10 Differences between Working in Microfinance and Traditional Finance

By Isaac Iglesias, KF10, Mozambique

I used to work in the loan business area at the London headquarters of a major global bank. Now I get a lot of emails from friends asking me how different traditional credit and microcredit are from a worker’s point of view. I get even more emails from people who are contemplating jumping from traditional to microfinance and asking me about my personal experience.

With all those emails and conversations, and for future reference, I have compiled a list of the 10 main differences I have found between working in the two industries. This will be a whole chapter of my soon-to-be-published first novel “All You Wanted to Know About Working in Microfinance and Never Dared to Ask.”

1. Location
Although you could be a cocktail-sipping hedge-fund manager in some tropical tax-haven island, if you work in traditional finance you are likely to work in a large city somewhere in the developed world, enduring harsh winters and mass public transport. Although you could be based in Ulan-Baatar, if you work in microfinance you will very possibly live in a rural area somewhere in the developing world, enjoy tropical weather and go to work on foot everyday.

2. Salary
Although you could be a credit-card call-centre worker earning next to nothing in Mumbai, if you work in traditional finance you likely earn crap loads of money that you do not have time to spend. If you work in microfinance you will be a volunteer (my case) or earn a reasonable/modest salary. This time you will have the necessary time but no money to spend. If you want the money plus the time, this is the wrong book. Instead, buy “How to Marry a Hedge Fund Manager – Tips for the Perfect Prenup.”

3. Stress
While in England, I did not stress one bit during my time in regular finance (this is why I never got rich either). However, if you work in traditional finance you probably lead a hectic life, suffer from headaches and muscular pain and you would have a heart attack if only you had time for one. If you work in microfinance you will lead a much calmer life and will not suffer from stress-related health problems. On the other hand, other health hazards are present in the microfinance world. To name a few I’ve been through during these months as a Kiva Fellow, these are stepping your foot up to your groin in an open sewage in Nairobi, crashing your minivan into a 300-kilo kudu outside Maputo or arriving at the Joburg Park Coach Station at 4am (by far the most life-threatening of them all). Malaria is enough for a whole different post.

4. Interest
If you work in the credit card industry you are probably trying to charge 25% interest to your victim and make her believe it is actually only 3%. When you work in microfinance, you will be feeling guilty for charging up to 60% to people who would probably accept 100% or believe it if you told them if was actually only 10%.

5. Certainty about the Future
Working in regular finance, you know this capitalistic world is doomed. Levering on this certainty, you pile up as much money as you can until your company goes bust, you suffer the aforementioned heart attack or you finish paying your mortgage/porsche/divorce. Working in microfinance you are uncertain about the future. You are not really sure if you will still be doing the same in a few years or even if microfinance as a whole is actually going to work. You do think you have some control over this future, and that keeps you going.

6. Purpose
Working in traditional finance, your purpose in your work life is to generate as much money as possible. Working in microfinance your goal is to eradicate poverty. You will not be as marriageable any more but you will sleep better at night.

7. Working Hours
Working in traditional finance, you signed a contract to work a 40-hour week and have ended up working 65 hours every week, 66 more than what you actually really wanted. Working in microfinance, you will do long hours (there is always stuff to do and not much money to hire employees), but only because you want to.

8. Outdoors Time
In traditional banking, you spend most of your time inside an office and only get out for 15 minutes to buy a sandwich or light up a smoke. You communicate with your clients over email, fax, phone, blackberry messenger or twitter. Working in microfinance you will get to go outdoors and you will speak to clients face-to-face.

9. Working Environment
Regarding interpersonal contact with your colleagues outside the office, both jobs are equally fun. (In microfinance you’d get drunk doing cheap karaoke, in traditional finance you’d get drunk in an overpriced fancy club.) But inside the office is a different matter. In microfinance, everyone in that office is there because they want to be and would not necessarily go somewhere else for more money. There is less competition among colleagues and generally the hierarchical structure is a lot more flexible. Relaxed dress code and the possibility to actually have a life are a plus.

10. Friends and Family
This is a similarity as much as it is a difference. When you work in the banking industry everyone thinks you spend all your time developing complex strategies and models in order to manipulate the stock markets and make absurd amounts of money. In microfinance they think you are some sort of modern Robin Hood jumping from village to village in some exotic country helping the poor. In reality all you have done in your life is a few spreadsheets and the occasional email but that is something they don’t need to know.

If you’ve read this far, which I very much doubt, I want you to know that this text is written in a humoristic way and is intentionally full of stereotypes, misconceptions and inaccuracies. Working in microfinance really is great. The truth is that I was happy when I was doing traditional banking and I am just as happy as a Kiva Fellow. Which path to take, after my fellowship ends at the next full moon, is something I don’t know yet.