By Gary Carrier and Harrison Pharamond
Photography by Harrison Pharamond
Note: Content in italics has been translated from Spanish.
The walls of Ixoq Aj Keem are adorned with a vast array of vibrant colors and intricately woven designs characteristic of traditional Mayan culture. Meaning weaving woman in Tz’utujil, one of the many Mayan languages still spoken throughout Guatemala today, Ixoq Aj Keem is a traditional textile cooperative located in the small town of San Juan La Laguna, framed by the idyllic backdrop of immense volcanoes surrounding Lake Atitlán in the Western Highlands of Guatemala. The cooperative comprises twenty women who, with the help of microfinance institutions like Friendship Bridge, are weaving a better future for their families and community.
Ixoq Aj Keem was founded in 1993 with the mission of fostering the socio-economic and intellectual development of women and their families by using the traditions of their ancestors to create high-quality, competitive textile products. For Herminia Catarina Ramos Hernandez, President of Ixoq Aj Keem, the hand-made scarves, shawls, table clothes, backpacks, and other products draped throughout the cooperative’s workspace, each unique in its design and made from locally sourced materials, carry more than just cultural significance — for her, they represent an opportunity for improving the livelihoods of the women and children of San Juan La Laguna.
Ixoq Aj Keem provides a primary source of sustainable income for the women who work there, increasing their economic stability, savings, and mobility. In addition, their contributions to the community of San Juan La Laguna enable other women to save money while sending their children to school. This not only enables families to experience a higher level of financial security, but is also correlated with improvements in health, women’s empowerment, and poverty alleviation. With the profits from products that they produce and sell on a daily basis, Ixoq Aj Keem currently provides more than 75 boys and girls with free backpacks, notebooks, clothing, and other resources they need to attend school. As her organization grows, Herminia continually strives to increase this number.
“As an association of Mayan women, we are utilizing the work of our ancestors and the traditions of our culture to generate more economic opportunities for our community,” explains Herminia. “I have two objectives: to help the women of San Juan La Laguna and to help give their children an education . . . The women here dedicate their lives to their children, to give them an education and possibilities for the future. Therefore, from my perspective, the best way to help women is to help their children.”
Ixoq Aj Keem’s efforts are bolstered by Friendship Bridge, a nonprofit organization which creates opportunities that empower Guatemalan women to create better futures for themselves, their children, and their communities through microcredit, education, and health services. Friendship Bridge combines small loans with educational training programs that cover a variety of topics including business skills, women’s rights, technical assistance, and health. Each year, nearly 30,000 women take advantage of these programs, and its microcredit program maintains a loan repayment rate of over 97%.
Like many women, Herminia has established a long-term working relationship with the organization. Ixoq Aj Keem is also part of Friendship Bridge’s Artisan Market Access Program, which supports artisans throughout Guatemala with training designed to ready them to access new markets, particularly the global market. This is especially important for artisans, who are often limited by seasonal sales and unpredictable cash flows that prevent them from investing in their business and planning for the future. The artisan sector, estimated at $32 billion dollars per year globally, is the second largest employer in developing countries behind agriculture. Providing market access for artisans is a form of economic development that creates jobs, increases incomes, and fosters sustainable community growth while preserving and sharing the unique cultural identities of the artisans themselves.
“First, Friendship Bridge gives us microcredit with which we invest in our products. Then, each month, Friendship Bridge hosts a workshop focused on health, or education, or business — how to sell our products, how to make a profit, how to run an organization, how to negotiate, how to create new designs and utilize new colors for our products. I’ve learned all of this through Friendship Bridge, and their trainings have helped me immensely.”
The support has helped her grow her organization, expanding its market beyond San Juan La Laguna. During monthly training sessions, Herminia has the opportunity to share her experiences, challenges, and motivations with other women entrepreneurs in the region. Additionally, she has weekly calls with a mentor from Friendship Bridge to discuss Ixoq Aj Keem’s operations. “In the past year that I have been a part of the Artisan Program, Ixoq Aj Keem has accomplished many things, including selling products in the United States,” says Herminia. “Thanks to Friendship Bridge, I have been able to grow the Association little by little. We’ve done well.” According to her, the services that Friendship Bridge provides are just as important as the microcredit given to Ixoq Aj Keem.
