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Microcredit
Insight Trip - Anthony's Perspective16 days ago
Domestic Microfinance in the USA59 days ago
MicroCapital Monitor - July 201766 days ago
Honduras Impact Story93 days ago
MicroCapital Monitor - June 201798 days ago
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Insight Trip - Anthony's Perspective
Category: Microcredit | By SDR, 6-Oct-2017 | Viewed 52  Comments 0 | Source Anthony Tonkinson - Calgary Chinook Rotary Club
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Anthony Tonkinson in Honduras

Why is it necessary to visit Microcredit Projects?



Helping people achieve their dreams.

By Anthony Tonkinson -Calgary




For me this was the highlight of a very emotional tour. How do people in very poor circumstances take a few dollars, as a loan, and create a business which provides enough money for them to support their family? They do this and pay back the loan at a very high interest rate (by first world standards) and in most cases, improve their circumstances. Why would, or how could, a lending institution justify lending money to people who have nothing?


We learned that the basis for the loans is the collateral. There isn't any. There are no possessions to loan against. It was explained by Alison and Jannalee Anderson (OIC's lead in Honduras) that all the people have are their brains and their hands and that acts as the collateral.  To make this work the bank lends to individuals who belong to a group, The Solidarity Group, described is one of these.


Each member of the group is responsible for the loans of every other member. For this reason, they are very strict about who joins the group. Each member knows the other members or knows one of the group who vouches for a member. Amazingly this works. The losses on loans is in the 2% range better than in North America.


The interest rate, 24%-28%. Why so high, because that is the standard rate in Honduras. If borrowers go elsewhere for money this is the rate they will face.  IDH, the lending institution (it is planning on becoming a bank) is a charity so the money gets ploughed back into more loans. There is an incredible need for funds to keep enlarging the program. IDH estimates only 15% of possible loans have been met. With financial support, they are opening offices in new areas to address the need.


On our visit to The Solidarity Group each lady talked about her business. I had realized that the reason we were there was not only to see and understand micro-finance in action, but to listen to the people's stories. Each lady in the group told us what she was doing and what she had accomplished. One lady that exemplifies the very best benefit of micro finance very proudly declared that her daughter had just graduated from university. The sacrifices and work that lady had gone through to make that happen is amazing. Plus, for her daughter to take this small opportunity and work hard and graduate is very impressive. All the ladies who spoke were very pleased and proud to tell us their stories. Each member of the group receives a loan (some as little as $200.00) about every nine months, pays it back and receives another.  This group has been doing this for nine years.


At least 70% of the borrowers are women. Although we did meet several male clients, and in some cases the men were helping their spouses. The main reason IDH likes to lend to the women is because the extra money earned gets used for the family. Some women are just churning through their small loan and not getting any bigger.  However, they are making enough money to support their families. Besides the basics of food clothing and a roof over their head the next priority is education, as was clearly demonstrated by the lady whose daughter graduated.


One of the many questions I put to the OIC staff is "Why don't we have programs like this in Canada?" Two reasons given were, one, that the small sums of money loaned are of little impact in Canada (whereas they are life changing in Honduras), and secondly (and more importantly), there is a safety net in Canada that doesn't exist in Honduras or in many countries. The safety net includes El, Welfare, charities, and a sound medical system. In Honduras, most of these do not exist and, if they do, they are very rudimentary. The safety net is a cushion against failure. Failure in Honduras could mean your children starve.


I think the main benefit of the trip is that we realized we can make a difference. Plus, our donations are being put to very good use, including being recycled indefinitely.

Anthony Tonkinson


44tonk@gmail.com
Calgary Chinook Rotary Club
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