by Mark Weston | Feb 5, 2010 | Africa, Economics and development
I’ve been in Freetown for a couple of weeks now and am starting to get my head around the place. Sierra Leone has only recently climbed off the foot of the UN Human Development Index, but signs of poverty, which people in the West – where its most abject form is mostly confined to society’s margins – can go long periods without glimpsing, are everywhere.
Among the most arresting are the crowds gazing at DVDs playing in shops; the emptiness of markets after festivals; the accused dressing up for court in clean T-shirt and flip flops; young African girls on the beach with old white men; the hordes of disabled people – not just amputees from the war but also victims of polio, leprosy and unhealed fractures; beggars of all ages on every street corner; the ubiquity of slums, which as well as having whole districts to themselves also fill in the gaps in more affluent areas; billboards telling people to beware of counterfeit medicines; people collecting used plastic water bottles; the popularity of lottery outlets; car engines being switched off going downhill; children outside a bar at night using the electric light from inside to see their homework; stalls selling individual cigarrettes, pills and teabags; incessant and insistent requests for money or help with getting to the UK, even by people who work; the huge number of working children; and, of course, the proliferation of NGOs.
And finally an audible indicator of poverty, in the shape of a complaint made to me last weekend by an old man in a slum: “We should be shitting four or five times a week,” he said, “but people here only shit twice a week.”
by Mark Weston | Feb 4, 2010 | Africa, Economics and development
Of course, traditional banks like Ecobank look down on microfinance as a small-fry, over-risky industry. In Freetown I met SB, who heads a not-for-profit microfinance institution (MFI).
Set up in 2002 by a large American NGO but now self-sustaining, it has 20,000 members in four Sierra Leonean cities. It lends sums of between $120 and $2000 – in a country where most people live on a dollar a day, this means the loans are too large for the poorest people to access (SB says small loans are too costly to administrate).
Loans are for “income-generating activities” only. That is, not for weddings, funerals, medical bills or luxuries, for example, although SB is receptive to my argument that the first three of these can indirectly lead to improved income-generating capacity by relieving stress and strenghtening health (he also admits that some loans probably end up being spent on consumption rather than investment).
Most of the loans are repaid over 6-10 months, with repayments made weekly. They do not come cheap. The monthly interest rate is 3% – with inflation at around 11% this works out at an annual rate of 25%. And to this must be added the cost of travelling to the MFI’s office to make repayments (my medicine seller friend Musa said he gave up his membership because having to pay every week was too tough – his business is collapsing, and he asked me to fund him last week instead). Clients put up with these rates because they are poor, and cannot access cheaper loans because they lack collateral and credit ratings – SB’s MFI relies on word of mouth references, visits to inspect businesses, and guarantors.
Eighty per cent of clients are self-employed businesspeople, who borrow to buy palm oil for cooking businesses, refrigerators for storage, baskets and trays for hawking, and stock. The other twenty per cent are salaried but moonlighting. Eighty per cent of clients are women because, as SB says, men want to shoot for the big pot so they look down on small loans. Women are also much better payers.
The recession has hit the MFI’s clients hard. Remittances and investment from abroad have slumped, and the increased costs of food and fuel have hit customers. Many small enterprises, says SB, have gone to the wall. The normal default rate on loans is 3-4%, but in 2009 11% of money loaned was not repaid. As SB put it, “You might want to pay back a loan but if you have the choice of maintaining your credit rating or feeding your family, you don’t worry about not being able to borrow again in the future.”
If clients do default, the MFIs have limited options for chasing their losses. SB threatens to take bad debtors to the police but never carries it through because he knows it won’t help him recover the money. He worries that “clients talk to each other,” and come to see not-for-profit MFIs as a soft touch. Readers of Hernando de Soto will not be surprised to hear, moreover, that in many cases SB can’t even find his errant clients – some don’t have identity cards, and changes of address are frequent and go undetected by officialdom.
SB’s profits (which are all reinvested) have halved in the past year. Other MFIs have seen similar or worse slumps – in Morocco, once the poster child of African microfinance, the government has had to step in to help as several MFIs went bankrupt after defaults soared to 30%.
