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Friday, September 24, 2021
BUENOS AIRES, May 17 2011 (IPS) - Avoiding the costs of traditional microcredit models, remote communities in the La Puna high plateau region in northwest Argentina have launched a successful loan programme that enables them to meet extraordinary expenses such as weaving material, school supplies or medicine.
“We all know and trust each other here,” Francisca Brajeda explains to IPS. She is the treasurer of the neighbourhood fund created by 30 families in Abra Pampa, an impoverished town of around 10,000 people in the province of Jujuy, 1,700 km from Buenos Aires.
Abra Pampa is the capital of the department of Cochinoca in the arid altiplano region of La Puna, whose scarce population is mainly of indigenous origin, as is Brajeda, a Kolla Indian who, as she says, “was born and will die here.”
“You’ll laugh if I tell you how much money each of us puts into the pool. It might be 30 or 50 pesos (between seven and 12 dollars) and once in a while up 100 pesos (24 dollars). The money then goes to whoever needs it,” she said.
The loans are small, up to 5,000 pesos (1,200 dollars) at the most. “Anyone who wants more has to go to the bank,” Brajeda laughs. The interest rate is nine percent, and has remained stable since the fund was created seven years ago.
“Our group gives out loans monthly. If we don’t have the amount someone requests, we continue to collect until the next month. And the small interest fee we charge is so that the capital will not run out, so that there will always be something there,” she says.
The system, which is so homespun it doesn’t even have a name, emerged as a breakaway project from a microcredit plan inspired by the Grameen Bank, founded by Bangladeshi economist Muhammad Yunus, known as the “banker to the poor”, who was awarded the Nobel Peace Prize in 2006.
The microcredit projects operate under the concept of solidarity lending, which entails small groups borrowing collectively and members encouraging each other to repay the small loans.
The Grameen Bank’s interest rate is higher than what is charged by community funds, because administration costs are much higher and because loan recipients must provide weekly reports on how their endeavours, which must be productive in nature, are going.
By contrast, “we meet the fourth day of every month at 6:00 p.m., and each member brings money in their pockets. Most of us are street vendors who buy clothing (across the border) in Bolivia to sell here,” says Brajeda, who is a weaver and homemaker.
Solidarity lending has also taken off in other communities in the La Puna region, such as Cerro Negro and Queta.
The original adviser to all of the projects was anthropologist Raúl Llobeta.
“This programme was conceived of from an anthropological, rather than market-oriented, viewpoint,” Llobeta, a professor at the National University in Jujuy and an adviser to several Avina Foundation projects, tells IPS.
One of his studies found that South America’s Aymará indigenous people used to have a financial institution: the “pasankus” – a trust-based community system of savings and credit.
The old system was recreated “to strengthen the self-esteem and cultural identity, and the political and social organisation, of local communities, and it also serves as a financial lever to break the circle of poverty,” he says.
The anthropologist says the loan system has to enable families to afford medication needed to save the life of a child with a respiratory infection, while offering a system of cheap, easy credit.
“In the area of loans for the poor, there have been many abuses, because the microcredit system was thought up by economists and bankers. The basic concept is that the poor always pay back loans, which makes it good business,” he says.
Llobeta points out that the Grameen Bank charges interest rates of up to 60 percent. Although the interest is lower than what is charged by loan sharks, it is still high for the poor, and that is because administration costs are so high.
“We don’t need credit officers or assessors,” he says. “The communities manage the whole thing without any help. This is designed for the specific conditions in these remote, isolated communities, and it is a new, unique model.”
Nor does he share the Grameen Bank’s promise of creating “a world without poverty.”
“Yunus’ idea was based on an exaggerated sense of optimism, on the belief that you can end poverty through microcredit. But that is a bit naïve. Poverty is a phenomenon much more complex than a mere lack of money,” he says.
The poorest of the poor in this region – one of the most impoverished areas in this South American country – suffer a lack of access to information, low self-esteem, and the loss of their cultural identity, Llobeta says. Against this backdrop, the loans fight poverty, but don’t eradicate it, he underlines.
“A 1,000 peso (243 dollar) loan doesn’t put an end to a family’s poverty, but it can improve their living conditions, and that’s valid,” he says.
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