3 Mexican women talk about their group loan from Sofipa
Written by Lynn Hamerlinck on 25 January 2023
A new investment opportunity makes its appearance on Lendahand. Microfinance institution Sofipa in Mexico is seeking crowdfunding to provide group loans to women entrepreneurs.
What better way to get to know microfinance institution Sofipa than from their clients directly? Digna, Debora, and Carmen tell you their story, in words and images. All three receive credit from Sofipa in the form of a group loan. They have their own small business, in the informal sector, and need credit as working capital to grow their economic activity and provide an income.
Through Oaxaca with Sofipa
The enchiladas verdes breakfast is short. Isabel, Head of Funding at Sofipa, and her colleague Angel are at the front door of the guesthouse, ready to leave. "We have put together a busy program for today," Isabel says cheerfully.
We are in Oaxaca, a typical colonial city with colorful houses in southern Mexico. Its historic center is on the UNESCO World Heritage List, but the region has always been one of the most backward states in the country. Weighed down by a shortage of educational infrastructure and financial services.
18 years ago, Sofipa began as the Sociedad Financera Pacifico to give people growth opportunities and improve the living standards of the underprivileged. Meanwhile, microfinance institution Sofipa has 36 branches spread across 7 states in Mexico. They offer two main products to Mexican entrepreneurs. With MasBisne, they support the growth of SME entrepreneurs with a well-divided portfolio between female and male borrowers. With Sofipa, they offer credit in the form of group loans to female entrepreneurs in the informal sector.
"With our loans, we want to end poverty and help ensure gender equality for the long run. We have already supported more than 14,500 women entrepreneurs," Isabel confirms.
How does a group loan work?
Can you get at least eight women together who need a microloan? Great, you can start a group! The loans run on a 16-week (4-month) cycle, and per cycle, the women build a credit history that can later help them apply for a formal bank loan. On an initial loan, a group member can borrow a maximum of 7,000 Mexican pesos (340 euros). Without collateral. The women guarantee each other, providing a strong social guarantee.
Each group meets physically every week under the supervision of a Sofipa coordinator to repay a portion of the loan, save a predetermined amount and have a chat. The coordinators also help the women with financial knowledge and tips about entrepreneurship.
Paying Digna, Debora, and Carmen a visit
Endless concrete stairs climb along a hill in a suburb of Oaxaca and bring us to Digna's home and business - a bit short of breath. Together with her family, she makes botanas; deep-fried Mexican snacks. Crunchy chips in all shapes and sizes. "I have now concluded 20 cycles with Sofipa," she tells us proudly. I count, that's over 6.5 years!
"Without credit, doing business stops for us. After a fire in our factory, we needed credit to reinvest. We bought a potato machine, which we have earned back already," Digna continues. "We are ready to expand and are outgrowing the Sofipa group loans. Now, we will switch to a MasBisne loan from Sofipa."
Digna and her husband know how to do business. "Every payment we make, we do it via bank transfer. That way, the bank sees that we have money and we build credit history and credibility for future loans."
Keen to see what Digna's business looks like? View the video here.
A half-hour drive away lives Debora. As a child, Debora learned to tie hammocks and sew sports balls from her grandmother. 19 credit cycles in, she dreams of buying her own sewing machine. "We sew about a thousand balls a week. A machine would greatly facilitate the work for my family and me," she sighs. Sports balls have been the family's largest source of income for three generations. "We make sure that money keeps flowing in until we can make hammocks again."
Indeed, at the time of our visit, there are no large hammocks in the making. "What I could sell, I sold. The yarn is very expensive at the moment, so I'm holding off on buying new material."
At 76 years old, Debora still regularly takes the night bus to Puerto Escondido to sell her hammocks and sports balls. "There are more customers there, and I get a better price for them," she confides. By taking the night bus, she doesn't have to pay for a hotel. She goes there, sells everything in one day, and returns to Oaxaca on the next night bus. That's two times 11 hours on the road, endless hairpin turns included.
Our next stop takes us to Carmen’s house in a remote and simple neighborhood on a hill near Monte Albán, one of Oaxaca's tourist attractions.
Carmen's fingers braid rapidly. As you speak to her, she watches you from the corner of her eyes. Her fingers don’t seem to ever stop. She braids the plastic ribbons so quickly and deftly into a basket or shopping bag that it makes you giddy. "I love it," she smiles softly, "All day long I braid, I don't know when to stop. Now if only I had enough customers."
Carmen's work is wonderful. Only, how do you get clients when you live remotely? Caring for a disabled daughter confines Carmen to her home. What do you do when selling through Facebook is more difficult than selling your beautiful products in a market?
A catalog of women entrepreneurs
Like Carmen, in addition to credit, many women simply need customers to be able to grow their businesses. To help them get started, Sofipa compiles a kind of phone book with an overview of all the services and products offered by women with group loans.
Isabel: "They borrow together, vouch for each other, and can also contact each other to build a customer network. We want to expand the contact book further." We discuss the possibilities of publishing the overview of all (micro) businesses beyond Sofipa circles. Wouldn't businesses in Oaxaca have a need for this? Or wedding planners? Hotels often use little baskets as decoration in their rooms, don't they?
"To be continued," we conclude.
In the meantime, you can support these inspiring women through Lendahand by investing in their businesses. Sofipa's first project will soon be available on our Projects page.