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Tiny loans, big impact



Nogales, Son. – Bill Holliday is used to managing millions of dollars for a Tucson financial planning firm. Twice a month he heads to a hillside shanty town in Nogales to talk money with women whose entire life savings couldn’t pay for a single tire on the car that got him to the border city.

The women are clients of BanComun, a new not-for-profit “micro-credit” program in Nogales that aims to lift people out of poverty by helping them start or expand a small business.

Each woman has borrowed from $50 to $200.

It’s a tiny sum, but for women such as these, it can mean the difference between going hungry or sending their children to school.

BanComun’s one full-time employee, Luis Molina, believes the small loans can also cut down on illegal immigration to the United States.

“There’s a myth about Nogales that people are just here until they can find a way to the States. But there’s a generation of people who want to stay” if they can make a living, he said.

Gregoria Sandoval’s husband used to support her and her three children by fixing stoves.

He earned about $60 a week working in their neighborhood of Rosarito.

“But he only had work on the weekends, and sometimes by the middle of the week, we’d be broke,” she said.

For years, the couple had wanted to open a taco stand to make more money.

The few times they tried, “we put everything we had into the business, and didn’t have enough to eat, so we had to stop,” she said.

In November, Sandoval got a $200 loan from BanComun.

She and her husband were able to buy supplies they needed to start the business.

They work six days a week making and selling tacos, tostadas and chimichangas.

“Now, if we run out of money any one day, we know we can make more the next,” Sandoval said, running her finger down a meticulously kept accounting log.

“Plus, my husband and I get along better. We spend all day working together, so we have less time to argue,” she said, laughing.

BanComun was started by Tucson’s Borderlinks and Catholic Relief Services to target people such as Sandoval who are too poor to qualify for a traditional bank loan.

But BanComun is more than just a minibank.

It operates on the model of community lending made famous by Grameen Bank in Bangladesh, where risk is shared by a group.

“We’re all neighbors,” said Milagro Mercado, who heads the BanComun group in Rosarito out of her scrap-wood house, “so we know each other.

“We trust each other. If somebody’s having a problem, we can talk to them.”

The bank works by lending up to $2,000 to groups of 10 to 15 people. Each individual can borrow up to $200.

If everyone has paid back their share at the end of four months when the loan cycle ends, the group can take out a larger loan.

The model seems to be working.

“No one in my group has defaulted so far,” Holliday said.

The bank encourages people to save a little every week.

If somebody falls behind, the group can decide to cover the person’s share with part of the group’s savings.

Every two weeks, members of Rosarito’s bank crowd into Mercado’s front room to pay back a portion of their loans and discuss business with volunteers, including Holliday.

This week’s lesson focuses on budgeting.

“It’s basic stuff,” said Holliday, who also runs an audio engineering business, “like how to know if you’re even making a profit.”

During the meeting, a pan of cinnamon-scented capirotada, or Mexican bread pudding, crackles over a wood-burning stove in the corner.

As soon as the meeting ends, Mercado will sell the pudding as part of her catering service.

She used her $100 loan to buy new pots.

“I’m secure now,” she said. “I know my business can go on.”

Before BanComun, Mercado’s only credit options were pawn shops and local businesses that charge high interest.

Mercado once had to pawn her daughter’s $130 gold bracelet for $20.

She couldn’t pay back the loan and lost the bracelet.

Microbanks tend to target women such as Mercado because “globally, it’s women who wear the face of poverty,” said Tracy Carroll, a University of Arizona physical therapy professor and BanComun founder and volunteer.

But she said the model also attracts women.

“They’re comfortable working together in groups, supporting each other and taking responsibility for each other,” she said.

Borderlinks, Catholic Relief Services and the J.P. Morgan Chase Foundation donated $95,000 to start the bank.

It charges clients 2.5 percent interest and plans to use that money to become independent within the next seven years.

Since November, the bank has started seven groups that loaned more than $15,000 to nearly 80 people.

Within five years, BanComun hopes to serve 3,500 people.

“Microcredit is globalization from the bottom up,” said John Hatch, founder and former president of the Washington D.C.-based Foundation for International Community Assistance, one of the largest microcredit organizations in the world.

Traditional globalization benefits the most wealthy, Hatch said, pointing to a growing global gap between the rich and poor.

Microcredit reaches what he calls “the poorest of the poor,” or the estimated 1 billion people living on less than a dollar a day.

“An average client earns an extra $4 a day with a loan of just $150,” he said.

Hatch called it a “silent revolution” that little by little is working to eradicate extreme poverty.

He estimated there are more than 10,000 such programs worldwide and that they have benefited 100 million people.

Thanks to BanComun, at least 79 of those live in Nogales.

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