Rural revival

In Salinas, the thin air keeps the pace slow. It is Sunday and on this, their only free day of the week, a group of men are found gathered around the football pitch. The game among six young players doesn’t hold their attention. They are mainly talking and laughing together. Up ahead, church bells are ringing. Rain starts to flow from clouds hanging just above the highest point of the church. Neither the men nor the boys seem bothered.

On a day like this it is difficult to imagine that this small city is an economic motor in Bolivár, the province at the heart of Ecuador. But compared with the small towns that are home to only a few farming families, Salinas is a dazzling metropolis in this section of the Andes clamped between the Cotopaxi and Chimborazo peaks, two literal highpoints in the national landscape.

Salinas is the improbable location to which cocoa farmers from the lower sections of Ecuador deliver their organic cocoa beans that are then shipped to Europe as chocolate bars under fair trade conditions. It is also home to a factory that manufactures hundreds of leather footballs for export to neighbouring Peru. Nougat bars are produced here for the national market from locally grown peanuts, honey and sugar. But above all, this is where Ecuador’s best cheese comes from. And they make a lot of it in Salinas. The cheese, just like the completely organic chocolate and nougat, is sold in the country’s major supermarkets.

It is even more difficult to imagine that only 30 years ago Salinas was home to only five farming families that had just about given up on economic advancement. The salt mines – which lie at the origin of the town’s name – barely generated revenue and the prospects were dismal. It looked as if the inhabitants of Salinas had no other choice but to follow so many other villagers making tracks to the city in the hope of finding work.

Urban migration has hit Latin America hard: between 60% and 80% of the area’s population live in cities, according to World Bank calculations, putting this part of the world at the forefront of a global development. The centuries-old phenomenon of urbanisation recently reached a historic climax: the majority of the world’s population now lives in cities. The world has changed from a place where most food was consumed by its producers, into a place where most people work in and around the city in the industrial and services sectors and depend for their food on a minority working in agriculture.

In the West, migration to the city was inspired by opportunities for new economic activities. But, as the persistent unemployment levels can attest to, similar opportunities have failed to materialise in many developing countries. There, urbanisation is the result of people being forced to move because they cannot make enough money to survive in rural areas. Moreover, the sanitary conditions in rural areas are often quite poor, which presents a continual threat to their health. The city beckons as an alternative with a rich potential of wealth and health.

What happened in Salinas over those 30 years that helped the village to buck the global trend? Firstly, a handful of Italian volunteers were persuaded to come help out by a catholic priest who had heard about its struggles. But above all there was financial assistance – and that was remarkable. After all, what bank would have the confidence to loan money to a remote village whose primary source of income had virtually dried up? What bank employee wouldn’t burst out laughing when faced with a couple of uneducated farmers from the Andes coming to ask for a loan that far exceeded the official value of their collateral?

Commercial bank loans are simply not an option for Ecuador’s poor farming families, which make up a substantial portion of the total population. Banks are not willing to run the risk, particularly in light of the continual menace of El Niño and other threats to the harvest. Even if they miraculously were to become interested, farmers would simply be confronted with the next insurmountable hurdle: high interest rates, which are currently running at around 18% in Ecuador. Thus local communities remain trapped in poverty.

But in Ecuador, and elsewhere, there are also organisations that do believe that extending credit to the poor can be profitable. Fondo Ecuatoriano Populorum Progressio (FEPP) is one. This institution issues small loans – microcredits – to people and organisations that are trying to find a way out of poverty. The man that heads FEPP was one of the Italian pioneers that came to Salinas years ago: Jose, or more accurately Guiseppe Tonello. ‘Money is concentrated in the city and people simply travel after the money. Farmers leave their land in the hope of finding work in the city, often in vain.’

Few villagers ever make it past the city’s slums. They often have no education and thus only qualify for the most miserable jobs. In that world, worker’s rights are an unknown phenomenon, which means there is a good chance they will be exploited. As Tonello puts it: ‘Poor people from the villages actually have nothing to offer the city. They simply take their poverty with them, which helps to further impoverish the city.’

The migration trend Tonello speaks of is particularly popular among young people. They are no longer interested in farm life; partly thanks to Coca-Cola and MTV that now reach to the furthest corners of the earth making a radically different lifestyle seem very attractive – and within everybody’s reach. Much to Tonello’s disgust: ‘Television doesn’t show who we really are. We see copies of a lifestyle that fits into the Western urban culture.’ So together with FEPP, Tonello organises courses in rural areas on capacity building and empowerment, Western words that easily roll off Tonello’s tongue.

