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Esperanza International - USA

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Microfinance Services Print E-mail

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The foundation of our Integral Development Model (IDM) is our Microfinance Services program, which consists of five components designed to sustainably improve the economic situations of impoverished families:

1) Microcredit
2) Business training
3) Savings
4) Insurance
5) Group-lending

1) Microcredit- The main ingredient is a small loan averaging $150 to start or expand the small business of a person living in poverty. This capital empowers the working poor with self-employment so they can invest in their business and use the profits to provide for the basic needs of their families. Esperanza serves people who are not eligible for commercial loans or who are preyed upon by loan sharks who charge extreme interest rates. Esperanza charges a 2% interest on the loan balance, which is paid every two weeks over a six-month period. Being in charge of their own business and working to repay the loan by their own merit fosters dignity and self-worth.

2) Business training - In order to maximize the effects of the micro loan, Esperanza offers its associates training in business planning, specific trade skills, marketing, budgeting, inventory management and accounting. Five business training sessions with an Esperanza loan advisor prepare them for running their businesses and understanding how the loan repayment process works. Empowering our associates with knowledge and skills decreases dependance and helps break the cycle of poverty.

3) Savings - Esperanza requires each associate to put 2% of the balance on their loan into a savings account. Living in poverty can cause increased vulnerability to disease, exploitation, natural disasters and theft. Therefore, mandatory savings of 2% as well as voluntary savings can ensure that our associates will be better prepared for emergencies and have improved security of their capital for future investments such as tuition and home improvements. This process develops peace of mind and transforms hopes into achievable goals.

4) Insurance - In the event that an associate becomes incapable of working and is unable to repay the loan, whether because of extreme illness, injury or death, then the family keeps the loan balance without having to make any more payments.

5) Group-lending - Esperanza associates form solidarity groups of five entrepreneurs in a given community. Multiple groups in one community join to create what we call a Bank of Hope. Together, this group receives their micro loans, goes through business training, makes loan payments ans supports one another throughout the process. If a member cannot pay in full or on time, the other group members are responsible for making the payment. This not only cultivates social bnods and trust, but accountability as well.

Our associates, more than 80% of whom are women, use their loans to invest in their businesses and use their profits to improve nutrition and living conditions and send their children to school. Once associates have been through the loan cycle and have successfully repaid their loan, they are eligible to borrow larger amounts to continue developing their business and enhancing their quality of life.
 
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