Costa Rica: Tropical Paradise?

By Gabriel Francis, Kiva Fellow class 12 in Costa Rica

When asked what they think of Costa Rica most people usually refer to the poster in their local travel agency, white palm beaches, virgin cloud forests, and toucans. Yet, there is a side of Costa Rica that the tour packages pouring out of San Jose regrettably fail to recount. The truth is, while eco-tourism and liberal trade agreements have brought prosperity to some in Costa Rica, many Ticos still live below the poverty line.

Is ignorance bliss? We Kiva Lenders know better.

Why you should lend in Costa Rica

As a Kiva Fellow, I was placed with one of Kiva’s Field Partners to provide support and transparency into the money lending process. As you may know, all entrepreneurs on Kiva’s web site are supported by local Field Partners, or micro-finance institutions (MFIs) like FUDECOSUR, who are Kiva’s liaison between Kiva lenders and Kiva borrowers in southern Costa Rica. They choose which of their clients are eligible to receive Kiva support, write and upload business profiles, disburse loans, collect payments, write journal updates, and respond to lender comments. Currently, FUDECOSUR is one of three MFIs in Costa Rica and the only to focus exclusively on Costa Rica’s impoverished agricultural region.

Southern Costa Rica is ripe for micro-finance innovation. For a majority of FUDECOSUR’s clients their Kiva loan is the first loan they have ever received, and in some cases ever qualified for. Despite an abundance of national banking options and agricultural credit unions in the area most loan terms are too steep to afford and bank branches too difficult to reach over the muddy unpaved roads. FUDECOSUR specifically tailors its loans to serve this marginalized client base. By operating on a village banking model FUDECOSUR empowers local communities to manage their own credit resources. With your neighbor as local banker, barriers to affordable credit are significantly lowered. Village banking also creates a bond of trust in these farming communities between the organization and its users, ensuring decision-making starts at the community level. As a non-profit organization all interest payments to this partner go to extending new credit opportunities to these local banks and providing additional educational services such as computer classes. To further facilitate its agricultural clients FUDECOSUR often extends longer than average loan terms, so that when a plague or heavy rains destroy the harvest, farmers have some flexibility in payment.

Riding around in FUDECOSUR’s four wheel car over the past three months, I have interviewed over one hundred Kiva borrowers and visited nearly all of its 41 village banks. Since FUDECOSUR is a new Kiva partner and still in pilot phase a majority of my work has been spent on ensuring they are prepared to scale with a Kiva funding increase. In addition to process refinement and borrower interviews, I have also compiled several Social Impact studies to measure FUDECOSUR’s success in their mission to alleviate poverty. The results have been heart-warming.

Recently, Melvin, an entrepreneur in Santa Rosa de Brunca who took out a Kiva loan to purchase two cows, told me that he has really seen a difference in his community since FUDECOSUR came to town. The people have hope he says. Just by looking around he can see a difference. Houses are well kept and children go to school rather than work in their family’s fields. Melvin then wondered out loud if Kiva lenders would like to help his community finance a potable water system, which they are in the process of building.

Client Profile: Doña Maria and her pigs

The Executive Director of FUDECOSUR, Leonardo, often starts off his meetings with local village banks by telling the story of a butterfly farm.

“Imagine,” he says, “if at every birthday celebration, graduation, or religious ceremony if people let out butterflies! Wouldn’t it be beautiful? A room full of butterflies swirling about in the warm air to complement the happiness of the occasion? All we need are you to be the butterfly farmers.”

Butterflies of all colors, shapes, and sizes are abundant in Costa Rica but most importantly this kind of radical thinking exemplifies the utopian ideal we chase in micro-finance: new economic activity created where there once was none. So it is truly remarkable when such a case is found.

Doña Maria is one of the spunkiest 76 year old women I have ever met. A few years ago Maria’s partner, who is 77, grew tired of trekking about in the hills of his coffee fields. The work is hard and at his age he didn’t feel like battling the mud, the rain, and the ant nests to pick the ripe red berries. So Doña Maria had the innovative idea to create something out of nothing. She decided to build a pig farm.

Maria noticed that people in her village often travelled to the nearby town of Pejibeye to purchase their meat. Very few of her neighbors raised their own pigs and no butcher shop existed in her village. With a Kiva loan of $1,200 Doña Maria purchased six piglets and built a pig sty behind her house. Within six months from her loan date these pigs had already birthed 18 babies, a return of 300% on her original investment. If only my own investments showed such quick returns! Her neighbors quickly started placing bids for her pigs rather than travel all the way to neighboring town. By now Maria has a healthy business that help her and her partner earn a steady income without having to crawl around in the coffee fields. When Don Gerardo, a loan officer of FUDECOSUR, and I first met Maria she was out in knee high rubber boots and an umbrella feeding her pigs despite the heavy rains. Don Gerardo noted that he hopes he shows such initiative at that age. Who wouldn’t agree?

Doña Maria’s case is only one of many example I have witnessed during my time in Southern Costa Rica. Despite popular opinion, most poor people work hard and when given an opportunity to improve themselves, they take it. Truly, the power of inclusive financial services like micro-credit is astonishing.

Of course, not every story turns out with a happy ending. Every once in a while I interview a borrower where things haven’t gone so well. Like Keilyn of China Kichá who took out a Kiva loan to finance her father’s grocery store. Within several short months of taking the loan Keilyn lost over $3,000 from bad customers who failed to pay grocery bills made on credit. When her father became ill and required two consecutive surgeries Keilyn found herself burdened with debts beyond her means and was forced to close the store. She and her father count on the sale of the house they live in to cover her Kiva loan payments. Though few and far between stories like this are humbling reminders that although micro-finance is a valuable service it is not magic. After all, this is still real life.

The Rain in San Isidro

Here in southern Costa Rica the rainy season is in full swing. I think I’ve seen more rain in the past few months than I have in the past three years combined. It rains every day all day without fail and often hard enough to turn the street outside my tiny apartment in San Isidro into a full fledged river. Although it will be a relief to see some sunshine, I have to admit that I will miss the sound of rain clattering against my tin roof. The droning wash puts me to sleep at night and a warm metallic ping is my natural alarm clock in the morning.

Despite these miserable conditions the farmers of Costa Rica press on. Every day trucks loaded with bright red berries from the recent coffee harvest roll through town, leaving behind a syrupy scent that is unique to the area. It seems almost surreal that soon after my Kiva Fellowship ends those beans will follow me overseas to be ground into a dark cup for my daily coffee. As I walk among the fierce skyscrapers of the Manhattan skyline I will be more thankful than ever for the sacrifices it took to get those beans there, for the farmers of the Brunca Region of Costa Rica to which I owe an unforgettable three months, and to you, the Kiva Lenders, who are making it all possible.

On behalf of the Kiva Fellows and the entrepreneurs of the Brunca Region of Costa Rica thank you for being a Kiva Lender. Together, may we find sustainable solutions to poverty and facilitate development world-wide.

Lend to a Costa Rican Entrepreneur today!

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UPDATE: Tomorrow Friday, October 23rd, 2010 I will host a one time personal interview with Leonardo, Executive Director of FUDECOSUR to be published on the official Kiva Fellows blog. If you have ever had a burning question about how micro-finance works in the real world or a specific questions for this partner, now is your chance. Please use this Google Moderator page to submit and vote on questions: http://www.google.com/moderator/#16/e=35f62

Gabriel Francis is a Kiva Fellow in Costa Rica. He will soon be trading his rain-forest for the concrete jungle of New York City.