Grassroots Micro-finance in Oaxaca: Fundación en Vía

By Alvin Starkman, M.A., J.D.

Four years ago Juana, a resident of Teotitlán del Valle, Oaxaca’s main rug village, was earning virtually nothing selling the odd bottle of soda pop or package of gum out of her family’s narrow, halfempty storefront. Today, with the assistance of small, interest-free loans facilitated through $50 USD donations from tourists visiting Oaxaca, she earns a decent living as the proprietor of a handicrafts store filled with colorful handwoven wool rugs, tapestries and handbags.

Fundación En Vía is a non-profit micro-finance organization responsible for several similar success stories. En Vía relies exclusively on donations of time, expertise and modest sums of money from mainly tourists to the state capital. En Vía is based on two premises:

  • Indigenous women who have a trade, talent or aptitude, and the desire to succeed, should not be held back from realizing their potential as a consequence of a lack of training and business knowledge – nor as a result of an average borrowing cost of 70% per annum.
  • Many visitors, both tourists for a week or two as well as those spending longer periods of time in the region, look for worthy charitable causes to which they can contribute money and/or time and expertise. This is particularly so when it includes an opportunity to meet the beneficiaries of their generosity, and their families, and learn about their cultural traditions through touring their towns.

How Fundación En Vía Works

Fundación En Vía is run almost exclusively by volunteers who drive, translate, assist with web design and related promotional matters for both the program and participating borrowers, liaise with recipients and donors, and give English and business classes to the women.

Each donor pays $50 into the program, and is encouraged to spend a day in the town in which the women reside, part of a group excursion. The purpose is to learn about the community and meet some of the women and their families, and to see firsthand how the loans are utilized and their positive impact. The women repay an initial loan of 1300 pesos over ten weeks. Once a loan is repaid the borrower is entitled to subsequent loans, provided the need is for a business purpose supported by the program. The second loan is for 2000 pesos, the third for 3000 pesos. Further loans can exceed 3000 pesos, as En Vía deems appropriate under the circumstances. Similarly, repayments schedules of these subsequent loans can vary.

The entirety of each initial donation is used to provide first loans to program participants. Upon repayment, a small portion of the repaid funds is used for operating costs and for further loans. Proceeds are therefore segregated into two parts; the operating portion, and a trust fund used to make interest free loans to the women.

Each recipient is a group comprised of three borrowers. The group is made up of women who know and trust each other. People tend to work better with others with whom they are already acquainted. This concept works well because the women can offer advice and support to one another, and call on one another in the event of difficulty making a loan payment.

The En Vía screening process maximizes the likelihood that the participants will succeed in their business ventures and comply with repayment schedules (in over 800 loans to date, the default rate has been about 1%; in each case noncompliance generally arises from circumstances beyond the women’s control).

As a prerequisite for receiving the first loan, each woman must complete a business course; and for subsequent loans agree to receive a groups of donors who tour their town. Donors thus have the opportunity to meet with the women and their families in their homes and businesses. Since the program has concentrated on women in the rug weaving town of Teotitlán del Valle (though it’s expanded to other villages), and most loans are related to wool and weaving, tourists have learned about rug making.

Touring Teotitlán del Valle with En Vía

After a 40 minute orientation, a group of donors and three En Vía workers leave downtown Oaxaca for Teotitlán del Valle in a van. They first stop at the town church, where an En Vía worker, Samantha, explains a little about the town, its people and their economic activities, education and system of local government.

“We always need volunteers, although naturally donors are the financial backbone of our program,” Samantha stresses as we walk to our first workshop. “As long as visitors will be in Oaxaca for at least a month they can volunteer to come to the town twice weekly to teach English; and if they plan to be in Oaxaca for at least three months we can train them to accompany donors into the town, translate, and assist the project in other ways including making business and marketing suggestions. Our ability to offer and build on our programs depends on our volunteers. ” Samantha explains.

In addition to visiting Juana’s new handicraft store and hearing her story, the group stops to learn from other loan recipients:

  • Rosa used the proceeds of her first loan to buy raw wool and one of the most expensive natural dyes, cochineal, which produces tones of red, purple, pink and orange. The second loan, now being processed, will be used to purchase a sturdy dolly to enable her to tote her rugs to and from the marketplace more efficiently.
  • Lina has had three loans, used to help operate her meat and cheese market stall. Her first loan enabled her to expand her selection of cheese, second was used to buy a slicer to satisfy demand for sliced meats, and third to finally purchase a refrigerator, reducing her frequency of ordering product and paying for delivery.
  • Cristina always had a sewing machine, but never enough money to buy material, so she did piecework, earning 5 – 10 pesos for each apron she sewed from a roll of fabric supplied by her patron. She bought material with her first loan, enabling her to make her own aprons to then send to someone else for specialty embroidering, finally wholesaling them to market vendors. With a second loan she’ll buy more sophisticated machinery, so she can do all the sewing herself. Ÿ Gloria’s story is similar to Cristina’s. She began by making rugs using dyed yarn supplied by her patron. With her first loan she bought wool and dyes so she could make and wholesale her own rugs, and with the second she’ll buy more material, then additional equipment, eventually enabling her to have sufficient stock on hand to open her own rug store.
  • The restaurant, where the group stops for lunch on the way out of town, has had three loans. The first was used to increase the diversity of menu options, the second to finally be able to supply beer to its customers, and the third to build a new roof over part of the building, enabling the entire restaurant to be used during the rainy season.

Why Participate in Fundación En Vía?

The assistance En Vía provides is not otherwise available to townspeople. The individuals selected to participate recognize that borrowing at exorbitant rates is imprudent. Many are initially leery of the program, but those who apply and are accepted eventually realize the opportunity they have been given. Juana was one of the first loan recipients:

“When Carlos [Last name? program co-founder] first approached me, I didn’t believe it, and had my doubts. But look at what Fundación En Vía has done for me and my family.” Juana’s gratitude is echoed in the warmth and welcoming nature of each loan recipient visited.

Alvin and Arlene Starkman operate Casa Machaya Oaxaca Bed & Breakfast ( Alvin has written over 270 articles about life and cultural traditions in Oaxaca. He often takes tourists to visit the sights in Oaxaca’s central valleys.