Save as you drink: local brew saving clubs in Uganda

Tags

malwa, microfinance, ROSCA, savings

Ugandans love drinking. This is verified by my late-night trip to the town centre yesterday. After having a bottle of beer (I had “Club” and loved it), I followed my Ugandan friends to a local brew place. It was a spacious open area with a television playing Uganda popular music. People were sitting in groups and drinking brown colored “beer” using plant straws from a shared bucket. The local beer is called malwa and is made from fermented millet. As a foreigner and non alcohol lover, I had only one sip of malwa and nearly vomited. But the locals seemed to be having a good time.

It turns out that people don’t only drink and chat together: they save money and invest together. Each malwa drinking group is a saving club and has an account at the SACCO. Each saving club has a chairman, a secretary, and a treasurer. According to the brewer, the ten people in a group each pays 2000 for one night of drinking. Eight of them pay directly to the brewer, and the remaining two pay to the treasurer of their group. Members can also put any spare money they have into the pot (i.e.the joint account). If you want to join a group, you just find a seat there and ask for permission from group members. If all of them agree, you pay a fee of 10,000 UGX (around 4 USD) and becomes a member.

Don’t let the name “saving clubs” deceive you. These groups offer loans as well. To acquire a loan, a member needs to find three guarantors among group members. Guarantors are responsible to urge the borrower repay the money on time. The brewer told me there is no upper limit for the loan, but I think there might be informal rules as to how much you can borrow (e.g. a certain percentage of the total deposit). All loans should be paid back in one month with 10% interest, which is quite steep compared with loans from banks. But no collateral is required and it takes little time to get a loan. If someone fails to pay the full amount in a month, he can pay the 10% interest first, and will be granted another month to repay the principal plus 10% interest. Interest incomes are deposited in the joint account and will be shared among members equally at year-end.

The operation mechanism of these saving clubs reminds me of the Grameen Bank and ROSCAs where social capital plays a crucial role in reducing default. Since people usually sit beside their friends upon their first visit, they are more likely to form groups with acquaintances. However, whether this level of familiarity will bind people to their promises is not clear.

In developing countries, getting a loan from formal financial institutions can be difficult (because of collateral and guarantor requirements) and time-consuming. Borrowing from informal sources are usually easier but charges higher interests. These local brew saving clubs cleverly combine the best of the two worlds. Security of the money in their pot is guaranteed by the bank. At the same time, loan application is simplified through informal arrangements within the group.

You can expect follow-up posts in the next few weeks on this topic.

Asking the right questions in household surveys

Tags

household survey, qualitative survey

/Photo: banana fibres used to make baskets, taken in Naziwanga, Nkokonjeru. /

In the past three weeks I have been surveying members of the SACCO on their use of financial services and advice on our medical loan product (which is still in the pipeline). Luckily, most of my respondents were cooperative and tried to provide as much information as they could. In retrospect, however, some questions turned out to be time-consuming and useless. One example is my question about the estimated resale value of food produced and consumed within the household. This question is often difficult to answer for two reasons. First, a family may consume a variety of self-grown crops, some of which are hard to measure in volume (like sweet potatoes). Second, estimating the value of food from one’s own gardens is hard, as he deal with these not in monetary terms but purely by need. Translating volume into market price can be challenging especially for people who grow crops only for subsistence.

Some questions tend to generate inaccurate answers or even spur resistance from the respondent. One respondent doubted the purpose of our survey because she didn’t understand why we needed detailed information of every family member. We spent 20 minutes explaining the anonymity and research nature of this survey, but an air of distrust penetrated throughout our discussion. It is probably better to state at the outset the purpose and the potential sensitive information we will touch upon. This way the respondent can adjust his expectations accordingly.

For an interviewer, there is a delicate balance between what she wants to achieve (the ideal) and what the respondent can provide her with (the reality). Surveys are snapshots of the lives of a selected population. They will not capture the full picture, but if designed skillfully, they can give you a nice bird eye’s view of the world you want to know.

