Why Im a vegetarian

Hey!

So went I wrote this a week ago it was my third day of work at Capitol MicroCredit (CMC) and I got the opportunity to go out into the field to do field work with clients!



The background:
My project at CMC is helping the company come up with a new lending methodology by evaluating a client’s cash flow. It sounds more complicated than it actually is – essentially after meeting with Yale professors, reading books, talking to CEOs I’ve come to the conclusion that microfinance can be a good tool to help the poor/middle class, but is not THE SOLUTION to poverty, especially extreme poverty. The reason for this is that microfinance industries that are sustainable have to make a profit, so not only do clients have to be able to pay back the loan, but they have to be able to make enough money to pay a pretty fair amount of interest so that the microfinance industry stays in business. The problem comes in when people can’t pay back the loan – some microfinance corporations really abuse their clients by not telling them about high interest rates or how much collateral they will take from clients if they default (can’t pay back the loan). This is especially problematic for the unregistered businesses and loan sharks. People who take out loans don’t want their house/children/wife to be taken as collateral, so then they take out more loans with huge interest rates, creating this spiral of debt that is nearly impossible to get out of.

Not only can bad information and malicious microcredit institutes end up harming people, but sometimes even when microfinance credit institutions try and give people fair loans, the clients don’t keep records. That means they don’t know how much money they will make to be able to pay back their loan, so they still default and end up worse off than they started. The good news is that corporations that care about the welfare of their clients have really low default rates (ex. CMC’s default rate is 3% so about 97% of the people that get a loan successfully pay it back and improve their business profit). In order to make sure that even more people can pay back their loan, Im helping CMC come up with this way of documenting a client’s clash flow, specifically trying to sort out household finances and business finances. Its essentially a lot of accounting … which brings me to today.

I went out into the “field”, like 20 minutes from the office with a loan officer. We were evaluating a business (surprise visit) to a butcher who had applied for a loan. Essentially he had this “shop” that was like a shack with hooks of raw meat (and lots of flies) that we visited. We sat inside and talked to him about how much meat he bought, how much it cost, how much he sold it for, how much it cost to transport, how much rent was, how much he spent on food/utilities etc. We then created a cash flow to see how profitable his business was, calculated how much income he had per month, and what type of loan he could afford. The whole thing took about an hour and it was all in Luganda, not English, but Im learning my numbers in Luganda, so I could keep track of the finances and record the numbers on the income sheet. Plus, my loan officer was really nice and translated for me.

For you math nerds out there:
So for example, the guy we were interviewing bought 1 kg of meat for 3,200 Ugandan Shillings and sold it for 5,000 Ugandan shillings. That’s a profit of about 70 cents per kilogram of meat. He sells about 30 kgs a day, plus his wife sells plantans, so taking into account additional business expenses he makes about 1,000,000 shillings a month (about $500). But, he has household expenses as well, so taking into account school fees, food, rent, he ends up with about 450,000 shillings per month ($225). So that means the monthly payback of the loan he can get should only be 50% of his household income to make sure that if someone gets sick or if the loan doesn’t help his business but keeps it performing as it, he will still be able to pay it back. So my loan officer decided he couldn’t afford the 3 million shilling loan (about 330,00 per month) but instead is giving him a 2 million shilling loan (about $1,000), which he pays back 220,000 shillings per month for 12 months. (20% interest rate)

Hmm, that might have been a complicated explanation of what I do, feel free to comment if I was unclear, in my nerdiness I find it fascinating.





About the pictures:
So, the reason why Im a vegetarian ….. well they say pictures are worth a thousand words, but just imagine walking into a wood shack about 3 by 4 feet without AC in the middle of the afternoon in Uganda and sitting with hunks of raw meat swinging for about 1 hour. Oh, and throughout the conversation we would be interrupted by the neighborhood clients who would want some meat. Then the client would get up, take out this HUGE knife, and start hacking away at this hunk of ribs with piece of bone and flies going everywhere. Look closely at the second picture – that furry brown thing is a tail hanging off the hunk of meat so you can identify what type of animal it is. With the 2 million shillings hes going to buy his own cows because they will be even cheaper to slaughter and sell. And if he grows his business, he will be able to send all of his kids to school.



So while the smell and flies and tail was quite an experience, it also made me step back and realize what a luxury being a vegetarian is, because for this guy, being a butcher was literally the way he supported and fed his family. It was definitely a humbling experience and put my “discomfort” in perspective. Now, even though I still think I will be a vegetarian when I go back to the US for food distribution and environmental reasons, Im much more appreciative and aware of the privilege that I have to make that choice.