Back To The Basics: Why We Need Credit And How It Can Stimulate The Economy

February 25, 2013

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Morin Kamga, our boss and the founder of Utamtsi, spoke to us about his experience in the village markets—a story that reveals the basics of credit and how necessary it is to stimulate economic activity. Here’s his story:







“In the village markets you find the section of women who sell plantains here, those that sell oil there, and those that sell beans over there. The market is segmented. And this is a problem when we are talking about economies that use money as a system for exchange, because this means that we are in an economy of credit. Money itself is not worth anything, it represents value that can be exchanged in the future. That is fundamental. This is a theory of economics.

“In this money economy people harvest/manufacture their items and then we give them the money for their goods. That is the reverse of what it should be. How can they begin to make money when what they need is initial funding, or credit?

“Well, this means what? This means that a woman who sells plantains is here, and the other woman who sells oil is over there, and the man who sells beans is over in another section of the market. The first woman wants to sell her plantains to buy a little bit of oil. The second woman wants to sell her oil to buy beans. The man wants to sell his beans to buy plantains. But no exchange is happening. We wait. The money doesn’t come. To start the exchange between the plantain woman, the oil woman, and the bean woman, someone from the outside has to come in with money.

“I was in a market like this. I walked over to the woman with plantains who wanted to buy oil. I said I’d by the stalk of plantains for 300 francs. She’s a big planter and usually sells her stalk for 800 francs. She said no.

“I waited in the market. Just until the afternoon, she still hadn’t sold her plantains. The woman selling oil hadn’t made a sale either, and neither had the man selling beans—despite the fact that they all needed what the others had. What they needed was money to facilitate the transaction.

“I went to the plantain lady and asked what she would do with her plantains. She wanted to sell them to buy oil to prepare her family’s dinner. I said, ‘OK, I will loan you the money so you can go and buy oil—but I will only give you 500 francs. The day you sell your plantains, you can come to my house and give me back my money.’

“With the new money the plantain lady received, she went and bought oil. The oil lady took that money and went and bought beans. The bean man went and bought plantains. The plantain lady came and gave me my money back. It was finished.

“Eight hours waiting under the sun in the market that day and nothing happened. I gave a small credit to be repaid in a week and I received my money immediately.”

The story that Morin Kamga illustrates above is a story of a micro solution to a large economic problem. All that these people in the market needed was a small injection of money to stimulate the market’s money exchange. While micro credit cannot solve the problems of nations’ economies, it can help a small group of people, like these Cameroonians selling at the market, to increase productivity and sales.

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