A highly readable paper entitled straightforwardly “How Gambians Save” by Parker Shipton has many lessons for savings group promoters. Its pages are chock full of important insights, despite is publication way back in 1990. I’m highlighting one quote that dovetails with ab earlier discussion on interest rates. In that post I quoted from Julie Zollmann’s paper “Waiting For Rain.” As readers may call, in this paper Zollmann described the practice of groups basing interest allocation on amounts borrowed, not amount saved. 

 In his piece, Shipton offers another conundrum, that of interest ratios versus interest rates.

 “Cultural differences between international lenders and borrowers in The Gambia make their partnerships hard to manage. Assumptions about interest charges, for instance, differ profoundly between northern and West African peoples. Whereas the former conventionally distinguish fair lending from usury in terms of “interest rates”(i.e. increments per unit of time), the latter tend to draw the distinctions more in terms of interest ratios (i.e. of interest to principal, as the amounts are finally paid), the amount of time elapsed being less important. Differences between Judeo-Christian Islamic, and local religious understandings about interest multiply the misunderstandings.”

This leads me to speculate that our Western/Northern approach to fairness and transparency may be cultural. We are so certain that interest must be either related to investment or time, that we neglect to see local interpretations of interest as more relevant to local people. So where does that leave microfinance initiatives like MF Transparency who use APR as an absolute ruler? Does this form of transparency make any sense to borrowers not reared in an APR culture?

Perhaps more relevant to savings groups is what Paul Rippey calls the “First Five Minutes,” referring to the idea that whatever promoters do to promote savings groups early on makes a lasting impression. Groups will often charge fees or interest rates according to what the promoter advises, but left to their own devices groups may choose other ways to justly charge or divvy up income. I am wondering what readers think.