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What is Microfinance?

The second thing people ask me when I say I am going to Mexico is,” what are you doing there?” The first generally being, “OMG! Isn’t it dangerous? Aren’t there drug dealers there?” which is a sad indictment of the sensationalist power of the media.

The third thing is, “Microfinance? Whats that?”

Microfinance 101
Microfinance is a general term to describe financial services to low-income individuals or to those who do not have access to typical banking services.
Microfinance is also the idea that low-income individuals are capable of lifting themselves out of poverty if given access to financial service.

In Mexico the interest rates on small loans average 70%-100%, making it almost impossible for people to pay back a loan, even if they were granted one in the first instance, which obviously comes with its own issues – such as requiring a bank account, documentation, loan guarantors and a credit history.

Fundación En Vía
Fundación En Via, a NGO in Oaxaca, Mexico, operates a interest-free microloan program. They run half-day tours to villages near the capital city of Oaxaca, providing tour participants an opportunity to understand microfinance in action; to meet women applying for microloans, and to learn about their lives and businesses. The tour money is then used to generate the capital for the interest-free loans.

Fundación En Vía “ensure that their borrowers have a more viable option than commercial banks. Their borrowers are then able to leverage their loans to have a real impact on their small businesses, their lives and ultimately the entire community“.

What are microfinance loans used for?
En Vía loans have been put to work in a variety of different businesses: opening a small home-based tienda (convenience store) to sell basic groceries to neighbors; making the hand-made traditional candles used in church and civic ceremonies; and investing in wool and dye to sell their own rugs instead of working for the big rug brokers outside of town“.

For more information on Fundacion En Vía, or to join one of their microfinance tours in Oaxaca, follow this link

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