Accountancy at the sharp and pointy end

As many (all?) of you know in a former life of pork products and all day electricity I was an accountant, the letters which now expensively grace the end of my name apparently designate some form of sharable skill. In the hope of spreading the simple word of double entry, rates of return and income statements I have been working with a NGO called Hope for the Village Child on their microfinance program.

This first involved me desperately reading everything the internet could tell me about microfinance, which told me many things. The first was that I have never actually been an accountant, secondly that this didn’t matter and thirdly and most worryingly that deep down i quite like the bits of this accountancy malarkey which are like financial engineering (I can definitely recommend- Measuring Microcredit Delinquency: Ratios Can Be Harmful To Your Health, 20 pages of pure geeky fun).

After thoroughly reading up on the subject I had a couple meetings with the two people who would be administering the microfinance program. This obviously changed everything, and the plan in my mind went from “microfinance empire” (poorly received) to “I think you’ll need to use what is known as a spreadsheet “ (Enthusiastically received) this may be the only time someone else was more enthusiastic about excel than me. Getting ahead of yourself is a bit of an occupational hazard here, remembering to start small and work from there is the name of the game.

Every January they disburse hand out agricultural loans of around £20-25 to groups of women to help in the improvement of their farms. Each group consists of five or six woman and the whole group is joint and severally liable for the loan of the whole group. Most of these loans should be put to buying goats/renting farmland/developing new income streams. To put it in perspective, £20-25 is probably more than rural families live on a month.Previously these groups have used the money to simply buy up food just after the harvest and then re-selling once prices have risen, which isn't quite the life affirming, liberating change HVC is looking for.

Designing how to do this effectively surprisingly never came up on the ICAS Audit exam.

You have a group of Illiterate woman, who speak only the local village language and a bit of Hausa, a shopping bag full of money, One Land Rover, 2 pens and some paper. What controls would you put in place (12 marks).

The first day we went out we were dealing with around 50 women, and the whole thing nearly descended into a riot. With people pressing in a crowd around the Land Rover (my new mobile office) hands, paper and money everywhere and people giving any old name their group leader told them to give

Example conversation:
Mercy: "whats your name?"
Woman A "err.."
Woman B "Aggie Bobbins"
Woman A" yes how silly of me to forget Aggie Bobbins is the name, chimney sweepings the game"
Mercy "how do you spell that"
Woman A "err...."

In video form

There are a number of problems with the above:

• Explaining that this money is a loan and has to be repaid
• Figuring out who you are dealing with
• Making sure that who you give the money to actually gets to keep it.
• Getting them to spend it on something worthwhile with the money.

Most of this is work in progress... ideas on a postcard please. We had problems with men hanging around and I suspect simply taking the cash off the woman as soon as we had headed back over the horizon.

Money is in the jargon term fungible. Advanced microfinance theory states trying to control what the money is spent on is pointless and all that is needed is to provide the cash in the family unit will efficiently allocate the capital. In theory, theory is the same as practice, in practice its not. Nigeria has the habit of taking advanced theories down unlit backstreets and beating three kinds of hell out of them and stealing their wallet. However once you give someone some money its quite difficult to get them to spend it on what you want them to spend it on so even though I (plus HVC staff) don't like the theory we're pretty much stuck.

Mercy (who runs the woman’s program and can be seen in the photos) said “we’ll probably come back to find them all with new wrappers”.It’s nice to not be the cynical one all the time!

The simple solution to the identity problem was to take photos of each participant:

This amused the hell out of the customers, “who is this crazy white man with his crazy camera and tiney tiny whiteboard”. But hopefully this should impress on people that “we know who you are” and that the are entering some form of enduring system, its almost all a deterrent factor but hopefully we’ll see higher repayment rates. The rest of the changes will be around general microfinance theory awareness and the record keeping (almost accountancy).

Look at their happy smiling faces

These loans are one year(ish) in duration and attract 10% interest. Which is both a long time and a pretty soft loan (the interest doesn’t cover inflation), so hopefully we’ll be working towards some more text book microfinance over the next six months or so. Currently the farmers whole business model does revolve a single planting season, normally of a single or two crops with a single harvest. This is fine for a western farmer who has access to insurance markets, subsidies, irrigation,fertilisers and a welfare system. For people who have access to none of this it doesn’t take a genius to spot this is somewhat of a high risk strategy.

HVC works on grain banks, to give the farmers a way of storing some excess. Over the next couple of weeks I’ll be using my dubious physics skills to work on building some food dryers. Proper and hygienic drying should allow people to store the early rainy season fruit for up to year and selling this fruit should be an easy way to raise cash (especially if done on a community level, leading to smaller transport costs, more division of labour etc.) The dryers are as simple as a polythene tent over a table, with sliced fruit laid out on wire racks (but don’t tell anyone they think it’s my in-depth knowledge of physics that allows me to copy the design of the internet). I’ll post some photos once they’ve actually been built.

My tragic tale i won’t prolong, you’ve only yourselves to blame if it’s too long, you should never have let me begin....