whole bank of untapped demand, untapped potential, sorry, in these countries. So what gives you hope then? Is it that human potential that you're just seeing?
Speaker 2:every day. Yeah, absolutely, I mean even. I mean I've been with now with Microloan Foundation just over five years and I have seen I mean how things. I mean it's important to pause and take stock of the success and the wins, because every day that you know, there's a lot of firefighting.
Speaker 1:Yeah, so I saw a stat was it 450,000 entrepreneurs that you've helped female entrepreneurs? Anything else you can just showcase for us any stats?
Speaker 2:yeah, over 2.4 million lives, because if you think about these entrepreneurs, and maybe I should say now, now would be a good time as to say why we lend to women yes before we get into that, stats on lives is because, um, when you look empirically, there's plenty of evidence that suggests that women tend to be better borrowers than men.
Speaker 1:Yeah, so I can see that I can attest to that.
Speaker 2:Probably absolutely and it and it, and it holds true globally, it's not just in these markets. Uh, so the way we look at it is there are two types of dividends that we can realize when you lend to women. One is the social dividend. You know, when you lend to a woman, a woman is more likely to invest back into a family than a man, so her children are more likely to go to school, the family as a whole is more likely to access better health care and she's, you know, able to reinvest her profits into the business and grow that, and we have plenty of evidence that supports that. There's also a. So that's a social dividend, but there's also an economic dividend, because women are better repairs than men.
Speaker 1:It's a commercial. You're a for-profit commercial.
Speaker 2:So there is a commercial argument to lend to women. I'm not saying don't lend to men. There are lots of microfinance institutions that do that For us. It also sets us it's a differentiator in the market when we lend to 100% women. That's very much our mandate. We want to focus on areas where we can achieve most significant impact and by concentrating on women, who are more likely to be underserved than men and in regions where poverty is the highest, we feel we can achieve the most impact. So that's very much our mission. So when we say women are more likely to reinvest into their family, that's where we're saying OK. Actually, because of lending to 450,000 women, 2.4,. If each family has four to five children on an average in these countries, that translates into over two million lives impacted and also, just you know, yes, there's room for charity, but you need you know people need to.
Speaker 1:Life is about learning to take risk judicious. Risk judiciously that doesn't sink you, and that's what living is that's what having a meaningful existence is and people aren't even.
Speaker 1:You know. I see a lot. I work in the investment industry as well and I see a lot of, particularly on social media, particularly on that dreaded thing we call linkedin. You know a lot of middle-class women here in the west, you know, and men moaning about middle-class impact, esg social problems, looking at solving those for middle-class people and with middle-class indicators for people who just don't know how lucky they are to even exist. In a country where a currency is relatively stable, contracts are generally enforced, there is some sort of access to justice and people are, there will be someone out there willing to take a chance on you and give you a give you, whether it's a loan or or or an education or whatever it is. Um, it feels like you guys are just you. You're without the kind of oh look at me song and dance that I see on social media. You're genuinely creating an impact. So, like thank you and keep it up.
Speaker 1:My closing question that I generally ask, which I'd love to ask you, is something I call the long bet. For me, predictions are tax-free entertainment, so you're not being held to anything. It's purely for as a bit of fun, and you have a 10-year time frame. Why 10 years. It's far out enough to be meaningful, that actually you can predict something that can can have a change, and it's not so far out that it doesn't matter, because none of us will be, you know, held to it. And do you have something that you think will happen in 10 years, whether it's to do with microfinance or anything else, or that you would like to happen in 10 years? And obviously, if it's like to happen, answers such as world peace and people being kinder are to be discouraged if possible. So, yeah, what's your? What's your uh long bet on the meeting people podcast it's a long bet.
Speaker 2:Well, that's an interesting one, I think. What I'd like to see happen? I think two things come to mind. Um, I recently read a stat from un women which said at the current rate that we're going to achieve gender equality it's going to take three, close to 300 years. Right, that was quite deflating to me. So what I'd like to happen is that if we can advance that quicker, I think it could be a game changer. There was another report, I think McKinsey or somebody put out a stat out there to say if women were given the same opportunities as men, I think you add roughly 12 trillion to the global economy.
Speaker 1:Yeah, I mean that's mind-boggling by gender, just to kind of keep you precise yeah by gender equality you don't mean women on 50, 100 boards, you mean actually being able to well, that too yeah, that too.
Speaker 2:That's part of it that's part of it but also are getting the access to basic things Food, education, employment, access to finance. Yeah, I think I mean even there's a lot of inequality that exists, even in countries like the UK, but it's very, very stark when you look at countries like Malawi, zambia, zimbabwe, where we work. Yeah, but it's very, very stark when you look at countries like Malawi, zambia, zimbabwe, where we work. So, if we can just double down on that effort, I think there's a lot of positive buzz around gender lens investing from the investment community as well. It's sort of now looking at this issue very, very seriously and saying how can we do more? And as part of this process also, what I'd like to see is not to exclude the men because, one can often say, oh, we're focusing on this.
Speaker 2:It's about achieving that right balance. Um so having, you know, women get access to these basic things but increasingly also looking I mean even in the countries where we work in having more women in senior executive roles. You know, in microloan, malawi or Zambia or Zimbabwe having more women on the boards, and I think we've made some strides over the years, but we really need to do a lot more if we want to bring that number down from 300. It's not going to be in our lifetime.
Speaker 1:I don't. Yeah, I think to give you, my view is that these things compound rather than they're not linear, they are kind of exponential. So when you get getting from 20% equality to 25%, equality will be a lot faster than getting from 15 to 20. So as these things become normalized. The last leg of that journey may only happen in. The hardest part will be year zero to year 20, and then actually 20 to 300 may happen in five years, five years, yeah, absolutely so let's hope that kind of compounding happens.
Speaker 2:Yeah, so I think it's a sort of call to action.
Speaker 1:Yeah that j curve effect absolutely. Well, look. And the second sorry second.
Speaker 2:Thing I wanted to say um, that I'd like to happen is perhaps more risk-taking yes from donor community, from, you know, development financial institutions which are like essentially development banks, uh, who have that ability to take on more risks. And just mainstreaming I mean this exists out there, I'm not saying it doesn't exist already, but mainstreaming the social return on investment and how that's measured. It's as simple as saying three pounds translates into nine pounds of social value, three pounds of actual physical investment. And if we're able to do that successfully, then high impact institutions can actually receive the funding from investors who care about impact. Because right now we're talking very much in financial terms. When somebody comes in, they're saying you know when's the exit? What's the return? I'm getting out of it and more often than not it's just the financial return.
Speaker 1:So mainstreaming this would also be a game changer, being able to apply some sort of metric to the other, the kind of second order effects.
Speaker 2:Absolutely.
Speaker 1:Anything else you want to get off your chest.
Speaker 2:No, I think those two were sort of my long bet.
Speaker 1:Great.
Speaker 2:Yeah, the hope, at least over the next 10 years. Well, look.
Speaker 1:Thanks so much for coming on. We'll love to have you on again. This has been an absolute blast and keep up the good work. Micro Loan Foundation. Do you have any social media? Where can people find you?
Speaker 2:on instagram, on on facebook. Uh, just go by at micro loan.
Speaker 1:Yep, yep, brilliant. Well, thank you for having me come on again soon.