December 1, 2016
Written by Alex Martin, ePesos
This post originally appeared on Medium.
Pachuca, the capital of Hidalgo, is a city of 500,000 people just north of Mexico City. I went to experience the operations of a microfinance institution (MFI) firsthand. In Mexico, 85 MFIs serve over seven million clients (see them all here). I jumped in the car with a loan officer and we went to a weekly solidarity group meeting. (Muhammud Yunus’ group lending model is wildly popular in Mexico). The group treasurer collected cash from each group member; they had come to bring their loan repayment for the week. The credit officer verified the amount, and he and the group president signed a form. It would be up to the president to go to a partner bank to deposit the cash.
I noticed that everyone in the group had an Android smartphone. Though all of these borrowers are unbanked, they are all connected. Mobile penetration in Mexico has far outstripped bank penetration. I pulled out my phone and showed them ePesos, a mobile wallet that lets the unbanked make free peer-to-peer payments, send cash and pay bills. I explained that I had come to talk to their creditors about distributing their loans electronically, and that they would be able to pay business providers digitally. “It’s so easy,” one member remarked, “when can we start?”
Meeting completed, we got back in the car. “I wish I had more time to seek out new clients,” the credit officer explained as we sat in Pachuca’s traffic. He told me that business was good, but pointed out some of the inefficiencies in the institution’s operating procedures. “Clients are being robbed daily,” he lamented. A group loan might be as large as $80,000 pesos, or $4,000 USD. The group president is responsible for going to the bank, collecting the cash, and distributing it to her group members. With the minimum wage in Mexico at $73 pesos ($4) a day, this is a lot of cash. Borrowers have been robbed outside the bank, on a bus, or on the way from a group meeting. This isn’t an isolated problem: this USAID publication notes MFI-related robberies in Kenya, Cambodia, Philippines, and other microfinance strongholds.