Femi's Perspective

::January 14, 2011::

Our first full day in Honduras started with a lovely breakfast at the villa. Everyone slept very well after our very long journey from Washington D.C. bright and early Thursday morning. After breakfast, Jorge and Nery's our hosts and guides while we are here, arrived to take us out for the day. So, well rested and full of yummy breakfast, we set off to explore the city. Our first stop: Prisma, one of the micro-finance institutions (MFI) based in Tegucigalpa, Honduras. MFI's are the main source of credit for small businesses. Increasing the number of small businesses is one of the ways of aiding economic development and poverty eradication in Honduras.

There are two main types of business in Honduras and they are described below:

• Micro-business: the business owner usually makes about $3,125 a month; the capital invested by the business owner is approximately $2,400. The business is chatacterized by the following: it involves manual labor; there is no division of labor; the business owner has little or no academic education.
• Small business: this type of business is a lot more capital intensive with about $25,000 invested in capital; the monthly revenues are in the order of $9,375 and the business is characterized by the following: semi-automated labor; more division of labor; business owner has some academic education and there is official paper-work filed with the goverment.

A few facts about the country: Honduras has a population of 7.8million people, 52% of whom are women and 4.5million people live in poverty. Prisma was founded in 2004 by a group of people interested in promoting small business in Honduras. PRisma gives out two types of loans: group loans and individual loans. The groups are usually made up of three people performing some sort of economic activity, must know one each other and qualify for individual credit. Individual loans are given to people who already have a source of income; the individual also needs two other people to guarantee the loans in the event of a default. Both individuals are required to have a steady source of income as well. Group loans have become more common because there have been more cases of defaults amongst individual loans.