Microfinance and Guatemalan Emigration

Research shows that the most poor are less likely to migrate to those who are poor but have access to some resources. As Benjamin Helms and David Leblang note:

For countries with low levels of per capita income, we observe little migration due to a liquidity constraint: at this end of the income distribution, individuals do not have sufficient resources to cover even minor costs associated with moving abroad. Increasing income helps to decrease this constraint, and consequently we observe increased levels of emigration as incomes rise.

This excellent Washington Post story shows how U.S.-backed microfinance loans in Guatemala spur people to emigrate.

What enables those payments is a vast system of credit that includes financial institutions set up and supported by the United States and the World Bank, part of the global boom in microfinance over the past two decades. The U.S. government and the World Bank have each extended tens of millions of dollars in funding and loan guarantees, money that helped create what is now Guatemala’s biggest microfinance organization, Fundación Génesis Empresarial, and backed one of its largest banks, Banrural. 

But in Nebaj and communities like it around the country, those financial institutions now serve Guatemalans eager to migrate.

In short, these loans give people in a very poor country access to the necessary resources for emigration. They wouldn't have access otherwise. It would be one thing if they managed to reach and stay in the United States, but often they don't. They end up back in Guatemala and in deep debt, from which they cannot recover.

I am teaching a graduate seminar on U.S.-Latin American relations this semester, and we were just talking about the difficulty of explaining the jump of Central American migrants in 2014. You have to separate constants (i.e. poverty and violence) from variables. This is something that did change.

We also talk about unintended consequences, which are a constant in U.S. policy. Decision-makers routinely fail to see long-term ramifications, some of which should be obvious while others are harder to foresee. In this particular case, microfinance--which does work for some people--just becomes just another hustle.