Moving Beyond Microcredit
The Makola market, in Accra, is a five-way assault on the senses: a frenzied din of bumping carts and shouted exchanges, amid piles of goods ranging from plastic Chinese housewares to local beads and beat-up Nokias. Smells waft in from a food section filled with goat heads, smoked fish, hot peppers, and ground spices packed together under the tropical sun. In the nearby second-hand-clothing section, the pace is slower. Merchants call out for customers, and have time to sit and chat. Outside an end-row stall, Ussher Desbordes, a thirty-five-year-old vender, modelled a fuchsia polo shirt and peach-colored shorts, a representative outfit from the low stacks of casual wear he was selling.
I’d come to the market to talk with merchants about how they fund their operations. Financing is perhaps the biggest problem faced by small businesses in the developing world. Local banks aren’t typically an option, because the fees are too high, and in some cases because people lack the necessary documentation and literacy required to get accounts. Less than a third of Ghanaians had a bank account as of 2013, according to statistics from the African Development Bank, and only six per cent of them had a bank loan outstanding. These numbers help to explain why microcredit—short-term loans, typically paid back within a year—has become one of the most popular forms of development assistance. Nearly everyone at the market has borrowed this way at least once, Desbordes told me, despite high interest rates. In Ghana, these rates average a hundred per cent for consumers, according to the nongovernmental organization MicroFinance Transparency. “If you go for a loan and you don’t know what you are doing, you are going to be burning your money,” Desbordes said.