Tonello sees hope in the growing movement in Latin America of, mainly, young people consciously developing themselves politically and socially. He says that more and more youth are devoting themselves to their country and their community. For example, in Peru the local variety of cola, Inca Kola, is more popular than the American equivalents. Tonello: ‘The same globalisation that is leading the migration from the village to the city and from South to North, has also led to a revival of local culture. I also see countless young people whose basic values include a love of their country and community. And the beautiful thing is that these young people have no affinity with the farmer’s movements of the past 30 years that wanted nothing to do with capitalism. They are realistic. They realise that you need a market to combat poverty. They understand the economic logic.’

In Salinas, Luís Córdova is one such young community leader. He left his native village to study computer science in the capital Quito. He recently returned wearing blue jeans, a black leather jacket and a trendy hat, effectively making him the man in Salinas. Explaining why he decided to come back Córdova says: ‘I want to contribute to the community where I come from.’ He now trains young people in the area to become leaders when they return to their communities, so that the villagers are not swept along in the migration to the city.

Micro-financing institutions such as FEPP can count on moral support from Ecuador’s government. Blanca Guamangate, a senior civil servant in the Ministry of Social Affairs raises her voice as she speaks of the success of microcredit. ‘It represents a boost to wealth and self-confidence, communities take important steps towards supporting themselves and new jobs are created, which means talent doesn’t flee to the city.’ But even an enthusiastic advocate like Guamangate realises that, for the time being, only a fraction of the population is being helped. ‘Microcredit is still in the early stages. We have only planted a seed.’

A few years ago, the World Bank commissioned a study into microcredit’s effectiveness in combating poverty in Bangladesh, where for many years the Grameen Bank has been doing pioneering work involving loans for the poor. The study revealed that microcredit does indeed increase families’ standard of living. The United Nations was also clearly enthusiastic. Microcredit programmes, it said, could make ‘a successful contribution’ to the escape route that frees people from poverty. And, for what it’s worth, 2005 has been declared the ‘Year of Microcredit’. During that year, the aim is for 100 million families worldwide to make use of microcredit.

One of the many organisations that are contributing to achieving that official target is Oikocredit, an international investment fund that gives people in developing countries the opportunity to use credit to pull themselves out of poverty (see below). Lavinia Comacho, Oikocredit’s regional manager for South America, has just returned from an international conference on microcredit, organised by the World Bank and USAid, the American development organisation. It is good that these institutions are getting involved with the issue, says the Chilean economist, but: ‘what a shame that they are only talking about issuing loans in the cities. As if there are no neglected rural areas.’

After studying in the United States and Great Britain Camacho worked as an agricultural advisor for various United Nations institutions in Brazil, Paraguay, Peru and her native Chile. She has been working for Oikocredit for 12 years, and she is definitely planning to take the idea a step further, to the rural areas. ‘Farmers cannot develop themselves,’ Camacho explains. ‘They have not been educated and, according to commercial banks in the city, they are not creditworthy. But if, for example, farmers were to shell, roast or store their products themselves, this could be a great contribution to employment in the local community. The farmers could get much better prices than they do now. That’s why Salinas was able to succeed. The people in Salinas had the opportunity to build their own machines and produce finished products instead of only supplying the raw materials.’

In Quito, Camacho shows why she believes using microcredit in the city is not a sustainable solution. We pay a visit to Fulvia Dolores Trujillo, who has her own shop in the crowded southern part of the city. She wedges three chairs in between the three-litre soda bottles and large jars of sweets. All her life Trujillo worked as a maid for a wealthy family, she tells us. But as a single mother she barely earned enough to support her family. Her life changed when she heard about Corfec, a micro-financing institution that primarily issues small loans to women so they can set up their own business. She used a preliminary loan of around 600 euros to start her own food shop. Four other women, who also received a small loan from Corfec, stood surety for her. Within six months, the loan was repaid. Two loans later, Trujillo has expanded her activities by adding a barbecue so she could sell roast chicken in the late evenings.

‘A wonderful success story, isn’t it?’ says Camacho as we leave the shop. ‘But did you notice something? We talked for 45 minutes and not one customer entered the shop.’

Which is not surprising. The street where Trujillo has her shop appears to be crammed with similar shops. ‘That’s the problem in the city,’ according to Camacho. ‘People who get a loan often do the same thing. They start the umpteenth sweet shop or yet another hair salon where there are already so many. They all compete with one another. That doesn’t bode well for the future.’