Practical notes about conducting one-on-one interview

Tags

interview, survey

After spending two weeks chatting with villagers and testing tentative questions, I have finalized my questionnaire and interviewed 13 members of the SACCO. Here are my reflections on field testing and surveying:

Field testing helps a surveyor weed out useless and ambiguous questions. A question that yields homogenous answers across the survey population is redundant and should be omitted. For example, a question about the source of drinking water will fail to convey any useful information because almost all households in this town get water from nearby wells. If many respondents have trouble understanding the same question, you should check if this question conveys what you intend to ask in an appropriate vocabulary.

Before conducting your survey, you should gather enough information about your intended interviewees. The more detailed contacts the better. Call the respondent before you visit his/her home, and set up an appointment when necessary.

If your translator asks the questions, you need to make sure he/she interprets the questions correctly and can convey the meaning in the local language. Ask your translator to translate every sentence the respondent says. A translator, especially one that is not trained in surveying, tends to omit a lot of information and keeps what he/she thinks is useful. Detailed translation will help you avoid missing information and allow you to ask clarification or follow-up questions in time.

A side note:
I interviewed a 28-year-old woman with 7 children. She started having children when she was 18 and had one child approximately every 1.5 years. This reminds me of what my colleague at the bank told me: as a Ugandan, if you have too few children, you are not blessed. I am sure this family is filled with blessings. Unfortunately, several of their children have displayed signs of malnutrition. The good news is the children seem to be independent and taking care of each other, especially the older ones.

What I learned from my first focus group discussion

Tags

boda boda drivers, focus group discussion

As I mentioned in my previous blog post, my first focus group discussion among SACCO members is conducted with boda boda drivers. As a novice researcher and a mzungu, I didn’t conducting the discussion perfectly. But I did learn a lot and I am confident that I will do better next time.

Only one boda boda driver showed up at 2PM, our scheduled time of discussion. My translator and I welcomed him into our discussion room, introduced ourselves and told him the purpose of the discussion, and started asking him questions about basic information (number of people in the household, number of people employed. But we soon entered a phase of awkwardness when we didn’t know if we should proceed to the other questions or wait until the others are here. The second driver came in and melted this awkwardness. Since I was not sure whether the others will be coming, I started a small discussion with the two of them. Somewhat unexpectedly, four more drivers showed up. I was happy that I reached the minimum number of participants for a focus group discussion, but I didn’t provide the newcomers with enough context of our discussion.

The first three questions went fine. The respondents were comfortable to discuss with each other. However, one driver said he was too busy and wanted to leave early. Not wanting to disappoint us, he proposed that we ask him the questions first and ask other people after he leaves. Without too much consideration, I agreed. So we spent some fifteen minutes just talking with him. In retrospect, this is a bad strategy because 1) talking with only one participant will not generate a diversity of ideas (which is the aim of the focus group discussion) and is no different from a one-on-one interview 2) the explicit time constraint places the facilitator (in this case, me) under great pressure and lowers the quality of answers, and 3) other participants will feel being left out and may be less involved when they are the ones to speak. 1) and 2) happened this afternoon, and indeed I had to cut some questions short for that one driver. I didn’t finish all the questions for him because I could sense the impatience of other members.

Several points about the skill of asking the questions:
- Not all questions should be asked separately to each respondent. Many can be asked to one respondent first, and then ask the others to share their thoughts.
- Avoid multiple answers at the same time. If more than one is speaking, the translator will have a hard time conveying all the information to the facilitator and the facilitator will be less likely to fully observe everyone’s reaction. This is hard in practice though.
- If you have a translator, ask the translator to translate every sentence that each participant says. This generates a spontaneity between the facilitator and respondents. It also allows the facilitator to probe the answers. My translator was a bit too involved in the discussion herself (as she is a bank officer and knew all the respondents), and often waited to gather all the information before translating to me.
- Have a guideline, but make changes when necessary. While a facilitator should always make sure the discussion is heading for the right direction, she does not need to stick to every single question written in her guidelines. As long as the flow of the discussion is well controlled, the facilitator should focus on probing the most important questions instead of trying to touch upon every detail.

