This program is supported by:
CAUSE Guatemala has been involved in microcredit programming since 2008 in partnership with the Butterfly Effect Foundation and CIDA. There are two branch operations in Guatemala, one in Todos Santos, Huehuetenango, and the other in Comitancillo, San Marcos. These communities are indigenous Maya-Mam people, with a primarily agricultural economy.
The markets in which the branches are located have a population of around 60,000 people in each. This is an increase of 10,000 from only ten years ago. There are many marginalized villages in both markets. A number of new financial institutions have entered these markets in recent years. However, these organizations are mainly based in the centre of the municipalities and have limited service to outlying areas. In addition, these other organizations rarely provide integral support to borrowers, as is the case with CAUSE Guatemala.
CAUSE Canada will pursue its mission of serving the most marginalized women in the municipality, as well as seeking out villages in neighbouring municipalities such as San Juan. CAUSE Guatemala has many years of experience working with the people of San Juan, where significant development needs still exist. As well, CAUSE Guatemala will cultivate its comparative advantages in this region, as well as in all of Guatemala, to attract and maintain its client base. These comparative advantages are described below.
Microcredit is provided to rural women in marginalized villages who form solidarity groups of 4 to 6 women, providing mutual support and guarantees. CAUSE Guatemala works with all of the groups in a single village together, holding joint meetings and training sessions, as well as requiring joint accountability and guarantees. This has contributed to a very high rate of on-time loan repayment, and a strengthening of community solidarity and capacity.
Initial individual loans are a maximum of Q500 ($65) and increase by a maximum amount of Q500 in each cycle, to a maximum of Q7,500 ($975). Approved loan amounts depend on the repayment history, capacity to pay and savings levels of clients. Loans are provided for six to 12 month terms, with interest payments monthly. The principal is repaid at the end of the loan term. Borrowers appreciate the ability to invest the full amount of the loan during the loan term, in contrast to other lenders in the area. On-time repayment rates in Guatemala are very high, as clients seek to maintain their good credit history.
Other services provided include health orientations, human rights discussion, business management consultations, literacy and numeracy follow up, financial management skill building, leadership training, and agricultural support. The agricultural support includes a wide range of services, from technical assistance, to the provision of hi-bred animals and seeds, and vaccination services. The agricultural services are paid for separately by borrowers and non-borrowers. Active and punctual CAUSE Guatemala borrowers always receive priority attention.
CAUSE Guatemala microcredit and
business development services are promoted through community visits and word of mouth among clients. Initial visits are held in potential communities with leaders and women with an interest in the program. Mutual understanding is developed in the first community meetings. Afterward, women who decide to participate in the program are provided with eight pre-credit meetings, during which solidarity groups are formed by the participants themselves. Groups who have complied with all of the eligibility criteria and have completed application forms are submitted to the credit committee, which decides on the approval or rejection of the application.
The most important source of program promotion is the support of local leaders and existing, satisfied clients who pass along program information to potential clients and communities.
CAUSE Guatemala is planning to change the name of the microcredit program in order to differentiate the community development programming of CAUSE Guatemala from the longer term, business oriented services including microcredit and savings promotion.
CAUSE Guatemala aims to maintain clear, simple, fair and transparent pricing of its business development and microcredit services. As of January 2013, clients are charged a 1% (of total loan received) fee for loan administration at the time of disbursement. Most clients also participate in the Life Insurance Fund (LIF), which cancels all debt and contributes a modest amount to funeral expenses in the case of client death. The cost of the LIF is the same as the administration fee. The interest charge is 2.5% monthly, charged on the initial loan disbursement amount. Loan payments are monthly, and include only the interest amounts. The principal is paid in one lump sum at the end of the loan term. This pricing structure is highly competitive in comparison with other microcredit providers in our operational areas. This is especially true given the high level of client attention and support provided by staff on an ongoing basis.
CAUSE Guatemala strongly encourages all borrowers to save in either an individual or group bank account. These savings are under the control of the borrowers at all times, and can be utilized to cover emergency costs. In every loan cycle, borrowers must have savings worth at least ten percent (10%) of the value of the new loan. This amount can be important to assist clients with payments when sales are slower or household expenses rise suddenly.
CAUSE Guatemala has taken significant measures to ensure the best levels of internal controls and risk management. An important aspect of CAUSE Guatemala risk management is the insistence that all client payments be made at a financial institution. A number of banks have increased their presence in rural areas in recent years. This has enhanced the access to formal financial services for remote clients.
The advanced microcredit projection program MICROFIN was utilized to calculate the portfolio growth of the CAUSE Guatemala microcredit branches. A summary chart of this data follows:
Category: Payday loans