FIELD Report 8: Migrant-Backed Loans: Mobilizing Remittances for Enterprise Finance

  • Date Posted: November 8, 2010
  • Authors: Diego Aycinena, Dean Yang
  • Organizations: Universidad Francisco Marroquín
  • Document Types: Technical Report
  • Donor Type: US Agency for International Development

It is widely accepted that remittances sent by migrants to their families back home have several beneficial effects, such as helping households out of poverty, improving child school attendance, and facilitating investments. Under FIELD-Support, and with these benefits in mind, the William Davidson Institute’s Migrant-Backed Loan pilot activity was initiated to encourage migrants to send more resources home and to facilitate access to entrepreneurial finance. The new financial product designed in the course of this project, the Migrant-Backed Loan (MBL), made it easier for poor households who want a loan, but do not have adequate collateral, to start a new business or expand an existing business.

In undertaking this initiative, WDI has achieved success on several fronts. First, they facilitated a partnership between two financial institutions, in the US and Guatemala, to design and offer a unique financial product: a migrant-backed small enterprise loan. Second, they collected qualitative and quantitative data from potential customers that confirmed demand for the MBL product and provided insight into the design of the product. Third, they shepherded both partners through the process of offering the first migrant-backed loans and set them on the path towards being able to continue offering them on an ongoing basis. Since both the U.S. and Guatemalan partners plan to continue making migrant backed loans, the project is likely to have a sustained impact beyond the foreseeable future.