Because of the recession, many MFI clients have resorted to “multiple borrowing.” They join several institutions at once, borrow money from all of them, and often fail to repay. The problem is so serious that SB’s MFI has stopped taking new members until it figures out a way to stop the multiple borrowers. Such is people’s desperation, he says, that “if we opened up our membership now, we’d have 200 applicants queuing outside our office every day.”
by Mark Weston | Dec 30, 2009 | Africa, Conflict and security
The arrest of a Nigerian national suspected of plotting to blow up a transatlantic plane is another worrying piece in the jigsaw of West African Islamic terrorism. Until a year or two ago, Al Qaeda’s presence in the region was more a rumour than a serious concern to Western governments. The group was thought to be involved in diamond smuggling during the Sierra Leonean civil war in the 1990s, and some observers believe it has profited from the heroin trade through the Gulf of Guinea.
But as recently as February this year, when I gave a talk to the UK’s Office of Security and Counter-Terrorism, the British government did not believe Islamic extremism in West Africa would coalesce into a serious threat, especially outside the region itself. Although the FCO has placed half of Mali and Niger and all of Mauritania on its list of travel blackspots, their people still seemed unruffled when I talked to them about their West Africa strategy a couple of months back.
They may be sleeping less easily now. Although Al Qaeda’s infiltration of the region remains at a fledgling stage, the arrest of the Nigerian and the kidnappings of four Spaniards and two Italians – all in the past six weeks – are an indication of the potential dangers both within and without West Africa’s borders. And the pressure that is encouraging young Africans towards extremism – the great collision between demography and poverty that is taking place against a background of inept and venal governance – is intensifying by the day.
The authorities are doing what they can. Nigeria’s police cracked down violently on the Islamist Boko Haram movement back in August, and Mauritania’s police take copies of taxi drivers’ ID cards so that they can haul in their families if passengers disappear.
But without economic development the region’s governments will be fighting an impossible war. Al Qaeda’s wealth will buy off police and army as well as luring in new recruits. It is development that people need – relevant education and infrastructure investment provided by their own governments that are responsive to them and not to donors or other vested interests, and that provide a fair enabling environment for businesses large and small; assistance from the West by means of getting out of the way of trade and migration and forcing Western businesses to behave honestly; and they also need a large dose of luck: they need leaders to emerge who have the will and courage to stop the cycle of selfishness and corruption at all levels of government and to shed the burden of aid in favour of self-reliance; and they need their neighbours to remain stable and peaceful. Only West Africa itself has the power to stop extremist violence in the long-term. As many people I have spoken to in Senegal and Guinea-Bissau realise, the rest of us can help most by clearing their path.
by Mark Weston | Nov 30, 2009 | Africa, Conflict and security
The UN is pessimistic about the situation in Guinea. In Tambacounda last night, in the south-eastern wastes of Senegal, I met a World Food Programme employee from Dakar. Like everyone else in this one-horse town, he was on his way somewhere else, in this case to Kedougou, near the border with Guinea. He is going to investigate whether there are sufficient telecoms and internet facilities there, in case war breaks out in Guinea and a flood of refugees pours into Senegal. Similar preparations are taking place in Guinea-Bissau, Mali, Sierra Leone and Liberia.
The UN’s caution may be well-founded. Guinea’s increasingly-unhinged leader, Dadis Camara, has recruited South African mercenaries to train his supporters in the art of war, in case the majority Peul population decides it has had enough of him and moves to unseat him from power. I asked the WFP man what the Senegalese government’s position is. He said that the president, Abdoulaye Wade, supported Camara when he took over last December, and has maintained a discreet silence since. “Guinea is rich in resources,” he explained. “It doesn’t pay to antagonise those who control them.”
by Mark Weston | Jun 4, 2009 | Africa, Conflict and security
Edwin Dyer
Back in February, I gave a talk on security in West Africa at a Demos leadership masterclass on International Security and Counter-Terrorism. Yesterday came news that Al Qaeda’s African arm had killed a British hostage, Edwin Dyer, whom they captured in Niger in January (they killed him in neighbouring Mali). In my talk, I predicted that the security threat from West Africa might be more of a long-term problem for Europe, but that it was one that was worth monitoring in the short-term too. It seems the threat might be more immediate than I feared. The talk is available here.
