Microfinance helps Latin Americans lift themselves out of poverty

Miriam lives in a one-room shack in El Salvador with her husband and 11 children. They store their fresh water in a barrel by the side of the house and cook on a stove in the yard. Although the kids go to school it's unlikely that they'll finish their education.

Miriam is not unique, but what's interesting about her situation is that she has taken the first steps toward improving her family's income and standard of living. That's thanks to a $100 microfinance loan that has allowed her to begin buying produce from farmers and selling it to local residents. Over time additional loans will help Miriam grow her business and improve her family's prospects.

I heard Miriam's story a few days ago at a breakfast briefing by Global Partnerships (GP), a Seattle-based nonprofit organization that works to help people in Latin America to better their lives through microfinance.  GP identifies and invests in microfinance institutions (MFIs) in Latin America, which then make small-scale loans to borrowers, most of whom would never qualify for a traditional bank loan.

According to Jason Henning, GP's director of development and investor relations, roughly a third of Latin America's 560 million people live below the poverty line and approximately 94 million live on less than $2 per day. Henning estimates that around 48 million people in the region could benefit from microfinance, but fewer than 20 percent have access to loans. GP seeks to increase that number.

Currently, the organization works in seven countries: Guatemala, El Salvador, Honduras, Nicaragua, Ecuador, Peru, and Bolivia. In addition to its Seattle headquarters, GP maintains an office in Nicaragua whose staff performs much of the screening work to identify MFIs to partner with.

"All microfinance is not created equally," says Henning. Many charitable MFIs are doing fine work but are not growing to meet the demand for microfinance credit. At the other end of the spectrum are the commercial microfinance institutions, which operate like traditional banks according to a profit-seeking model. GP has developed a model that enables it to continually increase the amount of money it invests in MFIs, which in turn can then extend loans to more and more borrowers.

While GP carefully evaluates MFIs based on traditional investment criteria, social service factors are equally important in the selection of GP partners. Some of the criteria examined include an MFI's percentage of female clients, the percentage of loans to rural areas, interest rates, and the average cost of a first-time loan. In addition, GP's practice is to invest only in institutions that reinvest their profits into services such as health care, education, business training, and other much-needed programs. As part of this effort, GP is partnering with the nonprofit organizations Pro Mujer and PATH to develop models for improving access to low-cost health care. (See my earlier post, "Health care through microfinance" for more on this pilot program.)

GP's investments come from philanthropic donations and socially motivated investors, including individuals, corporations, foundations, and other organizations. According to Henning, large-scale institutional investors are increasingly supportive of social enterprise investments. As of June 2009, the organization had more than $46 million invested in 28 different microfinance institutions.

The beauty of microfinance is that it helps people help themselves. Often it takes only a small amount of credit to start or expand a business and increase a family's income. Although the size of the loans provided by GP's microfinance partners varies, the average is about $500. That's enough to make a significant difference in the life of someone like Miriam.

Photo by Chris Megargee/Global Partnerships: Norma, also from El Salvador, is a member of a communal bank organized by GP's partner organization Enlace. Microfinance loans have helped Norma start and expand a business making and selling hammocks, a skill she learned from her grandmother. This business has created an additional source of income for Norma's family, enabling her to buy medicine and clothing for her five children.

Patagonia vs. the dams: Travel companies offer a special trip to fight a destructive project

Picture this: two wild and scenic rivers rushing from the glaciers of the southern Andes, through dramatic canyons, ancient forests, and productive ranchlands, traveling through some of the most pristine landscapes on earth. Now picture those same rivers tamed by megadams, the surrounding landscapes marred by clearcuts, power lines, and new roads, the livelihoods of local people interrupted. That's what's at risk if the controversial HidroAysén project to dam the Baker and Pascua rivers in Chilean Patagonia is approved.

Located more than 1,200 miles south of the national capital, Santiago, Aysén is the most sparsely populated region in Chile. In addition to indigenous communities and local ranching families who have lived on this land for generations, the area surrounding Baker and Pascua rivers supports a thriving sustainable tourism industry based on river rafting, trekking, and sport fishing.

One of the principal tourism operators in Aysén, Patagonia Adventure Expeditions (PAEX) has been running rafting trips on the Baker River for over a decade and have established several new trekking routes in the region. PAEX founder Jonathan Leidig sees a tremendous potential for sustainable tourism to generate income for both local residents and Chile as a whole - a potential that would be seriously reduced by the construction of the dams.

According to Berkeley, California-based International Rivers, one of the many international and Chilean environmental groups that have formed an alliance against the project, the proposed two dams on the Baker River and three dams on the Pascua River would involve creating the world's largest clearcut in order to lay new transmission lines and build thousands of 220-foot-high transmission towers over a 1,500-mile-long corridor. The reservoirs created by the dams would flood an area of 23 square miles, including prime ranching and agricultural lands, as well as critically important wildlife habitats. The transmission lines would cross 64 communities and 14 legally protected conservation areas.

Not only would the dams destroy the pristine character and traditional lifestyle of the Baker-Pascua region, it would likely also negatively impact Chile's international reputation as an ecotourism and adventure destination.

Environmental groups call the dam project unnecessary, destructive, and shortsighted. Rather than building more dams, Chile needs to embrace more modern, forward-thinking energy alternatives, as noted in a 2008 New York Times editorial. Yet the HydroAysén dam controversy is more than just a Chilean issue. In fact, the project's backers include not only Chilean companies but also multinational corporations.

