Monday, October 31, 2005

Aitalafu (credit) Reform

A friend asked me what I thought about aitalafu. His family recently opened up a store and complained that the practice would hurt his business. I both agreed and disagreed with him.

I agree that the custom of borrowing in Am. Samoa as it works today hurts small businesses. It’s common for customers, especially family, to take a long time to pay for goods they put on the aitalafu books. Meanwhile, storeowners still have to pay their bills on time lest they face late fees. In addition, businesses may miss opportunities because they don’t have the money still owed to them from people who have borrowed long ago.

Paying on time is extremely important. No worker ever suggests to his employer, "Please boss, pay me the day after payday." A dollar is worth more today then it will tomorrow for everybody. Why? Because you might not live to tomorrow to spend it.

However, you might be willing to forgo that dollar today if someone promises to pay you an interest rate. Your employer may say, "Please, if I pay you a couple of days after payday, I’ll give you an extra $100." You might consider it, right? You would be mad, though, if your employer instead says, "I’ll pay you a couple of days after payday. End of story."

That’s exactly what we’re telling storeowners when we aitalafu and don’t agree to pay an interest rate. Here is where businesses can start to reform the practice of aitalafu. Requiring interest on aitalafu is not only right, but also serves as an incentive for borrowers to pay back ASAP as the debt grows larger.

Stores can also share information on their customers with one another in an effort to assist each other to collect what is rightfully due them. One store might check with the other village store to see if a particular person pays on time. Businesses may even agree amongst each other to require patrons to pay off debts owed to each other before allowing them to aitalafu.

This can be done in the age of the computer, internet, excel and email. Demand for these things and people to operate them goes up thus spurring investment and creating more jobs.

Businesses cooperating to reform the way we do aitalafu will encourage responsibility among consumers, increase small business viability, attract more investment and entrepreneurship, and add more jobs to the economy.

Nevertheless, such measures of reform must always be voluntary as they are barriers to entry. Many may not be able to afford to do anything I’ve suggested above and shut them out of the market. Some of these suggestions may go against their personal beliefs. People may lack the initiative to try, or they like aitalafu just the way it is. The only moral incentives for storeowners to follow these suggestions are the better business and higher profits resulting from reform in the aitalafu tradition.


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