By Xavier Martin
This blog was originally posted in Spanish in the Prosavings program blog.
This is the story of Miguel and surely of many other microentrepreneurs that use financial services in the region and dream of a better future. I heard this story from Miguel himself, as he drove me to the airport following my presentation at Foromic on commitment savings and what microfinance clients want. Miguel let me know what he wanted.
Miguel at 43 years old is a taxi driver in Guadalajara. He does not own the taxi he drives. Each day he pays roughly US$26 to the car’s owner, whether he uses the car or not. His wife Alejandra is a bookkeeper and is just starting to work. Miguel’s family has been growing; he has three children and the two eldest want to have their own room. Years ago Miguel purchased some land which he now wants to use to build a house.
In order to do so, Miguel and his wife are participating in a savings group with ten relatives. The savings quota is US$75 per month. They have taken over two quotas each, meaning that every month their contribution to the savings group totals US$300 per month. They have selected to be the last of the group to withdraw US$3,000 (savings). Their plan is to combine this amount with a loan they will take out from another savings group, in which they will select the first turn to withdraw (credit) and thus, accumulate a total US$6,000 by combining informal savings and credit that will allow them to build their home.
Miguel is happy to participate in a savings group because he knows that if someone in the group has a problem or becomes unemployed, this person can rely on money from the savings group by having his turn to withdraw moved up (the savings group works as an insurance as well as savings and credit).
Miguel also uses another savings method. He takes a small blank business card and every time he makes a trip worth over US$4 he draws a short line. At the end of the day he counts the lines and separates US$1.00 for every three lines. He saves this money at home in order to cover his Christmas expenses.
He also has a Bancomer credit card. He uses it for basic expenses, for clothes, or when the family eats out. Every time he pays with the card he saves the receipt and when he gets home he saves the amount spent in cash in a box. He uses this amount to pay his credit card at the end of the month. Usually he tries to pay it all off, but he often carries a balance and he does not know how much he is paying in interest.
Miguel and Alejandra would like to buy a taxi. He has done some research and the license plate should cost him US$4,500. To purchase the car he would need an extra US$12,150, since in the areas he works it is important to have an air-conditioned vehicle in good condition.
He would like to take out a loan, but he has never done it. He doesn’t even know where to ask for one, though he plans to stop by Bancomer one of these days to inquire.Years ago he opened a savings account at a popular savings bank, but he closed it angered by the commissions that ate up much of his savings.
Arriving at the airport, Miguel turns to me for advice. "Should I buy the car? Where should I request a loan? Should I save some money beforehand? I did not have all the answers, but I immediately thought – perhaps an instution that is closer to people like Miguel, that offered a good commitment savings product linked to a loan, would help him buy a taxi. It would be a good product for thousands of people in similar situations to that of Miguel.