Someone asked me how it was that I seemed to have (almost) constant access to the internet AND no indoor running water or heat. From an American perspective, it seems irrational and contradictory. But, Guatemala is filled with (seeming) contradictions and contrasts. I suspect that many of my “fellow” fellows have experienced the same in the countries where they are working.

The family I live with has satellite TV, a wide screen television (and a television in every bedroom) but they have no indoor running water or heating. They still wash their laundry by hand in a lavadero, outside.  They cook over a wood stove. The water for showers is heated by a fire lit under a big black drum, which they fill with water early, every morning (before the water runs out). They make their own masa from the corn that they grow. And they all have cell phones, MP3 players and their favorite “novellas” (soap operas) on television.

The office where I work has internet access (including wi-fi) and right outside my window, there is an elderly couple working their land like it’s probably been worked for centuries—all by hand, living in an adobe structure (with no running water or heat). One of my most surreal experiences during this fellowship was the day I was sitting in my little office at ASDIR, uploading Kiva borrower videos to YouTube; listening to a loan officer explain the terms of a loan in K’iche and, through my office window, watching the elderly couple plant their corn.

At dinner, in the weeks before Easter, my host family would sit around the dinner table and listen to the story of Christ’s resurrection told in K’iche, being broadcast over a radio on someone’s cell phone.

The inside of their stores and homes are very tidy—almost meticulous. Yet, they don’t hesitate to litter pretty much anywhere and everywhere else.

Lori Gibson Banducci is a Kiva Fellow, working with ASDIR in Nimasac, Totonicapan, Guatemala where she blends in perfectly with the people who live here.

Lori and Kiva Borrowers

So, warning, this has NOTHING to do with microfinance.

But, here are two videos that give a definite flavor of life here in Nimasac, Guatemala where I have spent the last two months as a Kiva Fellow with ASDIR, Kiva’s field partner in Totonicapan, Guatemala.

K’iche is the predominant language spoken here. Many people have asked me to describe what it sounds like, but I’ve found that to be an impossible task, so here is a short video of animated dinner conversation in K’iche.

The second is a glimpse at what is involved in washing clothes here in Nimasac (it takes a LONG time!)

Lori Gibson Banducci is a Kiva Fellow working with ASDIR, Kiva’s field partner in Totonicapan, Guatemala where she blends in perfectly with the people who live there.

Lori with Kiva Borrowers

Long hours, low pay, angry barking dogs, collection calls, long motorcycle rides and even longer walks…………what on earth keeps these loan officers “in the saddle” 8+ hours a day, 6 days a week?  I interviewed two of ASDIR’s (Kiva’s partner bank in Totonicapan, Guatemala)  loan officers to try and find out.

I have to say I have been most impressed by the dedication, care and compassion of the  loan officers at this MFI. I would also bet  that most of Kiva’s 90+  field partners  have similar, committed loan officers—- clearly motivated by a lot more than money!

Interview is in Spanish, with subtitles and, it will soon become clear that I was not selected as a Kiva Fellow on the basis of my video editing (or taking) skills.

Click on this link for more information on ASDIR

It’s taken me some time to “get my feet on the ground” microfinance wise. So many distractions upon arriving in a new country, community, culture, family–not to mention learning my way around ASDIR, Kiva’s partner bank.  After almost 6 weeks here, this is my first post that focuses on microcredit.

I have visited almost 50 Kiva borrowers since arriving here, but these two stand out for me as exemplifying the role that “having access to credit”  can play in the lives of the hardworking and resourceful poor.

The first, is an interview with Ofelia Marina,  a woman who used her loan to become her own boss. Ofelia’s loan enabled her  to get out from underneath dependence on a patrón and to develop her own, custom apron sewing business. Ofelia’s customers  come directly to her and order custom aprons to be sewn for them.

Microcredit has given Ofelia Marina control over her own destiny.

The second, is a young father, Juan Pedro who originally took out his loan to buy leather and other raw materials for his “shoe-part” making business. He lives in a one room home in Nimasac, Guatemala with his wife and toddler son.

Aside: Making shoes here is a classic cottage industry. Someone sews together the buckles and straps, someone else makes the soles and the heels and then, finally someone puts them all together to make a pair of shoes. Much of the work is done by individuals, in their homes. They depend on their ” patrón” for their business—the ” patrón” decides how many straps and what color need to be made this week.  This will be a subject of a separate blog as I will walk you through the steps (and number or individuals) involved in making a pair of shoes.

