Background

● Once part of the great Mayan Civilization, Honduras is a developing economy bordered by the
Caribbean Sea to the north and the Pacific Ocean to the south.
● Honduras gained its independence from Spain in 1821 and now uses a democratic style of
government.
● The majority of people in Honduras live in the highlands, and family life is considered very
important.
● A third of the economy in Honduras is derived from agriculture, with coffee being the biggest
export, followed closely by bananas, and many Hondurans practice subsistence farming to
meet daily needs.
● Honduras is known for its diverse landscapes, including beautiful beaches, lush rainforests,
and ancient Mayan ruins.
● Honduras is the second poorest country in Latin America, with over 70% of Hondurans living
below the poverty line. Many Hondurans face challenges in accessing banks or lack the credit
history to obtain loans and the financial capital to support economic mobility.
● Women & children are among the most vulnerable groups in Honduras, facing daily challenges
of food insecurity, health problems, and gender-based violence.
● Many children leave school for work at a very young age to help support their families.
Although school is provided by the government through the 5th grade many children are
unable to attend because their families can not afford uniforms and school supplies.
● According to the World Bank's Human Capital Indicator, a child born in Honduras will be almost
half (48 percent) as economically productive when they grow up than they could be if they
were guaranteed a complete education and health.
● Many people lack access to basic services such as drinking water and electricity, a situation
that has been greatly aggravated due to climate change and related natural disasters.
 Scenario
The COVID-19 pandemic and hurricanes Eta and Iota significantly impacted the Honduran economy
in November, 2020. Social assistance programs had relatively small mitigating impacts due to their
low coverage. During that year, around 400,000 people lost their jobs, and approximately 70 percent
of households reported reduced income, according to high-frequency telephone surveys by the World
Bank.

María Irene resides in one of the areas most affected by Hurricanes Eta and Iota. María Irene is an
entrepreneur and owner of a prosperous pulpería (small general store).

Unfortunately, María Irene lost a large part of her business due to the hurricanes, most of the items in
her home, and the walls of her house cracked and broke. “Those were very tough moments. Here,
nobody expected this…the water was at our waists. We had no choice but to flee, and leave
everything underwater.” María Irene returned to her home after it was safe to begin the process of
cleaning up and to see what she could recover.

Now she wants to reopen her business with the few things she was able to salvage, but she needs
capital to invest to get back to where she was before. She is also fearful that her house may fall down
at any moment due to the structural damage from the storms. Additionally, María Irene needs money
to buy clothing and supplies to send her 3 children back to school, as she knows that finishing school
gives her children the opportunity to break the poverty cycle her family has suffered for generations.

María Irene knows that she can approach an organization called the Adelante Foundation for a loan,
but where should she start? The well-being officers advised her that she could not afford to borrow
enough money to repair her home, send her children back to school and restart her business all at
once. Without business income from the pulpería the family will have to rely on her husband’s income
(he works as a mechanic). Marie Irene's neighbor who used to make tortillas for local stores and
neighbors has fled the area and does not appear to be returning. With nominal supplies and getting
the outdoor oven working, she could feasibly make and earn some nominal income making tortillas.
How would you recommend María Irene proceed?

1. Option A: Apply for an individual loan in the amount of USD$1,500 from Adelante to rebuild
her business, including ordering merchandise and finding a new location for her general store.
Repayment plan for this loan would be $150/month for 10 months. Before Covid-19 she was
securing about $180/month in profits, but this would leave little money left over to buy food and
necessities, but with her husband’s additional anticipated income, not impossible.

2. Option B: Apply for a home improvement loan from Adelante that will allow her to make some
critical structural repairs to her family’s home to ensure it is safe. This loan would be in the
amount of $2,400 and repayment plan would be $200/month over the course of 12 months.
This scenario would require some creative measures by the family to supplement their income
during the rebuilding process.

3. Option C: Apply for an education loan from Adelante to cover school supplies, uniforms and
transportation required to send her children to school. This loan would be in the amount of
USD $150 ($50 for each child). Repayment plan for this loan would be $30/month for five
months.

4. Option D: Other? Is there some other way you think María Irene should plan for rebuilding her
business? It is possible to combine loan options listed above, for example. If so, explain your
detailed suggestion.

* Note: Due to the unique circumstances in Honduras, the microfinance organization is

offering assistance by removing their nominal interest rates and fees.

Consider how your proposed solution follows the S.M.A.R.T. guidelines:

Sustainable
Measurable
Achievable
Realistic
Timebound