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A major program of ICDI is providing micro loans to farmers and small business men and women in the area. About 25 loans have been made in aggregate of over ,000, most of these loans going to farmers, but we have made a few loans for expanding or even starting small businesses.
The loans are provided at low interest rates (8.5% or lower), compared to rates well above 20% from banks in Turrialba. All interest earned is reinvested in ICDI to provide future loans.
Those receiving loans are referred to as “agribusiness partners,” and to date all loans are paying on schedule, though we make a few consessions on loan payment dates depending on when the harvest is ready. The loans are uncollateralized and no payment is due until after harvest.
This contrasts sharply to bank loans, which require collateral and monthly amortization. Additionally, farmers borrowing from banks must borrow much more than needed so they have funds to make the first several months of payments before their crops are harvested.
The ICDI partners borrow money primarily for clearing land, planting, and maintaining and harvesting their crops. Partners can use funds to pay workers on the land, which can include those requesting the loans themselves. This is an important component of ICDI’s program as, without this, the farmers would not be able to dedicate time to their farms as they would not have the cash flow to support their families until harvest.
The loans are structured as personal loans from Dr. Alekcey Murillo, whom ICDI supports, thus eliminating the need to create a community bank and saving ICDI significant legal costs. Personal loans are more likely to be repaid than bank loans, as none of the farmers wants to be the first to default. They view themselves as true partners, and they protect the partnership, making sure only those who have shown themselves to be responsible in maintaining their land receive loans.
In early 2011, officials from the Costa Rican Department of Agriculture visited this area and expressed amazement at how much better maintained the farms were from the last time they visited. When they asked the farmers the reason for this tranformatiom, the farmers replied with great pride that it was the agribusiness partnerships through ICDI.
In 2011 the program reached a critical juncture where new loads are now being funded by repayments from partners on previous loans. This means the program has reached an important self-sustaining point. As a result, we have branched out to a community nearby, Grano de Oro, from where we have already added a few new partners.
We are looking into many other opportunities in the area, but are taking it slowly to let the program mature at a manageable pace.