But Camacho says there is one institution that in fact issues more microcredits in local communities than cities: CrediMujer in neighbouring Peru. Which becomes our next destination.

In Lima, the capital of Peru, we meet Gloria Diaz Campoblanco, the manager of CrediMujer. She has just returned from visiting her clients in what are sometimes inhospitable areas. ‘Some villages are an 80-hour drive from the provincial capital,’ Campoblanco sighs and her expression reveals that this work is true madness. ‘That means high costs for travel, but also for insurance, because the chance of a robbery is higher in those parts of the country.’ Twice a year she sets off on these long journeys and now she is behind her desk sorting out her mixed feelings: tired from a long trip, relieved to have returned safely, inspired by the improvements she has seen once again in the villages. Villages that now have electricity, families that are now able to send one of their children to school, houses which now have a stone floor.

CrediMujer – which is part of Manuela Ramos, an organisation that has been fighting for women’s rights for 25 years – considers it an important goal to issue loans in these mountain villages in particular. Two-thirds of the US$1.5 million in loans issued by CrediMujer go to villages in the jungle and Peru’s Andes mountain area, while only one-third are issued in cities. CrediMujer staff, all of whom are women, travel to villages throughout the country to spread information about their work. CrediMujer grants loans for as little as 300 and as much as 1,700 solas (70 to 400 euros). A group of at least 20 villagers must unite to stand surety for the loan. The villagers can use the money to buy more chickens or pigs, for example, so that there is more and better quality food available. A regional supervisor acts as their primary contact if problems arise.

The Spanish word for woman, ‘mujer’, inspired the organisation’s name and indeed women form the majority of the client base of this micro-financing institution. ‘Women, more than men, have a long-term perspective,’ Campoblanco explains, ‘which allows them to estimate which expenditures are ultimately better for the development of their family.’ In other words: women don’t spend the money on alcohol.

Campoblanco underlines another positive effect. ‘Microcredit strengthens women’s self-confidence. They often think they are incapable of taking on financial responsibilities, but once women get the chance, they always develop in positive ways. Because the extra income means their family can eat better and has money to upgrade the house, they flourish in their role. They have won a victory for themselves and are proud of it. And rightly so.’

CrediMujer has some 450 village banks, which means that at least 10,000 families are directly supported by microcredit. The loan must be repaid within six months, at 4% interest in the villages, which it is in 90% of cases. CrediMujer is doing better than other micro-financing institutions, which are also – albeit more cautiously – issuing their first loans outside the cities. ‘We are different from them,’ says Campoblanco, ‘because we have an intimate relationship with our clients and because we realise that microcredit alone is never enough to strengthen the position of local communities and because we also offer courses in management skills and legal aid.’

‘There are high costs involved with bringing microcredit to local communities,’ Campoblanco concludes, ‘but it is our mission to be sustainable, to want change. To achieve this, you cannot simply just seek out the poor people in the cities, but in fact you must go to the local communities so the problems in the city don’t further increase.’

Oikocredit
The projects described in this article were partly financed by Oikocredit, an international social-ethical investment fund that is world renowned as a leading provider of development credit. Investors – private, institutional and churches – receive limited dividends (a maximum of 2%) but they see the value of the greater ‘social return’.

Phyllis Wanjiku Kibui, the newly elected chairwoman of Oikocredit who works for the micro-financing institution Women’s World Banking, has a special memory of the success of microcredit. She was visiting a woman who lived in the slums of Nairobi, the capital of Kenya. It was a ‘mud house’; there was nothing but sand because she had no money. Wanjiku Kibui sat on the floor to explain the concept of microcredit to her. The woman received a minimum US$70-loan, which allowed her to make a major leap forwards. The next time Wanjiku Kibui came to visit, there were chairs. And the third time the woman offered her not water but tea, served in new teacups at a large table.

Wanjiku Kibui: ‘The fact that some economists say the success of microcredit cannot be measured is not to say it has no effect. They just can’t always calculate it. But what difference does that make to anyone when the living conditions of such a woman – and of her children – have improved for good?’

For more information: Oikocredit, Tesselschadelaan 4, 3818 WD Amersfoort, The Netherlands, Tel.: +31 33 422 40 40, Fax: +31 33 465 03 36, info@oikocredit.org, www.oikocredit.org.