Tuesday, August 31, 2010

Savings in La Union: Part II

So, last time I talked about savings in La Unión. Recap: nobody does it and it is vitally important since incomes vary drastically at different times of the year. So what can be done to remedy this problem? The two things that need to be addressed are the lack of knowledge and the lack of a good savings facility.

Enter INFOP, the National Institute for Professional Formation in Honduras. This organization provides business training and development to a variety of small businesses, including small agricultural producers, in just this area. INFOP, much like IHCAFE, has professionals ready to teach, and UMF is now coordinating business training sessions for the near future.

Now, when I say, “business training”, this may not be the same thing that most people think about in the United States. The first training that we are looking to coordinate will be on savings. How much do people make during the harvest? How much could they save? What could they do with this money? How will they save it? The next session will be the planning of investment, essentially, planning beforehand how much producers will need to invest in their fields, versus how much they will make during the harvest, in order to decide the right amount of land to plant, how to budget the money they have saved in order to purchase necessary inputs, and how much money to expect to keep after all of their expenses. This will be complemented with several other topics tailored to agricultural business, but these first to sessions – which will teach both how to save and then what can be done with those savings – will serve as the building blocks for anything that will be taught in the future.

As for the lack of facilities to save money, the easiest solution to the lack of savings facilities would be for UMF to take savings ourselves. Unfortunately, as a non-profit rather than a formal bank, we are not legally able to do this. Additionally, we have heard stories of distrust from people in towns who have deposited savings with organizations before, only to find their money gone when they went to withdraw it at a later date. As such, UMF has been looking into other options. So far we have come across two.

One – form community banks based upon the common Caja Rural form. These would allow members to manage savings themselves and would be located in each individual town. However, these come with problems of trust and the potential for mismanagement mentioned in my previous post.

Two – set up bank accounts at a formal bank. To me, this seems the better option, especially with the recent opening of an ATM in La Unión (which consists of a card scanner at a pulperia or small store; the store owners then take money out of the drawer in the amount withdrawn). While basic, this ATM allows bank members to make deposits and withdrawals 7 days per week here in La Unión, thereby fixing the transportation problem previously faced. Taking advantage of this, UMF could coordinate the opening of personal savings accounts with the training sessions in towns so that people could, in a short period of time, learn about the advantages of saving and gain access to a viable savings mechanism.

So where does that leave us? I think that, by coordinating proper training and facilities for savings, UMF can help to implement an effective savings program which will help the people of La Unión save money to be used for emergencies or otherwise productive uses during times when money has not traditionally been available. My hope is that we can at least make first steps to move away from the attitude of “dinero ganado es dinero gastado.”

Until next time, adios.


Monday, August 30, 2010

The Real Leaders

Hello Readers,

It is very intriguing to me the way we’re approaching the building of a non-profit microfinance organization. Whether or not we are sustainable or close to becoming sustainable is a side issue, but what interests me most is including more than just gringos in our operations. Gilberto and Martir work active roles leading town meetings in conjunction with a locally elected board of directors in each village. Bilingual students contributed to collecting socioeconomic data which helped create the basis of our project. High school students are helping us gather more information on our client and client villages. And a scattered mass of community members help us coordinate logistics, gather resources, move materials, and carry out an array of other small but necessary activities.

We’re not only instructing what people are to do for us, but local leaders emerge who take their own initiatives and solve problems when issues erupt. I’m not suggesting that by tomorrow we’ll be able to hand over the keys to Union MicroFinanza to a group of Hondurans, but I sincerely believe and see us heading in that direction. The idea as I see it: empower people economically through microloans, train people to orchestrate these microloans, and one day remove all gringos from local operations and allow the people who we’ve been working with to take the reins and move forward, helping themselves help each other.

Certainly, this is a very idealistic perspective, but anything is possible; such as creating a self-sustainable microfinance organization managed, run, and organized by their Honduran neighbors.

Peace and Love,
Daniel Schwartz

Tuesday, August 24, 2010

The Definition of Savings in La Union: Part I

Yesterday, I had a several hour conversation with Gilberto and Martir about financial planning and what people in La Unión do to plan, budget, and save money. It started because we wanted to ask new loan applicants the question “If you wanted to make a small investment of 1,000 Lempira ($50 USD), how long would it take you; right now, a few months, the next harvest, or never?” We wanted to ask the question in order to gain a better understanding of how people in the area manage their money. “Patrick,” Gilberto said, “This question is going to seem very odd if you ask people. No one has money set aside right now? Everybody will have to wait until the harvest.” From here we began discussing what people do to save money.

The short, and somewhat disturbing explanation, is nothing. I was told that there is a saying here “dinero ganado es dinero gastado” or “money earned is money spent”. When people make money – almost exclusively during the coffee harvest – they spend it immediately. As Martir said, if he has 10 Lempira and his Aunt comes by selling bread (which he knows is delicious), he is going to buy it. This is not to say that it all is wasted, since I was told that money often goes to new clothes, housing repairs, medicine, and other worthwhile purchases. However, it means that shortly after the end of the coffee harvest, all of La Unión and the towns around it are collectively broke for the rest of the year. This is the reason that fertilizer is so difficult to buy in May and September – people have been unable to save the money they need for inputs in the many months between the harvest and the following growing season. Additionally, what happens when a roof starts to leak? What happens when a child gets sick? Unfortunately, there is no good solution for people. For extreme emergencies, people can go to neighbors and ask for small amounts of money, to be paid back when possible. For less urgent matters, the only realistic option is to hope that it can wait until the next coffee harvest. This leaves little possibility for fertilizer or agricultural products, since all people in the area need them at the same time.

