Monday, July 15, 2013

PHPG's Partnership with the Pulsera Project

This post is written by Trent Shelton, the new Program Coordinator in Granada. Trent has taken over for Kyle Engelken, who had the position from January until July of this year. PHPG would like to thank Kyle for all of his hard work and dedication to the organization the past six months. Kyle’s passion for microfinance and his desire to help others showed through his high quality of work. Kyle will continue to stay active with PHPG while completing his MBA at William & Mary in Williamsburg, Virginia. 


Trent Shelton - Granada Program Coordinator

It is an exciting time to be part of PHPG! We have many projects in the works and a few more that have recently hit the ground running.

In June, the PHPG team conducted several business training sessions with current clients. Reviewing business concepts like basic accounting and inventory management, the clients left with new accounting notebooks and ideas to implement into their businesses.

Another exciting project is our new partnership with the Pulsera Project. The Pulsera Project’s mission is to educate, empower, and connect Nicaraguan youth with US students. They accomplish this by taking in street kids, teaching them the skills to create bracelets and other artisans, and finally selling the products through their fair-trade business in the US. The project has been hugely successful and the artisans are sold at over 350 schools in the US.

Many of the Pulsera Project’s clients have the desire to start their own businesses, to go off on their own and become entrepreneurs. Combining Pulsera’s successful clients and PHPG’s microloan expertise, a partnership was created.

On June 17th, our team headed over to Pulsera’s beautiful office, located just half a block east of Parque Central. Having already received the loan solicitations and business plans, we met with all 10 potential clients to discuss the microlending program. Juan Carlos, our head loan officer, walked through many examples showing the amount of the loan, the monthly payment, what the entrepreneur would need to earn, etc. The group of borrowers consists of young adults between the ages of 20 and 30, and the businesses rang from making hammocks, to buying and selling cheese, to creating a chicken coup. The entire group was very involved in the discussion and had many great questions. There is no doubt that this discussion made the loan seem more real for the entrepreneurs. The group was excited. They know that this is an incredible chance to create something new; an enormous opportunity but also a huge responsibility.

Pulsera Project clients reading over the terms of their loans.

After conducting interviews with each client, our team evaluated the loans and made decisions on the terms of each loan (total loan amount, repayment period, collection dates, etc.). To continue with our group lending strategy, the clients created three different loan groups named Pulsera 1, Los Colores, and Los Hamaqueros.

On July 1st, we distributed the loans to the excited group. After reviewing the loan terms and having each individual sign the loan contract, Juan Carlos dished out the money. Some, being the joking types, used this as an opportunity to act like they just won in the gameshow “The Price is Right”. All in good humor!

Juan Carlos (left) distributing the loan payment to Carlos Meneses. Carlos has started his business repairing and selling cell phones.

Living just a few blocks away from the Pulsera Project office, I often see the entrepreneurs. Out of curiosity, I asked around just a few days later if they’ve used the money yet to start the business. Within 48 hours, everyone I asked had already purchased tools, inventory, etc. The hammock makers had purchased the tools and materials needed to start producing hammocks. Another gentleman, named Marcos, had already started his business of selling artisans on La Calzada, the main pedestrian street in Granada. He had already purchased a table and a solid selection of inventory to sell to tourists looking for a souvenir from Nicaragua.

I truly look forward to keeping in touch with the clients to see how their businesses are going and to work with them in the process. The exciting partnership between the Pulsera Project and PHPG has now officially hit the ground, and we look forward to working with their incredible organization more in the future.

Thursday, July 11, 2013

Repayment Rates

This post is written by PHPG's summer intern, Charlie Bates. Charlie recently finished his sophomore year at Villanova University. Majoring in economics, he is spending the summer in Granada working as a microfinance intern with PHPG and also volunteers at a local elementary school with La Esperanza


PHPG Summer Intern
Charlie Bates - PHPG's Summer Intern

Microfinance has often been termed a miracle. While I don’t seek to address such a bold claim, I would like to draw your attention to a characteristic of microloans that is indeed surprising: their extremely high repayment rates. Unlike traditional banks, most microfinance organizations (at least those that are truly mission-focused) do not require collateral, nor do they have the legal protection from bad debts that traditional banks enjoy. But according to the Grameen Foundation, a pioneering microfinance organization, microloans to impoverished clients have a higher repayment rate than both US student loans and credit card debt.

In PHPG’s case, this translates to a repayment rate well above 90%. How is it possible to give a loan to someone who lacks many resources, except for business skills and a will to succeed, and continue to retain such a high repayment rate?

An easy start is to focus lending efforts on women, who are consistently marginalized in less-developed countries like Nicaragua. The Grameen Foundation points to numerous studies that demonstrate that women are far more likely to invest loans in their businesses and to use the proceeds for their children’s education and health. The fact that 78% of PHPG’s clients are women partially explains our high repayment rate.

Another way that microfinance organizations ensure repayment is by working with clients in “solidarity groups”. Forming groups encourages collaboration and mutual support and provides some healthy peer pressure to repay.

PHPG has seen a tremendous improvement in repayment rates since it started working exclusively in groups. We designate an especially qualified community member as a group leader, and he or she is responsible for collecting the repayments of the other group members and reporting any concerns. Being a group leader is a huge responsibility; if one of the clients does not repay his or her loan, no one in the group is eligible for an additional loan. This sense of responsibility helps increase repayment rates.

Juan Carlos & Juan Carlos Jr. collecting from a group leader


Since microfinance is very relationship-based, a key part of ensuring repayment is to establish and maintain relationships with the clients. More difficult in larger microfinance institutions, this is one of the hallmarks of PHPG’s operations. At our weekly collections, we visit the houses of the individuals and group leaders. Juan Carlos, our professional yet good-humored field manager (he’s an important part of the organization - you’ll be hearing more about him on this blog soon), is the point person for discussing repayment issues with clients. By making an effort to understand their situation and taking whatever steps we can to help, PHPG’s forming of relationships through consistent visits is vital to improving and maintaining our high repayment rate.

On a personal level, repayment comes from the clients’ gratitude for their loan, their dedication to their businesses and families, and their desire to see others in the community succeed using the same funds. It has been interesting to see the effects of PHPG’s measures to ensure repayment, and I look forward to seeing how they develop throughout my time here.



--Charlie