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Micro-loan Program: Financially Empowering Women Living in Poverty in Cd Juárez

Location:
Tuesday, November 1st, 2011

Details:

In the last 20 years, the FEMAP micro-loans program has distributed more than 25,000 loans to micro-entrepreneurs, mostly low-income women living in deprived areas of Cd. Juárez. Micro-entrepreneurs also received training in basic accounting, marketing and other skills needed to succeed in their new work.

“FEMAP provides women with a powerful combination of micro-financing, health and education to help them get out of poverty on their own,” explains Jose Luis Escanero, Mircro-Finance Program Director. “It has been shown that poor families with access to small loans and other financial services can better face their health problems and start making an important difference in their own lives. The money that is earned from a small business contributes to household income and can improve a family’s food security, help with children’s education, investments in the home and to start building equity. A small amount of savings can help a family get by and recover more quickly after traumatic events such as the death or illness of the family breadwinner,” he adds.

FEMAP has the knowledge, experience and infrastructure (loan officers working in deprived areas of Cd. Juárez, an administration and accounting area, a credit and collections area and a specialized information system for micro-financing), for achieving greater expansion of loans and encouraging self-employment even more and along with this, the generation of income for families facing poverty conditions and allowing them to improve their financial status.

One of the goals for 2012 is to channel 3,000 new social loans to micro-entrepreneurs and their families living in poverty.

This goal requires $200,000 dollars for encouraging self-employment in Cd. Juárez. These resources will be allocated for providing loans for satisfying working and investment capital needs for low-income people who are engaged in an income-generating business or who have some kind of micro-enterprise, and when they are organized into groups (Community Banks) they back one another up and are able to have access to an initial loan of up to $230 dollars per member.

“With the capital received for this project, 3,000 micro-loans can be made within a term of 36 months, considering the amounts and terms for each loan cycle. The capital received can be recycled three times in the first year (cycle 1, cycle 2 and cycle 3) each time loans are repaid by borrowers, so with a delinquency rate of no more than 4% in the next 12 months, some 740 small loans will have been provided, benefiting about 2,960 persons including micro-entrepreneurs and their families,” explains Escanero.

For the second and third year, in cycles 4 through 7, the amount to be lent to each bank member is greater, in addition to the terms, so the loan is recycled twice a year. It is estimated that the equivalent of 20% of the capital generated in years 2 and 3 (cycles 4 through 7) can be channeled to loans for new clients starting in cycles 1, 2 and 3.

The project has two stages for provision of capital in which the first $100,000 dollars would be disbursed within a period of 3 months (June, July and August, for example) and the next $100,000 dollars would be provided during the months of September, October and November, for example).

Methods
Since most people living in poverty status have no collateral to provide, they do not qualify for a bank loan. The FEMAP Community Banks model is a system that helps to facilitate poor people’s access to credit, and especially poor women, in seeking to help them engage in businesses generating income for themselves and their families.

A Community Bank is a semi-informal group made up of 5 to 10 persons (mostly women) from the same community who get together voluntarily and provide a common guarantee for receiving a joint loan and encouraging their members to save, with the sole objective of strengthening their income-generating businesses and becoming self-employed. These loans will continue increasing progressively (each time they pay off their loan they will be able to receive a larger one on an ongoing basis) as they become better established in the project. With FEMAP’s micro-loan methods, micro-entrepreneurs can continue developing, while at the same time they become prepared to continue raising their business’s growth potential.

Project Benefits
With the provision of resources the project will broaden its coverage by offering the following benefits to poverty level population: i) Micro-financing services; ii) Access to institutional medical care services; iii) Encouragement of savings among participants; iv) Education and prevention in health; v) Social mobilization and vi) A culture for handling credit.

A donation of $100 a month will help up to 10 women expand their business. To help the micro-finance program, please call the FEMAP Foundation at (915) 544-4151 or Lic. Jose Luis Escanero at escanero@femap.org.mx or 01152(656) 616-0833