Poor villagers in the developing world are a distinctive, underserved microfinance segment. There are nearly a billion rural people who make less than $1.25 a day, and most are illiterate or marginally literate, so microfinance documents are inaccessible to them.
There are three widely neglected factors that make rural microfinance fundamentally different from urban microfinance.
- Cash flows are acutely seasonal, and turnover slow.
- Trust in villages is earned in the oral – not the literate — domain.
- Villagers see value mostly in non-monetary terms.
Microfinance reaches the literate. Next, the oral majority.
The loan and savings products we offer do not respect seasonality. Many villagers fear they can’t make the fixed payment in the lean months, so they drop out or simply don’t sign up. And capitalizing a farm requires longer-term investments than keeping a market vendor stocked.
The retailing and governance systems we create do not respect orality. Millions of microfinance loan contracts are signed with thumbprints – a red flag we must stop ignoring. And villagers will continue saving at home until we begin respecting the ways of our marketplace.
The root principle of modern finance – the ‘time value of money’ – is deeply alien to many villagers. Cash inspires less confidence than tangibles like jewellery, or a cow. Time is not measured in hours and seconds, but in natural cycles.
It is time to ‘re-invent’ village finance.
villagefinance 
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