Reflections on Bolivia: Pasanaku

Pasanaku: Microlending as complement or bastardization?

Working in Bolivia with Pro Mujer, a women’s microcredit and integrated services organization, I have seen and learned a lot I never could have learned sitting in a library back in the U.S.

Before my arrival all of my knowledge of microfinance was theoretical, gleaned from books and articles, all written or at least translated into English. These things focused on those hot topics of microfinance so readily found everywhere these days in the wake of the UN´s Year of Microcredit and the Gates Foundation’s recent commitment to support the field. Discussion abounds over its success as a tool for women’s development, as a sustainable development measure, the tension between profit-driven and purely do-gooder projects, and above all, Muhammad Yunus as the godfather of all of this great poverty alleviation and his Nobel Prize.

The first thing I learned when I arrived and began working was something I don’t recall ever reading in any one of the articles or books that I had used for research the year before while developing a year-long class project. It was something utterly logical and though initially surprising, essentially necessary to a group lending model where the fate of the group is tied to that of the individual. That great epiphany was this: that microfinance involves fistfights.

If you stop to think for a moment, though, of course it does. When you collect together 20-35 women, who may or may not know each other and make them all accountable for each other there are going to be fireworks when someone turns up short for the third time in two months, or brings in a false bill, or doesn’t show up at all. All these things I’ve seen happen, all things that are common, all things that are understandable given the high-risk financial realities of most of these women. But these women are all in the boat together and group cohesion is essential to success. The original idea, that women from a community, from a family even, would go in on this loan venture together, was great. A confianza already exists there and probably a precedent for helping each other out when the need arises. Perhaps though, as the field of microfinance grows and the reality strays from this model, trouble begins and debt rises.

There is a very old system of group monetary support. Explained to me as culturally Andean, in use since forever and continuing today, the tradition of pasanaku is so well ingrained that it is apparently a failure-free system of group support and lending. Pasanaku means “passes between us” in a combination of Quechua and Castellano and is common today in both rural and urban areas. It is actually identical to group arrangements with different names (su su, tontin, etc.) that exist throughout the world. Known generically as Rotating Saving and Credit Associations (ROSCA´s) these traditional arrangements actually served as a partial model for Mohammad Yunus as he was developing the first microcredit project in Bangladesh in the 1970´s. Perhaps the Andean model is identical; perhaps the cultural values and traditions it is built upon are distinct. Either way, the impact of microlending on this traditional arrangement as perceived by participants and observers with various agendas, is interesting. Is it a growth out of the old system or bastardization?

A group of people, usually women,[1] gather together and arrange out a schedule of turns where each month a new member comes up as the group beneficiary. Every month the group gathers and every member puts in the same amount, be it 10 bolivianos or 10 dollars, whatever it is it is an amount agreed upon at the beginning. That month’s beneficiary takes home the pot to use for whatever she pleases; she can use it to augment her business, pay tuition for her children, or throw a party, anything that she wants. At the end of the cycle, once every woman has had her turn benefiting from the pot, the group is finished and can disband or decide to go for another round. It can add new members or say goodbye to old ones, change the monthly payment amount or the payment period but all only in between cycles.

Supposedly, default in pasanaku is virtually nonexistent because women all benefit the same and pay the same and because the group is developed out of such a tight, already existing community. It is built on a spirit still very alive in rural indigenous Andean communities of taking turns to help community members. Rotational support systems exist to help build houses, water systems, and for work in the fields. The idea is that as individuals or individual families the same work cannot be accomplished as can be with community groups. It’s a sort of profoundly culturally ingrained “pay it forward” arrangement.

In Cochabamba, I have heard lamented repeatedly the loss of this communal spirit. The idea that urban migration and organizations like Pro Mujer have created a much more individualistic mindset and contributed to the diminishing existence of community assistance and teamwork is often expressed by cultural advocates and borrowers themselves.

I am left to wonder, does a microcredit group lending model build off of the culture of pasanaku or does it break it down?

On the one hand, in its purest form, a Latin-American group lending model should be a sort of extension of pasanaku. Women come together periodically to make payments, to meet with each other, and the obligation only lasts as long as the cycle. The differences are that instead of meeting for each other, the women meet for Pro Mujer, and they do not make decisions for the group (i.e. Amount of payment, meeting intervals), and they pay interest, a lot of interest. Ideally, members of a group know each other, are from the same neighbourhood or community, and are at times involved in the same business. Low default rates in microfinance in these group lending projects are meant to be attributable to social pressure, to the obligation to the group above all else. As little or nothing is offered up in the way of collateral and the worst punishment the lending organization can visit upon a borrower in default is the refusal to lend in the future, group pressure is essential to ensuring good repayment rates. And it is successfully sufficient across the globe. At Pro Mujer, it has been repeatedly observed that group cohesion and confianza is directly related to successful repayment. The groups that go on to borrow cycle after cycle contain friends, family members, and neighbours who have relationships with each other beyond the loan group.

However, as the organization grows, it appears to get farther and farther away from the “purest” form of the group lending model. More and more groups are composed solely or primarily of strangers who have not formed the group themselves. The need to maintain participant minimums in some groups leads to the recruitment of random outsiders into already formed and cohered groups. Loan officers trying to achieve or maintain their group minimums will create associations out of interested individuals rather than interested groups. These things do not necessarily lead to default but, when the chips are down, do lead to greater conflict, greater reluctance to cover for other group members, and better fistfights.

It is worth pointing out, though, that in a pasanaku group a woman is not necessarily any more than peripherally connected to the group she may join. Suggesting, then, that the way groups are formed and augmented in microloan organizations is not necessarily completely beyond the pattern of the traditional loan group.

So, are these two things, pasanaku and microcredit complementary or contradictory? Julieta Zurita, an advocate for bilingual education and teacher of Quechua (with a cultural-awareness bent) told me during a discussion of Pro Mujer and its services that she feels that organizations like these take rural migrants farther away from their culture of community assistance and makes them more individualistic because they don’t need their community to get a loan; they can act that much more independently. Also, she feels that the pressure on the group generated by the organization leads to an unhealthy amount of pressure by the group on the individual. Instead of uniting women in a spirit of help and group support, it divides them and brings them to a point of holding a woman accountable to her portion without looking beyond the group need to individual circumstances as they would have before. These are valid critiques…

I am left to wonder, though, if pasanaku and community support is sufficient as a credit tool and has been such a powerful, pervasive force in Andean life, how does one account for the huge success of microcredit? Projects abound, everyone participates, and women that once would have been involved in pasanaku now take out loans with organizations like Pro Mujer. Not infrequently, women are involved in both microcredit and pasanaku simultaneously.

Women as head of economic life in Bolivia and heart of indigenous identity

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[1] Women as economic center