After I wrote my last post, I came across two more systems for savings and loans in Benin.
One system is quite familiar: purchasing goods on credit. I was at my friend's dry goods shop earlier this week when a customer bought larger quantities of spaghetti, tomato paste, and bouillon cubes. Since she did not have enough money for her substantial purchase, she bought the goods on credit. She will use the ingredients to make spaghetti to sell, and once she has sold all of the cooked spaghetti, she will have enough money to pay her debt. The shopkeeper records the debt in a notebook and provides a receipt to her customer. I assume most debts are ultimately paid off because otherwise, my shopkeeper friend would surely discontinue this practice.
During another visit to the shop, I learned of another local loan/investment practice, as described by a customer. Farmers can find it difficult to make their harvest money last until the next season, so when a farmer is in desperate need of money, he can sell future sacks of corn in advance for a low rate. In this case, the investor had bought 15 future sacks of corn from a strapped farmer for 5000 CFA each ($10), knowing that when the corn was finally harvested, the sacks would already be worth 12,000 CFA ($24). Through this investment, she thus stood to make $210 in profit, a handsome sum in a country where the median daily wage is $1.25. Unfortunately for the investor, once the corn was harvested, the farmer refused to give her the sacks she had paid for! I do not know what recourse she has, but when the system works, it is a fantastic investment opportunity.
Do not forget either an investment practice I described in the fall: buying goats for cheap in the spring when demand is low, and selling them for top dollar right before Tabaski when demand is high. Since the upkeep of goats is nearly free during the rainy season when plants and water are plentiful, this, too, can be a great investment opportunity.
Another common investment is to buy land and rent it out to field hands. Some teachers, nurses, and other professionals who do not want to dirty their hands in the fields will do this.
As you can see, income in Benin is more complicated than meets the eye. While it may be tempting to label the Beninese as helplessly poor, there are a number of investment, savings, and loan opportunities that an American onlooker might never know existed.
One system is quite familiar: purchasing goods on credit. I was at my friend's dry goods shop earlier this week when a customer bought larger quantities of spaghetti, tomato paste, and bouillon cubes. Since she did not have enough money for her substantial purchase, she bought the goods on credit. She will use the ingredients to make spaghetti to sell, and once she has sold all of the cooked spaghetti, she will have enough money to pay her debt. The shopkeeper records the debt in a notebook and provides a receipt to her customer. I assume most debts are ultimately paid off because otherwise, my shopkeeper friend would surely discontinue this practice.
During another visit to the shop, I learned of another local loan/investment practice, as described by a customer. Farmers can find it difficult to make their harvest money last until the next season, so when a farmer is in desperate need of money, he can sell future sacks of corn in advance for a low rate. In this case, the investor had bought 15 future sacks of corn from a strapped farmer for 5000 CFA each ($10), knowing that when the corn was finally harvested, the sacks would already be worth 12,000 CFA ($24). Through this investment, she thus stood to make $210 in profit, a handsome sum in a country where the median daily wage is $1.25. Unfortunately for the investor, once the corn was harvested, the farmer refused to give her the sacks she had paid for! I do not know what recourse she has, but when the system works, it is a fantastic investment opportunity.
Do not forget either an investment practice I described in the fall: buying goats for cheap in the spring when demand is low, and selling them for top dollar right before Tabaski when demand is high. Since the upkeep of goats is nearly free during the rainy season when plants and water are plentiful, this, too, can be a great investment opportunity.
Another common investment is to buy land and rent it out to field hands. Some teachers, nurses, and other professionals who do not want to dirty their hands in the fields will do this.
As you can see, income in Benin is more complicated than meets the eye. While it may be tempting to label the Beninese as helplessly poor, there are a number of investment, savings, and loan opportunities that an American onlooker might never know existed.
The selling on credit sounds very Little House on the Prairie.
ReplyDeleteThe buying of corn futures sounds very Chicago Board of Trade. There's certainly risk involved there: the crop could fail, the price might collapse, or as you mentioned, the farmer could renege on the deal!
I think the biggest risk involved with buying sacks of corn in advance is that the farmer could renege on the deal. I wouldn't worry much about crop failure or price collapse. The investor arranged the deal in terms of sacks of corn, not a percentage of the harvest, and the farmer should expect to harvest far more sacks of corn than the investor purchased, so even a reduced yield should not hurt the investor. As for the uncertainty of prices, since sacks of corn generally sell for 10000-20000 CFA depending on the time of year, I think the investor is pretty safe buying each sack for 5000 CFA.
ReplyDeleteI sense that some people are not trust worthy. I wonder if putting some of these agreements in writing would solve some of those problems, at least if people are able to read and write.
ReplyDeleteJean Ralley
Unfortunately, I think the borrowers generally do not know how to read and write. I know that my shopkeeper friend made a receipt (and kept a copy for herself) of the money the woman owed her for the goods purchased on credit, but the borrower cannot read the receipt. My shopkeeper friend periodically ventures out to collect money on debts that are well overdue.
ReplyDeleteWhile the corn deal did sound like the futures market, it also sounded a little bit like loan sharking. Someone taking advantage of someone else's unfortunate situation.
ReplyDelete