Unfortunately, the orders for his shoe parts dried up and it didn’t seem like such a good idea to invest in more raw materials. Instead, he used the money to buy a foot (or treadle) loom which is used to weave traditional “cortes” (traditional fabrics which are then used to sew blouses or skirts ).

The interview is in Spanish and I have not yet mastered subtitles. But, the gist is that Juan Pedro says that if it weren’t for his loan from ASDIR/Kiva, he would have nothing. He might be right.

Not every micro finance loan is going to dramatically change someone’s life or provide compelling video.  In fact, the majority I’ve seen have been “nice to have” but not “life altering”.

I think that may be the real and sustainable power of micro credit—to incrementally improve the lives and financial stability of the world’s poor.

Warning: this post has absolutely nothing to do with microfinace. Just gives you a glimpse into what is involved with taking a hot shower here in Nimasac, Guatemala.

When I was first accepted as a Kiva Fellow,  I was asked if I had any “special” requirements. My response was that I wanted to be relatively safe and be able to take a hot shower.

Taking a hot shower is no simple matter in Guatemala. First of all, most homes do not have running water. (this includes the family that I am living with). So, in that situation, here is how you get to take a hot shower. First, they run a hose from the closest water source (in my case about a block away from the house) and fill this black (20-50?) gallon drum up with water. Then you light a fire underneath the drum and wait until the water gets hot. This big drum is always located above the shower, as it is gravity fed.

Now it gets dicey……because without any cold running water to “mix in” with the hot water, instead of a “hot” shower, you can get a SCALDING HOT shower……..so, it takes some time to figure out exactly how big of a fire to build and how long after the fire has been built is it safe to take a shower…….go too soon and you get scalding hot…….wait too long and it’s tepid at best.

When there is running water, as there is at many hotels, they use this kind of an electrical contraption which is located right there in the shower, right above the shower nozzle. The one pictured here is one of the “safer” versions…..many have electrical wires portruding and a lot of electrical tape wrapped (sometimes loosely) around them. And, when you’re tall like I am and the water splashes on the exposed electrical wires, that too gets a bit “dicey”.

And, as long as we’re talking about “bathrooms”, I thought I’d share a photo of the outhouse that my host family and I use. (actually, it is quite pleasant, as the view from the crack in the door is of the beautiful countryside surrounding Totonicapan)

It’s almost impossible to find a family in this little town of Nimasac (in the western highlands of Guatemala) who has not had a son or husband go to the U.S. to find work.

Boys often leave when they are teenagers (16 or so) and take the perilous route to the U.S. through Mexico, by enlisting the services of a “coyote” (immigrant smuggler)—which is a very risky proposition. If they do make it to the U.S. alive, they arrive in large cities (Houston and New York seem to be the favorites here) where they connect with acquaintances or friends who are already there. Many leave wives and young children behind. Many stay for years before they return……..some never come back to Guatemala.

In the U.S. they find work in restaurants, construction, landscaping and, most of them, faithfully send money back to their families in Nimasac twice a month. It is hard to imagine the impact of these bi-monthly “remesas” (remittances) on the families and the local economy. In fact, annual remittances from the U.S. to Guatemala are the second biggest driver in Guatemala’s economy—second only to exports, totaling $ 4.3 billion in 2008  (Sources: MIF, IMF, US Census International DataBase, Latin America Monitor).

You can look around this village and clearly distinguish between the houses that were built with American money and those that were built with Guatemalan money. (see photos below)

Families with sons or husbands in the U.S. can often afford to feed and clothe their families, send their children to school, have cement block homes with running water and maybe even have electricity. It is estimated that 43 percent of Guatemalan households receiving remittances have been lifted out of extreme poverty. (Source: Economic Commission for Latin America and the Caribbean (ECLAC)). So, these families are still poor (especially by American standards) but no longer among the poorest of the poor.

Remittances are projected to decline by 8% or more in 2009. In data just released by Banco de Guatemala, remittances for the first two months of 2009 are down 9.6 % compared to 2008.  The impact of the decrease in remittances is profound and widespread and likely to get worse. Construction on many homes has simply “stopped” (putting those who were building the house out of work). Families can no longer afford to buy things, significantly impacting demand across the board, and especially the weaving, sewing and shoemaking cottage industries in Nimasac.