In an effort to increase awareness of the HidroAysén issue, PAEX has joined forced with Vaya Adventures, a Berkeley-based tour operator specializing in South America, to offer a special "Ice to Ocean Fundraising Adventure" trip to the threatened area. The trip, which runs from February 26 to March 12, 2010, will include trekking through glacial valleys at the edge of the Northern Patagonian Ice Cap, the source of the Baker River, as well as rafting the Baker River all the way to the ocean. Under the proposed project, the river would be dammed in two places, making such a rafting adventure impossible.

All net proceeds from the trip will go to the International Rivers Patagonia campaign. The trip costs $4,975, not including airfare. Participants who commit to raising $2,000 for the International Rivers campaign prior to departure will receive a $1,000 discount.

In addition to raising awareness and funds for the anti-dam campaign, Vaya Adventures hopes to highlight the region as a sustainable tourism destination. "The region is too special not to try to do something to protect it from needless harm," says Vaya Adventures founder Jim Lutz. "The potential long-term benefits to Chile from sustainable tourism in the area are immense."

For more on the International Rivers Patagonia campaign, visit the organization's website or check out this fact sheet. For more on the fundraising trip, including how to sign up, visit the Vaya Adventures website.

Photos courtesy of Vaya Adventures: An area of the Baker River that would be flooded by the dam (top); a proposed dam site on the Pascua River (bottom)

Costa Rica seeks volunteers to teach English for sustainable tourism development

If you're looking for a way to support sustainable tourism development, have a background in English teaching, and have the ability to take off for three months to a year, here's a new volunteer opportunity worth looking into. The recently established Costa Rican English for Sustainable Tourism (CREST) program is seeking volunteer English teachers to help improve the international marketability of its tourism industry. Another goal is to provide Costa Ricans of all social classes and regional origins with the language skills to gain access to high-paying tourism jobs.

According to the CREST website, the program is part of "a government sponsored initiative that seeks to improve the country´s economic competitiveness by increasing the number of English-speaking professionals by 2017." CREST is coordinated by ALIARSE Foundation, which works to promote sustainable development and social responsibility in Costa Rica. Support for the program comes from the Ministry of the Presidency of Costa Rica, the Ministry of Tourism, public and private enterprises, and various local development associations.

Volunteers serve either as teaching assistants in technical high schools or as community leaders teaching employees from hotels, restaurants, and local ecotourism companies. Applicants are required to have a college degree and Teaching of English as a Foreign Language certification or the equivalent.

The program offers volunteers the opportunity to learn of improve their Spanish through immersion in a local community. Volunteers have a choice of living either with carefully selected Costa Rican host families or in international dormitories with other volunteers and a regional coordinator.

Volunteers choose between a full-year commitment, starting in January, or a six-month commitment, starting in January or July. For volunteers unable to commit to a long-term stay, CREST also offers a summer program beginning in June.

Although CREST does charge volunteers a fee, the charge is less than many that for many comparable programs. The current costs are:

• Full-year program: $1,750 plus $1,000 refundable deposit
• Half-year and summer programs: $1,250 plus $1,000 refundable deposit

All programs include transportation to and from the airport, lodging and three meals a day, support and 24-hour backup, teaching materials, professional and educational mentoring, and administrative costs. The full- and half-year programs also include a five-day induction program. The refundable deposit is required to cover the costs of getting a new volunteer if you leave early or are dismissed for misconduct.

CREST recommends applying to the program three months ahead of the desired start date in order to ensure sufficient time for paperwork processing and other preparations.

Health care through microfinance

Three of the most respected nonprofit organizations in the fields of microfinance and health have announced a joint initiative to address health issues in Latin America through a microfinance model. Microfinance organizations Pro Mujer and Global Partnerships are joining with the leading global health organization PATH in an effort to improve access to essential, low-cost preventive and primary health care. The initiative aims to break the cycle of poverty and poor health that affects many communities in Latin America and elsewhere.

Based in New York, Pro Mujer focuses on development and microfinance programs for poor women in Latin America. Seattle-based Global Partnerships also supports microfinance and other poverty-reduction programs in Latin America. PATH, also headquartered in Seattle, works to create solutions to health care problems in communities throughout the world.

Over the course of the next year, the three organizations will work together to create and launch a financially sustainable health program for Pro Mujer in Nicaragua. The initiative will build on Pro Mujer's history of helping poor women in Latin America improve their income and the lives of their families through an integrated package of financial services, training, and health care. The ultimate goal is to create a model that can be replicated elsewhere.

“Pro Mujer has 20 years of experience providing high-quality, low-cost healthcare and preventive health education," said Rosario Pérez, CEO of Pro Mujer. "Collaborating with Global Partnerships and PATH will enable us to do so with greater focus, higher impact, and lower costs, with the goal of tackling the health care problems that contribute most to poverty and pose the greatest danger to women and their children.” 

Global Partnerships will provide overall leadership for the initiative. “Poverty and poor health are inextricably linked, and the solutions are as well,” said President and CEO Rick Beckett. “One of the strategic challenges facing the microfinance industry is the need to develop fully sustainable solutions that address multiple facets of poverty. This collaboration with Pro Mujer and PATH allows us to bring together microfinance experience, global health expertise and rigorous economic discipline to advance the field for the benefit of people living in poverty.”

During the initial phase of the microfinance-health initiative, PATH will conduct an assessment to identify priority health concerns and develop appropriate strategies for addressing them through microcredit services. Pro Mujer will test the strategies in a follow-up pilot project. The experiences garnered in the pilot project will form the basis for a resource guide for defining an integrated health strategy for microfinance institutions that can be replicated in other markets.

“We will be looking at a range of health solutions—largely preventive and primary care—that are affordable, sustainable, and appropriate to Pro Mujer’s client base and infrastructure,” said Chris Elias, president and CEO of PATH.