CHAPTER 6: PRESENTATION OF FINDINGS
6.1.2 Loan Amount Provided to Participants
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The process of understanding what quotations entailed and being able to draft one, could be very challenging and almost impossible for people with low education levels residing in the rural communities which the fund targeted.
The fund requested quotations from participants in order to verify their loan applications for that specific type of business. This was a general requirement of the fund for all chiefdoms, and it was submitted along with the loan application. It is also worth noting that requesting a quote is not necessarily a bad thing. It ensures that people are realistic about the resources required to run a business. When applying for credit from traditional banks, one must provide business plans, cash flow projections, and other information that will help the banker
determine the appropriate loan amount. However, the majority of the fund beneficiaries lacked the necessary knowledge or, in some cases, numeracy levels to meet these standards.
Nevertheless, most retail shops where participants needed inputs provided a preliminary quotation that the fund could use to align the loan amount required and the nature of the enterprise.
Microfinance institutions in Eswatini operate within political structures in order to be legal, and they target creditworthy beneficiaries to ensure repayment. According to the evidence, social institutions continue to oppress women because they have patriarchal norms that maintain the culture of how they view women in a household. Also, the requirement of a husband’s permission could create vulnerability for some households which reported abuse, alcoholism and polygamy. Garikipati (2013) observes that this has the potential to exacerbate pre-existing power and inequalities between women and men by utilizing their social
positions in loan applications. However, it is worth noting that not all women were married and they had different lived experiences regarding the loan processes.
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proportionate to the type of business these women were running and whether the fund assisted them in reaching their objectives. Some of the loans obtained through the fund were not used solely for the business. It is worth noting that the fund played a significant role in determining the loan amount to be given to participants, as they considered the nature of the business and its ability to generate enough profit to repay the loan. Zandie stated that they examined her small garden and awarded her E2000.00, which was not the amount she requested, but rather what the fund assessed she would be able to repay.
Zandie said:
The fund came to my homestead so to see the business I was doing … found a small plot which I used to farm the maize and a small back yard garden in which I grew lettuce……They left without saying anything and after a while I got a call that my form had been approved and the fund had agreed to give me E2000 towards my business…
later I had to borrow another loan (Primary Data, 2020).
Nevertheless, Merriam asserted that she was able to achieve her goal through accessing credit from the fund for her business and said:
The house we are sitting in; I was able to build it using the money from the fund through my business. This is however not the only thing. Over there is my extended family’s homestead (Primary Data, 2020).
Alice, one of the participants was disappointed as she was not able to access a certain amount of credit that would sustain her business. She said:
I am happy with the fund because I started borrowing E10 000 from the fund, then I borrowed E20 000. I was thinking of borrowing E30 000 which would enable me to sustain my current businesses and diversify to another but unfortunately the fund only borrows beneficiaries up to E25 000 (Primary Data, 2020).
Ngabisa noted:
It is difficult to borrow money to start another business or a business from scratch. I borrowed money from the fund so to meet my clients’ demands by buying a lot of stock which I was unable to do on my own without having to borrow money from the fund (Primary Data, 2020).
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According to Ngabisa, this was due to the fact that the amount paid by the fund was
insufficient to start a business; rather, it could only work when the money was invested in an already existing business. However, this has changed, and the fund now lends to start-up businesses as long as they have a clear business plan and see the potential for profit.
Microcredit loans as start-up capital or small loans to start or expand micro-businesses are supported by Chen et al. (2017) who state that microfinance is a broad category of financial services that includes the provision of microcredit loans as a source of funding for the establishment or expansion of micro-enterprises.
Sonto stated that she was pleased with the loan amount because her main goal was to improve her life and that of her family. She took on the responsibility of being the primary
breadwinner after her father abandoned them when they were young. The majority of participants did not complain about the loan amount because they were aware that they tended to use the profit or loans for personal purposes rather than investing it in the business.
Banerjee and Jackson (2014) confirm that the majority of loans are used for consumption by the family of beneficiery which includes purchasing food, health care services, and other necessities of life rather than investing in income-generating activities.
The findings reveal that the majority of the participants borrow more than once and have a continuous cycle of borrowing. Few participants indicated that the loans were invested in the business and would often use the profits or income for households needs. Another issue in the findings is the frequency with which the participants’ access to loans was determined by the loan size which was insufficient to sustain their businesses, or it may be that they used the business profits instead of reinvesting or saving. Several studies reveal that the majority of women used their loans to fund their husband's activities (Goetz & Gupta 1996; Yin et al, 1994; Kabeer, 1998). This may lead to the business performing poorly and women may opt for more funding to sustain their businesses.
6.1.3 (Un) sustainability of the Participant’s Businesses
The term “sustainability” refers to the success of the business of the participants who rely on the business making a profit. The loan should be repaid by the participants from the profits of their businesses. The participants’ use of the money borrowed from the fund was also
considered in terms of sustainability and why they chose to use it in this manner.
