She wanted a 10,000 Lempira ($500) loan. We were there to promote our loan service but before we could say much she asked for a 10,000L loan. We were startled. Many new clients asked for larger loans than we could give them, some ask for L5,000 ($250) others for L2,000 ($100). None had asked for L10,000. From the very first interaction, Elizabeth Discua stood out.
In January 2013, La Ceiba Microfinance Institution spoke to Elizabeth in her home in Las Brisas, a small community in northern Honduras. We explained to Elizabeth that we could offer a L500 ($25) loan and that she could work her way up to L10,000 over time. She accepted and went on her way. We did not realize at the time that L500 would not do much to help her in what she was planning next.
After our initial meeting with her in January, we did not know much about Elizabeth. We knew she was living by herself with her two daughters. We knew that she had a husband who did not live with her in Las Brisas. We knew her friends and family called her “Betty.” We knew that she was calm yet direct, quiet yet confident. That she had the demeanor of a lady on a mission, a reserved and polite lady on a mission. But her mission was a mystery to us and we didn’t want to pry.
Over the next six months Elizabeth was very active. She paid her loans at an astounding pace. She asked for a loan term of one week, and she was paying ahead of time. Elizabeth flew through nine loans, totaling L3,750 ($187.50), in less than six months. No other La Ceiba client has paid that many loans nearly as quickly as Elizabeth did. In fact, some clients work through nine loans in two or three years. Elizabeth did it in six months. What’s more is she could have paid and received even more loans if La Ceiba’s service could keep up with her. After Elizabeth paid, the organization would take a few days, sometimes a week to deliver her next loan.
Soon, the entire organization was asking itself: How could this be possible? How is Elizabeth paying her loans at a seemingly astounding pace?
Finally, in April 2013, having arrived in Honduras a few days before, I stopped by Elizabeth’s house and made a remarkable discovery. Elizabeth’s husband was home and there was a bakery operating out of their house. Her husband! He had come back to Honduras after spending eight years living in New Orleans and promptly founded a bakery. It was clear that this was not a small operation. The bakery had three part time employees, they were selling bread in over 6 communities to 100 pulperias (convenient stores), they were making over L3,000 ($150) a day, and they had plenty of room for growth. Where one question was answered, Elizabeth was planning the bread business with her husband when we saw her in January and using the profit to pay off her loans, others arose. How did Elizabeth and her husband start a successful business apparently out of thin air? Who was this man who was gone in January and now making 200 units of bread each day in April?
Something else became apparent as well: Elizabeth and her husband were close. Whenever I spoke to either of them about the other or about the business, they spoke passionately and kindly. They were invested in the business and in each other, and they had a plan.
Melvin Omar Diaz Rodriguez and Elizabeth Discua Maradiaga were born and raised in Las Brisas de la Libertad. Las Brisas is a 15 minute ride from El Progreso, Yoro in Honduras. It is a small and rural community of roughly 1,000 people, surrounded by palm tree farms on the north and south borders, a highway on the east border and Villa Soleada, a similarly small community, on its west border. Las Brisas is a relatively typical Honduran town. In the middle of town is a large soccer field equipped with floodlights for night games and bleachers for spectators. The town has one small bar, one church, a high school and elementary school, several small home businesses ranging from convenient stores to food vendors.
When Melvin and Elizabeth were born in the 70’s, the landscape was a bit different. Most of today’s businesses and institutions did not exist. There was however, a bakery. Melvin’s aunt owned and ran a bakery out of her home in Las Brisas, not far from where Melvin lives today. Growing up Melvin helped with the family business. He weighed flower and butter, he delivered bread and he learned all there was about the art of baking. Melvin went to elementary school up until 6th grade at which point he dropped out to work at the bakery. “I didn’t like school, I wanted to make bread with my aunt,” explained Melvin. But, before Melvin left school something happened. Melvin met Elizabeth. They were in the same class together. Elizabeth left such an impression on Melvin that he had set his heart on two things at the age of 12: own and run his own bakery, and marry Elizabeth as soon as she finishes school. Melvin married Elizabeth at the age of 18.
Melvin’s second goal would have to wait. The next several years of marriage proved difficult. Shortly after marriage, Elizabeth and Melvin were still living in a family home; there was no room for a bakery. Economically the couple struggled to find work. There was no money to start a business and no land or house to call their own. Together they came up with a plan to resolve one of these challenges. They would build their own home and build room for a bakery. The cheapest way to obtain a home is not to buy an existing one but to build one yourself. This is very common in Honduras. And so Melvin and Elizabeth built their own home from the ground up. This meant that Elizabeth and Melvin had to work to make a living and simultaneously buy construction materials like cement blocks, cement mix, metal bars, etc., and they had to put in their own labor to erect the building. In 2003 they finished their home, a one floor two bedroom home.
