Right this very second, Occupy Wall Street protesters are braving the first snow in New York because of a belief that banks have become too big for the people's good. While it's true that big banks across the major world markets have severely and negatively altered the global economy because of risky practices, there is such a thing as too little bank intervention. Most people in the US are tired of the way that big banks manifest themselves into our everyday lives, but for those that have no other option, banks provide a necessary utility that, in their absence, people feel helpless and tied - the same as those feel in Zuccotti Park. Vinolia's story below illustrates the need for banking and financial options in order for people living without to be granted the same opportunity for success and improvement as those living with a multitude of financial options.
Vinolia Atatsi's leopard-print headscarf, tied neatly around her head, quietly hides the anxiety that she feels during her first cooperative meeting with Lumana, the microfinance organization she recently joined, located in her hometown of Atorkor, Ghana. Two weeks after receiving her first loan with Lumana, Vinolia, a porridge seller by trade, woke up to flames licking the sides of her mud-and-palm-leaf hut, destroying absolutely everything she had worked so hard to achieve. Her clothes, her cooking pot, family photos, notes, porridge ingredients, the palm-leaf roof, her entire life savings, and her Lumana loan were all gone, in the blink of an eye.
A fire is always a tragedy, no matter where in the world. However, in Vinolia's small village of Atorkor, little factors add up to make this fire a bigger tragedy than most. Unlike most families who live in the West, Vinolia hides her savings underneath her mattress, making her money more vulnerable to theft and natural disaster than if it were kept safely locked away in a bank. This is because Vinolia's local bank - the Anlo Rural Bank - doesn't offer interest rates that match the increasing rate of inflation in Ghana, meaning that Vinolia would likely lose money if she kept her hard-earned money in a Rural Bank savings account. So now, because Vinolia did not have the option of reliable savings, her savings have been destroyed.
Another reason makes this fire a deep-seated tragedy: although Vinolia's home cost around 1,200 cedi (USD$775) to build - more money that Vinolia has seen collectively in her lifetime - her home is not considered insurable by Ghanaian standards, as it is made of palm leaves, mud, and cement. This means that when Vinolia woke up to flames, she watched her house burn down knowing that there would be no settlement to collect. She was on her own.
The Need for Financial Diversity...
Since Vinolia's local government structure has failed her, she now has lost everything, leaving her with only one other option – her microfinance loan. For most Atorkor residents, Lumana's financial products fill an important gap in the local economy: another, more beneficial financial option for Rural Bank patrons. In an area where there is little to no quality - or even acceptable - options, Lumana represents a chance for residents to make choices about the type of loan or savings account that fits their needs best. Can you imagine if you walked into a bank needing a student loan, but received the only option the bank offered - a car loan - instead? This is the reality for most students in Ghana, who find it impossible to receive a loan that will allow them to go to school.
It's important to provide financial products that customers can use to support their lives and their businesses. If customers can't support their livelihoods, then their banks have failed them, and more diversity in the financial marketplace is paramount to establishing a local economy that runs smoothly day after day and provides opportunities to local people. Not only does financial diversity create a more robust local economy, but it also creates more healthy competition, which leads to better customer service.
... With Customer Service
No matter how evil big banks are behind closed doors, every time I walk into any bank in the US, I am greeted with a courteous hello and customer service that sometimes tiptoes into ‘extremely annoying’ territory, with bank managers running up to explain how a simple deposit works. Yet, yesterday I walked into my local Ghanaian Rural Bank to make a simple withdrawal that should have taken five minutes, but didn't walk out, frustrated and late, until an hour later. Bank bureaucracy and dismissive employees make every trip to the bank a struggle, leaving long lines and despairing customers in it's wake. The worst part? This particular Rural Bank has just won an award for being the best Rural Bank in all of Ghana. I shudder to imagine what the other Rural Banks must look like.
One doesn't realize how important customer service is until you don't have it. Every Lumana microfinance client wants to save for their children's education or an important asset for their business, as well as make financial choices that reflect their own interests or personal situation. However, the lack of flexibility in most financial products in their vicinity have made it impossible to tailor a loan to their lifestyle, and banks do not allow them to do so. This rigid outlook to banking is instantly felt when one walks through the doors to a Rural Bank all over Ghana - do you really think that locals, if given the choice, would actually choose to bank with such an institution? It's just that they have no other choice.
We live in a world that revolves around our economy, where we are no longer limited to basic human necessities such as food and water. Now, financial products, and the flexibility of those financial products, make it possible for the poor to receive an education, create a business, and lift themselves out of an oppressive lifestyle. Taking out a loan is not a catch-all for poverty, just like taking out a student loan in the US is not a ticket out of the projects. However, taking out a small loan - for anyone in the world - is a beginning to creating opportunities outside of the bounds of hand-to-mouth living. This is why financial diversity is important, and why we need to continue striving to create economies and marketplaces that work for the local community.
Now, the real question: how can we create a banking sector that is a cross between Ghana and the US, to truly serve the global economy?
Still interested? More posts on my experiences with microfinance in Ghana can be found here.