Banks in the barrios would better their lives

SEEN from the air, many of the countries of the Far East have this in common: you can tell that the settlements hug the road, that they never like to be too far from the beaten track. And this makes sense when the landscape is a flood plain, when it is rice land. The road will be a dike above the flood level and the houses will cling to its sides. Even when you live in a stilt-house, it is useful to have access to a bit of dry land.

More difficult to comprehend is why people should be so eager to live slap bang beside a road through hilly or even mountainous terrain. The dust raised by the traffic would, you might have thought, make life unpleasant, along with the other pollution and the noise and the danger to the children.

The Philippines, which I have just revisited, is one of those places where squatters and other settlers of new lands live right under the wheels of the traffic. When I asked why, one of the answers seemed to be that people stick near the road for the sake of security. They do not relish life in the outback. They do not yearn for solitude. They want to stick together in as close a human contact as possible, and the noise of the road is a reassurance rather than a nuisance.

I am thinking of a particular road, which links the towns of Infanta and Real to Manila. One day a typhoon caused a landslide on to this road, and the landslide revealed what looked like a man-made tunnel cut square into the mountain. People gathered at the entrance to this tunnel and soon speculated that it might be the place where a local general hid his legendary treasure at the end of the Second World War. But no one dared to go into the cave, not because it might be booby-trapped but because, if they went in and found the treasure, they might be killed by the others on the way out. Even if they did not find the treasure, they might be killed on the off-chance.

A friend told me that one of the reasons why people would hesitate to live away from the road, away from other habitations, would be that if they had some stroke of good fortune, and others got to know about it, they would fear for their lives. They would immediately be vulnerable. Any Filipino will be cautious about doing anything to attract the eye of envy, but I was surprised to think that this might be a reason for ribbon development in South-east Asia.

People have all kinds of reasons for terror, some less obvious than others.

Some fear dwarfs, some aswangs (women whose upper halves of their bodies are detachable from the lower halves); and one accident on the Manila-Infanta road was said to be caused by a giant with the head of a horse.

The Kapalaran company used to run a Manila-Infanta coach service. It had a monopoly on the route and it was big business. But recently it had two bad accidents and one lucky escape when a boulder crashed into a coach. As a result of this, the company completely suspended operations on the route.

Its name, Kapalaran, means destiny, as in the destiny written on the palm of your hand. It knew its clientele well enough to know that it could not continue to trade as destiny when it was clearly under a jinx.

A friend decided he would operate a passenger jeepney service on the same road, so he took a loan on two vehicles and hired drivers. Soon disaster struck. One of his vehicles was involved in a fatal accident. My friend disposed of the vehicle at a loss, and paid compensation to the bereaved family to the tune of pounds 800.

In order to raise the compensation he had to borrow money at 'five-six' which, in the barrios, is the classic lending rate. In one form, you borrow 500 pesos and for the next month you pay 20 pesos a day, a fantastic 240 per cent per annum. The repayment period may vary. Typically, a farmer will borrow for fertiliser and seed, and pay back in kind after the harvest three months later. This is a great cause of rural poverty and the expropriation of the poor.

My friend began to fail to meet his payments, and so was forced to borrow elsewhere in order to finance the original loan. Very quickly, his finances turned into the barrio equivalent of a Lloyd's hard-luck case, with no fragrant hint of Mary Archer.

He had been forced to borrow in this way because he had no collateral to offer a bank. But even with collateral, his lowest possible borrowing rate would have been 25 per cent. It seems to be one of the rules of life that the poorest people suffer the most punitive interest rates. In the Philippines, this is built into their expectations. When I told my unfortunate friend about current interest rates in Britain he exclaimed: 'And the banks survive?'

Five-six is a notorious system, detested everywhere. It is all unofficial.

There are no documents involved and no collateral. Either the money- lender must take the attitude that a proportion of his loans will fail (but if that is known to be his attitude, the failing proportion will be high indeed) or he must have some powerful sanction. Public shaming of the defaulting debtor in his own community is the first powerful sanction (and it is strong).

Other options range from threats, through the breaking of legs to murder.

My friend was comparatively well off before his driver's accident. He was insured, but at a low rate, and payments are slow. A better banking system would have saved him from the loan sharks. Better banking and better insurance would transform the lives of the poor. But how often do you see better banking listed as a priority when poor countries are being discussed?

If the poor had better banking, trustworthy banks geared to their needs, they would put any windfall straight into the bank. They would sleep more easily. They might be happy to build their houses farther from the road.

They would be less likely to suffer road accidents. And if insurance were better, then their families would be better compensated if an accident occurred and the owners of the vehicles would not risk bankruptcy.

This argument may look a bit whacky, but I hope my conclusion is not. The poor are not people who do not need banks because they do not have any money. The poor are the people most in need of decent banks. They will never have any money if they do not have decent banks.