Changing The Face of Banking

Rosa Olmedo

In the town of Rocafuerte on the northern edge of Ecuador's northwest coast - just below Colombia - twenty-six-year-old Rosa Olmedo wakes early to bake rolls and bread before getting her children ready for school. She pours water into flour and begins kneading dough. The air is heavy and warm. Low, dark clouds lie in wait off the coast portending afternoon showers over the tropical mangrove forests of Rioverde. Rosa works quickly so that her fresh-baked goods will be out of the oven before the regular customers arrive.

Like many Ecuadorians, Rosa has struggled to keep her family safe and fed. Life is difficult in this low-income, rural parish in the Esmeraldas Province. Most of the people here have lived a subsistence life since their ancestors arrived on the slave ships of Spanish Conquistadors centuries ago from West Africa. The coast is lushly beautiful, and the Afro-Ecuadorian culture rich in folklore, dance, and poetry, but few tourists find their way here. The region only became accessible by road thirty years ago.

Instead, visitors to Ecuador follow the Route of the Volcanoes in the Northern and Central Andes, or visit Amazon rainforests near Brazil before flying to Darwin's Galapagos Islands. For local color, tourists seek out the Saturday market in Otavalo, an hour north of Quito. There, they find a small pocket of indigenous Ecuadorians driving SUVs. People living in the Esmeraldas, like too many others in remote provinces, have been left in isolated poverty.

Due to an increasing global market and with it increased corruption, little revenue from Ecuador's primary exports of bananas, flowers, and Amazonian oil trickles downward. Also, the millions of dollars given by other countries for development and mega-building projects often have long-term strings attached and can actually perpetuate poverty.

But, Rosa Olmedo has hope for a new future for herself and her two daughters. Two and half years ago, she joined a group of friends and took out her first loan from one of Ecuador's microfinance programs, FUDECE, an NGO that promotes a microfinance program, and is one of the six members of Red Grameen Ecuador. This "Village Network" program is a replica of the microcredit bank, Grameen, created by the Bangladesh Nobel Laureate, Dr. Muhammad Yunus.

Rosa borrowed $200 and used her skills to raise chickens to sell. Within seven months, she paid off the loan and family expenses, and saved $147 - enough to garner a second loan to start a bakery shop with the help of her husband. The bakery business has expanded with the assistance of a third loan for $600.

Through Grameen-type microfinance programs that require no collateral and lend small amounts of money with reasonable interest rates to women in cooperative groups, 21,000 women across Ecuador are coming out of desperate poverty, gaining self-esteem and creating a brighter future for their children.

Around the world, billions of dollars have been invested in programs to help the poor and disadvantaged rise out of poverty. Since 1945, the World Bank, whose motto is: "Working for a world free of poverty," has taken the lead as the global lender to developing counties. Yet, in 2001, half of the world's population - almost three billion people - continued to live on less than two dollars a day.

Major lending institutions initially dismissed Dr. Muhammad Yunus's alternative solution to poverty, microfinance - giving small loans to the poor, mostly women, so that they can become self-sufficient. Yet, thirty-one years later, Yunus, the 2006 recipient of the Nobel Peace Prize, continues to educate the world about microlending and achieve his personal goal to eliminate poverty in his home country of Bangladesh by 2050.

"I think we will exceed this date," he has said. "Then, we will build poverty museums to show the new generations what it was once like."

Dr. Yunus gives not only hope, but shows a way for countries like Ecuador to begin the process of eliminating poverty. "He is a human and professional model for our borrowers and team members. It meant a lot for them to get to know him," says Celia Varea, Executive Director of FUDECE, after Dr. Yunus visited Ecuador in December 2007.

For twenty-seven years, Varea worked at the Central Bank of Ecuador in Quito; the last twelve years spent in the bank's Economic Research Department. When she retired in 1992, Varea volunteered in Quito's YMCA microfinance program. Her passion to help Ecuadorians rise from poverty escalated in 1997 after contacting the Grameen Bank in Bangladesh. "The Internet was not easy in those times," she says, But, Varea persevered. In 1999, she was accepted to attend a study-visit to the Grameen Housing Program and the 34th International Grameen Dialogue. Later, in 2001 she was invited to Dhaka, Bangladesh for training with Branch Managers at the Grameen Institute.

Varea has tirelessly promoted Grameen-type microfinance lending in her country and elsewhere. She translates Grameen program literature into Spanish (and English) around the globe to educate and seek borrowers, businesses, and politicians - anyone who will listen and help. One of Red Grameen Ecuador's far reaching goals is to contribute to the Millennium Development Goal set by Muhammad Yunus and other leaders of halving world poverty by 2015,

Celia Varea speaking to Dr. Yunus at a conference in Quito in 2007

a lofty reach for any grassroots organization, yet one worth working toward. "So this is what retirement looks like," says the enthusiastic, sixty-year-old Varea, wondering when she will have time to spend with her five grandsons.

"When I first contacted Grameen in Bangladesh, I was looking for the best way to face poverty in my country where the biggest microfinance institutions give more importance to financial needs of the institution than to human considerations," says Varea.

