Thread: Migrant-Backed Loans: Remittances in Guatemala

Notice the date of this article and compare it to the time when the Guatemalan flood of illegals started in earnest. I do believe they are government sponsored illegal workers encouraged to come here to build up the economy of Guatemala at the expense of American citizens and our government is on board with them. We need to redistribute our wealth - it the Progressive Democrat thing to do.

William Davidson Institute of the University of Michigan. I wonder how much the government is "granting" them?

Migrant-Backed Loans: Remittances in Guatemala
BY DASHA KUTS
ON FRI, APRIL 8, 2011 11:03



Yesterday’s After Hours Seminar focusing on migrant-backed loans featured two speakers from William Davidson Institute (WDI), Khalid Al-Naif and Raul Reynoso and WOCCU’s Saul Wolf.
Background

In 2010 WDI initiated migrant-backed loans (MBL)¹ with assistance from the Microfinance International Corporation (MFIC) in the United States and ACREDICOM in Guatemala. MFIC marketed the product to migrants in the United States while ACREDICOM helped process loans in Guatemala. According to this report, some of the benefits of MBLs are the following:

1. Migrants provide 50 percent of the funding with the remaining 50 percent coming from formal banks. The overall effect doubles the recipients eligible loan size.
2. The ability to obtain a loan from a formal bank enables recipients to establish credit history.
3. In Guatemala recipients stated that they were more comfortable with getting a MBL than with going to the bank to get a loan; senders stated that MBL gave them more assurance that they will receive some of their money back and that their remittances would be put to good use.

Promoting Financial Inclusion

According to the report "Two Trillion and Counting" prepared by Peer Stein in 2010, the total need for credit by all formal and informal micro, small and medium enterprises (MSMEs) in emerging markets today is in the range of $2.1 trillion to $2.5 trillion. Among the estimated 365 to 445 million formal and informal MSMEs in developing countries, only 25-30 million are formal SMEs. Formal SMEs usually have 5-250 employees and some history of working with the formal banking sector.
The vast majority of MSMEs in the developing world consists of micro or informal enterprises. The credit gap for micro and informal enterprises around the world is about $1.4 to $1.7 trillion. Even though Latin America has the highest percentage of MSMEs with access to finance (about 60 percent) according to Peer's findings, the credit gap in that region is still very wide.
Access to Credit

It is very challenging for MSMEs to obtain credit because of the following reasons:

1. MSMEs often have no collateral and no credit history, making lending risky and unattractive for banks.
2. The remote location of some MSMEs makes transaction costs very high.
3. MSMEs have lower revenue potential, making these investments less attractive for banks.

Nevertheless, providing MSMEs with access to finance (referred to as financial inclusion) is essential to fostering sustainable economic development. When meeting in Seoul in the end of 2010, the G20 established the Global Partnership for Financial Inclusion (GPFI) in order to emphasize importance of this issue.
Experts working with GPFI identified the following steps that need to be taken to address this issue:

1. Engage governments in establishing enabling environments that will encourage banks to lend to MSMEs by making necessary changes in the regulatory environment or by providing credit guarantee schemes to make it less risky for banks to lend to MSMEs.
2. Reduce barriers to property registry or reduce enforcement costs for lenders.
3. Address the problem of high transaction costs when banks deal with MSMEs located in remote areas through improved infrastructure.
4. Provide entrepreneurs in the developing countries with access to loans through migrant-backed loans.

Final Thoughts

Since the WDI project was recently completed, it is hard to draw conclusions. I thought that it was interesting to note that MBLs in Guatemala were offered at 19 percent interest rate while microcredit loans had rates of 22 percent. It is possible that the lower rate of MBLs reflects the fact that formal banks found MBLs to be less risky. While I think MBLs are a useful product, I think it is important to offer it not just for credit but also to promote savings. In addition, I think it would be beneficial if WDI considered offering training on financial literacy to the recipients of such loans.
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¹A migrant-backed loan (MBL) is an instrument that allows migrants to not just send their wages back home but to use remittances that they send to help their friends and family obtain a loan from a bank. MBLs require the establishment a separate account where remittances can be deposited. Migrants provide 50 percent of the loan, and the remaining half comes from the bank. If the beneficiaries do not pay back their loan, the bank takes the funds provided from the migrant out of the separate account and the migrants do not get anything back. Once the recipient pays their loan in full, the account is unfrozen and the migrant gets their money back.

https://www.microlinks.org/learning-marketplace/blogs/migrant-backed-loans-remittances-guatemala

Who is making money on remittances? - the World Bank. Who is being robbed to pay for it - American citizens and workers, compliments of our government through USAID and the Global banks.


Global Forum on Remittances 2013

Date:May 20, 2013 (All day) - May 23, 2013 (All day)
Event Delivery:In-person
Event Host(s):International Fund for Agricultural Development (IFAD)
Event Page:GFR2013 Website
Location:United Nations Conference Centre
Bangkok, Thailand


COMMUNITY CONTRIBUTION

Join online now!

