Dominican Republic is considered an island paradise, but behind the serene visions, more than 60 percent of its 8.5 million people live in poverty. Over one third are unable to cover even their basic food requirements. A ten-hour-shift in the sugar-cane fields yields barely $4. For poor Dominican households, there are limited opportunities to create better life for their families. Microfinance development programs offer hope to these poor, but there is clear need of expansion as microfinance only reaches about 6% of all poor households, even fewer in rural areas.
In 2003, at the invitation of the Bank of Reserves of the Dominican Republic, Grameen Foundation USA (GF-USA) was asked to explore the possibility of developing a microfinance program in the country, based on Grameen philosophy. Through a selection process involving 25 institutions, GF-USA and the Bank of Reserves evaluated 9 of the most promising NGOs for initiating a fast track expansion. Esperanza International obtained the highest overall rating in key areas of program evaluation.
In fall 2003, the Executive Director and other top managers of Esperanza were invited to Grameen Bank in Bangladesh, to study its operational systems as a means of strengthening their current program. Their group lending program had begun in 1997, and was serving 2,800 clients. In early 2004, H.A. Shah Newaz, a Deputy General Manager of Grameen Bank and a technical advisor to Esperanza contracted to serve as resident technical advisor for the project, and Andrea Findley, GF-USA Country Representative, worked with Esperanza to define their 5-year expansion plan to reach over 23,000 households.
Esperanza began this expansion in May 2004, and by the end of the year had increased its outreach to 1,339 new clients. Cumulative disbursements totaled US$235,000, and active loan portfolio was about US$125,000. On-time repayment remains high at 99.6%, and more than US$15,000 has been deposited in savings by new members since May.
The Dominican Republic context is unique in two respects. First, there are many single mothers in the country. Many Dominican men leave their partners after having children, and families among the rural poor comprise on average 5-6 members. Another feature is that there are many immigrants from Haiti, both legal and illegal, who are interested in receiving microcredit, because they are among the poorest in the country. Many have lived in the Dominican Republic for more than 20 years, but they do not have citizenship in the country and face fierce discrimination. Single mothers and Haitian immigrants thus form an important target group for the project.
Borrowers of Esperanza at a Group Meeting
A Big Opportunity for Esperanza
Since initiating the expansion, Esperanza has had the fastest growth of any of GF-USA’s Latin American partners. Four new offices have been established in the eastern part of the country and a total of 12 full-time credit advisors are forming groups daily. The fast track approach, if funded adequately, is expected to lead to extensive outreach and sustainability in a short period. The dedication of its leadership, coupled with hands-on technical assistance and support from GF-USA, has produced significant improvements in overall operations.
Based on its five-year business plan, Esperanza will strive to serve nearly 10,000 total active clients by the end of 2005 and 22,500 by end of 2008. In total, US$ 4.3 million will be needed for this rapid expansion plan; of this, US$ 1.4 million for 2005 alone. Esperanza is looking for potential funders. This is an excellent opportunity for individuals and institutions to become significant stakeholders in a promising pro-poor MFI in the Dominican Republic.
Report by H.A. Shah Newaz and Andrea Findley, technical advisors of GF-USA at Esperanza International