Thursday, October 29, 2009

Students and Small Business Owners Learn Together

In a small Honduran Christian high school, students are putting in practice the theory they are learning in class. The students, who are studying business administration, are going out in their community to help their neighbors implement and use basic bookkeeping principles. At the same time that the students help improve business administration, they are learning practicle lessons of how business operate in their community.

In a country where 25% of GDP comes from micro, small and medium size businesses, the sector's importance is well documented, but few have helped improve production and administration of these businesses. The students at El Verbo Christian High School are some of the few who are getting involved in their own community to help improve business administration.

(PICTURED: High school students work with business owners at an accounting workshop)

Thursday, August 13, 2009

Tiny Loans

Like most "Economic Development" organizations, Partners Worldwide supports business lending practices in developing countries, also known as micro finance. An article touched on some of the problems with micro finance in today's edition of The Wall Street Journal. The article, "A Global Surge in Tiny Loans Spurs Credit Bubble in a Slum," highlighted the fact that "lenders are aware that applicants often lie on their paperwork" to be able to get a loan because "many microfinance providers require loans to be used to fund a business." Small business owners make business plans and talk about their vision for their business, only to purchase a television, pay for a wedding or cover medical bills, as seen in the article and the experience of Partners Worldwide in Honduras.

Maria* is the owner of a small store in a marginalized area of Tegucigalpa. While her business was thriving, she took out loans in her "Community Bank." As in most microfinance lending programs, the other members of the bank were cosigners on her loan. Since she had always made payments, Maria was also offered an individual loan on top of her regular four month loans from the "Community Bank."

Individual loans were designed by the organization in Honduras to move people like Maria from the "community bank" so that they would not have a larger loan than the rest of the group combined. Some individual loans use mortgages as collateral, but most have two cosigners. Maria had a loan of $635 in her "Community Bank" and a $1,588 individual loan.

Early last year, Maria became depressed and her business was not open daily during regular business hours. When she was at the doctor, or in her room crying, she lost clients that began walking to other stores to purchase fruits and beans. As her depression was improving, she developed kidney failure and the business closed nearly entirely.

Throughout Maria's treatment, she took money from the business to cover her bills and her husband also took out several loans from various micro finance lenders. They currently owe close to $4,000 and the only income is the $291 that Maria's husband earns monthly as a security guard. To make matters worse, there is no inventory left in the business that was used as the pretext for the loans.

The local Partners Worldwide affiliate has worked with Maria and her husband to consolidate their loans and lower their monthly interest rates. They have plans to get out of debt in two years, but more importantly for everyone is to learn lessons from this case.

There is often more debt being offered to Hondurans than they can manage. Partners Worldwide affiliates are joining a national Credit Bureau to be able to minimize risk for their portfolios and for the clients.

Clients often say they will use a loan for their business, but instead invest in other personal expenses. Doing follow up visits to the business can help assure that clients invest in their business.

Monday, April 20, 2009

Christian Honduran Businesspeople - Experts

What makes Partners Worldwide different from other government and non government efforts to promote business development? Most importantly, Partners Worldwide does not believe that all business growth solutions come from North America.

Honduras is a nation of rich resources. Honduras is a rich nation. Hondurans can grow businesses and the knowledge to do so is currently in Honduras.

Last week a group of eight Christian businesspeople gathered to learn more about Partners Worldwide. I can only imagine what was going through their minds when they learned that we were offering very little to them. Of course there are opportunities for loans, training workshops and the establishment of a business network, but the idea that we offered them was that they had the knowledge needed to help smaller businesses grow. They are the experts.

Partners Worldwide offers a truth that is difficult to grasp due to the long history of donations to the "poor." It does not take a check from a wealthy person with a heart for the downtrodden to start change. Hondurans have started businesses that have grown. Stated differently, Hondurans have business experience, information and knowledge. Hondurans are business experts.

Before the meeting ended last week, it was agreed that we would each invite other business owners to join our network. We hope to grow the number of experts and diversity of business experience so that together we can network and promote business growth. We also had an intentional focus on helping small businesses that are still in the initial start up process.

Please pray for growth, unity and a common goal of showing Christ's love through our ministry. Please pray for understanding that our ministries are our businesses.

Monday, March 23, 2009

NEEDED: Business Mentors

Many Hondurans purchase cars that were damaged or even totaled in the United States, ship them to Honduras, and fix them up. The cars are then sold to the many Hondurans who demand inexpensive transportation. It is a very profitable business because these cars are inexpensive in the United States and labor costs are low in Honduras (minimum wage is $291 per MONTH).

Nasario is a minor player in the North American Car Restoration Industry. He does not travel to the U.S.A. to purchase crashed cars nor does he sell the cars once they have a fresh coat of paint over the area where there previously were dents. He and his employees are the cheap labor that makes this industry possible.

