A Lesson on Cellular Economics

It's Tuesday night. Laura has had a long day, and I'm tired too. Neither of us particularly feels like making anything for supper, so we call Mimmo's. Tuesday night is two-for-one pizza night.

And an hour later we receive a lesson on cellular economics in Africa.

My cell phone rings, but only once. I retrieve it from the office, punch in the code to unlock it, and a message appears to tell me that I have one missed call. An unknown number.

At home, I would have just stopped there. Probably someone dialled the wrong number, realized it, and hung up. But that's not how cellular economics works in Africa.

I suspected that this was the "Mozambican answering machine," so I hit redial. Sure enough, it was the pizza delivery man, lost. Five minutes later, we had our pizza, only slightly cold.

I wrote previously that cell phones are ubiquitous. That only tells half the story. Most people don't actually have any credit on their phones, so it is very common to receive a one-ring phone call. Call me back, please. On your credit.

In Mozambique, outbound calls are charged; inbound ones are not. That simple fact has a profound impact on cell phone usage here. Everyone with a cell phone is an amateur economist.

* * * * *

In Bangladesh, the Grameen Bank's "telephone ladies" made popular a micro-enterprise of what amounted to a roving phone booth: a lady would receive a loan for a cellular phone and make her living by selling airtime to people in the community who didn't have telephone service but needed to make a phone call.

In Mozambique, a similar model is used by South Africa's OneCell. Even in the capital of Maputo, the streets are dotted with OneCell's bright orange umbrellas. Under these umbrellas, entrepreneurs sell phone calls over a cellular network.

These, like the phone booth back home, will soon be extinct.

* * * * *

Everyone has a cell phone, but few have credit. Sounds like prepaid credit is valuable, right? Right.

In fact, it is a convenient way for people to store and transfer wealth. By punching in a particular series of digits, followed by a recipient's phone number, users can transfer credits from one to another.

Imagine wanting to purchase a small bunch of bananas from the sidewalk vendor, but not having any money left. Rather than handing him cash, you can instantly "deposit" some of your wireless credit from your phone to his (that is, if you've conserved your prepaid credits!).

For the vendor, having less cash means that there is less risk of being robbed.

And I hear -- though I haven't seen it yet -- that there are even enterprising individuals who will purchase the street vendors' excess cell phone credit at a modest discount and resell it to people wanting to replenish their phones.

Cell phone credit, it turns out, functions as a second currency in Africa. Without, I would imagine, having to pay taxes to the government. Yet.

Os Emprestimos

When I started learning Portuguese, I learned the word for "loan." Emprestimo. I thought that it would be a useful word to know when dealing with microcredit and business development.

I didn't realize how often I would hear it from individuals asking me for a loan. Queria um emprestimo, por favor.

Of course, the request is never that direct. Not in Africa.

We've been asked for many loans or gifts (the lines are rarely so clear) over the past months. This week, it was our empregada who asked for a loan. The conversation went something like this:

"Good morning, patron. How are you?"

"Good morning, Alzira. I'm doing fine, thanks. How are you doing today?"

"I'm fine as well. Laura is at school today?"

"Yes, she's at school."

"My mother is sick right now, but she's in Chokwe and I don't have enough money to visit her."

"I'm sorry to hear that."

(Notice my Western-style response: directly responding to the explicit statement. I didn't detect a request for a loan buried in there!)

I had inadvertently forced her to ask more directly:

"Could I have a loan for two hundred so that I can travel there this weekend?"

Even here, when my ignorance has forced her to be more direct, she avoids using the key words that I would understand: dineiro or meticais. Money or dollars. I almost missed the question. Then I realized that I had heard the key word: emprestimo. Still, I wanted to clarify:

"Two hundred meticais?"

She looked embarrassed, perhaps because I made the request more direct by using the word meticais. Or perhaps because she was asking for a loan in the first place.

Some people have advised us against lending money to Mozambicans. Their reasons vary.