Elizabeth and Melvin had enough land and property left to build additions and extensions to their home. Slowly but surely they did exactly that. By 2005 Melvin and Elizabeth built several additions to their house including a porch and two rooms. One of these rooms was built for the bakery. Melvin started to save up funds to buy equipment for his bakery. The same year Elizabeth gave birth to a girl. However, soon after the birth of their daughter, Melvin had to leave the country.
Melvin’s father was involved in a security organization in Honduras. In 2005 Melvin’s father received a death threat from an anonymous source. The threat implied Melvin’s family and he was forced to leave the country. Melvin’s destination was New Orleans where he had a brother. It was not a good experience as Melvin recalls, “I lived in a part of the city that was very poor and not safe. I worked long days in a restaurant. I did not like it.” Elizabeth remembers Melvin’s struggles too, “He was lost. He was in a very bad place and I was worried about him.” As time passed and Melvin struggled to stay motivated in New Orleans, it was Elizabeth who reminded Melvin of his goal. Elizabeth insisted that Melvin continue to save his money for the bakery. Indeed, in eight years, Melvin saved up enough money to buy an industrial grade mixer in the US and ship it to Honduras, an industrial grade oven in Honduras, furniture and tools specific to baking, and had enough money left to start operations as soon as he returned to Las Brisas.
And so in March of 2013 Melvin returned to Las Brisas ready to work. The bakery Melvin had dreamed of since he was 12 was so close to becoming real. “Panaderia Las Brisas” attracted its first customers, not by marketing or advertising, but by the smell of baked bread. Several pulperias within smelling distance followed their noses to the bakery where they saw then tasted and negotiated over bread. The bakery expanded at a rapid pace. Between March and June of 2013, the bakery had customers in seven communities: Las Brisas, Nunez, Waymitas, Mezapa, La 28, La 29 and Burro. In each of those communities there were between three to 20 convenient stores that were selling bread from Melvin and Elizabeth’s bakery. Demand was so high that Melvin had to hire an assistant. Melvin is grooming his assistant to take over day-to-day operations so that Melvin can supervise daily operations and take care of long-term projects. Elizabeth keeps her eye on the finances of the business and helps buy ingredients whenever there is a shortage. The bakery employs two part time delivery boys who deliver bread on their bikes, and the business owns a truck that is used for larger deliveries. Currently, Melvin and Elizabeth work 12 hour days, sometimes more, just so they can meet demand. Even so, they often have to turn people away because they sell their bread so quickly. “It is a good problem to have,” says Elizabeth. They both recognize that there is room for growth.
La Ceiba’s role and involvement with Elizabeth has changed since January. From April to June, La Ceiba was able to deliver loans to Elizabeth more quickly. In June, Elizabeth finished her last repetition of L1,000 ($50). After deliberation, a decision was made to extend to Elizabeth a L4,000 ($200) loan. She would be the first person ever to skip steps in our loan ladder.
We asked Elizabeth for her thoughts on our service, “My experience with La Ceiba has been good. The loans I received helped buy flour, oil, and sugar. It is useful when there is a shortage of ingredients or an unexpected cost.” Elizabeth and Melvin are looking to buy another truck. They bought one at L25,000 ($1,250), but it was in bad condition and they returned it. They would rather receive a L10,000 loan from La Ceiba, but for now they are making due with a L4,000 loan.
Melvin and Elizabeth’s success highlights their need for capital. In El Progreso, credit, loans and mortgages are difficult to obtain. Banks will charge high interest rates on loans or ask for proof of formal employment before granting a loan. This proves problematic in an economy that is composed largely of informal work or self-employed business people. There also exists an informal lenders market. This market is comprised of individuals who will extend loans without asking for proof of employment. However, these lenders charge upwards of 80% monthly interest. What’s more is that these lenders will ask for collateral or come to your home with the intention of taking land property or wealth if a client cannot pay.
La Ceiba found a niche in this environment. There is demand for loans and credit and the alternative services either wont extend loans to residents in Las Brisas or, if they do, they charge unreasonable interest and ask for collateral. La Ceiba does not ask for collateral nor does it ask for proof of employment nor does it charge a high interest rate (15% annual interest). We reduce our losses by extending small loans as a first step. If a client is able to handle larger loans they can work their way up towards that amount. We take chances on people and their stories. We don’t employ a risk analysis formula. We include anyone who lives in the community, is 18 years old, and is a woman.
Extending loans to individuals who are outside of the formal financial sector can be risky. We don’t know if Elizabeth will be able to pay back a L4,000 loan and if she doesn’t we have no collateral to mitigate the loss. What we do know is that Melvin and Elizabeth worked hard to get where they are, and they did it almost entirely without the help of La Ceiba. La Ceiba has a role in extending credit where it is not easy to obtain, but we are not the reason Elizabeth and Melvin are and will continue to be successful, that much is up to them. We just hope our service doesn’t hold them back.
Santiago Sueiro, co-Chair of La Ceiba MFI (www.santiagosueiro.com)
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