Microfinance

As of Spring 2010, we have ruled out microfinance as an option.  This information gives a general overview of the concept for future AguaClara teams if they decide this is a option they wish to pursue.  

What is Microcredit?

The provision of small loans or microcredit to poor people to help them engage in productive activities including growth of very small businesses is called Microcredit. The term may also include a broader range of services, including credit, savings, and insurance. 

Central American Microcredit projects already in existence

In general Microcredit projects can range from between lending to an individual to implementing a project which would help the whole community at large (generally with the aid of the government or a Non-governmental charitable institution). The current Microcredit projects in Central America are mainly concentrated on small size businesses. Microcredit in Central America has been growing at a steady pace of 12% in the last decade with Honduras among the lower end of growth spectrum.

How does Microcredit work?

All the Microfinance organizations in Honduras seem to follow the Grameen model for lending purposes. In this model an organization assigns a number of officers to a community to become familiar with the situations on ground and gather loan applications. Once the loan applications are reviewed they decide on potential borrowers (usually the limit is five people) and form a group with all them as members. Then they give money to two members of the group (the loan could range from anything between $50 to $5000) and monitor repayments for a two year period. If the two borrowers return the money on time, they extend the loans to everybody else in the group. This creates a dynamic that encourages borrowers to make payments on time.

How can Microcredit can be used to help AguaClara?

Many of the Honduras villages have a Water Board that keeps tax records. The Microcredit institution could verify their credit worthiness and provide them the initial investment required to build the water treatment plant and pay the salaries of the AguaClara/APP employees working on the project.