Dario Espinoza and Dr. Warner Woodworth, MSM

In December 2009, I visited three cities within the Yucatan Peninsula to investigate the government’s efforts in providing micro-finance opportunities to citizens in struggling areas. My purpose in visiting these areas was to evaluate the success of the government’s micro-loan projects, to report on their status, and to understand the reasons why a micro- finance project would be successful or unsuccessful for individuals in the area.

I chose the Yucatan Peninsula because it had become popular through the Mexican media as the first place where the federal government had made extensive efforts to implement federal micro-credit and micro-loan programs. When I went to the Yucatan Peninsula I had an idea of where I wanted to go and the questions I wanted to ask but I did not know what my findings would suggest. However, in my preparatory research I was not able to find out what happened to the government’s micro-credit projects. I was not aware of how the government’s efforts were being implemented or what they had evolved into. In summary, the media did not report on what had happened or what the current situation was.

I specifically chose three small towns to visit. Each had about 500 to 700 people. The three towns were located in a major tourist area called Chichenitza. The reason why I chose these small towns is because I knew that the government had begun to run its programs in towns located near tourist hotspots. These hotspots are surrounded by small towns whose residents make handcrafts to sell to tourists. In each of the three towns I visited, I collected research by using half of the day to interview residents and by using the rest of the day to visit local businesses. Some of the businesses I found were maintained through personal gains and income, but I wanted to find businesses that were operating off of micro-credits.

In the first town I visited, I spent the half of the day interviewing people. Everyone was friendly and willing to talk. However, as soon as I started asking about loans and their businesses and how they provide for their families, things changed. Most people were a little resilient to talk about these subjects. The people I met were very poor and lacked formal education. Some only know how to work with wood or fabric and use very primitive techniques. I found out that lots of lenders had come to the area and had done a lot of damage. Many said that these lenders took advantage of them, because they would offer quick access to money but charged exorbitant interest rates that were impossible to pay off.

The government’s response was to start running their own micro-loan program in hopes of alleviating people from borrowing money from unreliable sources. If people did not want to receive a micro-loan, the government would give them sewing machines. In consequence, almost all the women in this town had sewing machines. The problem with receiving sewing machines was that they required electricity, and households did not have electricity. People were still sewing with their rudimentary tools and using primitive
methods to create their crafts. Some even started taking out loans from other companies to get electricity for their household. Fortunately, the government did not take too long to respond to the issue and gave big portions of electricity to a few houses, where women with sewing machines could go to use their equipment.

In the next town where I collected research, I found a full block where someone had built a hostel, a store, and a disco hall right next to each other. I asked the owner how he had established his business and he told me that because he could not keep up with the lenders, he had immigrated to the United States. By doing this, he knew he could make seven times the amount of money he could have made in Mexico. He worked hard and saved his money for six years to build the three businesses.

Meeting this man showed me that one indirect consequence of having dishonest lenders in the area was immigration. In cases where the government is not able to protect individuals from lenders, among many other things, people immigrate to the U.S. The individuals with the sewing machines were not immigrating to the U.S. because they had received equipment and resources and they had a job. In comparison, this second town had an individual who had to work in the U.S. for six years to afford a living in Mexico. He came back, made his dreams come true, and was now a successful businessman.

In the third town, we met a couple that owned a school supply store. They had fully funded their store with two different micro-loans from reliable and responsible lenders. The couple was becoming successful. They took their loans and opened their store after receiving training in some very basic finances. Out of the three or four surrounding towns, they were the only suppliers and were located in an area through which students from different towns had to transit often. In contrast to the town full of sewing machines, under some direction, these individuals used their funding in a creative way. They were more successful than others because they had received training and had not limited themselves to receiving a specific type of equipment.

When I began my research, I wanted to learn why the federal micro-credit programs were not being followed-up in the media. I had first assumed the media was not reporting because the government was corrupt. However, from visiting these three towns, I felt that the fact that the government wanted to take a bigger role in the micro-credit market was the right thing to do. My research took me more to the area of politics than I thought it would, and it will take time to come up with suggestions for how federal micro-credit programs can be improved. Nevertheless, perhaps government involvement at an earlier stage could have prevented people being tricked by illegitimate lenders, and in a way, could have prevented immigration. A lot of people had lost money, time, or energy through experiences with bad lenders and ended up immigrating, which was something I was not expecting to find. If we think of this in global terms, establishing efficient federal micro-credit programs that integrate proper training, evaluation, and follow-up might be a step toward preventing illegal immigration.