Oaxaca Research Trip 4

Part 4 of the research trip.

Posted 4th September 2010

Today we took a relaxed morning, enjoyed a leisurely breakfast, some reading time, some sunshine on our patio and then headed off to meet up with Envia for their special Microfinance tour of Teotitlan. Started only a couple of years ago Envia have used the model of microfinance started in the 1970s in Bangladesh whereby underprivileged people who are unable to obtain credit from banks are given small loans by NGOs, which are used to start or expand businesses, and are paid back as any other loan.

What Envia have done is that they charge a group of tourists a fee for witnessing this project in action and use that money to provide loans free of charge. When the loans are repaid, they take their own low admin costs from this and reinvest the rest in further microfinance and other projects such as free English lessons for the people of Teotitlan. We met up at the Cultural Institute of Oaxaca, where Envia are based and drove out to Teotitlan again. Over lunch, Emily explained the project and how it works, how funds are spent, pay back policy and anything else we could think to ask. The restaurant where we had lunch was one venture that had already benefitted from Envia’s loans. Loans range from 1,300 Pesos (about GBP65/USD100) to 3,000 Pesos and rely on people forming groups of three (or more) to act as guarantors for each other and only after repaying the level one loan of Ps1300 can people apply for a level 2 loan etc. Though there are many micro-finance companies in Mexico the average interest rate remains as high as 70% p.a. for various reasons (including profitability for these firms). Envia on the other hand offers interest-free loans, making them more attractive to people on the very edges of society and most in need. In return loanees need to come to meetings once a week to pay back the amount agreed and need to present their ideas to a group of tourists on two occasions. After the second presentation they will receive their loan money.

After a quick visit to the charming church our first stop was to a small home where we met Christina. Christina was a weaver with a small business. This was her first loan (so Ps1300) and she wanted it to buy 16 kilos of yarn and 3 kilos of warp (the heavy material that is used on the weaving frames). By buying in bulk she would be able to get a better rate and thus increase her profit on each item she sold. The extra profit (even after paying back the loan) would help her to further expand her business.

Martha was another weaver and she was looking for 3,000 Pesos (GBP150/USD225) to buy 50 kilos of yarn. She was on her 4th loan, used for a variety of projects from fruit tree planting to buying other people’s weaving projects which she then sold to a Mexico-city based website that already sold some of her own weaving. Martha was a true entrepreneur and was using the loans not only to help herself but also to create more work for her fellow villagers.

Next we met Catelina, who explained both her project and that of her mother. Her mother’s project involved a special foam made from a particular cocoa bean that needed to be buried for six months, and the foam is something used in all such hot drinks served during specials times – weddings, funerals, the Day of the Dead celebrations. Much as we tried we could not quite get our heads around this one! Her own project was Herbal Life (a supplement health shake designed to aid weight loss, think Slimfast with more of a “health” spin). She sold individual shakes which she sold to customers for Ps19 (GBP0.95/USD1.40) or the whole container for Ps500. Even though it was a small village, she was not the only person selling it and one other girl from the village was selling it too. She wanted the loan to extend the range of products she sold to attract in more customers, and keep the ones she already had.

Our last stop was at the shop of Christina and her mother. Her mother was looking for a loan to buy live chickens, kill them, pluck them and sell them. The margins were tight and a previous attempt with a slightly different model had failed due to some of the chickens dying. Christina herself wanted her 4th loan to expand the range of products available in her small modest shop (Emily later explained that the shop now sells a lot more than it used to and that it was very gratifying to see this progress). One thing she wanted to add to her store was corn – not chicken corn which the already sold, but corn for humans, for tortillas!

The project is a very simple one, a very basic one, but one that encourages enterprise, encourages people to work for themselves and to get out of the cycle of poverty and disempowerment that pervades many rural communities in Oaxaca. Envia have plans to expand their projects to other, perhaps needier villages when their funding allows. This is one project we have every intention of making a part of our tour. As we drove back to Oaxaca everyone in the car felt the buzz of being a small part of something that was making a small but real difference to people’s lives.

This blog is part of an Off-The-Beaten-Track Travel Diary. Click on the links below to navigate through this journey.