Mr. Nasario is contracted by the person who imports and sells the damaged cars. He is hired make the car look like new. Currently he can do paint jobs and smooth out dents, but does not have the equipment to straighten car frames.

When he has to straighten a car frame, Mr. Nasario must haul the car to a workshop and rent time on the machine. For small dents the cost is $100. When members of the Honduras Pella Affiliate visited Mr. Nasario in early April, he showed us a machine that he could purchase used for $1325.

Our next question, "How often do you rent this machine?"
Answer, "At least 10 times a year."

Mr. Nasario is paying at least $1000 per year to rent usage of the machine (if all ten cars only have only small structural damage). It is fairly safe to say that he has rental costs around $1250 per year.

One possible solution: purchase the machine.

The whole story is that Mr. Nasario rents the space where he works and the machine that he is looking to purchase needs to be anchored in the ground. The investment in the workshop floor is risky since Mr. Nasario could be forced to leave the rented space (and $150 investment in the anchoring the machine) if the owner so desired.

What Mr. Nasario needs is a business mentor who can walk with him while making these decisions. Partners Worldwide has seen businesses grow with the loans that the business owners receive. Business growth, however, seems to take place when there are business contacts, knowledge of markets and good advice. Loans can be a tool to help growth, but only after a good plan has identified where the funds will be invested.

Friday, March 13, 2009

The Price of Food in Honduras

On January 31, 2008, Honduran families of 5 members needed $272.47 to eat for a month. On January 31, 2009, the same Honduran family needed $330.77 to purchase food every month. The spike in prices was caused by historic prices in seed, fertilizer and oil.
The need for a job is great in Honduras. The need for entrepreneurs who create jobs is even greater.

Wednesday, February 18, 2009

Chamba in Honduras: Part 3 Retirement

Juan Ignacio Ortiz, or Don Nacho as his friends call him, is 72 years. He started his car wash and oil change business two years. To Don Nacho, work means retirement security.

The retirement spending of many Hondurans is based completely on the generousity of their children and grandchildren. Since few Hondurans save, no nest egg awaits them when they reach retirement age. Senior Citizens have very limited work opportunities and most banks and NGO lending organizations (micro-finance) see them as high risk clients, thus preventing the possibility of starting a business. Without savings and few opportunities to generate income for themselves, the elderly are dependent on family and friends.

Hondurans is not the only nation with an elderly population that feel hopeless in the face of globalization, cell phones, computers and a world in which both university and high school degrees are listed as job requirements. The government of Chile announced that the nation's economic stimulus program includes subsidies for small businesses that hire citizens age 45 and older who recently lost their job.

In the face of this reality, Mr. Ortiz started his business with the hopes of not becoming a burden on the state nor to his family. He also built four apartments behind his house that rent for $60 each per month. The income that his businesses provide is important in his "retirement years," but the businesses have also provided employment and thus economic security for others.

Mr. Ortiz employs four to six young Hondurans depending on yearly business cycles of the car wash industry. In the waiting area for clients, he allowed a neighbor to set up a cafeteria. Honduran style tacos and home made fruit drinks are sold to hungry clients and car wash employees at lunch time. The cafeteria is another source of employment the Don Nacho's business has helped create.

Don Nacho is always looking to grow his business. He recently purchased an industrial vacuum cleaner and air compressor with a loan from a Partners Worldwide supported organization. (Mr. Ortiz paid off the loan in mid January.) A bucket and sponge car wash costs $2 but Mr. Ortiz can now offer a $4 wash using the power washer and air compressor. Many clients prefer having their car washed in half the time for $4.

For Juan Ignacio Ortiz, work is a retirement fund.

Below: Mr Ortiz during Partners Worldwide visit

Wednesday, February 11, 2009

Chamba in Honduras: Part 2 Social Security

Hector will be six months old later this week. His respond to most questions is a smile and a coo, thus his mother had to explain what work means to little Hector: work means health. To little Hector, when his dad has work, he has health insurance, medication and more peaceful parents.

According to the Labor Code, all employers have to enroll their employees in the Honduran Social Security Institute (IHSS) and children of employees have the right to have coverage until the age of 12. Little Hector’s dad works as a security guard at a government building in Tegucigalpa, Honduras. As long as Hector’s dad has work, Hector will have health insurance.

For many Hondurans, the rewards of having a job are much more than just the salary or payment. A job means health insurance and the opportunity to go to the IHSS hospital. The difference between the IHSS hospital and the general hospital is the attention given to patients, long waits and the availability of medication. Patients can wait up to three years to have an urgent surgery and common cold or flu is rarely treated because of the long wait to see a doctor.

