Teo, the regional coordinator of the Huehuetenango region of Soluciones Comunitarias (SolCom), is afraid to take a loan from a traditional bank. After hearing countless complaints from her Guatemalan friends she decided it is simply not worth the hassle. One of her friends told her about how she tried to take out a loan and was confronted immediately with a complicated row of hoops through which she would have to jump in order to receive the money she needed. These hoops consisted mostly of paperwork. She had to prove her Guatemalan residency, supply evidence pertaining to the validity of her need for a loan, and –most difficult of all—she had to find a government-employed guarantor for the loan. After struggling to locate the necessary paperwork and proof, which she finally did, she was eventually denied the loan because she could not find the appropriate guarantor. In the end she was forced to borrow from family members and friends (note that this is exactly what a savings group is composed of) to piece together the necessary funds. It was a painstaking process and created unwanted tension in her relationships.
Teo also explained to me that the interest rates and fees for bank loans are too high. The lowest interest rate she has encountered was 6% APR. I expressed my opinion that a 6% interest rate is quite low, but she countered with an excellent point, saying that the interest she would pay on a traditional bank loan is money she would never see again as opposed to interest paid on a savings group loan which is reinvested into the group’s fund. Teo’s story gave me some insight into the options the typical Guatemalan has when seeking a large sum of capital. Learning about her desire to participate in a savings group, after hearing her explain why she won’t take a loan from a bank, was very encouraging. She was able to recognize the difference between a savings group (essentially a very small community bank) and a traditional bank. This made me feel like I was effectively able to express the benefits of a savings group during my pitch to the SolCom management team, who will be starting their CAF group in January.
The sense that I am getting from my conversations with people in Guatemala is that there is a high demand for loans, but there is not a viable option for obtaining them. In almost every interview I conducted during these first two months I found that the main reason for wanting to participate in a savings group was not, oddly enough, the opportunity to save. As soon as I would mention the potential for lending money to the members I would see a subtle peek of interest in the interviewee and most of the questions I’ve been asked were pertaining to the details of how the CAF model savings group loans were made.
Continuing with the lending theme, during my first meeting with the potential members of the Descanso CAF group I discovered that the group as a whole is more concerned with their ability to access low cost loans than the opportunity to save regularly. Questions such as “Will you be providing us with seed capital so we can start lending immediately?” and “Can I take out a loan if I don’t save regularly?” came up, suggesting that this group has its sights set on borrowing and lending (which confusingly is the same word “prestar” in Guatemalan Spanish).
Organizing that first meeting with the Descanso staff was no cake walk. It took the majority of November to finally set it up for the last week of November. This was mainly because no one was able to commit to a date and Miguel, the SolCom boss who also helps manage Descanso, was swamped with work during that month. Knowing this is a painstakingly slow process I decided to take a different approach this month. I have set up individual meetings with the Decanso CAF group members to further explain the decisions the group will have to make in January. These mini trainings aren’t the ideal, but since it will be very difficult to get everyone together at the same time, especially during the holiday season, they will have to do. I am quickly learning that the theory of implementing savings groups and the actual practice on the ground are not one in the same. I have to be able to adjust and navigate the day to day obstacles that continue to present themselves. This is both frustrating and exciting and the best way to learn.
Overall, things are going well down here. I am staying in line with my plan to start savings groups within Soluciones Comunitarias first and then work outward. In January both the Descanso savings group and the SolCom management savings group should be underway (knock on wood). There is still much to be done in terms of training and figuring out the best way to ensure everyone in these groups actually understand the concept and know how to make it work. I am looking forward to tackling these challenges and learning from this amazing opportunity to try to make a difference in the world.