FAQs (frequently asked questions)
Why are we working in Teotitán del Valle?
What are we doing beyond microcredit?
What are the microfinance tours like?
Why don´t we charge interest on our loans?
Why do we lend to women?
Why do we lend in groups?
How do we select loan recipients?
How much is the standard loan?
What Is Microfinance?
About Our Program
Why are we working in Teotitán del Valle?
Teotitán del Valle is a town just outside of Oaxaca that is famous for its tradition of weaving beautiful rugs. With 5,000 residents, the economy of the town has improved greatly over the past 10 years, due in large part to the weaving and the tourism it brings.
This reliance on tourism, of course, also brings with it unique challenges, including being vulnerable to large fluctuations in tourism.
When we first began our work in Oaxaca, we started our program in five different pueblos. We quickly realized that we wanted to focus our attention on one place in order to build a better program, and as the place where we had had the most success building a group of borrowers, Teotitán was the town where we chose to focus.
We are also proud to announce that we have recently started work in another town, Díaz Ordaz. Díaz Ordaz is a town of 5,000 people, an hour outside of Oaxaca.
We hope to continue to expand into more pueblos around Oaxaca, and will focus our outreach on towns with greater and greater needs so that we can have an even bigger impact on the community as a whole.
What are we doing beyond microcredit?
Read more about our programs
What are the microfinance tours like?
About our microfinance model
Why don´t we charge interest on our loans?
Unfortunately, interest rates on micro-loans in many countries around the world are quite high, which arguably diminishes the impact they can have in helping their borrowers escape poverty. In Mexico, the interest rates are among the highest. The average interest rate in Mexico is around 70%, and are sometimes even higher, at 100 or even 150%. While there are many reasons for these high rates, and while rates have been decreasing worldwide over the past few years, we are committed to making sure that our borrowers have a much better option by providing loans at 0% interest.
Why do we lend to women?
In most societies around the world, women have the least power, including having the least access to traditional financial services. In addition, research suggests that women tend to invest more in their family more than men and can thus generate longer-term benefits.
Why do we lend in groups?
The idea of group lending is a common practice among microfinance organizations, and it plays two important roles in our program. On the front end, by requiring that borrowers apply in groups, and that they are mutually responsible for the payments of all of the loans, we are leveraging the knowledge that villagers have of eachother to ensure that we are loaning only to reliable borrowers. Borrowers form their own groups, and are very likely to only form a group with other women they trust.
It also reduces the risk that any given borrower will default on her loan by making her responsible to her group members, and so creates social pressure for her to complete payments. If one person in the group does not pay back her loan completely, her partners must find a new group member to be able to participate in the program again, and must start again at the first loan level. Ideally, if one of our borrowers has trouble making payments, her fellow group members will help her with advice, support and/or payments so that the group can continue to increase their access to credit.
How do we select loan recipients?
To begin working in a new town, we invite potential borrowers to a community meeting with the help of other organizations and current borrowers with friends or family there. After that, members invite friends and family to our weekly meetings, where they hear an overview of our program. They then complete a paper application and an oral examination to make sure that all of the rules of the program have been laid out clearly.
How much is the standard loan?
The first loan borrowers receive is $1300 pesos (approximately $100 US). Once they have completed repayment of that loan, they are eligible to apply for a second, larger loan of $2000 pesos, and then a third loan of $3000 pesos. Upon completion of a third loan, they may apply for a larger "Item loan", which may be applied to a purchase of $4000 pesos or more. All loans are interest-free.
What Is Microfinance?
Microfinance is an approach to fighting poverty that is based on the idea that many peopleliving in poverty around the world have many of the resources that they need to get out of it: ideas, skills, drive. A major problem is that because of the way our financial systems are set up, people living in poverty often do not have access to the basic financial services, like access to credit, that they need to take advantage of the ideas and skills that they have, and that so many of us take for granted.
By solving this problem, and correcting this imbalance in the financial system, microfinance can help people get themselves out of poverty.
The modern microfinance movement was catalyzed in the 1970s in Bangladesh by Muhammad Yunus and his Grameen Bank, and has since grown into a worldwide movement that includes many different kinds of financial services, from credit to savings to insurance. Yunus and the Grameen Bank won the Nobel Peace Prize in 2006 for their work.
A micro-credit loan is typically a small loan of between $25 US to $1000 US, loaned to entrepreneurs to help them start or grow their small businesses. Many microfinance organizations also offer further support to their borrowers, including health education, training in financial literacy, business planning and other services.