Small Business Loans Reduce Poverty: Transforming Communities Through Economic Development

Small Business Loans Reduce Poverty: Transforming Communities Through Economic Development

Paula lives with her husband and five children in the rural community of La Labor, El Salvador. Several years ago while working with ENLACE, Pastors José & Jenny Molina of the Fe y Gracia Church and several community leaders, approached her and other farmers in their community to see if they'd be interested in creating small chicken farms.

Like most people in their community, Paula and her family lived on a very meager income. Her husband's earnings from farming generated less than $5 per day or 71 cents per person per day, and they greatly desired additional earning opportunities. However, because they lacked capital and training, they had yet to pursue their dreams.

"I had always wanted a business of our own. We’d never had the chance before. And this was perfect timing. We have one daughter in high school, another in ninth grade and the other three are in Elementary. This would be our way to really support them in their studies. We applied to join, and we’re so thankful to God that we were given the opportunity to participate. In fact, I remember the minute we found out that we qualified for the project, my husband went out immediately looking for wood to build the coop."

Paula, Chicken Farm Entrepreneur and CREDATEC Client, El Salvador

Paula started with 100 chickens and has grown her business to over 300 chickens, increasing the family's daily wages to an average of over $12 per day (1.71 per capita per day), which is enough to move them out of extreme poverty.

Paula, Chicken Farm Entrepreneur"We all work as a family," says Paula. "[M]y husband helps me, my children help me, and I go out to sell [the chickens]... For us, the [loans and business training] have impacted us greatly, mostly economically. My husband’s salary isn’t always consistent; we don’t get paid every two weeks or every month. But with the proceeds from the sale of chickens, [we can cover our basic needs] and invest back into our small chicken farm."

CREDATEC: A Fairer Option for the Poor

As one of the tools in the toolbox of ENLACE's economic development strategy, CREDATEC, a credit union and sister organization to ENLACE, provides loans and business consulting to small scale businesses and farms.

According to Ron Bueno, founder of CREDATEC, "Increasing family income is critical to sustaining long-term change in families and communities. That is why we established the credit union almost 20 years ago. It has grown steadily because it meets the growing need for low-interest loans and business training for micro-entrepreneurs and small-scale farmers."

Business owners, like Paula, would normally be denied help from traditional banks and often are forced to turn to loan sharks if they want to grow their businesses.

"The practice of turning to loan sharks," continues Bueno, "often has devastating consequences. Loan sharks charge entrepreneurs as high as 36% interest per day and require a client to pay back the capital entirely at one time so that many borrowers are locked into loans for many years until they cannot repay the loan and lose their inventory or other assets."

As a resource to these entrepreneurs, CREDATEC has bridged the gap.

"Hundreds of clients have literally transformed their lives through CREDATEC's low-interest loans and business training," notes Israel Melendez, Head of Credit Operations at CREDATEC. "Along with a much needed increase in income, clients (most of whom are women) have acquired assets like a home, have been able to invest in education for their children and better meet their health needs and invest in preventive health services."

Israel Melendez with Alba

Israel Melendez, Head of Credit Operations at CREDATEC with Alba, a micro-entrepreneur who runs a small store from her home which she shares with her daughter and granddaughter

CREDATEC & Partners World Wide

Due to these successes, we are so exited to report that as of last year, CREDATEC began working with Partners Worldwide, an organization that is providing capital to increase the number of loans for hard working entrepreneurs in El Salvador.

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families thrive in Central America through micro-loans?

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Recently, Partners Worldwide featured the story of Rosemary, who has been a CREDATEC client for many years. And as with Rosemary, CREDATEC has helped hundreds of small scale businesses to start or expand. The loans have helped grow the businesses, increase family income, which has translated into better nutrition, improved education and secure housing.

Family with chickens

It has also translated into the well-being of families, as noted by chicken farmer and entrepreneur, Vilma Estela.

"One of the most important gifts from [receiving loans and business training from CREDATEC] is that I am involving my children, delegating responsibility. My children are in charge of cleaning the coop, of giving [the chickens] water, food, which makes them responsible...I feel I am teaching them to be independent. I make them see that they need to look after [the chickens] because the chickens are providing for [us]."

Vilma Estela, Chicken Entrepreneur, El Espino, El Salvador

Currently, ENLACE works in over 240 communities in El Salvador with an area of impact of 250,000 people. Like Paula, Rosemary and Vilma Estela, there are many more small-scale farmers and entrepreneurs that need affordable loans and business training.

Since 1999 the credit union has lent over 4.4 million dollars to close to 4,000 clients. Last year alone, CREDATEC lent $360,044 with a 97% repayment rate. There is a sizable and growing demand for micro-loans in El Salvador.

This year, CREDATEC is actively looking for more partners. The credit union would like to provide an additional $100,000 in loans and business training to more than 150 small scale farmers and entrepreneurs.

CREDATEC, ENLACE & Local Churches: A Network of Trust Brings Hope

Through the strategic connection between the partnership of the local church, ENLACE and CREDATEC, trust is built (LINK for "trust is built": ) and people are forging new futures.

For Paula, the changes have not only included increased income and family cohesion but also hope.

"For us, the change has been very big...economically... [And]...we are more united as a family. There are times that my husband and I go out to the coop just to talk and have fun with the chickens. That’s when we make future plans and dream of a new life together as a family."

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