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:
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 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.
With their new loan, Maria and Benjamin purchased their first industrial sized oven. They asked for additional loans to purchase a second oven and 2 trucks to help them make deliveries. Today, they are able to make and sell around 100,000 loaves of bread a day.
In my opinion, Maria’s story is one of true microfinance success, and the reason why we are all in this business. Everyone who heard her inspiring story was touched by the power of microfinance to really change someone’s life. We were all glad that someone did decide to trust Maria again and give her family a chance at success.
Microfinance and Artisans
Oaxaca is a haven for hand-made traditional crafts in Mexico. Since the days when the Zapoteca Indians ruled the land, people have been hand weaving colorful rugs and typical clothing. In villages like Mitla or Tenotitlan del Valle, most of the citizens make a living by selling their crafts in the local markets, primarily to tourists.Compartamos has many clients in these villages, and they use their loans to buy raw materials and larger looms. Marciana Sosa is one such client who makes and sells hand-woven Zapotecan rugs. The vibrant colors she uses are produced from natural dyes found in the near-by sierras. After the yarn is dyed, Marciana and her husband weave it into intricate designs using their looms. Large rugs can take up to a month to produce, and sell for around Ps. $1000 – $2000 ($75 – $150 USD).
Walking around the village, one can see that many families produce equally stunning tapestries. The craftsman ship is outstanding, but I worry that, with so many families producing similar products, competition is fierce and profits are severely limited.
In the center of the near-by village of Mitla, there is a market with about 100 women, like Amelia Mendez, who are selling traditional hand-made Oaxacan dresses. Although each dress is hand-made by the individual seller, like the Zaptecan rugs, most of them dolook very similar.
We visited two clients who live outside of Mitla, and also make traditional dresses. These women, however, have been unable to procure a stall in the Mitla market and cannot sell their garments directly to tourists. Sometimes they try to sell their wares on the streets of the village, but the women of the market get angry and force them out. So, these clients have no choice by to sell to a middleman and make a profit of only about Ps. $3 – $5 ($0.20 – $0.50 USD) per piece.
While it is undoubtedly important to keep these traditions alive, I wonder if the market is now too saturated for families to make a living solely on selling these dresses. Is microfinance the right tool for these women to achieve financial independence? Or, would other programs focusing on vocational training or skill building serve them better?
This will be my last post from Mexico. I want to thank all of the wonderful people at Accion and Compartamos for giving me an amazing opportunity to get to know these two wonderful companies. I’ve had an unforgettable summer and hope you’ve enjoyed reading about.