About logistical issues:
- Expect some participants to be early and some to be late. Socialize with the early arrivers and try to keep them in a good mood. I have to admit I did a poor job today: the guy who arrived the earliest was so tired by the time we officially start the discussion that he nearly slept through the rest of it.
- Remember to turn on your recording before the real discussion starts, and ask for permission from the respondents before doing that. I was too nervous today and completely forgot to record (an unforgettable mistake).
- Have a good control of time. If a respondent is repeating what another person has already said or is going off course, politely acknowledge his sharing and steer the discussion back to the right direction.
- Sit in a circle and let everyone see each other. This fosters eye contact and creates a sense of closeness between the facilitator and the respondents.

Banking at a credit union in Uganda

Tags

credit union, Luganda, SACCO

Working at a credit union is fun. Having only four officers and a manager means intensive interaction between collegues and close contacts with our members. In the past two days, I spent much of my time standing behind the counter following bank officers through their working procedures. Banking at this credit union turns out to be much simpler than at a big commercial bank in the US.

Global Microfinance System developed by the IMF is used to store information of all members and to keep track of their account activities (including loans). Although the bank has electronic records for each member, members do not have online banking services or electronic monthly statements — computers are very rarely seen here. Instead, each member has a yellow “passbook” which they are supposed to bring at each transaction. When they come to the bank, bank officers will write down the details of the transaction and the remaining balance in the account. If a member comes to the bank without his yellow book, bank officers will give him a receipt specifying details of the transaction and current balance.
The SACCO offers agricultural, business, developmental, school fees, and boda boda loans. A grace period of two months (during which only interests are collected) is given to agricultural loans. The principal is equally divided throughout the total months of repayment. When the due date comes, the bank officer will deduct the amount due from the member’s savings account. More details about the loans remain to be learned.

The saving services offered by the SACCO are relatively straightforward. But I was confused about the fact of them not paying any interest on savings accounts (counterpart of checking accounts). Today a member provided me with an answer: members deposit and withdraw money too often for the bank to calculate interests! This is especially true for boda boda drivers who come here daily to deposit money and then withdraw a lump-sum at weekends. These high-frequency petty transactions increase the administrative costs of the bank whithout providing a secure source that the bank can use for loans or investment. A monthly ledger fee of 500 Uganda Shillings ($0.2 US) may be well justified to compensate the bank.

By the way, I am learning Luganda in an informal class with several American students. I can greet others and introduce myself, but I hope to know more about the vocabulary and sentence structure of this language in the weeks to come. To facilitate better communication with Ugandans, I have also got myself a Luganda name — Wanyana — which means a type of grasshopper!

Dos and Don’ts for focus group discussions

Tags

focus group, qualitative survey

A focus group discussion gathers together a group of people with some common interests, and asks their opinions about specific product, programs, or experiences. They can be especially useful for researchers who are unfamiliar with the local context. It can also help researchers to frame their questions using more interpretable vocabulary.
To know more about how our members think of our savings and credit services, I plan to conduct several focus group interviews with members of the Nkokonjeru SACCO. Drafting up the questions seems to an easy job, but checking their appropriateness proves to be hard.

Patton (2002) explains the features of focus group interviews

Unlike a series of one-on-one interviews, in a focus group participants get to hear each other’s responses and to make additional comments beyond their own original responses as they hear what other people have to say. However, participants need not agree with each other or reach any kind of consensus, Nor is it necessary for people to disagree. The object is to get high-quality data in social context where people can consider their own views in the context of the views of others.

