Last night I participated in a workshop organized by Making Cents International (who I would, from my very limited exposure, recommend for microfinance consulting needs). In the workshop, our group of 18 had to participate in one business cycle. We were put into three groups, which represented three businesses, and were given a loan of $200 which we had to grow into $250 by the end of the month. Along the way, we needed to remember to buy food, save extra funds in the bank, respond to “challenges” that were assigned to us, and increase our profit.
Needless to say, it was difficult. Two out of the three groups went bankrupt.
The most frustrating “day” in the business cycle was the day when we had to pay rent. A large lump sum was due, and it was the day before we were set to go to market. We didn’t have the cash on hand that we needed, and had to get creative with our “landlord.”
During the debrief session, one of the facilitators mentioned that once he had used this game with a group of Nigerian farmers and another time with a group of MBA students. All of the MBA students went bankrupt in the simulation, but the Nigerian farmers ended up with a hefty profit.
There are a number of take-aways that I gleaned from our workshop.
- First, financial literacy is not always about book smarts–it is often more about savvy. Our team was the only one that ended the game with a profit, and the reason was that we negotiated with those we bought and sold from.
- Loans are not always used for businesses, and if we think they are we are kidding ourselves. My team only used about half of its loan to invest in our business.
- To succeed in business, you need a good product–no matter what part of the world you are from. We listened to our customers, and continued to increase their satisfaction by producing more and better products that they liked.
- Social capital is important. I’m not quite up on my social capital literature yet (although I am working on it), but trust is often the bedrock of financial transaction.
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