Since it's a new month, I just entered by bimonthly loan, my loan number 12. This one is to Dunia Herrera, why sells cloth in Choluteca, Honduras. Choluteca, in addition to having a cool name, looks on Google Maps just like the place I'd like to spend some time on vacation, with nice, palm-tree lined roads, grid-square neighborhoods, arable land along the river, and about half an hour's drive to the ocean. Looking at some of the pictures at Flickr.Org, the place looks reasonably clean, colonial, very much like an old, provincial town that you come across in so many Latin American countries.
Although this helped, the reason I invested in Dunia's business, is because I wanted to see how I'd fare with a small, reasonably short-term loan. All Dunia's been asking for is $225, which is probably the equivalent to about 2 months salaries. She'll pay this back in about 6-8 months, which comes down to about $40 per month, including interest. Assuming that her investment is "sustainable", which is, that she is able to increase her income on a continuous basis by at least the amount of loan payback, she's adding at least $40 to the family income per month. For many people in Latin America, this is a substantial increase of their monthly income.
She got my vote, and, as usual, I vote with my feet... eh... wallet. Her loan is now fully funded. Mucha suerte, espero que el préstamo hará una diferencia.
7 comments:
I have seen a few Bolivia loans on Kiva, but they don't last long. The only reason I am getting Honduran loans is because I check many times a day, I think some of them are funding in hours.
I'll let you know the next time I see a Bolivia loan. What's the quickest way to reach you? IM or yahoo messenger?
Ramon, please link my blog to your blog as I answer a lot of questions that you and your readers may have.
www.microfinancetravels.typepad.com
It's especially interesting how you have formulated that loans need to be paid back at more than $100/month to be viable. I have to really think about that one since the avg monthly salary of a non-skilled worker in Honduras is probably less than $150/month. $100/mth in loan payments seem extreme to me especially if you're dealing with the poorest of the poor.
My latest article, Honduras - Going Down Market, might get a good discussion going as to whether we are doing any good for this sector of the population.
Thanks much, Kendall Mau, CFO/COO of Prisma.
Hi Kendall, thanks for commenting. My "normal" criterium for paying back a $1000 loan at $100 per month is based on the idea, that when someone does an investment, this investment should sustainably increase this person's profit by at least so much, that (s)he can pay back somewhere between 10-15% per month. The reason I've not invested into many of the smaller loans, is because I am not sure of the overall poverty reduction they result in. Even though a few dollars go a far way in places like Honduras, wouldn't a larger loan be a better business investment? Also, aren't small loans with long payback periods especially expensive to administer, and therefore especially expensive to get? Ideally, although I know that the alternative (informal loans) is much worse, I wouldn't want the monthly extra profit to be eaten up by interest payments either.
The argument against this is of course that as micro-entrepreneur you gotta start somewhere, and it's better for risk management to have your business grow in a way that the entrepreneur can control.invest too much at once, and the investment won't yield the growth return because the bus. owner won't know what to do with the money. This is all very much true as well.
So let me pledge to invest in a few more small loans with a smaller monthly payback and are how they fare. I know Kiva requires loan impact statements upon payback completion, and hopefully the MFIs take them serious and tell the lenders if and how much the entrepreneur's income increased because of it.
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