Microfinance challenged

by Anni Kasari - Volunteer, Program Manager

It's another Tuesday afternoon and we are on our way to meet our borrowers in Díaz Ordaz, an hour's drive from downtown Oaxaca. On our way we pass roadside stands selling tacos, tlayudas and other local delicacies; launderettes, petrol stations, and a small bank offering microloans. Suddenly I see another one, and another – dozens of signs advertising small loans before we even get out of the city centre.

Getting a microloan in Mexico is easy. There is all kinds of credit available: arranging a payment plan for a flatscreen television, for example, isn't a problem even if your household income is very low. What is often left unclear is the terms of the plan, though: many people from poorer backgrounds sign up without having a clear understanding of what happens if they are unable to repay. With interest rates on microloans offered by Mexican commercial banks averaging approximately 70%, even the slightest adversity faced by the borrower may lead to a situation in which they are unable to pay back.

So when did microcredit become so commercial, exploitative and ugly? At what point did people forget about Muhammad Yunus's original idea of providing small loans that poor people could use to lift themselves out of poverty? The kind of loans that are provided by commercial banks for financial profit are very far from the idea behind institutions like the Grameen Bank or Fundación En Vía. At the moment, microfinance institutions face the big challenge of maintaining their good reputation despite the ruthless efforts of some to exploit their positive image for financial profit. As Yunus recently wrote in The New York Times, ”credit programs that seek to profit from the suffering of the poor should not be described as ´microcredit,´ and investors who own such programs should not be allowed to benefit from the trust and respect that microcredit banks have rightly earned.”

Greater regulation is needed, but a great responsibility also lies on the microfinance institutions to guarantee fair practices and transparency. By providing loans with 0% interest, we at En Vía are working to ensure that microfinance remains a buzzword for doing good.

Experience Díaz Ordaz!

by Samantha Wattson - Volunteer, Program Manager

It’s fascinating how such little words like ‘’new’’ and ‘’first’’ can create and amplify the sentiments of a group.  With much enthusiasm, Emily and I kicked off our FIRST tour to our NEW town, Díaz Ordaz this past Thursday.  I am not sure if it was our own anticipation for this new adventure that was contagious, or if the words ‘’new’’ and ‘’first’’ alone were enough to infect the group, but there was definitely an air of excitement within the group that came from being the first to experience it. 

The town of Díaz Ordaz is centered around a plaza, and surrounding this tranquil plaza is a church, a market, a municipal building and a small taquería (a restaurant serving tacos), which also happened to be the first stop on our Thursday tour.  Ernestina, the owner of the taquería, started her business about six months ago. She spent the first part of our visit going over her business: she`s open 7 days a week, every afternoon; Saturdays are her busiest day; her largest expense is meat; and her rent is 400 pesos/month. She also filled us in on how she makes her tacos, which I’ve now added to my top three list. After discussing the down and dirty business costs and logistic, she began to tell us of her aspirations and the goals she has for this project. She plans to spend her first loan on meat, but over the next year her goal is to be open during the mornings as well and sell licuados (fresh fruit shakes) so that she can get more business and use her rented space during the day as well.

Sometimes, it is easy to forget how much a single peso is worth and that buying fruit to make licuados for a business could actually be impossible without someone lending you money.  This is about the time, I get all warm and tingly inside and think, Wow, this is the purpose of micro-lending! My thoughts were promptly interrupted by the smell of Ernestina cooking tasajo (thinly sliced beef), and as the delicious smell took over the room, so began our FIRST-hand look into the lives of 6 women in Díaz Ordaz and the hopes they have for their first loan, as well as a tasty culinary experience.

New town, new adventures!

by Samantha Wattson - Volunteer, Program Manager

At 4 pm Carlos, Emily, Elizabeth, Anni and I pack into the car and head an hour east outside of Oaxaca to the small village of Díaz Ordaz. For the first time in two years, we are expanding outside of our first village, Teotitlán, and bringing our micro-lending program to a new village. Until now, En Vía has focused all of its energy into growing a successful micro-lending program in Teotitlán. The ability to expand outside of Teotiltán is an incredible step for us, and all of us are buzzing with the possibilities, the frustrations, and the unknown stories that are sure to unfold.

Our program, like in Teotitlán, is delivered by word of mouth around the community, and women of all ages and trades have made their way over on this sunny afternoon to the house of Wil Frida, a baker that hopes to buy a new fridge with her potential loan. Soon after we arrive, the house begins to fill up with enthusiastic women: a grandmother that sells atole (a traditional drink made of corn) and primarily speaks the local indigenous language of Zapoteco; a taco-making mother-of-two - loud and boisterous - is looking to take on the world; and a quiet young mother wishing to increase the variety of items in her small tienda. They are all here ready and willing to welcome change, and even though they are unsure of what’s ahead they seem unafraid of the challenge.

This Thursday we will take our first tour group to Díaz Ordaz, so we spend the evening running through the program with them one more time…

As we prepare for our first tour with Díaz Ordaz, we have many questions… What will this new town hold? Will the learning curve for understanding the loans be different? Will we make a positive impact? How will a smaller market and fewer opportunities for sales affect the borrowers? Will the women require more resources from us? How will we need to adjust or change our program to fit this town?  With much to learn and many questions to be answered, we know it’s time to get started. 

Our borrowers are ready, and we invite you to join us on our new adventure in Díaz Ordaz!

Hola from Oaxaca!

by Samantha Wattson and Anni Kasari - Volunteer, Program Managers

At En Via we strive to bring innovative social change to impoverished women through microfinancing and responsible tourism in the state of Oaxaca, Mexico. We work to provide small interest-free loans to women who traditionally have not had access to banking services such as credit, savings and insurance.  In 2008 we started working with our first village, Teotitlan del Valle, with the objective of empowering women to lift themselves and their families out of poverty. Our goal was to funnel some of the resources coming in from tourism to those in need, as well as educate tourists about the power of microfinance. There are a lot of microfinance institutions working to reach poor families in Mexico, but the average interest rate on micro-loans here is 70%.  By tapping into the resources of tourism, we can provide loans at 0% interest, and make sure that our borrowers have a much better option. To this day 100% of our tour fees go to provide interest-free credit. 

In the last two years, we have been able to give out over 300 loans entirely funded by taking tourists out to see and meet the small business owners that we work with in the village. We also launched our first non-credit initiative one year ago, giving free English classes to women and children in Teotitlan.  With our 600 tour alumni and a team of 10 volunteers, we are excited to continue this great work - reaching out into new towns, and expanding the services that we can provide to our borrowers.

Stay tuned for updates on our daily grind, latest buzz in micro-financing, and inspiring stories from our borrowers, tour alumni, and fantastic team of volunteers.