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CENTRAL AMERICA: Beating Mega Challenges with Microloans

Danilo Valladares

GUATEMALA CITY, Oct 12 2011 (IPS) - Pilar Toc, a 45-year-old Quiche Maya woman, used to work endlessly in a factory making traditional clothing in northwest Guatemala. Even so, her situation was so precarious that she could not enrol her son in school. But her life changed when she took out a microloan from a community bank.

“I have been weaving ‘cortes’ (traditional indigenous dress) since I was nine years old,” Toc, who for many years survived on wages equivalent to 10 dollars a month while living with her firstborn son at her parents’ house, told IPS.

But one day in the late 1990s Toc decided to leave the clothing factory and set up her own business. To fulfil her dream, the then single mother of three applied for a 195 dollar loan from the community bank in the village of Vásquez in the northwestern Guatemalan province of Totonicapán.

Thirteen years and countless working hours later, she owns her own traditional clothing factory, employing four people. She has bought her own house, and two of her children are pursuing their studies, while the third is working in the United States where he emigrated in search of opportunities.

“The loans helped us to pay for our children’s education, and buy clothes and food,” said the microentrepreneur, who acknowledged the difficulties women face in applying for loans in the banking system, because “they ask us for guarantees, like land titles, but women do not own property.”

But that is not all. Toc is now the president of her local village bank, an initiative of the Experimental Centre for the Development of Small and Medium Rural Enterprises (CEDEPEM), an NGO that promotes economic advancement by means of a community fund managed autonomously by women.

Toc is one of 52 members of this bank, which grants microloans ranging from 195 dollars up to 7,000 dollars to support rural women’s productive projects, like craft work, raising farm animals, weaving textiles, trade and other activities.

The village bank project will be presented as “a story of overcoming challenges” at the 15th Global Microcredit Summit to be held Nov. 14-17 in Valladolid, Spain, organised by the Microcredit Summit Campaign which is a project of RESULTS Educational Fund, CEDEPEM coordinator José Luis Sigüil told IPS.

The Summit has set itself two goals: to extend credit to the 174 million poorest families in the world, on the one hand, and to lift 100 million of these families above the income threshold of 1.25 dollars a day, on the other. This would mean that 500 million people would be freed from poverty by 2015.

“Microcredit has not been just another project for Toc, it is her life’s work,” said Sigüil, who praised the “responsible, committed role, with clear goals” of the women who have been granted credit at the village bank in Totonicapán.

The bank has a capital of between 90,000 and 100,000 dollars, made up of the savings of its members and the contributions of CEDEPEM.

“The community fund model involves managing credit out of seed capital provided by the NGO, and from the savings that the women invest,” the activist said.

Fifty percent of Guatemala’s population of 14 million lives below the poverty line, while 17 percent is extremely poor, according to United Nations figures.

In this dire situation, microcredit has opened up significant opportunities for women to develop productive activities to improve the quality of life of their families.

The Central American Microfinance Network (REDCAMIF) says microcredit institutions in Guatemala have a combined loan portfolio of 63 million dollars. Fifty-five percent of its microcredit clients are women.

Meanwhile, throughout Central America and the Dominican Republic, REDCAMIF has 128 affiliated institutions with a total loan portfolio of 1.34 billion dollars, nearly one-third of which is devoted to rural areas.

Rocío Urizar, of the Financial Advisory Foundation for Development and Social Service Institutions (FAFIDESS), told IPS that microcredit has developed positively, and today has different models available to suit people’s needs.

“There are individual credits, group credits for solidarity circles – groups of three to 10 people – and loans for education,” she said. The primary beneficiaries are countries like Guatemala, Honduras and Nicaragua because of their high poverty rates, she added.

In her view, microfinance in Panama and Costa Rica, the most developed countries in Central America, “has not flourished as much” as elsewhere, while in El Salvador, dollarisation “has greatly helped the economy.”

However, Nery Zelada, an expert on finances who is also at FAFIDESS, told IPS that “the banking sector has distorted the market” by taking a hand in the microcredit industry, because “the banks do not analyse the situation of the clients, they just give them easy credit, and the client becomes over-indebted. And they are very quick to take possession of the collateral.”

And commercial banks ask women, “who are very punctual with their payments, for formal guarantees which they don’t have, like legal titles, whereas we are more flexible,” she said.

Despite all the challenges, women continue to derive benefits from microcredit.

Cristina Coc, a 36-year-old Cakchiquel Maya woman, approached the banks in search of a loan for her small business crafting bracelets, necklaces, earrings and rings. “They asked me for title deeds as security, but I didn’t have any,” she said.

So she went to the Foundation for International Community Assistance (FINCA International) in Guatemala City to ask for a loan. “They did not ask me for title deeds, and they gave me credit based on my savings capability. First it was 500, then 1,000, and then 5,000 quetzals (635 dollars), and so on,” she said.

Coc, who is from the northwestern province of Sololá, began with three employees. Now she has over 50, and her products are exported to Mexico. “The microcredit was vital,” she said.

Sebastiana Morales, from Chichicastenango, had a similar experience. She and her husband, Pablo Morales, make pants in the northwestern province of Quiché.

“We went to FAFIDESS and they gave us training and credit. We used to make 50 pairs of pants a week, and now we make 100, and we expect to make 500 pairs a week by the end of the year, because we have bought industrial machinery,” her husband said.

They have also managed to buy a plot of land and build a house.

Sebastiana Morales and Coc received awards in 2010 from the Guatemalan Network of Microfinance Institutions (REDIMIF) and Citibank, based in New York, for their achievements. “I am happy, because if it had not been for the credit, I don’t know where we would be,” Morales concluded.

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