Like in most places in Latin America, Honduras is a country full of people living in the dichotomy of almost complete access to information, coupled with an almost complete lack of opportunity. Roadside stalls and tiny general stores both have access to Google, and a shared inability to move beyond survival-mode. Which is why the projects supported by Opportunity International Canada are so important. We are striving to give those limited by their birthplace the chance to work towards a future the internet has helped them hope for. And right now, people in Honduras are looking for hope, because things are tough.
In late July, gas prices in Honduras went up to CDN$4.87 per US gallon, (roughly $1.28 per litre) and the government imposed increased taxes on buses and taxis. In response, public transport workers, drivers and university students went on strike, blocking major roads. After a week of negotiations, it was agreed to raise the price of passenger rates by 5%. In the capital of Tegucigalpa, buses prices rose from 22 to 33 cents and taxi vans from 70 cents to 75 cents. In the city of San Pedro Sula, costs increased from 43 to 55 cents per adult on buses.
Record Low Coffee Prices
International coffee prices are still at record lows. The Honduran Coffee Institute reports the current average price per hundredweight of coffee is $159.68, compared to the average price in 2016-2017 of $188.97, a drop of 16%. As the main exporter of coffee in Central America and the sixth largest in the world, Honduras is feeling the pinch. Coffee is grown in 15 of the 18 departments in Honduras, and it provides employment to 1 million Hondurans, with up to 2 million at harvest. On top of low global prices, the last coffee harvest produced less grain than expected. Almost 99% of the 120,000 coffee producers in Honduras are small-to-medium producers. They have felt the weight of these blows, and the trickle-down effect has been fewer jobs and lower wages for workers.
On their own, the impact of higher gas prices and reduced global coffee prices could be absorbed. However, in a country where national poverty levels hover at 60.9% and with one in five rural Hondurans living in extreme poverty, the cumulative effect has been an increase in the general cost of living – an increase few can afford.
In April and October, this general discontent and hopelessness among the poorest in Honduras morphed into a phenomena now covered daily by worldwide media: the Honduran Migrant Caravan.
In the second week of October, a “migrant caravan” started in San Pedro Sula, a northern Honduran town with the country’s highest rates of violence. Through Facebook and word of mouth, a group of some 160 people agreed to make the trek north through Guatemala, Mexico and then on to the US border together, seeking a new life. They hoped their large numbers would offer them some protection from bandits who target migrants on the route north, and also figured banding together would save them from having to pay the standard $7,000 “coyote” middlemen, or people-smuggler charge.
However, in this global age of communication, the word got out farther than anyone could ever have imagined, and by the time the group crossed the border into Guatemala, their numbers had risen to more than 1,000. As this report goes to press, the caravan has made it as far as the Guatemala-Mexico border, with the UN estimating the number to have swollen to 7,200.
When interviewed, those in the caravan say they are attempting to leave poverty, violence, corruption and hopelessness behind. In the wake of the international coverage, at the end of October, another caravan formed in a Honduran town bordering with Guatemala. Most of the people who make it to the border are likely to claim asylum in the US, although President Trump has said he will not let caravan members in, calling them a “security threat”. However, legally, the US must consider all cases of asylum seekers.
This is the third caravan starting out from Honduras in 2018.
IDH has been providing small loans and training in Honduras for 44 years. Their mandate is to provide the working poor with the same access to financial services and the opportunity to grow their own endeavours that the rich have always enjoyed.
Today, in partnership with Opportunity International Canada, IDH operates out of 16 branches with 110 staff, serving 9,762 clients, with a loan portfolio of almost CDN$22.5M. The average loan is $2,301. 59% of clients are in the poor, rural areas, and 54% are women. In 2018 so far, they have enjoyed a client growth rate of 19% over 2017’s numbers, while their loan portfolio has increased by 43%. With numbers like these, their operational sustainability is equally as impressive at 148%. Strategically, IDH plans to expand across the country to offer more struggling microentrepreneurs the opportunity to grow their businesses and, importantly, offer employment to others.
Financial Performance Award
Against 103 competing microfinance organizations in Central America and the Caribbean, IDH was awarded the 4th “Most Profitable” award by the network of microfinance organizations for Central America and the Caribbean (REDCAMIF). They have made $1.82M in profits in 2018, which they are reinvesting in the loan portfolio and expansion. They also came 7th in the category of penetration and outreach.
Thanks to administrative red tape and delays, IDH’s transition to a regulated financial institution (OPDF- Organización Privada de Desarrollo Financiero) is six months behind schedule. Currently, they are in the process of securing legal status. Once legal status is complete, they will be able to submit the application to the Honduran regulator, receiving a license in the first quarter of 2019 and beginning operations at the end of 2019. Becoming an OPDF will enable them to aim for exponential growth, with the ability to capture savings and receive remittances, both poverty-alleviating safety-nets for the poor. The market potential is evident in the numbers: in the first 8 months of 2018, remittances received from abroad in Honduras totalled CDN$4.19 billion.
IDH has recently secured additional funding through lines of credit for loan portfolio and branch expansion:
- $1M in a line of credit from the Geneva-based Symbiotics group, a socially-responsible investment company dedicated to “inclusive and sustainable finance in emerging and frontier markets.”
- $1M in a line of credit from Belgian social investor Alterfin, who works with MFIs and fair trade producers.
As a growing financial institution in a developing country, in the last few months, IDH has developed a plan to implement regulations for the prevention of theft, terrorist financing and money laundering established by the National Commission of Banks and Insurance. According to the US State Department, money laundering in Honduras stems from significant drug trafficking throughout the region. Laundered proceeds typically pass directly through the formal banking system, but are also known to pass through remittance companies, currency exchange houses, and the construction sector. In preparation for becoming a formal financial institution, IDH is developing technological tools for the detection, monitoring and control of suspicious financial activity. They will then begin training employees in their use and will periodically be required to present their activities to the Honduran financial regulatory body.
Encounter Days Training
IDH is currently focusing its efforts on providing loans to Small Medium Enterprise (SME) clients who tend to hire 2-3 others in the community who might not have the entreprenurial spirit to start their own businesses. As part of the SME program, IDH offers training twice a year that is tailoed to add value to this type of client. External trainers, experts in the field, were engaged to come and share their knowledge with IDH’s SME clients. Thanks to the support of a Canadian donor, IDH was able to deliver two one day training sessions. The result was 245 people trained -- 128 clients from the Comaytaguela and Tecuigalpa branches on August 18, 2018, and 117 clients from the Santa Barbara branch on September 8, 2018.
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