Two weeks have passed since I started work at Fundación Para La Vivienda Progresiva, or Foundation for Progressive Housing. I am still very much in absorption mode, so for now I will rely on broad strokes to paint the picture of what FVP is all about.
The organization is located right across the border from the U.S., with offices in the border towns of Nuevo Laredo, Ciudad Acuña, and, soon, Piedras Negras. In short, FVP helps people in the border region to build housing and to start or grow small businesses. Housing is in its title because FVP started in 2002 as an affiliate of Cooperative Housing Foundation (CHF), an international NGO based in the U.S. It was initially founded to address the housing crisis that had resulted partly from the large post-NAFTA migration of Mexicans to work in industries along the border. FVP is now independent from CHF, but the latter continues to advise the FVP on its development.
Housing is a big part of its heart and soul, but FVP has grown into an organization that addresses more than just housing. FVP’s work is dedicated to improving the livelihood of Mexicans of modest means who live in the border region. As one of their leaders explained to me, grinding poverty – not knowing where the next meal is coming from – is not nearly as common here as in other parts of Mexico. But poverty persists in this relatively affluent region, what he called pobreza patrimonial, which I will badly translate as something like a “poverty of assets”.
In other words, even if a family is getting along from day to day, their stability can be fragile. FVP builds up the foundation on which its clients stand, providing tools to actually build a foundation – housing loans – and to strengthen their source of income – small business loans. I will talk about this concept more in future posts.
For FVP, this means more than just giving a loan to an individual or household. It means creating a relationship with each client and helping them to build their business or their home up over time. Enduring growth, they call it here.
The organization’s work philosophy is to make borrowers feel like they are all part of a common project to improve their way of life – and you can see this in the way that the loan officers interact with the clients.
Please flash on your mental screen your picture of a “Loan Officer”. I know I had my own preconceived image, warts and all. And I have friends who work as Loan Officers. Now put it to the side for a moment.
Now imagine Mireya, a Loan Officer at FVP. She is by trade an accountant, she knows her numbers, and she dresses in a business suit, but that is where the similarities with my former image of a loan officer end. Mireya drives her hatchback car out to neighborhoods that paving has not yet reached, braving the rain and seeming to instinctively avoid the flooded streets most likely to swallow her car (we actually saw a truck here that was completely taken down by a pothole, so this is no joke).
When she arrives at clients’ homes or businesses, it has the feel of a cousin stopping by, not a financial officer. Even when she talks shop – getting an update on a business or helping to open a new loan – she and the client have a rapport that is more collaborative than hierarchical. Somehow, she does all of this without getting a speck of dirt on her light tan pants. I, meanwhile, look like I have been in a mud wrestling match.
We were fed tamales on our last stop, and stayed for almost an hour at the client’s house. Mexicans don’t feed tamales to people they don’t like.
The example of Mireya is emblematic of how FVP works. They emphasize forming a connection with clients that will extend beyond a loan, they try to treat each client as a special case, and their rule of thumb is to be honest and transparent with the client about all aspects of the loan process.
Can you imagine this from a bank? I have known loan officers in the U.S. at banks and mortgage companies who have really stretched themselves to help out their clients. I am sure they exist here, too. In general, though, banks are a place where many of the clients do not feel welcome, much less a place they would seek out as a source for a loan.
The conventional wisdom, amongst FVP clients and staff, is that most clients would not get a loan from a bank. I am still unpacking the reasons for why this is the case, if, in fact, it is true. Is it that they don’t qualify for a loan – that the bank’s requirements are too stringent or inflexible for the small entrepreneur without much collateral? Is it that banks are just not interested in giving out loans less than, say, $10,000 pesos ($1,000 dollars +/-)? Or is it that clients just don’t seek out a loan from a bank, because they are afraid of a bank or have a perception that the bank won’t serve them? Are there other small entrepreneurs that do go to banks for a loan, i.e. is it just that I am looking at a skewed sample?
It is probably a little bit of all of these depending on the situation. How it breaks down is something that I will explore over the next couple of months. So far, though, my instinct is that most of FVP’s clients just would never ask a bank for a loan. From initial conversations, it seems like most clients – mostly poor or working poor – just do not consider a bank loan one of their options.
Turn on that mental screen again. Imagine that you have a wealthy great-aunt who has historically has spurned your siblings in public, didn’t invite you to parties because she assumed you couldn’t afford the formal wear, and made you feel really uncomfortable when you walk into her house. Would you ask her for a loan?
Similar reasons have been offered up by the thirty-some clients with whom I have spoken: they don’t think that the bank would give them a loan, they view banks as a friend of the wealthy and the middle class, not the poor. And they just feel downright uncomfortable when they enter a bank.
Just to dilute my speculation with some empirical evidence, I looked at some of the research that has been done. A 2004 World Bank study estimates that only 23% of adults in Mexican cities have a bank account. The percentage of urban Mexicans that access bank loans, I would guess, is much less. (The percentage that has bank accounts in NYC and LA, for instance, is about 2.5 times this, at approx. 63%)
So, back to FVP. Their strategy is largely a response to this feeling of alienation. In the neighborhoods where they work, confianza is king. Confianza is a great word, a combination of a few concepts. It is trust, but also good rapport, a social familiarity amongst people. And it is these tendencies that bind people together in these neighborhoods, if I am reading things right. In other words, FVP’s strategy follows the contours of the way that people actually relate to each other in poor and working class neighborhoods of Nuevo Laredo. Their tactics build up confianza, so that the client trusts them and grows to count on them for collaboration in the project of improving their livelihood in an enduring way.
From what I can tell from some other Fellows’ blogs, this tendency is characteristic of other quality Kiva microfinance partner institutions around the world. They are not just micro-versions of banks giving out micro-loans – their approach to working with people is fundamentally different from the typical banking institution.
Now, I feel remorseful about being hard on banks. But that is probably a requisite way to kick off a microfinance blog, since microfinance is largely about providing financial services to those excluded, for whatever reason, from the traditional financial sector. I am not anti-bank. My work in the U.S. is in developing affordable housing in cities, so I fully recognize that responsible banks are essential to the well-being of communities in my own country, as well as being necessary for the health of our economic system. Here in Nuevo Laredo, I’m looking forward to seeing how all of these different models fall on the continuum of financial services available to the working poor.
To right the balance, I promise that this week I will enter at least one bank with an open mind and ask a loan officer some questions.
We’ll see if I get fed any tamales.
Next up: Nuevo Laredo incremental housing improvement 101
(Featuring many photos!)