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This is understandable as most women who obtained microcredit for the purpose of investing in their businesses had personal lives as well as household needs to meet. Although
participants indicated that they were trained in how to run their businesses with the loans received, the money was used for different needs besides the business. Training concerns are discussed in Section 6.3.6. Marconi and Mosley (2006) observe that training may encourage beneficiaries to spend their loans on business rather than consumption. However, as
previously stated, this was difficult for the participants because the women were poor and did not have enough money for their basic needs. That is why they used business loans, but it did not work for them because their businesses were typically small. The literature sheds light on the fact that regardless of the size of their businesses, economic activities provide a source of income for the poor, allowing them to meet their basic needs (Morduch & Haley, 2001).
The majority stated that the money was used solely for the business and they would use the profit or income for their personal use or consumption which might have had effects on the business sustainability.
Thoko said:
I was also able to invest the money on my maize production business. I plough for consumption then moved to commercial farming. I was able to buy fertiliser, manure and pesticides and not rely on my husband (Primary Data, 2020).
Thoko borrowed the money for her hawking business but also diverted some of the money to her maize farming business. Lindiwe was also one of the participants who borrowed money for the pig production business but later used part of her loan to pay her personal debt.
Lindiwe said:
I had borrowed the money to invest it in the piggery business. At the same time, I had a debt to pay. My husband was unable to help me with this debt, so I decided to use part of the fund to pay off my debt (Primary Data, 2020).
While some participants used some of the money to build or renovate their homes, others used it to buy a car, and almost all participants used the profit from the business for survival rather than saving it for the business. This calls into question their businesses’ long-term viability.
For Merriam, the Inhlanyelo Fund sustained her business and earned income. She noted:
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In some instances, you find that I get money from my business and it is more than that of people who are working or are employed somewhere. Month end I have my own income. However, days are not always the same (Primary Data, 2020).
While the fund was able to sustain Merriam’s business, for Doreen, Margaret, Alice and Lindiwe, it was not the case. For Doreen, her case was different, because she borrowed money for hair salon and diverted it to her restaurant. She then decided to apply for a tender which was a big mistake because her business was still small. The tender she got was to supply Inyatsi Constructions. She still had not been paid at the time of interview. She said:
The experience I have is that this photograph (See Figure 5. 3 Chapter 5) isn’t the way my restaurant/shop should be looking like because my restaurant/shop should be fully stocked as Inhlanyelo Fund gave me E25 000.00 and now it’s like I haven’t access to any credit due to the lack of payment from Inyatsi (Primary Data, 2020).
Sonto also had a similar situation where she had to divert money from the initial enterprise she borrowed for. She said:
I was expecting to use the money for dairy production, but I ended up selling handicraft and the three-legged pots (Primary Data, 2020).
In the case of Margaret, she said that the loan she received from the fund for her maize farming was sustaining her. She said:
But because of the profits I got when I had borrowed money from the fund, I think those profits are still sustaining me even today. I am currently paying the fund E 3000 a month for the loan and things are going smoothly. I would go back to the fund because there would be a need to do so or I would want to use it for something really pressing. But for now, I think I am doing well with this business. I am employed by the government so embarking on other business won’t work for me and also because of the passion for maize production (Primary Data, 2020).
It is worth noting that the fund lent to anyone as long as they had a business that they could fund. Margaret was able to obtain the loan despite the fact that she worked full-time. While it appears that the money borrowed from the fund sustained Margaret 's business, this was not entirely true. Margaret explained that she used her salary, which she borrowed against, to pay
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off the loan she received and also invested in her farm. So, the question is, would it still be the case for Margaret if she wasn't employed by the government and earning a salary?
Lindiwe complained that one businessman who owned a butchery took her pigs on credit and was not able to pay her, while blaming the COVID-19 situation for losing customers.
In her case, the extra support she received from her husband for feed filled in the gap of repaying her loan, leaving some money to sustain the business. However, Alice’s situation was different and hinged more on the insufficiency of the credit.
Nonhlanhla, on the other hand, had a different story about her loan, which she used to increase the business stock and not for anything else. She said:
I used the money I received from the fund to help my business. I had borrowed money from the fund to reinvest in my business in order for it to perform well again (Primary Data, 2020).
The question this raises is whether the participants' businesses' sustainability was dependent on other sources of income. Or was it determined by the type of business a beneficiary was currently engaged in? Should a business be considered sustainable when it can generate enough income on its own, where the capital can be reinvested and the beneficiary can live comfortably with the profit from the business rather than the capital, thus draining the business? Or, does the profit gained from the business need to be banked or saved for future use in the business? Businesses generally build up reserves for sustainability, but this seems to have not been possible in this case study. In reality, the participants' businesses were not solely dependent on business income, but also on other sources of income. It is observed by Henriksson and Karlsson (2008) that in developing countries, family members helping to start a business can be important.