Are Microloans the Solution?

In March 2014, a delegation of IDIA staff members traveled to Oaxaca, Mexico to see first-hand how microloans work.  The concept, initially presented by Mohammed Yunus, puts forth that small loans can help communities to develop economically.  Individuals are better off receiving small, low cost loans, sometimes even livestock, than receiving large monetary funds.  The idea is that individuals receiving microlaons might not be prepared to manage a sudden, large influx of capital, but can instead manage a series of small loans that can be repaid quickly.

During out visit to Oaxaca, we had the opportunity to visit Fundacion En Via, a group that focuses its lending efforts on women artisans throughout Oaxaca.  En Via offers ecotourism visits to visitors that allows them to see their work first-hand.  During our trip, we had the chance to visit four different women and families – one ran a small food stand, two ran storefronts, and two were artisans – creating rugs and delicate embroidery for sale to the local community and the tourist sector.  The cost for the tour wasn’t cheap, but that’s because our visit financed a new loan for En Via and for the women of Oaxaca.

Microlending is a complicated subject, and not all microlenders function the same way.  While En Via has low or 0% interest rates, other similar organizations charge much higher interest and provide little support.  Our takeaway from the journey was that microlending can’t be considered all positive or all negative.  It’s important to ensure that while these organizations need to generate profits to survive, they need to maintain low overhead and low interest rates, lest they become veritable loan sharks to the most vulnerable members of society.

Learn more about Fundaction Envia on this great CNN piece!

IDIA prides itself on going beyond traditional Model UN “solutions.”  Instead of accepting microlending as the solution to development, we went to Mexico to learn about it from the groups offering the loans, and the women receiving them.  We travel all over the world to ensure that the ideas developed at our conferences are practical, effective, and practical.  For more information about our programs, please contact us!