Some people think that when Africans ask for a loan, they really have little intention of repaying it. In this case, if she had've asked for the $8 outright to visit her sick mother in a different province, I probably would have obliged.

Some people argue that we're not doing anyone any favours by helping them to live above their means. I'm sympathetic to this point, but I'm also sympathetic to her sick mother. And I would rather let her make a bad decision about her life than force my own decisions onto her.

In a perfect world, Africans would save their money so that they had some left over for a rainy day (or perhaps a more apt metaphor would be for a drought). In a perfect world, they would have enough to eat every day as well.

I can give her a loan because I can secure it against her future wages -- after all, those wages come from my wallet. But that's not the point. The point is that we have a cultural bias towards savings, in part stemming from the comfort that comes from a stable political and economic climate.

Africans have had too turbulent a history to be able to count on their savings having any value tomorrow.

Instead, African culture permits the borrower, not the lender, to determine the level and legitimacy of their request. In some ways, that's a freeing thought. At least this time, I won't worry about whether or not I'm helping or hurting.

Homes and Cell Phones

I've been meeting with a young man named Mario twice a week to practice speaking Portuguese. I've been paying him for his services because it's truly been helpful, and because, at 24 years old, he's trying to finish school and look after his younger brother at the same time. He's looking for work as a translator at embassies, or as a chef. He loves to cook.

I met Mario at a local church that I attend more frequently than any other right now -- perhaps once every second week. He took the initiative to approach me for a job, and takes his commitment seriously.

Mario just showed me his new cell phone. It cost him $80, which I loaned him as an advance on his salary, to be paid back over two months.

The ubiquitous cell phone is a major asset in Mozambique. Just yesterday I heard about someone who is in hospital suffering stab wounds from a screwdriver. The thief coveted her cell phone.

By contrast, Mario is also paying a mortgage on the house he lives in. Because banks in Mozambique aren't interested in such small loans (and may not consider his meagre structure to be suitable for a mortgage anyway), the home's previous owner holds the mortgage (and title to the house, until Mario has completed his payments). Mario pays whenever he can put together some savings. He's not expected to pay monthly.

The house will cost roughly 20,000 meticais nova familia -- or about $800.

In other words, I just lent him 10% of the value of his house to buy a telephone. I was shocked. Surely that's an obscene amount of money for a phone.

Laura and I dropped him off at his house recently, in a subdivision of Maputo called "Polana Caniço." The house has three rooms, but it's only half-built: only one of the rooms has a roof, which consists of corrugated steel sheets set across the tops of the walls. There are holes where windows, or at least iron grates, might eventually go.

Some common features of homes in Canada are unnecessary and unheard of here. You have a heater in your home? Everybody does? Most Mozambicans don't understand the Canadian climate, and don't care to.

And other common features are luxurious. Like running water, which Mario doesn't have.

He doesn't have electricity either, because he can neither afford to hook it up nor afford to pay the bills. It's all too easy to forget the luxury that we are enjoying in Maputo: our electricity costs about $40 a month, purchased in advance on a pre-paid card. By contrast, the minimum wage in Mozambique, for those fortunate enough to have full employment, is US$58 a month.

(And even still, I don't know how common adherence to that official statistic is. A news service recently reported that soldiers in the army will receive raises to boost their salaries above $38 per month. Not even government employees receive minimum wage, it would appear.)

Cell phones are as expensive here as they are in Canada, which make them exceedingly expensive for the average Mozambican. They're also extremely important: potential employers need to know how to reach him.

The Response

Last week, I wondered whether or not honouring a request for a loan would hurt the borrower more than not giving it. The requester returned yesterday and told me that he had done much thinking, and would still like the full loan, if I'm able to offer it to him.

Of course, the rules of the game shifted over the weekend.

As if to taunt the "wisdom" of my earlier words, my prospective borrower's house was robbed on the very day I wrote them. Important, yes; Urgent, no, I wrote. And then the very vulnerability that he sought to repair was breached.

