Innovation in Microcredit: Women, Children and Second Chances
Here at FAMA in Honduras, the organization is always striving to go above and beyond to find ways to better serve clients, and to reach out to marginalized populations. Through a bit of foresight, an increasing tolerance for risk and a deep commitment to the community, FAMA has come up with three products that deserve special attention.
Perhaps the most interesting loan product that FAMA offers is the My Tierra (“My Land”) Loan, offered exclusively to women. When I asked the Executive Director her single greatest hope for FAMA, she responded in a heartbeat that it would be to reach more women. In Honduras, she explained, women are synonymous with poverty, with illness and with being unable to move forward. Women should be synonymous with hope, with hard work, and with being able to maintain a home while also remaining independent. I knew from living here only six weeks that being a woman in this country is not easy. That I am 25 and can’t really cook, can barely clean, don’t have kids and don’t yet want a husband is a shock to all I meet. They are few and far between the individuals who truly comprehend whatever vague notions I have of graduate school and defining a career for myself before thinking about learning to cook or having babies. (One of them, not surprisingly is FAMA’s Executive Director.)
The Mi Tierra Loan is aimed to cover the legal fees required to obtain or change the title of a piece of property. One Kiva borrower, Mayra, received a loan for about $185 to pay a lawyer who would work with her to bring her case to the Land Registration Bureau. Mayra’s father left her his house when he passed away, but he left no accompanying paperwork. Fifty percent of the loan is received upfront to pay part of the lawyer’s fees, about $10 goes to the Bureau to draw up the papers, and the rest is given to the client at the end of the process to complete the lawyer’s payment. But Mayra’s land legalization process didn’t go very well as the lawyer didn’t do his job properly. Although he was able to obtain the right to the land, he didn’t get it printed with her name on it. The rest of the loan wasn’t sufficient to cover this second, unexpected cost, so Mayra paid back the loan in full.
For the time being, she has taken out a work capital loan to further her used clothing business. When she has saved enough, she will take out a second My Tierra Loan to complete the process. It is perhaps an imperfect system, but at least it’s something.
Second, FAMA offers savings accounts for kids. As long as a child has a parent’s signature, anyone under 18 can get a savings account and can open the account for as little as $1. This may not sound like such a big deal. However, it is important to remember that generally speaking, a country like Honduras is not one that actively encourages savings. Unlike the concept of taking out a loan, the very idea of savings is foreign to most residents. When people have money, they spend it. Occasionally, someone might save toward a particular goal (such as to travel to the US), but rarely will anyone save simply to have a reserve of funds. By encouraging kids to understand the importance of savings, FAMA is doing its part to change the culture of savings in Honduras.
Lastly, in the future FAMA is considering, but has by no means confirmed, offering a sort of “Second Time Around” loan. The target audience would be—believe it or not—people who have bad credit. Though perhaps this may sound like a sort of suicide for an organization that relies on interest payments, FAMA sees two main advantages to working with this population. First, there is no competition for the market since no other institution is willing to take on the risk of loaning to folks who have a record of not paying back loans. Second, FAMA is doing a huge social service to individuals who have become completely ostracized from any sort of financial inclusion, formal or otherwise. Although this loan product may be a ways off (if it does indeed happen), in a world where institutions live in fear of delinquent loans, it would be a bold move indeed for FAMA.
Betsy McCormick, KF12