Today, microfinance is a $92 billion-dollar industry, and Herminia is just one of more than 100 million borrowers in more than 75 countries around the world. But microcredit is no silver bullet to poverty, and many microcredit borrowers do not share her same success. Previously held assumptions that extending microloans to impoverished people is a sure path out of poverty have been challenged. In 2015, leading development economists published six independent studies centered on the impact that microcredit has on the lives of those living in poverty. The research spanned seven countries between 2003 and 2012, and concluded that microcredit alone fell short on its promise; there was no conclusive evidence that access to credit reduces poverty in the aggregate.
Microcredit can afford borrowers, especially women, more freedom in their choices, and can smooth shocks from unexpected events like illness, crop failures, or livestock deaths. But the reality is that access to safe, affordable, and reliable credit is just one important part of a broader set of resources needed by people living in poverty. Simply gaining access to credit is not enough to break the cycle of poverty for most families.
MCE Social Capital (MCE), a US-based nonprofit impact investing firm, understands this reality. This does not, however, stop MCE from investing in microfinance institutions (MFIs). Instead, MCE believes that MFIs that focus on women in rural areas are uniquely positioned to offer additional services that address poverty holistically. MFIs that are committed to helping their clients achieve a better standard of living often complement traditional microloans with knowledge, tools, and services necessary to generate transformative, sustainable impact. MCE uses a unique loan guarantee model to make loans to MFIs like Friendship Bridge that provide these “Credit-Plus Services,” as well as to Small and Growing Businesses (SGBs) in emerging markets throughout the world. Combined with its strong focus on women and rural communities, MCE maintains its commitment to investing in MFIs that have these types of services built into their “DNA.” Indeed, 81% of the 53 MFIs currently in its portfolio offers at least one type of Credit-Plus Service. Credit-Plus Services can range from additional or customized financial products such as savings accounts and insurance to non-financial products such as health services, financial literacy programs, women’s empowerment training, legal services, and technical assistance.
Further research is needed, but existing evidence suggests that both MFIs and their clients stand to benefit from the provision of these additional services. This is evident in a number of recent case studies, including a 2014 study on the impact of non-financial services on the performance of women entrepreneurs in Nigeria, which concluded that credit combined with business training has a “positive significant relationship on the income, assets, and savings of entrepreneurs.” The study emphasized the additional benefits of network meetings in which entrepreneurs can “share experiences that will enhance their business performance.” Other studies have concluded that MFIs are not only well positioned to provide financial capital to those who need it most, but also to promote successful entrepreneurship through the development of psychological and social capital with the provision of business support and opportunities for social interaction.
For MFIs, there is evidence that the provision of Credit-Plus Services, if integrated effectively into standard operations, can actually improve portfolio quality while enhancing the MFI’s social impact. Research has also shown that offering these services can lead to higher repayment and client retention rates. Herminia and Ixoq Aj Keem are one example of the benefits of Credit-Plus Services, which add real value to Herminia’s dedicated partnership with Friendship Bridge through the exchange of knowledge, experiences, and the opportunity to connect with similarly motivated entrepreneurs. “Even if you have experience, there is always more to learn. . . Friendship Bridge adds value to our work. As long as we keep working, we will keep working with Friendship Bridge.”
The microfinance industry has entered a new era. The days when microcredit was heralded as the panacea to global poverty are gone; but microfinance has evolved beyond microcredit, and the story of the industry’s impact on global poverty is not finished. The first Sustainable Development Goal established by the United Nations in 2015, “to end poverty in all its forms everywhere,” is ambitious and will require significant advancements on all fronts of development. And while microfinance alone cannot solve the world’s greatest challenges, it certainly makes vital contributions to advancing financial inclusion, and has the opportunity to catalyze improvements in education, health, and women’s empowerment.
Organizations that understand the needs and limitations of impoverished communities and complement this knowledge with a wider set of financial and non-financial services are not only poised to generate lasting impact for the families they serve, but also to shape the reputation of the entire industry. With a forecasted global growth rate of 10-15% for 2017, and similar growth rates experienced in 2016 and 2015, it is clear that microfinance is here to stay. But its reputation is still largely under construction. MFIs, lenders, and other stakeholders share a responsibility to ensure that microfinance becomes a cornerstone, not a missed opportunity, in the global effort to alleviate poverty and create equal economic opportunity for all.
If Herminia’s story is any indication, that goal is within our reach.
“The organizations that are helping us, like Friendship Bridge, are very important. With them, we don’t have to fear the future of our businesses . . . The women here can continue to advance in their work, managing their own projects, stores, and other activities. Together, we can move forward.” — Herminia Catarina Ramos Hernandez
A version of this post was originally published in NextBillion.