US embassy cable - 05TEGUCIGALPA2491

UNCLAS TEGUCIGALPA 002491 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, EB/IFD, AND A/OPR/OS/CS 
STATE PASS OPIC FOR Richard Greenburg, Loren Rodwin 
 
E.O. 12958: N/A 
TAGS: ECON, AMGT, HO, OPIC 
SUBJECT: Honduras:  Post Supports Microfinance International 
Corporation OPIC Application 
 
REF: State 221168 
 
1.  Summary:  Post strongly supports MFIC USD 4 million 
request in OPIC financing to support its lending program for 
Microfinancial institutions, and USAID continues to work 
with all three prospective partner organizations of Finsol, 
Banhcafe, and ODEF.  Post looks forward to learning more of 
possible synergies between this OPIC project and ongoing 
USAID micro and rural microfinance projects.  End Summary. 
 
2.  USAID has worked in the past with each of MFIC's three 
prospective partner institutions and expects to continue to 
work with them in the future.  Further, USAID Honduras knows 
the management and lending programs of each of these three 
institutions and finds them sound. 
 
3.  FINSOL and ODEF are regulated microfinancial NGOs, and 
are leaders in the Honduran microfinance industry. USAID has 
provided support to both institutions with good results, and 
has seen an increase in their number of clients and a 
decrease in their arrears rate.  Currently, ODEF has 13,500 
borrowers, and a current rate of arrears of 5 percent. 
Eighty-one percent of loans are destined for commercial 
activities, two percent for industrial activities, eight 
percent for services, and nine percent for agricultural 
activities. 
 
4.  FINSOL is also commercially oriented, with a portfolio 
of ninety percent commercial loans and 10 percent industrial 
and agricultural loans.  They currently have 17,615 
borrowers, and an arrears rate of 8 percent.  Finsol's 
President and Executive Director met with Econ/Comm section, 
and participated in a conference call with Loren Rodwin on 
November 5 to discuss OPIC financing for microfinance 
institutions. 
 
5.  BANHCAFE is the only Honduran bank with a specialized 
microenterprise department, and is looking for additional 
market niches  - particularly as they face increasing 
competition from new foreign banks that have begun 
operations in Honduras, such as Cuscatlan and Lafise. 
BANHCAFE began its microenterprise activities after 
receiving technical assistance from USAID in 1999. 
 
6.  There is a good market for microfinance in Honduras, 
given the levels of unemployment and limited long term 
financing available for entrepreneurial activity. 
Competition in this sector is also rising, as several NGOs 
are launching microfinance programs.  The microlending 
sector is primarily (sixty percent) composed of self- 
employed women in their mid-thirties.  They are often the 
head of the household, and rely on their microbusiness for 
income.  These small and medium enterprises (SMEs) are a 
very important segment of the Honduran economy, generating 
employment for approximately 760,000 people (forty percent 
of the economically active population).  Most are engaged in 
commercial activities, such as microgroceries (the 
pulperias), used clothing, and small cafeterias.  Others are 
engaged in small manufacturing activities in areas such as 
food products, furniture, shoes, sewing shops, and 
metalworking.  About seven percent are engaged in service- 
related activities, such as electrical repair shops, 
automotive after-market services, and beauty salons.  Most 
SMEs are located in the urban areas of Francisco Morazn, 
Corts, Comayagua, and Choluteca. 
 
7.  Post looks forward to learning more details about 
MFIC/OPIC's program with them and evaluating how we can work 
with them in the future, especially for rural lending to 
small and micro rural enterprises.  Any details on MFIC's 
specific objectives and lending terms with these three 
Honduran microfinance lending institutions would be greatly 
appreciated.  Post thanks OPIC for its ongoing information 
n 
and updates on projects in Honduras, and looks forward to 
continued cooperation. 
 
Ford