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News tagged as "Microfinanzas"
August 12, 2013

Microfinance in Paraguay. Going back to basics

Tags: Microfinanzas, Paraguay | by Marcel Abbad Sort. MACS Consultoría Social

I´ve been working hard in order to organize (and start) a new MFI (Micro Finance Institution) in northern Paraguay. Specifically, in the province of San Pedro, which along with Concepcion are the northernmost areas.

A little to the north of the capital of the province, and almost touching to Brazil, there are four extremely poor human settlements, lost in the middle of nowhere, and hidden from the view of humans (does it sound familiar to you? Hidden and disguised poverty as I have seen it in Mali, Burkina, Niger, Philippines, India, Senegal, Morocco, El Salvador, Ecuador, Bolivia, Peru.  The instinct to hide our own misery is a kind of modesty, half hypocritical-half shameful, that is repeated across the planet). 

Perhaps Espíritu Santo is the most representative of the four settlements. And not only for its beautiful name, but because the wonderful place it is and the attitude of its inhabitants and settlers, all optimistic, hardworking, compassionate and grieved people. Espíritu Santo is a haven of humanity and certainly it could not be called otherwise! Its inhabitants are settlers

Here I find myself working to fight poverty and to assist the development of these people who are trying to break the infamous "cycle of poverty". But I realize that my work has a lot to do with politics, relationships, risk management and security, other people’s money and local interests. It also has to do with getting to bed every night in good shape and in good mind. 

I write these words because I want to highlight some aspects of our work that I think go unnoticed and, in many cases are precisely the key to success. 

Banks: in this area, a number of banks and financial institutions are and remain a major source of income, due to the poverty of these settlers. Here everyone is indebted, badly indebted. For this reason, one of the main steps to carry out before releasing our MFI is to agree with local banks the "output conditions" of the loans that are currently outstanding and that are actually hindering the settlers’ growth and development. 

Politicians: The residents in the four settlements are about five thousand people. More than half are potential voters. Dealing and negotiating with the local political powers is a key step to guarantee MFI’s launching success and to gain the respect from other institutions. Otherwise, they would condemn the MFI to disaster since political support is essential to surpass vulnerability. 

Guerrilla: Moreover, if you are vulnerable, the more you will be so to protect yourself from the EPP (Paraguayan People´s Army), surprising and dark “guerrilla” acting following invisible instructions with whom there is an obligation to agree any local development work plan. It is mandatory to listen to her opinion and to incorporate some of their suggestions for the sake of the MFI’s present and future and prove that it is “the people’s MFI” that requires a secure and peaceful environment to work properly . 

So, to create an MFI one must previously manage, in an effective way, a range of relationships and agreements of all kinds. And for that, previously too, you must know “who the boss is” in these settlements, which is the balance of power at the community level, how to organize the settlers, who are their leaders. Who they love and who they hate.

Ultimately, this work has taken me back to the origins of microfinance. People outside our industry may believe that creating an MFI is just to properly design a disbursements and refunds plan, like a massive, sophisticated Excel sheet. Not so easy....

Creating an MFI means managing the interests of others and designing a social balance under whose umbrella a number of personal interests will meet. Skillfully manage this multiple agents scenario is in my modest opinion the main skill required for this work. Without this balanced environment, no MFI has the remotest chance of surviving in Espíritu Santo: satisfied bankers; supported politicians and involved guerrillas. Local leaders respected and involved.

That is really the key to success.It´s back to basics.

Initiative financed by: Initiative financed by AECID
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