Those around the world who are not able to come in person can follow discussions online:

• Main feed: http://webcasting.ifad.org/gfr2013
• Parallel Session II (May 21st, afternoon): http://webcasting.ifad.org/gfr2013_side
• Join the discussion on Twitter with #gfr2013

The Global Forum 2013 (GFR2013), jointly organized by IFAD’s Financing Facility for Remittances and the World Bank’s Financial and Private Sector Development Vice Presidency (FDP), will be the latest ground-breaking international forum dedicated to highlighting the immense impact of more than the US$400 billion expected to be sent home to developing countries in 2013. The GFR will promote global awareness of migrant remittances in the region, emphasizing their vital role in the development of economies at both the national and local levels. The forum will bring together experts, practitioners and stakeholders from throughout the region, representing leading companies, regulatory authorities and civil society groups.

The GFR will also showcase the tremendous dynamism an innovation of the Asian remittance marketplace, worth over US$200 billion, and offers a unique opportunity to network with key players, both within and across sectors. It will allow participants to partner with international stakeholders involved in fostering an enabling environment to promote and enhance the strategic potential of remittances in the Asia-Pacific region. The three-day event will include a series of round-table discussions and working groups devoted to the in-depth exchange of knowledge, best practices, business models and latest innovations, stimulating debate on today’s market realities and tomorrow’s opportunities.

The Remittances Marketplace will run parallel to the Forum to allow private-sector entities, international organizations and major stakeholders to exhibit their products and services.
Click here to register, participation is free of charge.

Please find also attached the GFR2013 tentative agenda with an updated version to be posted on the website.


https://www.microlinks.org/events/global-forum-remittances-2013

Migrant-backed Loans: Mobilizing Remittances in Guatemala
Location

QED Group
1250 Eye Street, NW
11th Floor
Washington, DC 20005
United States

After Hours Seminar #50
Presenter(s):

Khalid Al-Naif
William Davidson Institute
Raul Reynoso
William Davidson Institute
Saul Wolf
World Council of Credit Unions

Date:
April 7, 2011 - 4:00pm - 5:30pm

After Hours Seminar #50 featured Khalid Al-Naif and Raul Reynoso from the William Davidson Institute (WDI) at the University of Michigan who discussed the impacts and challenges of their pilot activity, "Mobilizing Remittances for Enterprise Finance." Saul Wolf from of World Council of Credit Unions (WOCCU) followed with a presentation on "Guatemala Unbanked Remittances." He discussed current strategic alliances and ongoing challenges in creating increased opportunities for remittance recipients.

Download event presentation in English and SpanishDownload FIELD Report No. 8 Migrant-Backed Loans: Mobilizing Remittances for Enterprise FinanceRead the blog post recap

Mobilizing Remittances for Enterprise Finance

According to The Microcredit Summit, “more than 106 million of the world’s poorest families received a microloan in 2007.”

This achievement illustrates the fruit borne by decades of commitment to revolutionizing access to credit among the world’s micro, small and medium enterprises (MSMEs). Despite this growth, access to capital remains one of the biggest constraints on the ability of MSMEs, as well as the lending institutions that serve them, to expand their businesses.

Through a public-private partnership, the "Migrant-Backed Loans: Mobilizing Remittances for Enterprise Finance Innovation" pilot aimed to provide migrants with a financial tool through which they could secure loans in their home country, as well as expand the overall outreach of lending institutions. Under the FIELD-Support LWA, the William Davidson Institute (WDI) at the University of Michigan partnered with the Microfinance International Corporation (MFIC) and ACREDICOM to design, test and market a migrant-backed loan product that targeted Guatemalan migrants residing in the United States. Through this project, migrants had a portion of their remittances deposited into a personal savings account, and they were able to use portions of the account as collateral, which MFIC and ACREDICOM then lent to borrowers as identified by the migrant and approved by the bank.

Guatemala Unbanked Remittances

The importance of remittances to the people, communities and economies of developing countries—a $400 billion industry—has long been recognized, fueling an intense interest in how to best harness these money transfers to promote local economic development and reduce poverty. In recent years, WOCCU's pilot activities in Guatemala, managed by the FIELD-Support LWA, have focused on exploring ways to integrate remittance recipients into the formal financial system and provide them with access to affordable financial products to manage and grow their money and increase overall economic security.
Saul Wolf, WOCCU's Remittances Manager, will take a look back at what was learned from the WOCCU “Integrating Remittance Recipients into the Financial Sector” pilot implemented in partnership with the Guatemalan National Credit Union Federation (FENACOAC, currently known as MICOOPE). Building on these lessons, Wolf will then discuss WOCCU's current strategic alliances and products, as well as ongoing challenges in creating increased opportunities for remittance recipients.

https://www.microlinks.org/learning-marketplace/after-hours/migrant-backed-loans-mobilizing-remittances-guatemala

http://www.alipac.us/f9/us-signs-his...zation-258348/