A Glimpse of Microfinance and Urban Poverty in Ulaanbaatar

Last week I started visiting some of Kiva’s borrowers with Transcapital, one of Kiva’s field partners that I’m working with here in Mongolia. While it was really encouraging to see Transcapital’s enthusiasm for Kiva at the head office as well as its various branch offices around Ulaanbaatar (UB), the new insights I’ve gained on urban poverty—both from these visits as well as just day-to-day life here—have left me perplexed so far, with far more questions than answers.

A short term solution?

Our visits began with a stop at Narantuul market, the largest outdoor market in UB where a number of Transcapital’s clients have retail outlets. At a first glance, Narantuul is a colourful and vibrant marketplace where vendors sell everything from food and candy, to winter coats, scarves, belts, jeans, baseball caps, cardboard, and more. It’s the place where Mongolians often go to find cheaper wares, which makes sense considering some of the staggering prices I’ve seen at Ikh Delguur, the State Department Store. We spoke to Bayasgalan, the proud owner of a shop selling winter coats and clothes, a long time client of Transcapital’s, and a Kiva borrower.

Other vendors watched us with curiosity as we chatted with her, and the mood at the market was lively despite the cold. But my translator friend, whose family had sold candy there, explained to me as we left that pretty much all the vendors there need continual loans to in order to sustain their businesses. Without loans, they can’t operate; but even with loans, they struggle to get ahead… which is anything but encouraging.

Harsh working conditions

The next day, we visited Kharkhorin market, UB’s second largest outdoor market, located on the other side of the city. The wares there were slightly different: I saw lots of shoes, but also an eclectic collection of hardware parts, sinks, ropes, tools, and other random second-hand items.

We had trouble locating one of the two borrowers we had to meet, so we wandered around for some time looking for her. In the meantime we met and chatted with Saranchimeg, who had used her loan to increase her supply of winter boots. We had been outside for about 45 minutes by the time we finished chatting with her, and I thought my fingers and toes might fall off. It must have been around -25^oC that day with the sharp wind whipping through the stalls. But my thoughts were with the market’s vendors who stand out there all day long, day in and day out. My translator friend assured me that, just because they’ve lived in Mongolia their whole lives, it doesn’t make the cold is any easier for them to bear. I was humbled by how hard they work.

The reality for taxi drivers

We also visited with some taxi drivers. While a male taxi driver may not be one of the sexiest loans on Kiva’s website, you should know how hard these people work to support their families, just like anyone else. And for what? Being a taxi driver is a tough way to make a living in UB: A one-kilometre ride will earn a driver about 1,500 Tugriks (or 1.07 USD).

Moreover, the competition is stiff. Since cars have become ubiquitous in Mongolia’s capital, everyone has become a taxi driver. It’s an overhang from the early days of capitalism, when cars were not that common and the city’s residents would help each other out by giving rides. Now, you see people on the streets with their hand out all the time, and it usually only takes a few minutes for a car to pull over.

Another borrower we met lived in one of the outer ger districts, the slums of the city which lack basic services like running water and sanitation. He was middle-aged and had taken out a housing loan, but he told us that he had been a driver under the socialist regime. He explained that he had had much difficulty in finding employment in his profession. Recently, though, he has started applying for driver jobs again. It’s a mystery to me how he has managed to make ends meet over the years.

Survival of the fittest?

It’s easy to think that people don’t work because they’re too lazy, or because they simply refuse to accept lower-paying positions. This may be true in some cases. But there may also be more to the issue than meets the eye. Mongolia had its Revolution and transition to a market economy in the early 1990s and it seems the transition was difficult for those who were brought up and educated in the socialist era: Many of their skills and experiences have not translated well in the new economy. While a lot of the leadership I’ve seen in white collar jobs are shockingly young—in their late 20s or early 30s—street and market vendors tend to be in their 50s or older. And for many of them, their wares include no more than a couple handfuls of gum and candy, which can’t possibly bring in that much at the end of the day.

Maybe skills training is needed to support these people… or maybe it’s not that simple. Imagine being in your 40s or 50s and getting trained (or competing for jobs) alongside people who are a whole generation younger than you. And the longer you stay out of the workforce, the less confidence you generally have to return to it. One colleague of mine surmised that perhaps self-employment is the way to go for these people.

The fork in the road

Of course, this reflects only one facet of urban poverty here. Another, and perhaps larger, driver is the massive migration of traditional nomadic herders to the capital, as zuuds—extremely harsh winters—have killed off the millions of animals on which they depend for their livelihoods.

Mongolia has gone through some incredible changes over the past several years, thanks to the discovery of the largest unexploited reserve of copper, gold and silver in the world. Roads have appeared where they previously didn’t exist; herders have disappeared from the streets of UB; shiny new buildings have gone up; inflation has gone through the roof. It’s poised to be one of the fastest growing economies in the world in 2013.

There is immense potential for large-scale economic development and poverty alleviation in Mongolia. Microfinance is helping to tie things over, but how the country handles big issues such as corruption will ultimately determine whether the spoils will be shared by many. So far, everything I’ve taken in only seems to have raised more questions. I’ve only scratched the surface in terms of grasping the complex economic factors at work in this country, much less understanding the solutions.