Learning how to save. In Honduras this is one of the criteria for small businessmen to get microcredit. At the beginning of July, Radio Netherlands Worldwide published a video about financial training courses in Honduras. Klaas Molenaar, chair of the European Microfinance Network, argues that these well-intended training courses have their drawbacks.
Clients of banks and microfinance institutions need to be aware of the effects the financial services they buy may have on their personal life. The same is true for customers of microfinance programmes as was rightly understood in Nicaragua and Honduras.
In the Promifin programme much attention is paid to financial education, as shown in the video recently placed on the RNW website. Poor people in particular need to be made aware of the implications of obtaining a micro-loan or, to put it more accurately, a micro-debt.
Through radio, role playing, training courses and with the help of manuals and small booklets, men and women are taught how important it is to keep a clear eye on their finances. They are even told that saving money is more important than asking for a small loan. The results so far: more people save, better repayment of loans, more careful building up of businesses and more assertive people. A laudable initiative that should be introduced in more countries. It makes people less dependent on the microfinance institutions and more inclined to speak out.
They start to question the high cost of borrowing as well. But attending these courses means that people need to spend time and resources on it. Time and energy that they need to work their fields and run their businesses.
Other side of the coin
But there is also the other side of the coin: Are people really free to decide to attend the training or not? Do they see it as a necessity in order to obtain a microloan? And if the Promifin project ends, who covers the costs? Should the clients pay for this training? Should it be included in the interest rate?
Who should be responsible for organising and providing this financial education: the microfinance institutions, the government or even the donor community? I personally see this as a task for the government. Formal education needs to prepare people to participate in an ever-changing society and finance has become very important in almost all our actions.
If the management and leaders of microfinance institutions were socially responsible persons, would we need this additional training? Don't they have the moral obligation to not offer loans if they see that poor people are likely to get into trouble because of this borrowing?
Society may have something to learn from the experience in Honduras as well. Financial education is now becoming popular in microfinance programmes, but it may well be needed for all who buy services from banks and other financial institutions. Too often none of us seem to understand how the products we are asked to buy will affect us.