MEXICO - It was hard to believe, as we were still hours from the nearest town, but there they were: billboard after billboard advertising banks, cluttering the bumpy, potholed roads of rural Mexico. As it turns out, banks are the hot-ticket item out here, and competition is fierce. New banks are opening at a rapid pace, and those already existing are always crowded with patrons waiting in long lines to use the services. But why are remote areas, defined by their failing economies, seeing such a sudden explosion of banking services? Because of remittances: the steady flow of money coming into Mexico from migrants means that people need services that will help them to access and manage their newfound incomes.
It's no wonder that the banking sector has taken an interest. Combine the couple hundred dollars that each migrant sends home to his or her family each month and suddenly, more than $16 billion is flowing into Mexico from workers in the U.S. each year. While this massive sum has grabbed the banking sector's attention, figuring out how to tap into the money has proved challenging. Judging by the remarkable amount of energy and resources that are being poured into the effort, the challenge must be worth overcoming.
AMUCCS (in English, the Mexican Association of Social Sector Credit Unions) is one such organization working on the task, by setting up small rural banks, called Microbancos. The AMUCCS and others creating Microbancos have one goal: to create and sustain a business model that not only offers a valuable and positive social service but is also profitable. Although AMUCCS has focused all its resources on reaching remote communities, making it truly the pioneer of rural banking, it still is only operating about six Microbancos because of the many and varied communication and transportation challenges. With limited resources and a wide array of social and technical obstacles to overcome, AMUCCS has to choose which communities it can most effectively reach.
After chatting with some of the masterminds behind the organization, they offered to take me out to see some of the Microbancos. And since AMUCCS also offers banking services to individuals in communities without banking centers, I was carted off to see how the banks work in these communities as well, and what impact they have.
I arrived at the doorstep of the Microbanco to find it closed for the afternoon lunch break, so I decided to explore the small village center. I hit up the one store in the village for cold water and a snack, escaping the heat of the afternoon momentarily in the cool interior of the concrete building. Later, I approached the second of the town's two dilapidated and largely vacant buildings. The building had no doors, so I could see that inside sat a tall, heavy man in his late 30s. He wore a lightweight plaid cowboy shirt, a worn pair of jeans, and a cowboy hat resting lazily on his head. He was busily pounding away on an old-fashioned manual typewriter.
I quickly learned that he was the community's official leader. One of his main responsibilities during his two-year term was to keep in touch with the community's migrants to the United States and to keep their remittance money flowing. This is where the bank comes in. He explained to me that more than 90 percent of the community members had bank accounts, and nearly all of these people received remittances from their family members abroad directly through the bank. Several families had taken out loans to fix up their houses or buy agricultural inputs. So much of the communities' resources were invested in the bank that the townspeople had even created a rotating calendar of volunteers to hold nightly vigils in front of the office to ensure that it wouldn't be broken into. The bank had changed what it meant to receive and use remittance dollars.
When I returned to the bank later in the afternoon, I was welcomed by the young woman in charge of the small office, one of three employees in the bank. She talked with me for quite some time and explained the bank's services, demonstrating her points with official graphs and charts that she brought up on the screen of her modern computer. While she did so, a number of patrons filed in and out of the office. They picked up forms, asked quick questions, and promised to come back later in the afternoon to finish their business. She was so quick and efficient that I asked her to tell me about her experience prior to this job. She responded with a blank stare: experience? This was the first job that she'd ever had, and before she was recruited for it, she had little idea how banks even worked.
A few days later, an AMUCCS staffperson escorted me to a remote community that had access to banking services but no actual bank. This meant that my escort came to the community once or twice a week to conduct all official business. She carried deposit and withdrawal forms with her and patiently explained and filled them out for each patron in the comfort of their home. She also carried with her the cash that the patrons requested. All members of the community expressed to me the importance of the bank in giving them financial flexibility. Several were in the process of guaranteeing loans for a variety of projects.
Of all of the projects I have observed that tap into remittance dollars for development purposes, the banks do appear the most feasible and appropriate. They provide a useful, convenient, and much-needed service that operates efficiently within the community. They provide basic services, such as savings accounts, to people traditionally excluded from the formal banking system because they live too far away and usually don't have enough money to be thought of as a good investment. Some of the banks have special remittance programs so that migrants in the U.S. can deposit money into accounts that can be directly accessed by the Microbanco in rural Mexico. This reduces the traditionally high transaction fees charged by small check-cashing and money-transfer centers charge, maximizing the economic benefits of sending money home. They also offer small individual and group loans to finance projects and to assist people in making investments. And even though the banking model comes from the bigger cities, AMUCCS hires local people to run their branches, generating the first local job growth many of these communities have seen in years.
Yet I have to wonder about the overall impact of Microbancos. As with the other remittance-funded development projects, I return to the same polemic issue: how can migration, which is the exodus of people, be a sustainable source of development? In this case the banks that act as the catalyst for development, would not exist if not for the money being sent home by migrants. It boils down to the fact that the remittance dollars attract the banks. Once again, for the local community to have a chance to grow, people have to continue to leave. Is this model sustainable for either the community or the bank?
The second problem is the issue of lending. Micro-lending is currently in fashion as an international development tool in part because it kills two birds with one stone: micro-loans empower local people and also offer the opportunity for businesses to make money. As such, banks of all shapes and sizes are increasingly lending small amounts of money to a new market: the poor. Yes, loans give people opportunities, and no, the poor shouldn't be excluded from the chance to make investments, but must all growth, advancement, and progress be based on a foundation of debt? How do we delineate when loans are an opportunity for the borrower, versus when they are simply an opportunity for businesses to make money by exploiting a new and vulnerable population? It just seems a little risky to me: who is protecting and guiding those that are incurring the debt?
My last reservation is about how closely loans can be linked to development. In most cases, the loans are not being used to generate new earning opportunities, but instead to buy a new roof or overhaul a subsistence-agriculture system. When this is the case, the loans are paid back not by new earnings, but rather with the remittances - the same remittances that likely acted as collateral for the loan in the first place.
As with other uses of remittance dollars, I have to wonder if we are appropriately defining problems and using the right tools to solve them. In my next dispatch, which will also be my last, I'll summarize what I think about all I've learned from this summer in Mexico.