One Kiva borrower I spoke with said she used to have 35 individuals sewing/making parts for her shoes and now she is down to 15, with prospects looming of further declines. (She used her Kiva loan to pay her employees for work produced, but not yet sold due to lack of demand.)  Another Kiva borrower had originally taken out a loan for leather and other shoe making materials, but the market for his product has all but disappeared. So he bought a loom instead—hoping the market for traditional fabrics “cortes” is more dependable. This is a young, industrious, positive young man with a wife and a toddler to provide for. But, demand is down, across the board, in almost every area of the economy here.

On one hand, I understand the associated “hidden” costs of illegal immigration in the U.S. I know that some illegal immigrants do not pay taxes and often times avail themselves of the education and medical care and, with the economic downturn, may be taking jobs from Americans who need the work. I also realize that, since some illegal immigrants are paid under the table and do not pay into Medicare or social security or income tax, we all “pay the price” for their use of our services.

On the other hand, I can also understand the desire of these young men to provide for their families, to improve their lives by immigrating to the U.S. (legally or illegally) where they can find jobs and opportunity. It reminds me of the situation that Jean Valjean finds himself in Les Miserables, when he steals a loaf of bread to feed his daughter.

As with most things, there are definitely several dimensions to this illegal immigration issue. And it is apparent from the Guatemalan side, that many families who had been able to escape extreme poverty are about to be thrust right back into it as remittances from the U.S. continue to decline. And, in the absence of “demand” for products and services, the ability for micro credit to make a meaningful difference in the lives of these people may be compromised.

built with $$$

built with quetzales

I am not exactly sure how the “department” (like one of our states) of Totonicapan fared during the so called“civil war” in Guatemala during the 1980’s and 1990’s when it is estimated over 200,000 indigenous people were murdered by the government. Entire villages and all their inhabitants were destroyed during this time of genocide in Guatemala. (It is not a subject I have felt comfortable broaching……yet). BUT, I can tell you that this department seems fiercely independent, cohesive and not easily intimidated. In my two weeks here, I have become familiar with two examples of the independent, yet cooperative, spirit of the citizens of Totonicapan.

Example One-The Water

There are over forty communities in Totonicapan and each one is responsible for their own water. That means that the community must find a source for water for their residents and deliver it to them. This is not done by the government.

So, in the example of Nimasac (the community where I am living), the “elders” got together and worked with the adult men in the village to find a means to deliver water, reliably, from their source—which is a mountain spring located about a 3 hour walk from Nimasac, high in the mountains. The community layed the pipe, built the holding tanks and built the “water stations” located conveniently throughout the village. This, of course, took place over a number of years. This same scenario was repeated across dozens of villages in Toto.

Enter the Guatemalan government. After all the villages had developed their own water delivery systems, the government gave notice that it was going to take control of the water AND that, instead of being free, villagers would have to pay for it.

Well, you can imagine how this went over—after the villagers had invested hours, hard work and hard earned money to develop their own water systems. In fact, the father of the family with whom I am living is currently a member of a group of 8 men who, each and every Sunday for an entire year, go to the water source and make sure that it is cleared of debris and that everything is functioning. This is a rotating, one year long, responsibility shared by the adult men in the village.

In January of 2009 all of the villages of Totonicapan decided to protest the government’s action by calling for all adult men in the villages to converge upon “cuatro caminos” (four roads). Which they did, by the thousands! Cuatro caminos is where the four main highways connecting this part of Guatemala to the rest of the state converge. The protestors completely shut down all four highways……for an entire day! They also issued a warning to the government that, if they continued in their efforts to take over the water systems, the villagers would take the protest to Guatemala City. Apparently, at least for now, the government has backed off and the villagers continue to manage their own water systems.

Example Two-The Catholic Church

Okay, the details on this one are a bit sketchy as when this family gets passionate about something they talk in k’iche, and I do not understand a word. But, here is what I understand after a couple of conversations in Spanish with various members of the family.

This family is deeply religious. I can see no evidence of any continued existence of Mayan spiritual beliefs here…….Catholicism definitely permeates their lives. Night time activities, meetings and mass seem to consume the bulk of what little free time they have. Seems some one is constantly coming and going to various religious activities—every day of the week.

Mass here is not free. People must pay 10Q to attend mass or 25Q if you are married. (In fact, one of the daughters tonight told a story of a priest who said he would not say mass unless there were at least 300Q collected!) Seems that the church is always asking for money to pay for various activities and religious celebrations. The church has been growing significantly. It brings in a lot of money every single week. The church desperately needs repairs and needs to be expanded……but, the priests claim “there is no money” for repairs.

