Rob's Perspective

::January 14, 2011::

The group's first full-day in Honduras was spent with the micro-finance institution, Prisma. There was a bit of uncertainty in getting things moving as everyone straggled out of bed at different times, still unsure of what our schedule for the day would hold. All of us did manage to make it down for breakfast at 8:30 where Kun was the first person to point out how good the refried beans were, and almost all of us dug into the boiled plantains before getting on our way.

Some of us who were familiar with micro-finance were skeptical about the practice given recent controversies, particularly over high interest rates that one in the group pointed out are roughly as high as a monthly credit card or a check cashing business. In other words, in working with the poor, vulnerable and often uneducated, there was a concern about how those accepting loans could pay significant amounts at such high rates.

Prisma's staff addressed many of our questions and concerns in a well-organized presentation that covered the demographics and economics of Honduras, the goal in their operations - summarized as "Loans that change lives" - the individuals, groups and businesses they service, the ways they vet and work with their clientele and so on. While many of us focused on the social development implications with our questions, Kun really focused on breaking down the finance and economics of what they do in terms of the amounts of loans, rates of interest, rates of default and so on, and attempting to see where it fit in the larger Honduran economic picture.

It was interesting - if not necessarily surprising - to discover that most of Prisma's money came from the United States. We saw one small component of that in how, like many MFIs, they have worked with Kiva to finance loans for their clients, as well as to market Prisma online to the rest of the world.

A lot of attention was paid to the position of assessor, as these individuals are in many ways the most crucial members of Prisma's team. Handling a caseload of over 300 clients each, they are responsible for vetting customers, providing the money to them and ensuring payments are made. To service many communities, assessors will ride out on motorcycles to deliver services and collect payments.

For some, the fact that these employees receive commission (on top of a base salary) is somewhat troubling. It could on one hand force them to consider loans carefully to ensure that they are only finding customers who will successfully pay back the loan. However, it could also create an incentive for riskier loans in higher volume, and abusive scenarios by which the assessor ensures the loans are paid back. It's not that I believe Prisma would encourage such practices, because there are review panels that may help in discouraging such practices, but assessors seem to have quite a bit of autonomy. At any rate, it's more of a concern related to recent controversies in India where this sort of practice was being adopted by operators of for-profit MFIs, and it's an issue I would like to revisit in our next meeting, just to see what other controls Prisma has put in place to prevent such issues or situations from arising.

After wrapping up the presentation from which Adrian emerged a rock star for his ability to translate and interpret the questions and responses thoroughly, we traveled through Tegucigalpa to a local market where several of Prisma's clients operated. It showed in simple terms the differences in size of loans for individuals and businesses that Prisma provides. Moving in from the street, we first met a man whose watch stand and products were bought with microloans, followed by a woman who competed each day for a place to sell her tortillas in the doorway of the market. In both cases, the clients talked about how the loans enabled them conduct their businesses and how grateful they were for the opportunities Prisma had offered.

Entering the market, it wasn't initially unlike small markets you would find in most US cities, with fresh produce and slaughtered meats. But, it was jarring to see seemingly stray dogs roaming around, both directly outside and even in the market. We were also a little startled to have to make way for a side of beef being hauled on a man's shoulder right through the market, rather than through the back as one might expect in the US.

Inside we met Prisma's next client, who ran a small eatery. She said she was able to expand her business with microloans, and would like to continue expanding in the future. In each case, all three met us with smiles and talked about Prisma with a great deal of gratitude.

From there we went to a local restaurant, Al Asador, who was using microloans to improve its marketing. Even while the whole process of going from smallest to largest client type had been a bit of a marketing campaign itself by Prisma, we couldn't help but be thankful for the wonderful meal that came next.

The biggest debate centered around drinks, as we all wanted to try local fare and flavors, and so got pitchers of guanabana and berry-like juice. Coming out in waves of fried yucca, plantains (with more of the queso dura), tortillas with refried beans and more, the appetizers paled next to what came next. Al Asador is an Argentine-style bbq, and the meats arrived on on small grills and featured steaks, blood sausages, liver and much more. For the two of us who are vegetarians, special plates were arranged by the chef and owner as well, and all of us ate well. Out of what we ate, the desserts seemed the most unique from what you could find in the United States, as one seemed almost a type of french toast, and the other a ring of fried dough, but in each case cooked and served in a sugary sauce.

This wrapped up the "business" portion of our day, but seeing the direct connection between microfinance and the clients served there was at least a bit more optimism about the concept than there had been before. One of us even mentioned his interest in returning to Honduras to intern at Prisma.

With early evening coming we headed to a local shopping center for an adventure in getting the local currency. One interesting note, despite the typical shenanigans associated with being tourists that don't speak the language, was how the banks were all situated within the mall. We had noticed throughout the day how men with shotguns and machetes would guard various store fronts and businesses around the city, and within this high-end mall it was no different. Most of the bank's were clustered together with a security guard checking people before letting them even enter that section of the mall. Or, at least most people. While two finely dressed Honduran women were stopped so the guard could check their bags, we - the obvious tourists - were waved right through. Of course, once we saw the exchange rates and fees, we quickly turned right around to find ATMs and get Lempiras.

While Adrian and Amos left the mall to find an Internet cafe - with Charles and I getting slightly lost trying to find the same cafe a few minutes later - most of us went to the supermarket to get snacks, drinks and coffee.

At this point, we headed home for the evening, discussing what we had seen and experienced throughout the day, while some of us opened and shared snacks we had picked up along the way.