The target of the thievery wasn't televisions or jewelry. He doesn't have these things. He doesn't even have electricity or running water. No, the target had basic, but real, value. He was robbed of his single-burner paraffin stove, a pan full of food, and some other food on shelves. The thief was hungry.

How much this theft impacted my friend's decision to take the loan, I'll never know.

After much deliberation, I decided to meet him part way. I loaned him a third of the money that he needed, and the two of us agreed to a schedule of weekly repayments. I also gave him another third outright as an early Christmas bonus for work that he has been doing for me over the past months. Needing the final third will keep him motivated to continue to chase down leads for more regular work.

I also offered to help him with the repairs.

He was quite happy with this outcome. The schedule of repayment contemplates him being able to pay off the debt in two months. It is a little bit aggressive, but he welcomed the challenge. He pointed to one week in the middle of the schedule, and announced his goal to double his payment for that week in order to pay off the debt faster.

In doing so, he figured that $16 a month was more than what he needed to buy rice, cooking oil and sugar. The Mozambican staples. He would find a way to survive.

And he had understood that that debt is serious, after all.

Can Helping Hurt?

In a previous posting, I wrote that we have decided to help people however and wherever asked. Sounds simple, doesn't it? Too simple.

So what is the proper response when someone makes a request that could easily be fulfilled, but might just end up hurting more than helping?

Last week, a friend asked for a loan. To me, it was a relatively small sum: I could have honoured his request for $250. And through the looking-glass of North America, the need seemed great: he wanted the money to buy some sheets of tin to cover his open-to-the-sky house, and some other improvements that would help him secure his possessions. How can I deny someone $250 so that he can literally put a roof over his head?

To him, by contrast, this request was huge. It represented four or five months' worth of salary.

Knowing that I didn't really understand his living situation (though I've been to his house), but also knowing that he's lived without much of his house covered since March (which isn't that unusual in Mozambique), I knew that the situation wasn't urgent. Important, yes. Urgent, no.

Laura suggested that I make it a teachable moment, so that's exactly what I did.

When presented with the request, I told my friend that I would think about it and that we could talk about it the next day. When we met again, I didn't have an answer, but instead had prepared a lesson on Biblically-sound financial principles.

My task when I came to Mozambique was to work on micro-enterprise development initiatives. Being here, I've realized that mentoring people on personal finances is a critically important foundational step: an entrepreneur can't build a successful business if he doesn't know how to manage his own finances.

The requester is a young Christian, so respected the wisdom of the Bible. Had he not been, its teachings are still rational, rooted in common sense.

I spoke to him about things that seem obvious to a guy with a Master's degree in business, and a house with a mortgage. I asked him questions like:

Have you made a plan? Do you really need to do all of the work now? Or can some of it wait until you have saved some money?

How will you continue to feed yourself and your family -- an important obligation -- if you spend four or five months of salary on these house improvements?

How will you cope with other unexpected expenses that may arise over the coming months?

How will taking this loan restrict your future decisions? Will it require you to continue along a path you don't like in order to pay the loan back? Might it prevent you from pursuing an opportunity that arises because of the outstanding obligation?

These questions struck him like great bits of wisdom. He understood the need to think carefully about his request, and asked for time to do so.

* * * * *

Naturally, I could have offered to give him the money, which would seem like the compassionate thing to do. That would have been completely within my ability, and it's a response that I wrestled with at great length.

I could have allowed him to put a roof over his house and avoid being enslaved by debt.

My hope is that mentoring him in the way to plan and think through his financial decisions will be an investment worth far more to him than had I opened my wallet and handed him $250. My prayer is that he becomes a master of his own destiny, not dependent upon the generosity of a rich, white foreigner next time a big financial need arises.

* * * * *

Laura and I don't yet know how we will help. Our friend will soon return to us, having carefully reconsidered his request. We expect that he'll come back to us with a proposal -- perhaps the same request, perhaps not. And if, when he returns, he again requests the loan, should we comply?