Producto Creer: How for a Bank Doing the Right Thing Can Pay Off
By Emmanuel M. von Arx, KF16, Guayaquil (Ecuador)
My host and Kiva´s partner organization Banco D-MIRO provides over ten different types of microloans to borrowers in and around Guayaquil: among them loans to finance housing improvements, school expenses, medication, and loans awarded specifically to employees, young people with a great idea but no experience, and – as Ecuador´s only microfinance institution – discount loans for HIV-positive micro-entrepreneurs.
I am the first to attest, that all these loans have found enthusiastic and committed takers. Yet, one borrower group beats them all: the well over 400 disabled borrowers of Banco D-MIRO, whose deep commitment and payment discipline has turned “their” loan type – called Producto Creer (“Product Believe”) – into the most successful and inspirational product of D-MIRO´s extensive spectrum. The delinquency rate of Producto Creer is by far lower than that of any other major micro-loan type of Banco D-MIRO, which means that borrowers of Producto Creer are better at paying back their monthly rates than any other client group!
Specifically, by the end of October 2011, Banco D-MIRO´s entire loan portfolio had a delinquency rate (here defined as PAR1, or the total outstanding amount of loans with repayment delays beyond 1 day) of 2.67%, whereas Producto Creer shows a PAR1 of 1.91% – a number that´s extremely hard to beat! People at this bank certainly didn´t expect such an impressive outcome when, in April 2010, they first introduced a special discount loan product for physically disabled clients. The bank may have been encouraged by the success of another pioneering discount loan product that had been introduced in September 2007: the Producto Vida (“Product Life”) – a discount loan for HIV-positive entrepreneurs about which I wrote in this blog post.
So much for the numbers, but how is the reality in the field? Why are D-MIRO´s borrowers with a physical disability such incredibly good payers and clients? How and in what do they work? What are their main successes and challenges in life? No loan officer within D-MIRO is better suited to answer me these questions than Nahin Alvarado: his focus is on HIV positive and disabled clients and he was already my guide during an earlier visit to an HIV-clinic in one of Guayaquil´s largest public hospitals. When I ask him to join him in the field, he immediately agrees to take me to “Asoplejica” – an organization for the disabled that Nahin visits every month to educate its members on their financial options and specifically on Producto Creer.
After a ten-minute car ride to Los Esteros, a rough neighborhood west of downtown Guayaquil, we stand outside the headquarter of Asoplejica where I ask Nahin for his personal take on the low delinquency rate of borrowers with Producto Creer. Spanish-speakers please jump right ahead to the video – for all others, Nahin´s response to my question was: “Our experience has been very positive. Other financial institutions in Ecuador marginalize these disabled clients who are aware that only we [Banco D-MIRO] give them an opportunity to obtain a loan; so they are very faithful to us. To that extent, the delinquency rate is extremely low.” I follow up, asking: “Lower than for regular loans, right?” “Yes, we have a delinquency rate that is much lower than that of regular loans.” Here´s all this in Guayaquileño-colored Spanish:'
As we walk into the building, we are immediately greeted by the organization´s receptionist, who introduced herself as Mariuxi. She has just wrapped up a discussion on the day´s schedule with Emilio, the President of Asoplejica. Emilio immediately comes towards us in his wheelchair, inviting Nahin and me to sit down with him for a talk: he is amazed to hear about my Kiva Fellowship and is even more surprised when I tell him how Kiva connects over 640,000 idealistic Kiva lenders with over 668,000 micro-entrepreneurs around the world. He spontaneously exclaims: “I hope that one of my past loans with Banco D-MIRO has been funded through Kiva!” [Back at the office I double-check: while none of Emilio´s past loans was listed on Kiva, chances are good that future loans of his will appear on Kiva.org.]
Emilio recounts for me his loan history: “I have been a client of Banco D-MIRO for the last four years. Every year I take a higher loan which I then invest in my one-man taxi business, paying it off during the following twelve months. My first loan was on $1,500, followed a year later by one of $2,000. I hope my next loan will be on $5,000.” I ask him about his taxi business and how exactly he invested his first loan. He answers: “The first thing I bought were the papers for my taxi to make it legal. This was not cheap and cost me about $300. But it was a good investment: if you have a taxi that´s not legalized, the police can stop you anytime. And as a paraplegic driver I feel that I am more vulnerable to police harassment than otherwise. I also use my loans to pay for gasoline and repairs that cost me between $4 and $6 a day. My daily fare income with my little taxi is about $20, so I have a daily surplus of $15 which easily pays for D-MIRO´s low interest rate.” [The yearly interest rate for Producto Creer is about 16%, as opposed to 26% for regular loans.]
Our talk is interrupted by Javier, a white-haired elegant man with joyful eyes who rolls into the room on his wheel-chair. He looks strangely familiar to me and it´s not until the next day that I connect the dots: Javier´s photo features prominently on many of D-MIRO´s promotional materials, including the bank´s homepage. Apart from being one of D-MIRO´s favorite role models, he is also Asaplejica´s Secretary. Furthermore, he works two jobs: from his home he sells homeopathic health products which are popular in Ecuador as a way to fight just about anything, from obesity and hair loss to cancer and bad luck; and in the building of Asoplejica he also has a workshop space where he works as a serigrapher, creating beautifully elaborate stencils to screen-print T-shirts and paper. His current loan with Banco D-MIRO is $1,000 which he pays back with his monthly income of $450 to $900 from the sale of his prints and health products. When asked whether he has ever had any trouble paying back his loan, Javier emphasizes to me the importance of credibility when doing business: “Your credibility is key when it comes to doing good business. And I believe we disabled entrepreneurs have more to lose, simply because we don´t have that many options – so we always give our very best and work as hard as possible to provide excellent customer service. The same is true with my bank loans. I don´t know of any other bank but D-MIRO who would give me a loan, so I am extra careful to pay it back on time and reward their trust.”
I ask Emilio and Javier to tell me more about their organization: Asoplejica. Its name stands for “Hemiplegics´, Paraplegics´, and Quadriplegics´ Association of Guayas Province” and has over 200 associates, all of them physically disabled. It also has its own Facebook profile. Asoplejica was founded almost 30 years ago by a group of disabled men and women who used to get together after their rehabilitation therapy at a public hospital in Guayaquil. All their activities and operations – including the salary of two paid employees (one of them Mariuxi) – are being paid for through public fund-raisers, such as raffles and bingo. Among the services the association provides to associates are physical therapy, homework assistance to children, and – most importantly – pure and simple companionship. To explain what he means by companionship, Javier invites Mariuxi, Emilio, Nahin, and me to gather around the office computer where he shows us photos of Asoplejica´s last Christmas celebration. It was definitely a very merry Christmas among the members and their families… Walking back to Nahin´s car a quarter hour later, I feel as if I am leaving behind a group of friends.
In these times of economic and social turmoil, Banco D-MIRO´s Producto Creer may be a much needed reminder that it may pay off for banks to do the morally right thing. Please consider making a loan to one of D-MIRO´s clients on Kiva.
Emmanuel M. von Arx is a Kiva Fellow working with Banco D-MIRO in Guayaquil, Ecuador. Banco D-MIRO focuses on clients who have long been excluded from the traditional financial system for reasons that include culture, sex, race, poverty, disability, and illness. To learn more, please visit Banco D-MIRO´s partner page on Kiva or become a member of the lending team of Banco D-MIRO, the only provider of special financial services for disabled and HIV-positive clients in Ecuador.