Microfinance

In the blink of an eye my ‘Christmas vacation’ was over and I was back on the northern coast of Peru to start my second volunteer project. This time instead of installing clean burning wood stoves in rural villages I was working as a microfinance loan officer with a new volunteer organization in a poor urban area on the outskirts of Trujillo. The area in which I was working was where people from the mountains were settling in search of a better life on the coast. While the district of El Porvenir is only 10 minutes from Trujillo’s main square, it feels like a completely different world. In this part of town, it is very obvious that Trujillo is a desert. The roads in the area are more like trails in the sand with small adobe homes that are blocked together lining their sides.

In El Porvenir, there were a number of ways people earned money. Some people made shoes, some owned corner stores, others sold wood or charcoal used for cooking, and others raised chickens. Most people in the area lived on $2-4 per day. Having such little income you could see that a small loan might go a long way in helping finance a new business idea. As all income goes to buying food, then paying for electricity and water and buying clothes if possible, it is nearly impossible to save money for a new business idea. That’s where microfinance comes in. In this area we would give loans in the range of $7 to $100 to people who had an existing business and were looking to expand, or those who wanted to start a new business. With this small amount of capital, they were able to do just that.

Depending on the day, my actual work would be either making house/business visits to evaluate a person’s business idea and potential to payback a loan, going to collect a missed loan payment, working in the office helping people fill out loan applications, or actually handing out loans. By far the most interesting part of the job was making house visits. Some days were quite difficult when it was necessary to try to collect a missed loan payment from someone who didn’t have any money to give to begin with, but those days were made up for by some of the success stories.

One woman I met had a business selling bread in front of her house for 7 cents per loaf, but had a vision of owning a corner store one day. After a few years of receiving and paying back small loans, this woman expanded her bread business to sell juice at breakfast time, then pop throughout the day, to her now thriving corner store in which she sells everything from school supplies to milk to meat and of course, freshly baked bread.

My favorite story however, is one of a woman who received loans to start a business raising and selling chickens. When I visited her house to evaluate a new loan request, she had 2 dogs, a cat, and about 40 chickens all running around together in the back of her house. The majority of the chickens she raised were sold as food, but she also had a side business in which she would use a few of her strongest chickens in cock fights. Every two weeks there would be a new fight in the neighborhood and a winning bird could bring home anywhere from $60 to $120 which was pretty good money! Half of that money however would go to the chicken trainer as before fighting, the chickens need to be trained by a professional in order to compete. While morally debatable, this woman was making some pretty good profit and literally pulling herself out of poverty through cock fighting.

Until next time, keep livin’ the dream!