The success rate of microfinance lending - almost one-hundred percent return on loans - has caused many banks to create their own programs and cash in on the success. One of the criticisms of the programs worldwide is the high interest rates some banks and financial institutions charge. It was one of the issues Varea broached during a conference with Muhammad Yunus last December in Quito. She was pleased to hear his response.

"Anything over a fifteen percent interest rate and the organization is not social business, but lending for greed," said Dr. Yunus, whose message asks institutions to change their banking rules to establish an environment for all humans to find their source of creativity. "The idea of working for wages has never felt right to me," he told an audience at Guayaquil's Catholic University last December.

Along with Celia Varea, Teresa Criollo (who started a Grameen program in the southern province of Loja) and her team of university students from En las Huellas del Banco Grameen, another member of Grameen Ecuadorian Network, were invited to attend the December 2007 conference in Quito where Dr. Yunus spoke and listened. Criollo's presentation was impressive. She showed how the 1800 borrowers in her region are raising vegetables (including organics), eggs, poultry, and beef, at weekly markets.

Teresa Criollo, Celia Varea and team member university students presenting Dr. Yunus with a glass replica of an archeological piece of a Valdivian Venus, considered a symbol of womanhood

By working with Criollo and other program directors in Ecuador's provinces, Varea slowly sees progress. She follows the lead of Dr. Yunus by encouraging government agencies and businesses to work together. Ecuador's recently elected president - Ecuador's eighth president in ten years - Raphael Correa, announced that funding microfinance would be a priority for his new government, and has earmarked seventy million dollars to a National Microfinance System Program.

The process of doling out the money to reach the poorest women in the country is not simple. With so much money at stake, it becomes even more important that parameters be set for programs like FUDECE to receive this money.

Only last month, government authorities in charge of the National Microfinance System Program launched a system for qualification that now includes 50% financial and 50% social parameters. Varea suggests that perhaps Dr. Yunus's meetings in December with Correa and other political and businessmen and women have made a difference.

What Ecuador does not seem to lack are NGOs (including some of the members of Grameen Ecuadorian Network), and other aid and volunteer workers from around the world. They come in droves, from churches, corporations, grassroots organizations, and governments - the U.S. has over two hundred government workers living in Ecuador.

Roads, water and oil facilities, and houses are built; individual volunteers tend to farms, animal sanctuaries, and eco lodges. Still, 38% of Ecuadorians live below the poverty line and 12% live in extreme poverty.

"I agree with what Dr. Yunus said about the need for us to be stubborn in our efforts to create change in the banking systems," says Varea. "His firm and clear position regarding the cost of microfinance will certainly help government efforts to lower interest rates, which have been strongly rejected by the banking sector. There's more than one opinion that the microfinance sector in Ecuador is over-saturated. The government and banking institutions should help promote existing programs rather than start new ones," she adds.

The Grameen Ecuadorian Network programs seek funding wherever possible. They list several organizations that have helped promote microfinance programs: the Guayaquil Rotary Club and Catholic Church, Intermon-Oxfam, Ecumentic Projects Committee, the Canadian Agency for International Development, and others like Planet Finance, Oikocredit, and one of the Ecuadorian Government Funds, Programa de Proteccion Social (PPS).

"Maybe the most important source of funds is our borrowers' group savings fund," says Varea. When the community can support itself, and the women know that their system is helping families and neighbors, the results are powerful.

In Guayaquil, Cristina Bonilla lives in a low income neighborhood. Through a loan granted by Cooperativa de Ahorro y Crédito De Todas, one of the members of Red Grameen, she rents a laundry machine to the neighbors at $1 an hour. With the help of her eleven-year-old son, Cristina, she sends the machine to people's homes.

In Cerecita, a rural parish of the Province of Guayas, with a $100 first loan granted by Hogar de Cristo (another member of Red Grameen) Johanna Cayetano makes humitas, corn bread, and sells about 150 pieces a day for $37.50. This money pays off the loan and she has enough left to invest in the building of a new house. Her husband has quit his job in order to help in the business. Johanna's last loan was for $350.

Arminda Ruas of Bocana de Lagarto

Back in Esmeraldas, Varea travels to the first two Grameen replica centers formed in 2005 in a very poor village where the social approach to microfinance is most important to success.

The village women, who are members of the centers, decided to build a town square where people could meet and rest. With the approval and help of the local government, and their own volunteer work, Plazoleta de los Derechos de las Mujeres - Women's Rights Square, was created. At the request of the women, Quito artist, Marcia Vásconez, designed a sculpture in their image. Since the village has no water, the women carry it to help maintain the statue and square.

If ever a country could be the poster-child for microfinance success (outside of Bangladesh), it should be Ecuador. The opportunities are ripe and endless. The ecotourism business countrywide has proven successful for local and international business enterprises, and offers up new microlending opportunities. FUDECE, with the help of the Gender Equity Fund from the Canadian Agency for International Development has Ernesto Yumisaca, an expert in community eco-tourism, working in the Esmeraldas community of Rioverde to develop eco tourism programs. His efforts, like those of Celia Varea, will bring further prosperity and a voice to a people whose time has come.

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