THEME: Borrowing for new enterprises is a high risk activity.

The IFAD-supported PROZACHI project (1990-1997) operated in eight municipalities in the departments of Zacapa and Chiquimula in eastern Guatemala. This is a mountainous area of a mixed Chorti (the indigenous group of the region) and Ladino (non-indigenous) population. The project-targeted households are very poor, with an estimated 1986 yearly family income between USD 123 and USD 402. They engage in farming small plots (less than 5 ha of land) with extremely basic tools (hoes, machetes, hatchets and wooden planting sticks). Their main crops are corn, beans and calabash. Little production is marketed. Most households (54.4-65.5%, depending on the area) also have one or more family members engaged in part-time work on big farms. As non-governmental organizations (NGOs) become involved in the area, and market roads and opportunities open up, there is growing recognition of the potential of the population's taking up income-generating activities such as handicrafts and the market production of fruit, vegetables, ornamental plants, spices and herbs.

The principal goal of the PROZACHI project was to increase the production of basic grains. Initially, the project did not focus on women's productive role. But gradually it increased its attention to women, with a special women's component created in 1993. The project also attempted to integrate women as beneficiaries of other project activities, such as financial services. The experience of improving women's access to credit was mixed.

Before the project, the majority of people in the project areas had never had access to formal credit. There were numerous constraints on both the banker and the beneficiary side. As always, lending risk and collateral were issues among the bankers. Among the borrowers, and particularly the women borrowers, some of the problems were: avoidance of borrowing risk and indebtedness, illiteracy, lack of experience in dealing with the bureaucratic procedures of banks, and of lack of the legal documents that banks require.

In all, the project probably had more difficulties than usual in implementing the credit component, particularly in the case of women. The concerns about collateral on the bank side were overcome with the establishment of "solidarity groups", which provided lenders with better guarantees. These solidarity groups did not necessarily have to be engaged in the same project, but could also comprise friends or neighbours of the potential borrowers. The project made special efforts to review loan projects and to integrate women in the Local Communal Credit Committees, by creating a joint leadership between a man and a woman. The project also went to great lengths to help women (and men) obtain legal documentation and to process credit applications.

By the end of 1996, fully 2,448 women had received loans. Most of these loans were smaller than those received by men, as the types of activities planned to be undertaken were also smaller. Some loan projects were apparently successful, but others were not.

• Loans for reduction of domestic workload. Small loans (up to 150 quetzales) were provided for the purchase of more efficient, covered wood-burning stoves, with chimney outlets for smoke, and for buying manual corn-grinders. The study noted the many beneficial features of the new technologies introduced: Women save time on fuelwood collection and the grinding of corn using a stone, and are also spared a great deal of physical discomfort.
• Loans for women's handicrafts activities. Women sometimes took out loans for the purchase of sewing machines or for raw materials used in production of handicrafts (such as hammocks, weaving and straw crafts). The women's organizations that promoted the manufacture of handicrafts marketed them through two stores, one of which was well located at a tourist market in the capital. The project also organized marketing groups and provided useful training on entrepreneurship and marketing. Contrary to what happens under many development projects, there was considerable male support for helping women sell their products.
• Loans for agricultural production. Agricultural loans were not just for vegetable production but also, occasionally, for coffee or corn. This type of loan would be taken out by women who were heads of households or by wives of husbands who were in debt and therefore could not access additional credit in their own names. Prolonged drought became a major constraint on realizing the benefits of investment in fertilizers and pesticides for corn production. A study of the project notes that, unfortunately, most producers also lost money on loans for vegetable production "but not much". Eating fruit and vegetables - previously considered akin to "eating grass" and therefore a sign of poverty - is gaining popularity in the area, thanks to nutrition courses.
• Loans for poultry units. The project promoted the purchase of poultry units (two roosters and ten hens). Under optimal conditions, such hens would produce 100-240 eggs a year. Fully 90% of the units purchased between 1992 and 1996 were done so through credit, and 270 poultry houses were constructed as a result. Unfortunately, the poultry that came from a government farm were not resistant to the harsh local conditions and feed. They developed respiratory problems and diseases such as newcastle and poultry cholera. The project then distributed medicine, coupled with training for the beneficiaries, gradually reducing poultry mortality to 18%.

The key question - and one that is usually not asked, is "was it worth it?" Although the project went to a great deal of effort to facilitate formal credit access for women (and for men), external factors such as climate and disease often undermined the profitability of the loan projects. In other instances, as in the case of improved stoves and corn-grinders, the benefits of credit for women and their families are clearer.

Adapted from:

IFAD, MAGA, Government of the Netherlands. 1998. PROZACHI: The Story of a Development Project among Peasants in Zacapa and Chiquimula. Rome.

IFAD Projects in Guatemala