Project Awarded for Guatemalan Remittance Pilot Study
December 2008
DCS will team up again with the Academy for Educational Development (AED) under the FIELD-LWA framework in Guatemala.
DCS will manage the work of two professors from the Gerald R. Ford School of Public Policy and Department of Economics, University of Michigan, the Universidad Francisco Marroquín in Guatemala as well as the Banco Industrial on a one-year project funded by the Agency for International Development (USAID) to design and test an innovative financial facility that allows Guatemalan migrants in the U.S. to act as guarantors for micro and small enterprise loans in their homeland.
The approach involves allowing migrants in the United States to set up special savings accounts that serve as collateral for a micro-enterprise loan in Guatemala. The accounts would be set up in a home-country financial institution.
Loans would be extended to a borrower in the home country designated by the migrant in an amount greater than the amount placed in the special loan account. The fraction of the loan amount that the migrant would provide would be determined in consultation with the bank, but would ideally be in the range of 25-75 percent. Once the loan is repaid, the special loan account funds would be unfrozen.
The unremitted earnings of international migrants from poor countries are a vast potential source of capital for lenders in the developing world.