However,there is plenty of money for the priests to have cars, to have fancy clothes, to take trips, to entertain friends. This fact has not been lost on those who attend the church in Nimasac.

And, the people of Nimasac are not happy.There are petitions circulating, boycotts of mass being organized, letters being written. In fact today, one of the daughters came back from mass to report that where there were usually over 100 people in attendance, today there were only 30. All the talk centers around the power the villagers/church supporters have if they all speak as one. The idea that the church will have “no choice” but to listen to them.

Community organizing here seems to be ingrained in the culture. They have a history and tradition of working together—to better themselves and to fight the common enemy. This is consistent with what I have read of the current Mayan culture. What I don’t know is whether this spirit of cooperation and speaking with one, strong voice has intensified as a result of the atrocities experienced by the indigenous Mayans at the turn of the last century. Is this is an example of “never again” or is this how they’ve always been?

Many of my friends and family have been shocked, when I explained to them that microcredit loans often carry (what we would consider) usurious/oppressive interest rates. Many of them have asked me how ANYONE could justify interest rates of 30 or 50 or even 100%?

I have tried to explain all the factors that go into how a microfinance bank determines just how much interest it must charge in order to remain a viable business.

I go through the litany of factors contributing to the “high” interest rates—-the fact that it costs as much (or more) to make a $300 loan as it does to make a $10,000 loan; that in order to reach the poorest of the poor, the loan officers must often travel long distances on back roads in order to serve this population(because these borrowers do not usually have transportation to get to the banks); how a microfinance bank must cover its costs if it is to stay in business and continue to provide credit to the poor, that inflation rates must be accounted for in order for the banks to even recoup the original value of the loan. Usually, their eyes glaze over, they remain unconvinced and they find it difficult to get beyond their shock at the absolute level of the interest rates.

So, yesterday, I listened to a loan officer with ASDIR (Kiva’s field partner in Totonicapan, Guatemala) explain to a couple how they would have to repay their 30% interest loan in 12 monthly installments and (this is the key) that with each payment the total amount due on their loan would get lower and lower, until it was paid off.

That is when the differences between credit card debt which most U.S. consumers use to finance purchases and the microcredit consumer loans became crystal clear! It’s not about the absolute interest rates; it is about having reasonable repayment terms, which pay off the loan!

Let’s compare two loans of, say, $1000 —-one done the microfinance way and the other the American credit card way.  The microcredit loan is made at the apparently outrageous rate of 50%, while the credit card loan is at a far more “reasonable” 20%.

___________                                  Microcredit                    American credit card
Loan Amount                                             1000                                       1000
Interest Rate                                               50%                                         20%
Minimum monthly payment              ($107.59)                                ($16.67)
Total Payments in one year              ($1,291.02)                             ($200.00)
Amount owed after 12 months                 0                                        $1,000.00
Total amount paid in 5 years           ($1,291.02)                             ($1,000.00)
Amount owing in 5 years                           0                                        $1,000.00
Interest Payments to Bank                  $291.02                                  $1,000.00

With a microcredit loan, a loan officer evaluates the financial position of the borrower and develops a payment plan that is reasonable. It is a plan that gets them out of debt in a relatively short amount of time. In contrast, in recent years, the credit card way has been to provide people with a credit line, encourage them to make purchases on their card (up to their limit) AND then encourage/allow them to make only the minimum monthly payment. Paying off the card/the loan is NOT encouraged. Better for the banks to keep them paying interest only.

After one year, the borrower with a microcredit loan has paid off her loan and has paid a total of $291.02 in interest. After one year, the American credit card borrower has paid $200 in interest and still owes $1000 on the loan. After 5 years, the American credit card borrower has paid $1000 in interest and still owes the entire $1000. Meanwhile, the microcredit borrower may have taken out and repaid another loan or two, while the credit card borrower is still paying on the original loan!

Ends up the lower rates, but totally open-ended repayment terms are far more onerous for the borrower (and beneficial to the bank in the short term) than a significantly higher interest rate with clear and closed-ended repayment terms.

I don’t know if this will change the minds of some of my doubting friends and family, but, I think it illustrates how banks can charge interest rates high enough to cover their costs and risks, while still benefiting the borrowers who must pay the interest. It is truly a win-win, even if it may not seem like it at first glance.

For more information on microcredit interest rates:  http://www.cgap.org/p/site/c/template.rc/1.26.2617