It is important to lend to workers in low paying factory jobs so they have money for emergencies rather than going to a moneylender
Our partner also lends to employees who work in factories like the car assembly plants to produce products for export to the US. These workers make only $40 or more per week. When they have emergencies, previously their only choice was to quickly borrow from a money lender who charges outrageous interest. CREAR has made arrangements with the managers of factories and large stores to make loans to immigrants that are then paid back gradually from their salaries.
Dania, a 32-year-old Honduran immigrant, fled when violent gangs attacked her family and neighbors. She was hired by a factory in Monterrey and received training from CREAR about how to responsibly borrow when necessary. Months later, when she had a medical emergency, our partner quickly gave her a loan to cover the expenses. Later, she received a second loan for home improvements. Others have borrowed for supplies when their children start the school year and it is too much to pay at once from their small salaries. This type of quick loan and gradually paid loan installments have been a vital help to many Central Americans.
We are sharing other examples of the success stories of Central American borrowing from CREAR. IDEAS seeks investors and donors to increase the number of immigrants who are successful in transforming their businesses. Read more by downloading PDF.
Impact investments are needed
Investments targeted to positively impact the lives of immigrants are needed. Billions of dollars are now invested internationally to help support all types of impact. Worldwide less than $100 million in loans has been invested to lend to immigrants. Less than $50,000 in investments has been received by CREAR which needs $500,000 to lend to more immigrants.
Despite the fact that new immigrants have built excellent credit records in many countries, they are still viewed as risky by most funders. Some microfinance institutions find immigrants to be a very good market. From Costa Rica to Peru this type of lending is growing. But in Mexico it does not exist.
We are pioneers in promoting lending to Central Americans in Mexico. IDEAS is there to assist in developing this new market. Our partner has proven it works.
Watching the news you see the tragic daily scenes of Central Americans on the border and inside of Mexico Central Americans desperately seeking a stable life that they could no longer find in their home countries. We are grateful for those who provide all kinds of emergency aid, legal help, shelter, food and other short term assistance as it is vital to keep the refugees alive. But what about their long term life? Those who are able to go to the US and Canada may find income and jobs. What about immigrants seeking self employment in Mexico? Impact investors are needed.
Other encouraging signs are that some are beginning to lend to social enterprises that assist refugees. For example, there is a small corporation trains refugees in computer coding to become highly paid programmers.
Catalytic capital is needed for lending and sustainable development for immigrants
For lending institutions and social enterprises that are serving immigrants, there is a need for patient and flexible capital that lowers the perceived risk for lenders. This creates the conditions to facilitate more investments.
An example of catalytic capital is when a family foundation lends to the part of the lender’s operation that is sustainable. This is blended with donations for supporting the parts that are essential but not able to pay back loans. The donations often pay for short term training that is needed at first to help a new entrepreneur to be able to pay back loans.