03 September 2010
Posted by Elena
SPBD is the only microfinance institution in Tonga, and according to Canillas, in the first year of its existence it has grown immensely to 2,000 clients, none of which so far have defaulted on their loans.
Canillas says that the biggest difficulty is motivating repayment among clients. People joke here that Tonga imports remittances and exports people, and it’s not too far from the truth. With so many remittances regularly coming in from overseas, many are used to the mindset that another check will come eventually if they just wait long enough, a pattern that puts a huge strain on the family members working internationally, and often causes the family in Tonga to go through short “feast” periods and long “famines.” Steady income from a job often allows these same families to regularly pay for school fees, buy nutritional food, and maintain their standing in the community through church donations.
SPBD trainers also are working with clients to keep their businesses open more than once or twice a week- another pattern created by dependency on remittances. Frequently, Canillas says, clients start a small business only to lose interest several months later, and with a large part of the loan still to be repaid. This puts a strain on the many excellent, responsible business women in the group, and so SPBD does not allow a borrower a second loan unless she has kept her business running.
From my own experience at TDB, many borrowers view a loan as free money for the present, and don't plan on how to pay it off later, so I wonder if SPBD women start a business in order to get the money, rather than the other way around.
Canillas says that their main objective is to improve their clients’ quality of life, and says that their ultimate goal is to graduate clients into the formal sector. SPBD hopes to reach a target of 4,500 members within 5 years, but because of the very small population in Tonga, expects that they will have saturated the market for micro loans by then and will branch into other services. SPBD is currently doing an impact study that will be completed at the end of the year, and it will be fascinating to see what they find.
So from all that, the biggest question in my mind is "is microfinance good for Tonga?"
Like my question about globalization, once again for politics sake, I will refrain from strongly voicing my opinion. That's for Tonga, SPBD, and you readers to decide.