The right to attend the IHSS hospital is a benefit of work that is obtained with employment but is lost when an employee is let go. Every month, employers give their employees an official copy of the IHSS payment receipt. Without this receipt, the employee is not allowed to enter the IHSS hospital for treatment. When someone loses their job, they could at most receive treatment in the IHSS hospital for two months.

Hector has battled dengue fever in recent months. Thanks to the employment of his dad, he is doing better and has received needed medication. To many young Hondurans, work means health insurance.

Wednesday, February 4, 2009

"Chamba" in Honduras: Part 1 Social Racism

(This post is part of the series, "Chamba in Honduras." For more information see Introduction)

Mario is a 27 year old studying education at a public university in Tegucigalpa, Honduras. He says that work means economic stability, a sense of satisfaction, being productive and in his personal case, the absence of depression, economic worries and feeling useless. Mario depends on periodically available painting jobs as his source of income.

Mario knows that his expenses are low; he does not have to pay rent or purchase food because he lives with his parents. When Mario does have work, however, it is expected that he gives something to his parents to help with the household expenses before he can purchase toiletries, books or other expenses related to his studies.

In order to have the flexibility of working in the morning and early afternoon, Mario only registers for evening classes. He says that the majority of his classmates do the same; arriving to classes as the sun goes down, often exhausted from eight hours of work. Only the “children of mami and papi” (daddy’s girl and mama’s boy) have the luxury of studying full time during daytime hours. These privileged few that do not have to work are on the opposite side of a divide Mario calls social racism.

To understand Mario’s contentious statement, it is important to hear his story. Mario lives in a marginal community that could be called a slum. At the age 12, Mario dropped out of school and began using drugs. In order to avoid stealing, Mario worked in anything he could: masonry, welding and finally painting.

Mario’s transformation occurred when God force him to reflect of his past and future. With the help of a local church, he became saved, battled withdrawal and graduated from high school.

Returning to work as a painter was something Mario refused to do for years. Not only to avoid the temptation of using the drugs that his former coworkers would gladly share with him, but also because of the social stereotypes of being a day laborer in dirty cloths. Finally, when potential employers refused him for his auspicious past, Mario was forced to work as a painter once again.

These days, Mario gladly accepts any painting job he is offered and hires former coworkers when more than one person is needed. Some months, he is able to cover the costs of the university and support his family.

Aside from ministering to his former coworkers by giving them work, he is a leader of the youth group in his church, and volunteers at an orphanage outside of Tegucigalpa. However, he continues to be looked down upon not for his past but because of his current employment status.

According to Mario, people are judged first by their social status. Social racism, or prejudice based on socioeconomic class, is as common as racial prejudice was and is in the United States. North Americans might first notice the ethnic features of someone new. Hondurans might first notice the signs of work. Calloused hands, sun tanned skin and the lean build of a worker cannot even be hidden by brand name jeans, shoes and cell phone.

Mario’s dream is to be an English teacher. He wants to help students learn, something he avoided for ten years. He is motivated in his studies by the “social racism” he experiences. If the Lord allows him to join the Honduran professional class, he wants to always be the same Mario. He wants to always treat others equally, regardless of their work.

Monday, February 2, 2009

"Chamba" in Honduras: Introduction

Once a month a segment called "Working" airs on the radio show Marketplace from American Public Radio. The segment focuses on one person and their job. (You can view the entire series and listen to archives by clicking here)

Inspired by the series, we are proud to present a weekly series of posts called "Chamba in Honduras." (In Honduras, Chamba is slang for workin') The posts will appear every Wednesday in February and focus on the lives and work of Hondurans. The series will try to explain what it means to have a job in Honduras.

Workin' Facts

Despite already high unemployment levels in Honduras, experts predict less jobs in 2009. The World Factbook of the CIA estimated that the unemployment rate in Honduras was 27.8% in 2007. According to El Heraldo, one of the daily newspapers of Tegucigalpa, business was slowing down in 2008, evidenced by the layoffs of 20,000 construction workers and between 12,000 and 15,000 workers in the maquilas or garment factories. The business community was shocked on December 27, 2008, when President Jose Manuel Zelaya made official an increase in the minimum monthly wage from $180 (Lps 3,428.40) to $290 (Lps 5,500). Before the law went into effect on January 1, 2009, large personnel cutbacks began. The Honduran Private Business Council (Cohep) estimates that 15,000 Hondurans have been laid off since the announcement. The garment factories were not affected by the new wage because they pay per piecework or factory production. The National Industrial Association (ANDI) predicts cutbacks in the industrial sector of the economy to reach 300,000 Hondurans by the end of 2009.

The National Statistics Institute (INE) reports that Honduras has an active workforce of 3.2 million, of which 650,000 Hondurans have minimum wage jobs.