My friend Lauren, a PhD student in agriculture conducting research in Nkokonjeru, lent me a book called Qualitative Research: A Guide to Design and Implementation, by Sharen Merriam. There is a section on designing and conducting focus group interviews. As I was reading, I jotted points that are easily overlooked by novice researchers like me.
1. Four types of questions should are the most appropriate for focus group discussions:
– Questions about experience or behavior, e.g. “tell me about your typical day at work.”
– Questions about opinions and value, e.g. “what is your opinion as to …?”
– Questions about feelings. These can also be observed in facial expressions, voice and physical movements of respondents.
– Questions about certain knowledge.
– Questions about ideal situations, e.g. “what do you think an ideal savings account should look like?”

Some questions should be avoided in focus group interviews. The most obvious is yes-or-no question, because they do not provide any information. A definitive answer cannot reveal the underlying thought process of the decision maker. Interviewer should also avoid asking multiple questions at the same time which leaves respondents with little time to reflect and arrange their answers. Another subtle type of questions to avoid is leading questions where researchers (sometimes inadvertently) are incorporating personal bias or wrong assumptions into the questions. An example provided by the book is “What emotional problems have you experienced since losing your job?” Here the researcher assumes that everyone who loses a job will encounter emotional problems.

The biggest challenge in focus group discussions is probably not to come up with the questions, but to find the people who are willing to participate. I plan to organize at least four focus group discussions (classified by occupation) among SACCO members. It would be ideal if we could conduct these at the bank, but members are unlikely to come to the bank and spend one hour here without compensation. This is especially true for farmers who live far away from the bank Instead, we are trying to ask one farmer member of the bank to help us gather a group of farmers whom we shall meet at the specified village.
For those who are interested, the picture is the bank where I am working at. For boda boda drivers, we are adopting a different strategy — the cashier will call some of his friends and see if they’re willing to come to the bank after lunch for the discussion. We shall see if it works out.

What does it take to have clean water?

In my development economics classes, I have read about research on water and sanitation in developing countries. See a fuller description about chlorine dispenser projects at The Poverty Action Lab website. A question that has always puzzled me was: if there are inexpensive ways to improve the health of the family, why don’t people adopt them?
There are several ways to kill the bacteria in the water, and adding chlorine is one convenient and inexpensive approach. But this is not widely used, maybe because people do not like the taste of chlorine in the water. Another more expensive approach is to use water filters.
Our partnering NGO, the Rural Agency of Sustainable Development (RASD) has been building biosand filters and distributing them to households where boiling water is inconvenient. Sand and gravel are collected to make the filter. When water passes the layer of sand and gravel, the bacteria are suffocated due to lack of oxegen. The main body of this filter is a blue tank about 1 meter high (see here). A family is supposed to pour in 10 to 15 liters of water per day, and drinkable water will come out of a tube into a bucket. But the household has to ensure they take every step correctly in order to make the whole treatment effective. If the water bucket is not cleaned, for example, bacteria can still enter.
When we were discussing about ways to treat the water, our guide said :”Many people here don’t care about their lives.” He implies this to be the reason why people are reluctant in treating their water even if the costs are not high. The same is true when it comes to sleeping under mosquito nets. The government of Uganda seems to be giving out free mosquito nets, but not every family is reached. The households who haven’t got the bed nets still feel reluctant to purchase them. This is not that surprising given that malaria is not expensive to treat — often times parents just buy tablets to treat their children instead of going to a doctor. There are many ways to lower the risk of getting sick, but without the awareness of the potential beneficiaries these will only be empty slogans.

