TEGUCIGALPA — After 15 years in various stages of infancy, a new Honduran company has just taken flight. The Honduran Office of Development of the Social Sector of the Economy officially designated Empressa de Servicios Multiples Mujeres Artesanas Arte y Creatividad (aka Honduras Threads) a “company” under Honduran law, an action which moves the five Honduran Threads co-ops closer to sustainability.
News of the approval came six weeks ago, in time for the Saint Michael Honduras Threads mission trip, which started Sunday June 25, to develop workshops on how to run a company and how to comply with Honduran government regulations. Four parishioners, including Threads leader M’Lou Bancroft, started delivering the workshops on Monday, June 26.
The formal designation of the five Threads co-ops with 45 members is a game changer. In the short term, it will allow the co-ops to gain the necessary documentation to ship their finished product to the U.S. at lower rates. As the Honduran government continues to amp up its tax collection abilities, it will also allow the co-ops to continue purchasing needed supplies without paying exhorbitant sales tax rates. More importantly, it confers the status of legitimacy on the co-ops and its members, status they have never had before. The Honduran government took 14 months to approve the new company. The application was made possible, in part, from donations to Honduras Threads.
In the long term, it will mean significant changes in the way co-op members run their operations. The designation is for one company. Under the 15-year old Honduras Threads umbrella, co-op members have been working in five separate enterprises each attached to the location where the members live and each aligned equally with Honduras Threads. Now, those co-ops become production centers under one company. Two boards of directors (Honduran law requires two) will become responsible for the organization’s success. Activities, including planning and reporting of financials, will be rolled up into one statement to file the appropriate reports to the government. Co-op members become business owners. Honduras Threads will report to the boards of the new company.
The workshops are planned to help co-op members and leaders decide how the new company will work day to day. On Monday, co-op owners settled on a list of core values to guide the company and its officers – loyalty, creativity, cooperation, art, freedom and honesty.
Tuesday, co-op members will decide on functions and roles and who will take on those roles. They will introduce formalized approaches to make lists of urgent tasks and to use scorecards to see trends. The teaching will also focus on making critical process clear and understood by all.
“This is a huge amount of change to absorb all at once, “ said M’Lou. “I expect the training and transition will take place over an extended period of time.”
TEGUCIGALPA – Lizbeth Martell was beaming Tuesday as if she had slayed a dragon. So was Raul Sanchez. Ms. Martell is the director of FUNED, the micro-lending organization which continues to serve clients in part with a $59,000 low-interest loan from Saint Michael and All Angels. Sanchez is the head of Red Katalysis, a consortium of 23 microfinance organizations in Honduras and elsewhere in Central, providing technical assistance to those organizations. Sanchez was the man who led SMAA to FUNED.
Both were beaming because FUNED has substantially improved its record of helping otherwise un-bankable Hondurans to gain loans to start and continue their businesses. “FUNED is one of 15 organizations now in excellent condition,” Sanchez explained. “The situation has improved there substantially.”
Martell rattled off the numbers as if a mother sharing the stats of her star football player son. It used to be the FUNED portfolio was $5 million helping 6,000 clients. Now it’s $19 million helping 19,709. Some 56% of those clients are women, a striking statistic given that women over the years have proven more responsible with loans than men.
FUNED has reached deep into underserved rural areas. A few years ago, the portfolio mix was 70% urban and 30% rural. Now it’s 90% rural. Loans just for agriculture have increased from 15% to 58%. Rural and agriculture loans are some of the most difficult to manage and difficult for poor people to get.
The default rate on loans is substantially lower today – down from 13% to 3.89%. Interest rates are down as well. No longer, Ms. Martell said, is the charge as high as 48%. The rate now averages about 28% with the highest being 36%.
Why such success? To hear Ms. Martell is to understand how an organization’s culture can make a big different. The organization she took over four years ago, suffered from a succession of executive directors none of whom could successfully root out pervasive malfeasance. But “Ms. Martell is a tough women,” said Sanchez.
She discovered, for example, that loan officers provided with motorcycles to make their rounds to visit loan recipients would report their motorcycles missing. The motorcycles would disappear en masse. And no one could explain why. Ms. Martell changed the policy so loan officers purchased their own motorcycles. “All of a sudden,” she said with a broad smile, “the motorcycles stopped disappearing.”
In addition to the culture change, Sanchez highlighted a modestly growing Honduran economy and a better-managed government. While Honduras is still one of the world’s poorest nations with substantial crime problems, Sanchez and Martell agreed the country is experiencing more stability than it has in some time.
With stability, those at the bottom of the economic ladder are having more success. “These are much better times,” Sanchez said. Clearly, the SMAA investment is working.