Microfinancing Makes Rural Mexican Villages Richer
Carly Schwartz - HuffPost
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January 11, 2016

Kiva Fellow in the Field: "What is Microfinance?" (kivafellows)

As a Kiva fellow based in Mexico City, I spent much of the past year studying the impact microfinance has had on some of the country´s most rural, isolated communities. As a newcomer in Mexico, I´ve also spent much of the past year feeling like a tourist, an outsider looking in who´s eager to learn but hesitant to disrupt. My experience as a tourist working with underserved populations taught me two things: how microfinance can succeed or fail in a developing country, and that it´s possible to be a gracious traveler or a disrespectful, selfish tourist when interacting with the residents of said country.

The concept of microfinance - providing affordable financial services such as small business loans to individuals who normally don't have easy access to the banking system - is nothing new in Mexico, a country where nearly half its residents live in poverty. But Mexico also suffers from some of the highest interest rates on these loans, and often times, microfinance can create more problems than solutions for these communities.

A host of factors, such as a handful of bad players and the risk associated with lending to people with no credit history, can force rates as high as 200 percent, a phenomenon that often only pushes loan recipients deeper in the red. Moreover, a systemic failure to provide those same clients with a solid foundation of financial education further exacerbates the issue, as they can be prone to invest their loans frivolously and spend outside their means. Yet many of the larger microfinance institutions find it impossible to both scale on a meaningful level and make the impactful, necessary investments in the literacy of each and every person they serve.

My travels through Mexico also revealed the less attractive side of tourism. Visitors talking just a little too loudly in their native language, feeling just a little too lazy to learn some basic phrases in the local tongue, staring just a little too long at people doing unfamiliar things in unfamiliar settings. Assuming that because they're on vacation, the individuals they encounter who are at work - drivers and hotel receptionists and waiters and tour guides - only exist to serve them.

¨When done irresponsibly, tours can can cause local communities to resent travelers, are grossly self-serving and voyeuristic for the traveler, and move us further from peace and progress through travel,¨ wrote Trip Sweeney, the cofounder of Step Up Travel, in an article that introduces the concept of microfinance tourism.

Read the rest at The Huffington Post

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