Into the field

Tags

Africa, credit union, household survey, SACCO

My first field survey trip to the nearby village Bukasa ended with my sore legs from sitting too long on a stool. The purpose of today’s survey is mainly to test the appropriateness of our questions and get to know our potential customers. We left the bank at 2PM and surveyed 5 households by 5:30PM. We did our survey in the afternoon because most villagers are farmers and are usually working in the field until noon.
The first one took us nearly 1 hour because there was some confusion about the wording. My survey defines a family to be a group of people who have meals together for at least 6 out of the past 12 months. Because I did not make this clear, the respondent often answered about things happening to their extended family members who are not living in the house. Another reason was my translator, the bank officer, was not familiar with the questions.
Several problems emerge while we were surveying the households.
First, people often hide information, yielding inconsistent answers. A woman we interviewed said she did not have any savings plan. But when asked about medical expenses, she admitted she used her savings to pay for a 100,000 UGX hospital bill. Clearly she was hiding her saving information from us. A reason for doing this is the entrenched distrust of banks and among villagers, as suggested by the bank officer.
Second, income information is much harder to elicit than expenditure. Parents usually have a good idea about how much school fees they paid in the last year and about lump sum medical bills.
Third, household roster can get really messy if you do not follow the order. Start from the household head, then spouse, then children and grandchildren. When asking about children, go from the eldest to the youngest. Avoid asking all the children at the same time.

Taking a walk around the countryside is great fun. I was worried that our respondents might grow impatient as we ask more questions, but we are welcomed by all five households and the friendly atmosphere was maintained throughout our survey. Now I feel the urgency of mastering some basic Luganda so that I won’t be awkwardly sitting there smiling at the kids as my translator asks the questions.

Save to insure — rational choices of the poor

Tags

credit union

David Roodman, in his book Due Diligence, offers an insightful comparison between insurance and savings:

An insurance policy can be thought of as a savings account with one change: with both entail repeated small pay-ins and an occasional large payout, an insurance payout occurs after some specified event, such as death — or not at all. Thus insurance raises the same prudential concerns for regulators as deposit-taking. And the conceptual switch from savings to insurance raises additional business challenges. For one, regulators need to make sure that what insurers charge and what they promise are roughly in balance so the insurers neither grossly overcharge, accumulating large surpluses, nor under charge, rendering them insolvent in the hour of greatest demand.

Regulation burdens discourage microfinance institutions from developing microinsurance products. Moreover, the poor often have doubts over insurance as it collects premium but may not pay any benefits back. In Uganda, buying insurance is considered “inviting diseases” in some communities.
Through talking with bank officers at the SACCO, I learned that some members (mostly motorcycle drivers) deposit their incomes daily when they finish working. The SACCO offers a savings account without any interest. In addition, it charges a monthly ledger fee of 500 UGX (approximately 0.2 USD). At first, I was surprised to learn that people are willing deposit in such accounts without any interest. But the manager explains: “Many of our members are farmers, and their incomes are unstable. Therefore their savings are inconsistent during the year. They also need to withdraw often.” It occurs to me that the credit union, by offering people this savings account, is simply providing a safe place for members to save. Money saved at home are easily stolen or spent on consumption.
I recommend anyone who is interested in microfinance and poverty alleviation to read Roodman’s book. Solid content and vivid language make it pleasant reading.

Collaterals of the villagers

Tags

credit union, SACCO

My work at the SACCO gives me the opportunity to review loan agreements made to villagers. Textbooks say that the poor often do not have collaterals and therefore social capital is often used as collateral. In a typical loan agreement, I see the presence of both.
The most common collaterals are:
- land title. Land ownership is not very common in central Uganda as land titles are expensive.
- plot agreement: an agreement between the landlord and the tenant which gives the tenant the right to use the land conditional on an annual fee.
- house
- animals: cows worth the most, then goats, pigs, chickens and ducks.
- motorcycle cards. Motorcycles (boda bodas in Luganda) are valuable assets here.
- plantations
Apart from collateral requirements, the bank also requires two guarantors. The member’s spouse also needs to acknowledge this loan application and to promise he/she will help his/her spouse to pay back the full amount on time. The latter is more likely to be a moral committment though.
The SACCO offers group accounts as well. Many farmer groups have joint accounts at the bank. Each group needs to select three people responsible for the account. All three of them have to be present at any deposit or withdrawal. When the group takes out a loan, the three representatives are responsible for paying it back. Conventional wisdom in microfinance suggests group lending reduces default rates by peer pressure. Although the SACCO is a credit union instead of a microfinance institution, it would be interesting to see whether this group arrangement improves loan repayment.