BIG Pilot Project - Assessment Report - BIG Coalition Namibia

Section 2: Impact Assessmentgiven that the people of Otjivero-Omitara knew that theBIG pilot was only going to last for two years.Debt is not necessarily a bad thing. Used wisely, debtcan help households escape poverty by enabling themto borrow money to help start businesses, or to purchasecapital assets (like tools, or cars and houses).Low levels of indebtedness to local shops can also helpensure that the household has access to food, evenwhen monthly incomes have run out. This 'consumptionsmoothing' can help households escape the hungerand malnutrition that may otherwise be caused byshortages of cash. However, if households accumulatemore debt than they can cope with, then the debt burdenitself may become a cause of poverty – especiallywhen high interest rates result in the debt burdengrowing faster than the income of the household thatowes it.The BIG could help households reduce their existingdebts to shops, but we did not expect 'consumptionsmoothing activities' to end altogether. This is becausehouseholds may choose to allocate the BIG to largeonce off payments (such as school uniforms, schoolfees, home renovations, small business start-up costsetc) and hence may still find it useful to be able to buyon credit from the local shop.In June 2008, 41% of the respondents reported to beusing the BIG to help pay back debt, but only 9.4% oftotal BIG payments were allocated to that purpose. Thissuggests that a large number of people are paying backdebt, but that the amounts are small. This is consistentwith the picture provided by total household expenditureduring the first six months which saw an increasein the average monthly debt repayment from N$ 186 toN$ 200. Some households paid off their debts altogether– whereas others increased their debts. The datashows that 80% of the reported changes in debt werefor amounts smaller than N$ 500. Most of these debtswere owed to the local shop.According to data from the survey conducted a yearafter the BIG was introduced, average household debt(for those households reporting debt) had fallen fromN$ 1,215 to N$ 772, with over twice as many house-80