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Risky Assumptions to Avoid about Microfinance Borrowers

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Oops! Have you fallen into a trap?

Despite using the educated parts of our brains, it’s easy to make harmful assumptions when it comes to thinking about how microfinance clients and the poor operate their businesses. Let’s talk about some common misconceptions about microfinance clients – and how to respond to them.

1. “Microfinance borrowers just invest in the same things and don’t innovate.”

The majority of clients that I have met do invest in similar activities, such as in milpa (corn), coffee, cardamom or raising animals – but this doesn’t mean that they’re not doing these activities in innovative, new ways. For example, Genesis clients can get training on how to reduce the cost of chicken feed by 50% by using the chocolate-flavored ramón, or Maya nut, found in the Maya Biosphere Reserve. The ramón is naturally replete with protein, and it’s high in calcium, fiber and potassium. Ground into a powder and mixed with other natural goodies like yellow corn, the ramón nut arms local people with the tools to continue to make chicken-raising profitable, especially the face falling returns due to the monopoly on chicken concentration.

A ramón nut in its shell

A ramón nut in its shell

2. “People who can’t read and write can’t own a thriving business.”

The majority of microfinance clients who work with Genesis cannot read or write; in fact, 40 percent of clients have no education and 48 percent of clients have only a primary education. However, that doesn’t keep them from being sophisticated financiers and accouters. When asked, clients often know off the top of their head how much they get on return from their business in one month, how much they are paying in interest, and how much they spend on everyday needs from medicine to clothes in one year. When you have only a little to stretch a long way, you make sure it counts – and is counted!

3. “Microfinance borrowers invest in things that won’t produce returns.”

After interviewing dozens of clients, I’ve met only one who doesn’t own a cellphone. A New York Times article recently noted that, with the number of cellphone subscriptions exceeding five billion, more people now have access to a cellphone than a clean toilet. When a client lives in poverty, it may seem frivolous to own a cellphone, but, in fact, it’s the first step toward the best investment available: access to microcredit. Genesis now requires that clients offer a telephone number in order to contact them about meetings and the distribution of checks. What seems like a luxury purchase can often be a client’s most valuable resource.

guatemalan girl with cellphone

4. “Older people with a lack of education cannot learn new trades.”

It’s not only the young who line up to receive Genesis’ free capacity training courses; older clients are often ready to change their line of work after learning a new skill. Demencia, 59, just started learning how to prepare stew in a Genesis course and now dreams of opening a restaurant. Victor Manuel Ticios de la Cruz, 67, took out a loan last year to start a new business of buying and selling wood and, this year, started to construct rental homes. Santos Rax Ba, 56, is planning to learn how to vaccinate her cows in order to expand her cattle-raising business.

Demencia is ready to start her own business!

Demencia is ready to start her own business!

5. “The poor don’t know what’s best for them.”

This is probably the most dangerous assumption. Every Genesis client solicits a loan to fulfill business needs that they have outlined for themselves. Microfinance clients choose where to invest their money and how. No one knows the poor and their needs as intimately as they know themselves, which is why they are the most powerful and successful agents in lifting themselves out of poverty.

Name block - Alexa Wilcox

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