Last week, right before leaving on my trip to Tambopata, Drew wrote me an inbox telling me that she thought our documentaries script was WRONG. As badly as I just wanted to ignore the fact that she was right, I couldn't.
The problem was that we were making several statements--especially about banks--without having any sources or facts to support what we were saying. We were generalizing the information we recieved from the clients and entities we interviewed without being aware of bias.
For instance, we stated that banks were taking advantage of their clients through high interest rates, without knowing that peruvian banks only make an average 2.1% from the average 30% rate of a loan. Thus, suppose the bank gave out a loan of 100 soles for a year, their net profit would be 4.9 soles, that’s less than 1/20th of the initial interest rate.
Throughout our script, we were making statements like that of the bank, and we knew that if we wanted our work to be beautiful, beautiful to us, and beautiful to others, it had to be credible. So for a weekend, considering our time constraints, Andrea and I divided and conquered. She focused on working on our POL, while I focused on researching and re-writing our script.
If there's one word that I can use to describe this process it would be COMPLICATED, because many of the articles that I found backfired what I had read on previous articles.
For example, although I had found out that banks were not taking advantage of their clients through high interest rates, I then read that Peru is currently facing an increase in loan delinquency in the microfinance sector due to predatory lending.
Thus, I once again began to question the incentive of banks. If they are drowning their clients with debts, are they just trying to make money, or do they really care about the wellbeing of their clients?
What I've come to realize is that like in any system, there's a lot people who care and a lot of people who don't. Therefore, the effectiveness of a microcredit lending system depends highly on the establishment and implementation of strong regulation. It's the regulators who can constrain those who don't care from taking advantage of those living under poverty.
Now that we've finished our research, we've come to recognize that understanding how effective microcredit lending is in Peru would probably take us an entire year.
Why?
There are endless sources of information, and endless perspectives. Thus, to really understand how effective Peru's system is would mean having the time to look at each and every one the perspectives in depth. Plus, the effectiveness of the system is one that changes every day depending on the actions of the financial entities, those who regulate these entities and the clients themselves.
In December, one could have easily said that Peruvian banks were working with the right incentives. By February, however, there was information and articles to prove this wrong. MiBanco, Peru's largest microcredit lending firm was sold because they didn't measure the risk of their investments. Therefore, they were not prepared to face a cycle of increased delinquencies that resulted from the predatory lending in Peru’s micro finance industry.
It's complicated, I know. But this project has taught me that sometimes, showing people the COMPLICATED side is better than trying to SIMPLIFY something that isn't SIMPLE.
The problem was that we were making several statements--especially about banks--without having any sources or facts to support what we were saying. We were generalizing the information we recieved from the clients and entities we interviewed without being aware of bias.
For instance, we stated that banks were taking advantage of their clients through high interest rates, without knowing that peruvian banks only make an average 2.1% from the average 30% rate of a loan. Thus, suppose the bank gave out a loan of 100 soles for a year, their net profit would be 4.9 soles, that’s less than 1/20th of the initial interest rate.
Throughout our script, we were making statements like that of the bank, and we knew that if we wanted our work to be beautiful, beautiful to us, and beautiful to others, it had to be credible. So for a weekend, considering our time constraints, Andrea and I divided and conquered. She focused on working on our POL, while I focused on researching and re-writing our script.
If there's one word that I can use to describe this process it would be COMPLICATED, because many of the articles that I found backfired what I had read on previous articles.
For example, although I had found out that banks were not taking advantage of their clients through high interest rates, I then read that Peru is currently facing an increase in loan delinquency in the microfinance sector due to predatory lending.
Thus, I once again began to question the incentive of banks. If they are drowning their clients with debts, are they just trying to make money, or do they really care about the wellbeing of their clients?
What I've come to realize is that like in any system, there's a lot people who care and a lot of people who don't. Therefore, the effectiveness of a microcredit lending system depends highly on the establishment and implementation of strong regulation. It's the regulators who can constrain those who don't care from taking advantage of those living under poverty.
Now that we've finished our research, we've come to recognize that understanding how effective microcredit lending is in Peru would probably take us an entire year.
Why?
There are endless sources of information, and endless perspectives. Thus, to really understand how effective Peru's system is would mean having the time to look at each and every one the perspectives in depth. Plus, the effectiveness of the system is one that changes every day depending on the actions of the financial entities, those who regulate these entities and the clients themselves.
In December, one could have easily said that Peruvian banks were working with the right incentives. By February, however, there was information and articles to prove this wrong. MiBanco, Peru's largest microcredit lending firm was sold because they didn't measure the risk of their investments. Therefore, they were not prepared to face a cycle of increased delinquencies that resulted from the predatory lending in Peru’s micro finance industry.
It's complicated, I know. But this project has taught me that sometimes, showing people the COMPLICATED side is better than trying to SIMPLIFY something that isn't SIMPLE.