Microfinance in Senegal:
Study abroad turned me into an economist

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» fall 2008 Magazine

By Meg Young

This article was printed in Abroad View magazine fall 2008

Thanks to a nod from the Nobel committee, the word "microfinance" entered the global vernacular in 2007 (usually in the form of the third definition listed above). Nobel Peace Prize winner Dr. Muhammed Yunus proved that even the most destitute individuals may be capable of taking charge of their futures, once provided with adequate means. In the case of microfinance, those means consist of an innovative combination of money and social support.

Much of the world discovered microfinance this past year through news clips of Yunus’ beaming eyes and editorial articles on this booming system of crediting the poor. A psychology major uninterested in anything “finance,” I found myself unintentionally ahead of this fad when I stumbled across real-life microfinance while attempting to take a break from the academic world.

I decided to study abroad in Senegal during my junior year of college, quite unaware of microfinance’s expanding global success story. As far as I knew, I went to this West African nation in hopes of using my French without ending up in a European university that would probably look and feel much like my own. The SIT Senegal Arts and Culture program was a perfect fit. My five-month adventure—set to the tune of an intense mélange of Muslim and Wolof traditions—was certain to be more experiential than academic and more qualitative than quantitative. There was only one major requirement: a 40-page cumulative research project.

Uninspired by this task, I chose to ignore it. I instead continued focusing on my favorite part of the Senegalese experience: ever-extending circles of local relatives, each eager to share the news of the day with me. Talking with people! That felt worthwhile. One such conversation, which I struck up with the patriarch of a village just outside of Kedougou, suddenly shifted from daily banter into a precarious conversation about gender roles. I documented this experience in my blog:

When discussing gender roles with with my Peul Bande father, I asked him:
"Are women good with money?"

"No, of course not," he said.

"Who is in charge of the communal village collection system?" I asked.

"My wife! She is the president of the women's society."

"And what funded the new machinery in the peanut field?"

"The women’s communal pot. The women decided to buy the machinery."

"And have the machines improved the condition of life here?"

"Yes. They have brought in more money."

"Are women good with money?"

"No. Women are not intelligent."

Intrigued by this obvious dichotomy in thought and by the enormous power the village women had begun to harness with their rotating lending system, I asked more questions. I learned of the problem of material collateral. In many developing countries like Senegal, poor populations are denied access to credit and savings through local banks because they lack material collateral. A person seeking a loan to build herself a house may be told that without a house, she cannot get the loan. No loan, no house. No house? No loan.

The microfinance-savvy women of this village proposed an alternative to this double bind: social collateral.

Rather than using houses or material goods as collateral, microfinance turns to social bonds and pressures. In one version of this, one loan was given to multiple recipients within a single support group who then counted upon one another to pay it back on time in order to ensure that they all might continue to receive loans. Houses and finances aside, these loans rely on people. (This is why a psychology major like myself might find this interesting.) This type of financing empowers its users by opening financial and social doors simultaneously. In village after village, I heard similar stories:

 “I can send my child to school because I borrowed money to start my baking business.”

“Without our [rotating lending system], we couldn’t have village celebrations. Its how we help one another celebrate birth and death and always know there is enough money to do that.” 

“Microfinance helped us bring electricity to our village. We did it ourselves.”

Suddenly the 40-page monstrosity and the month I would be granted to research and write it was more of a gift than a curse. What was the real story behind this new word “microfinance?” What were the implications for women? For men? For gender stereotypes and village-level glass ceilings? More importantly, why had banks decided that entire populations might be “too poor” to be fiscally responsible? Was there a reason why this simple system of lending was birthed outside of the walls and assumptions of normal banking institutions? The research took on a much deeper meaning as it extended past my personal thoughts and into the greater global realm of development, change, and our role in it.

These questions drove me past those first pages of my ISP and followed me back to my studies in the USA. I wondered what deeper implications lay in my course material. I started taking economics classes and began questioning some of the driving principles behind current economic theory. What is the real global—macro—purpose of macroeconomics if it doesn’t apply to the majority of the world’s population, who live within a hugely skewed market? I became a pest in my psychology classes, wondering aloud: why are studies that hold new promise for development efforts simply gathering dust in their respective peer-reviewed journals? Where are the seats at the academic table for those most in need of this information? Where is the action? Where is the urgency?

Now post-college and officially in that “real world” we hear so much about, I have found that there is a growing force of people following a similar line of deep multi-lateral inquisition. Within my current position as a staff consultant for ECOLOGIA, (a new member to the microfinance club), and as a beneficiary of Oxford’s World Leadership Corps funding, I am now able to ponder these issues professionally. This year I will document and evaluate an emerging microfinance structure within a rabbit farming community of Sichuan Province, checking back in monthly with Abroad View to provide the latest news.

In the wake of Yunus’ success story, thousands of not-for-profits and banks worldwide have begun to count microfinance as one of the more powerful tools in their belt.  However, this story is far from complete; microfinance has proven to be a veritable rabbit’s hole of issues, with new questions and complications around every unforeseen turn. Knowing that no clear answers may emerge, I enter the coming year with a sense of global community driving me forward and a stubbornly curious mind leading me down the path of greatest inquisition.