A Contribution to the Empirics of Micro Credit.Evidence from AlSol,in Chiapas México.docVIP

A Contribution to the Empirics of Micro Credit.Evidence from AlSol,in Chiapas México Justin GrimmerGrimmerj@wabash.eduWabash College.wabash.eduA Contribution to the Empirics of Micro Credit.Evidence from AlSol, in Chiapas MéxicoJustin Grimmer and1Gustavo BarbozaAbstract:This paper analyzes the ALSOL micro credit firm in San Cristobal de Las Casas, Chiapas,Mexico. This micro credit bank is a Grameen style bank, employing join liability loans in an attemptto alleviate poverty among female participants. We construct payment indicators, in order todetermine the financial viability of the ALSOL bank, and to assess differences in repaymentbehavior. Fieldwork at the ALSOL site includes the construction of a consistent data set andinterviews with program participants.Our results show that ALSOL has a high rate of repayment. Urban participants have ahigh repayment rate and tend to not carry arrears, while those in the rural community have a lowerrate of repayment and tend to carry arrears. We hypothesize that proximity to the market is aprimary factor that causes the urban/ rural difference.I. IntroductionMicro credit, or the lending of small loans (some as small as $50 USD), has beenhailed as a new solution to the problem of poverty. Supporters of Micro credit assert thatthe programs are both self-sustaining and effective as a means of raising participant’sstandard of living. Along with this praise has been a vast increase in the number of micro 1 Wabash College and the University of South Dakota, respectively. This version February 2004. We arethankful to Dr Humberto Barreto of the Wabash College Economics Department for help in writing theMacros used to analyze our data set. We are also greatly thankful to David and Nancy Orr and the RoggeMemorial Fund for financial and logistics support. The staffs of ALSOL, especially Claudio Rovelo, PilarGarcia, Katia Castro, and the promotors were of the utmost assistance.