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Microfinance in the ‘Real Mexico’

Oaxaca is a state often referred to as “The Real Mexico”. Its rich indigenous roots combined with a strong colonial presence do seem to embody the Mexican soul. Or, maybe the “real Mexico” refers to the fact that considerable wealth exists side-by-side with rural poverty. Maybe it’s just because Oaxaca is rumored to be the birthplace of mole. Whatever the reason, this “Real Mexico” was one of the two states where Compartamos co-founders decided to make their first loans to clients in 1990. Over 20 years later, Oaxaca has a thriving microfinance industry serving thousands of clients. This week, I was fortunate enough to visit this fascinating state and talk to some of its people. Here are just some of their stories:

Bertha Gopar (center) has been a Compartamos client in Oaxaca since 1993. She now shares the group with her daughters and granddaughters (pictured) and even has a great-granddaughter who will join the group soon.

A Real Microfinance Success Story

Maria Teresa Hernandez was in tears as she told us the story of how she came to be involved with Compartamos.

10 years ago, Maria had taken out a loan with another bank. Shortly afterwards, her granddaughter became sick with pneumonia and needed to be hospitalized. With few other options in sight, Maria used her loan money to pay the hospital bills and was unable to generate enough income to pay back her loan. Having defaulted, the credit authorities started to come after her.

“I thought my family would be in ruins,” she said, choking back tears. She told us she thought no one would ever trust her again.

Compartamos decided to go out on a limb and offer Maria a loan of Ps.$3,000 (about $225 USD) to buy ingredients to make and sell bread. She and her husband, Benjamin Cruz, were able to use his mother’s clay oven to produce about 100-200 loaves of bread a day. This was enough to keep the family out of financial ruin and pay back their loans.

Maria Teresa Hernandez and her husband, Benjamin Cruz, pose in front of one of their industrial ovens. They use these ovens to produce 100,000 loaves of bread a day.

Maria and Benjamin soon realized that local schools needed to purchase loaves of bread for the children’s mid-morning sandwich snack. However, their small oven was not sufficient to make the amount of bread needed to provide to schools. So, they went back to Compartamos and signed up for the individual credit plan, Grow Your Business Loan. This credit works more like those given by a traditional bank, with loans of up to Ps. $100,000 (about $7,500 USD) made to and guaranteed by individuals. Continue reading


Thoughts on Chifeng ACCION Microcredit Company

During my stay in Chifeng, China over the last two weeks, I have closely observed the work of ACCION Microcredit Company’s (AMC) loan officers and I have also experienced the daily operation of AMC. I am very impressed by the loan officers and the fresh energy AMC injected into Chifeng’s finance industry. Being the first 100% foreign-owned Microcredit Company in China, ACCION has had to overcome many difficulties.

AMC provides micro and small businesses with non-collateralized loans basing their underwriting on ACCION’s proven methodology of cash flow lending. Loan uses are mainly for businesses, such as working capital and purchases of income generating assets. AMC remains focused on the micro market with loan sizes starting at one thousand Yuan (RMB1,000) for a maximum term of 12 months with both principles and interests being paid back in installment monthly.

AMC’s main advantages in the urban market include flexibility of loan guaranty and customized services. Guarantors do not have to be regular salary earners, as long as they have ability to pay back the loans. Loan officers talk closely to applicants about their family and their business, and they also visit their home and businesses to collect first hand information. They also use every channel, such as friends and business partners, to learn more about the clients. Through these, clients’ month income & expenses, cash flows, personal creditworthiness, and other information can be evaluated and cross-checked.

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Final Thoughts: Signing Off from Paraguay

As I prepare to head back to the U.S. this week, armed with new knowledge and new questions about microfinance, poverty and how to survive the often-terrifying Asunción bus system, I’ve been reflecting on what I’ve learned during my 10 weeks here.

There were days when I felt high on the potential of microfinance, eagerly absorbing the stories of clients who could serve as poster children for the industry. She tripled her income! The kids are going to college! Health insurance for the whole family! These stories were quite common, and the overwhelming hope evident in such narratives was contagious.

Here I am posing with Isabel, another FP intern (right) and Obaldo Arellano, a model client.

But there were other days when I wondered whether microfinance was a futile enterprise, plagued by problems that nullified the benefits for too many clients, at least in the group lending model. I witnessed many comité meetings where responsible members were forced to repay loans for irresponsible members, thus eliminating any profits the former group had earned during the cycle. I heard horror stories of tesoreras, or treasurers, disappearing forever with the group’s savings or loan repayment contributions. Oftentimes, as I documented in a previous post, a few late members of a comité would delay meetings for hours, thus sapping productivity from the rest of the group as they waited idly. Continue reading

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Microfinance – life changing or life enhancing?

A return visit to some of the members of the rural Comite San Antonio got me thinking about the life enhancing, rather than life changing, impact of microlending.  Comite San Antonio’s credit lines help this group of self-sufficient women who have a modern approach to life, family, and work.

Family is sacrosanct in Paraguay, and most of this committee are happily married to caring men who have good jobs.  Members of this committee juggle families, work, and school just as my colleagues in Boston do.  They borrow from Fundacion Paraguaya because the additional cash is helpful and the terms and training are good.  Comite San Antonio has made its monthly payments on time for the year during which they have been Fundacion clients, they have added to their “caja chica” (cash kitty), and they have built their savings account.  They’ve done this without extra committee meetings or special fund raising activities. Continue reading

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Adapting to change : From Paris to Xochimilco

Even though I have lived in many cities in the world and have learned how to get used to new environments, living in Mexico City has made me value something I see in every client I visit: the ability to adapt.

The first thing one must learn how to adapt to in Mexico City is to the chaotic traffic. You cannot say you have experienced Mexico until you are stuck for more than two hours in Av. La Reforma trying to move to any point in the metropolitan area.  All those who have visited Mexico around this time would know that the traffic gets even more chaotic when it rains non stop 24 hours a day. Imagine how worse the scenario gets when you are using public transportation.

However challenging, getting around the city was something I had to adapt to. At peak hours and on weekends, between jostles and shouts, from mobile vendors and mobs of people, even breathing gets difficult.

After some time and a couple of late arrivals, today, I finally felt like I am living and breathing Mexico City. This genuine sense of adaptation came to me after listening to a client story in Xochimilco.

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My loan bred eight stores

BAYAN, CHINA- After a sumptuous lunch at our loan officer’s family-owned restaurant, we took a three minutes walk to Mrs. Sun’s home. Mrs. Sun was one of the five happy female clients we interviewed in the morning, who was so enthusiastic to introduce to us how the loans she received from Rongxin Village and Township Bank (VTB) had enabled her to build eight stores outside her home and gradually helped her family to get better.

Mrs. Sun in front of her stores

At the turn of a major corner, a row of stores with colorful name boards and clear white paint were eye-catchy on this dusty country road. A fruit and vegetable “supermarket”, a Sichuan hotpot store, an Anhui noodle shop, a makeup and beauty shop, and even a veterinary clinic. “These are the stores that Mrs. Sun leased out” as our loan officer introduced to us, “it is at great location, all the traffic entering the town need to pass here.” Continue reading