So why don’t people save? This is a difficult question, but here are my thoughts. First, there is a lack of knowledge. People know that saving is a good idea, but don’t know how, where, or exactly why to save. They know that it is hard when they have no money for emergencies, but see this as an unavoidable way of life – like daily rainstorms – that cannot be changed. Second, there is a lack of facilities. The nearest commercial bank is a 3 hour, 80 Lempira ($4 USD) bus ride away. Since most people wouldn’t be able to deposit more than 40-50 Lempira (~$2.50 USD), they would spend significantly more on food and transportation than they would be able to put in the bank. Third, there are several community groups which have been set up to provide savings, but these are plagued by stories of mismanagement, burglary of houses in which money was kept, to straight out robbery by community bank treasures. Overall the outcomes have been poor.

It is important to realize that these reasons are different than saying that people are not CAPABLE of saving. Right now, UMF clients are making interest payments of 10-20 Lempira ($0.50-$1 USD) at each biweekly meeting for exactly this reason. People CAN save small in amounts, are capable of depositing those small amounts every few weeks. Our current 99% repayment rates are proof of this. With the proper training and facilities, La Unión wouldn’t have to scrape by for nine months out of the year. But how can this be done? Well, that is a lesson for another day.

Until next time, adios.


Friday, August 13, 2010

A Day in the Life...

6 am. It’s lights out. Did I oversleep? Nope, alarm won’t go off for another 30 minutes, but now I’m up and it’s time for coffee.

6:30 am. Coffee and some reading. I think Economics of Microfinance. We are going and revising all of our procedures for the upcoming round of loans, so it is good to run back through this.

8 am. Coffee’s gone. Time to head out. Bottle of water and iPod in my backpack and I’m off to meet Gilberto.

8:30 am. Meet up with Gilberto at his house and we are off to his field in Llano del Venado.

9 am. We arrive at his field, where I have planted an area of corn and beans. This is my first time here since I was in the states and, although I was told about it already, I am disappointed to see what used to be my beans. A plague of insects came and ate them in a day while I was gone. Fortunately, my corn is still looking good.

9:15 am. Gilberto shows me how to sharpen the hoe, and I start cleaning the field.

9:17 am. I am in a full sweat. This is hard work.

9:30 am. I step in an ant hill. They are the “angry ants” as they are known here, and I am quickly reminded why.

Noon. I have cleaned my part of the field while Gilberto planted yucca. Gilberto tells me that it would take a full three days to clean his portion of the corn, and I now understand why. His field is relatively small (he has about 1/4 of a manzana or about 2/3 of an acre planted), but looks monstrous next to the four rows that I just cleaned. I enjoyed the work, but now it is swelteringly hot and I am ready for lunch.

12:30 pm. Baleadas for lunch. I don’t have time to cook them, so I get them the little restaurant across the street. They aren’t bad, but they use reheated tortillas and beans and you can always tell the difference.

12:45 pm. Time for a shower. No running water which means bucket shower today. I grab two buckets, fill them with water from the pila (reservoir behind the house for such occasions) and am refreshed by the icy water.

1 pm. Showered and shaved, it’s time to start preparing dinner. Tomorrow is Trisha and Malia’s final day in La Unión and we are making a final dinner. I start some beans boiling and go to grab stuff to make dough. Tonight’s menu: nachos. pizza of various types (Hawaiian, cheese, pepper and onion, roasted tomato), onion rings, and cake and coffee milk shakes for desert.

1:30 pm. Trisha and Malia show up. Trisha and I go shopping while Mike starts prebaking pizzas and Malia fries tortillas. Cooking continues for the rest of the afternoon. I love cooking.

6:30 pm. With all of the food ready, guests arrive. First Martier and his family, then Gilberto and his family, and finally Rolando and Rosa (with whom Trisha and Malia live). In total, 18 people.

9 pm. After several hours, several courses, and a good time, dinner is over. It is late for La Unión and everybody except us Gringos go to bed.

9:30 pm. The gringos hang out, exchange music (a favorite pastime) and reminisce about the experience that the interns have had this summer. It has been great having them here, and I am sad that they have to head home to start school up again.

10:30 pm. It’s been a long, but great, day off. Time to hit the hay and start over tomorrow.

Such is a day in the life of a Gringo in Honduras.

Until next time, Adios,


Tuesday, August 10, 2010

An Important Part of the Team

Now that the month of July has come to a close, we need to, sadly, say goodbye to an important part of our team. Anthony, Malia and Trisha, UMF's first interns are headed back to the United States after a summer in the mountains of La Union Honduras.

These three did tremendous work for us this summer, from collecting loan applications, working with farmers and their families, organization agro-educational meetings and loan repayment sessions to creating marketing materials and spending countless hours filling out excel spread sheets.

Even though from time to time they would disappear only to be found in a near by city, up a mountain or under a waterfall, we cannot deny that they pushed UMF to the next level.

All three came down to Honduras on their own accord with countless other opportunities for their summer. They all paid their own way.

Anthony, Trisha and Malia, we thank you for your summer of work and joining UMF in Honduras. We hope you have a successful fall and stay intimately involved in UMF and Honduras!