Because of a $100 loan, a widowed mother in an impoverished Honduran village works in her expanded tortilla business to support herself and her three children.
With the profits from her enterprise, she has paid off the loan and its interests, purchased land on which to build a house that will be paid for upon completion, and is buying a sewing machine so she can become a seamstress, a more profitable trade.Hers is one of dozens of success stories about how families in many villages in Honduras and in Thailand are improving their lives. They are being helped through donations made by Church members to funds earmarked for humanitarian relief. A small percentage of those funds were channeled to two non-profit development organizations that work directly with needy villagers, mostly women, in nations of Central America and the Caribbean, and in several villages in Thailand.
One organization, Katalysis NorthSouth Development Partnerships, is based in Stockton, Calif. The other, the Freedom from Hunger Foundation, is located in Davis, Calif. Both organizations help poor people through a concept commonly called "village banking," an entrepreneurial effort that fosters a self-help program designed to lift people out of poverty.
Isaac Ferguson, director of the Church's Humanitarian Service Division, said the "village banks" help the poor break the cycle of poverty by helping them expand existing enterprises, such as farming, raising small animals, making and selling food items, making clothing and peddling various handmade items.
He explained that many villagers could earn more money at their current trades if they could afford to expand their small enterprises. He said the woman who makes tortillas is one example.
"She makes tortillas in the neighborhood for people every day, working from an area in the yard of her rented home," he related. "She couldn't buy enough materials to make as many tortillas as she had the capacity to make each day. She would go to the store in the morning, buy a few pounds of corn and a little bit of lime. She had to put her purchases on credit. Because she bought on credit, the grocer charged her interest. The next day, she would pay for what she purchased the previous day, and then buy more on credit. She had the same problem with fire wood for her stove.
"She needed a loan for capital to expand her business. But commercial banks consider landless people with no collateral to be extremely poor risks. She was trapped. She could barely eke out a living for herself and her children day by day."
An organization known as ODEF, an acronym that in English means "Organization for the Development of Women's Enterprise," went to the woman's village. Funded by Katalysis, ODEF representatives helped organize 15-20 women, most non-LDS, in a small community credit organization run by the villagers themselves. ODEF extended a loan of $1,000 to the group. Each woman in the group borrowed a small amount - as little as $40 and as much as $150 - to be used to improve her chances to generate more income.
Participants met weekly to make payments on their loans and learn how to run their enterprises. ODEF taught them how to make a simple budget, how to separate household from business expenses, basic principles of marketing, and how much to charge in order to make a profit. ODEF also taught participants to pay themselves a salary and committed them to save a certain percentage of their profits.
The tortilla maker used her loan to purchase a larger inventory of corn, lime and fire wood, which allowed to her make and sell more tortillas, which brought her a bigger profit. "Her whole life has changed," said Ferguson. "She increased her clientele because she could make more tortillas. She said, `Now I realize I can improve my lot and give my children an education and a better start in life.'
"She is one who took a challenge, saw the value of an opportunity and went after it. After two years, she had a new lease on life. She began to consider other options. She was paying a relatively large portion of her annual income for rent on a house that was little more than a lean-to. She realized she could buy land and build a better house. Then she looked for a better way to make a living. She decided to become a seamstress. She is saving to buy a sewing machine, which would have been impossible before.
"We started this program in Yojoa, where we have a branch of the Church," said Ferguson. "ODEF made sure that the local leadership of the branch knew they were working on this program. Church members in the village were invited to participate."
Ferguson said the ODEF project is an example of a relatively new movement within the development community of helping needy individuals generate more income. He noted that in the past, development groups tended to go into poor areas of the world and "prescribe" what they thought best for the people.
"Now the community development approach is to ask, `What are your greatest needs? What would help you most?' Most often, the answer is that they need ways to earn more money so they can pay for medicine, educate their children, and generally provide for themselves and their families.
"We've discovered that the notion of improving people's ability to generate income is important in underdeveloped areas of the world. But that is a major challenge. In many of these countries, as much as 50 to 70 percent of the total economy is based on what is called the `informal sector.' The informal sector is basically self-employment; that's in contrast to a culture where most people earn their living in a wage-type situation. Because the poor people in these low income nations don't have a capital base, they eke out a living the best way they can.
"They might farm or shine shoes. A woman might walk to a farm at 5:30 in the morning, buy fruit and vegetables, walk back to the city, put a cloth on the ground in or near the market area and hope somebody will buy the produce at a price higher than what she paid. It doesn't take very much to help some of these extremely poor people double or quadruple their income, or increase it 10 times. One woman who used to sell fruits and vegetables on a sidewalk now has a little grocery business."
A similar project in Thailand works with the same basic goal as the development effort in Honduras. In Thailand, the Freedom from Hunger Foundation has added the goals of helping improve nutrition of mothers and children in poor villages.
"Freedom from Hunger started its program in semi-rural areas," said Ferguson. "When the women meet together each week to make their loan payments, they also receive some training on health, nutrition and sanitation. One of the requirements for membership in the credit association is that they memorize a series of statements that contain tips about improving nutrition and the health of their children."
The village banks also teach literacy courses. "The credit associations become a kind of club designed to help people help themselves," said Ferguson. "Members of the associations share the same kind of challenges, and they help each other.
"It is a sad fact that in many underdeveloped nations women must support their families. They have no choice. Some have no husbands; others have husbands who cannot find work. In some parts of the world, a family needs two or more incomes to survive. In Peru, for example, the average minimum wage is $55 a month. In those areas the poverty level is about $110 a month. A majority of the population in many villages live way below the poverty level.
"If the mother and some of her children don't work, the family can barely earn enough for minimum food and shelter. The women we have been working with generally have home-based businesses, like the widow who makes tortillas."
He said the development agencies have had great success with their village banks. "We, as a Church, have made comparatively small donations to these foundations," he noted. "There are 10 village banks with which we have been working. What we've done is just a tiny thing, but it has brought big results. Seventy-two families have benefited from the loans to date.
"The latest reports indicate that the pay-back on the loans is 100 percent. We haven't lost a penny of the funds we contributed. People who were living below the poverty level now have savings in standard banking institutions. They have established credit at the local bank. They have new hope."