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Sunday December 17 2017
Microfinance and International Migration

Matt Rolland

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Can better financial services improve the lives of migrants and their families?

This is the fundamental, motivating question behind my 2010-2011 Fulbright García-Robles research project in Mexico. Microfinance is a movement to develop new tools and institutions that provide financial services to low-income groups.

In the last thirty years, microfinance has expanded from a few lone banks in Southeast Asia to include over 1000 institutions in 100 countries, reaching more than 150 million clients. Microfinance is no longer a novel experiment but an entrenched camp of the development landscape. As microfinance has grown, it has evolved differently in each region, demanding new tools as it expands wider and deeper.

My Fulbright-García Robles project is to explore the state of the microfinance sector in central Mexico with a specific interest in what tools have been developed to reach migrant communities.

Zacatecas is an interesting place to work because of a long history of international migration and a relatively undeveloped microfinance sector. If you consider all people born in Zacatecas, and their immediate children (this is called the ‘potential population’), nearly 50% of Zacatecans live in the United States. The remittances, or transfers of money, sent by these migrants to their friends and families in Zacatecas account for nearly 10% of the state’s GDP every year.

My first goal is to review the current financial sector in Zacatecas, documenting the credit and financial services available. So far, my research has shown that financial programs for migrants are offered by a few private sector actors concentrated in the three largest cities - Zacatecas City, Guadalupe, and Fresnillo – and a few key government programs. 45% of all financial entities are located in these three cities.

Considering over 40% of people in Zacatecas live in communities with 2500 or less people, most people in Zacatecas remain without access to basic financial services such as affordable loans or savings accounts. Rural options are scarce and costly. Government programs include the Secretary of Economic Development’s “Zacatecano, Invierte en Zacatecas”, which offers start-up funding for migrant owned business, “Fondo Plata”, which supplies larger credit lines, and Sedesol’s “3x1 para Migrantes”. A new program, “1x1”, looks to replace “3x1” as a funding source for productive projects by providing zero interest loans for migrant-owned businesses.

To compile and describe successful models, I am visiting prominent microfinance organizations throughout central Mexico. In nearby states, such as Guanajuato and Puebla, innovative approaches to microfinance have been pioneered. One front-runner in the field, Mexico City-based Amucss, has developed affordable life insurance plans for migrants, remittance-based income insurance, body repatriation funds, and is developing a rural health insurance program. Another innovation is the microfinance network, “Envíos Confianza”, which enables small banks to become international remittance providers, linking money transfers to savings accounts, education funds, and insurance programs.

Migration entails unique financial demands in terms of costs, risks, precariousness, and barriers to access financial services. To better understand the impact of these conditions, I am surveying the federations of clubs of migrants in southern California and Chicago. The goals of the survey are to test the level of interest in participating in hometown microfinance banks and to collect information on business perspective of these migrants, financial activity (health insurance, use of loans, etc.), and financial needs.

I am using these three research activities to equip the Federación Zacatecana (FEDZAC), the Zacatecan Federation of Clubs of Migrants, with a toolkit to design and expand a new credit program for migrant-financed productive projects in Zacatecas. This program will begin operation later in 2011. With expanded services, migrants will be able to better manage the financial risks and costs incurred during international migration and access new avenues for investment in their hometowns. Reducing the financial gap in Zacatecas is a crucial step towards raising the developmental impact of international migration.


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