HomeNewsBriefMicrofinance Programs Fight Back Against Loan Sharks in Colombia
BRIEF

Microfinance Programs Fight Back Against Loan Sharks in Colombia

COLOMBIA / 26 NOV 2020 BY VINICIUS MADUREIRA EN

A local government in Colombia is offering small, low-interest loans to people struggling to make ends meet in the coronavirus pandemic, to help steer them away from one of Colombia’s oldest criminal economies – “gota a gota” loansharking.

The northern Cesar department has made about $850,000 available to 3,000 microentrepreneurs in sectors like food, shoes, clothing and stationary to try to keep illegal lending at bay, El Tiempo reported. Named after the way in which victims are slowly bled dry of funds, the “gota a gota,” or “drop by drop,” tactic consists of lending small sums of money at interest rates as high as 800 percent per year to people who cannot obtain formal loans.

The Cesar government’s loans range from 200,000 to 2 million pesos ($55 to $550) and have an interest rate of 1.6 percent per month. The loans can be repaid over three years.

SEE ALSO: Colombia's Gota a Gota Loan Sharks Exploit Chile Market

When Cesar Governor Luis Alberto Monsalvo announced the lending program, he said the loans were a way to “attack gota a gota,” which “afflicts so many small shopkeepers.”

The lending program was launched in Bosconia, a municipality in the north of Cesar home to hundreds of small businesses impacted by the pandemic. According to the mayor, unemployment has increased to above 30 percent this year.

By mid-November, 30 loans worth 45 million pesos (about $12,400) had been extended in the town. The program is expected to expand to 24 municipalities within the Caribbean department.

InSight Crime Analysis

A small loan program like that offered by the government of Cesar has shown some success in the Colombian city where gota a gota was born: Medellín.

Gota a gota first took hold in Medellín in the 1990s, as a way to launder drug trafficking proceeds, Connectas reported in a recent investigation into the practice. Now up to 2.8 billion (about $800,000) are moved daily in Colombia through such networks, according to a study by the Universidad Central de Bogota.

The practice has also become one of Colombia’s most successful criminal exports. In recent years, Colombian mafia groups have been accused of running gota a gota schemes in Brazil, Chile, Peru and Mexico. According to Connectas, gota a gota loansharking operations have been found in at least 16 countries.

SEE ALSO: Colombian Loan Sharks Expanding Internationally

Law enforcement has found gota a gota especially difficult to stamp out in Colombia, because the cash is often a lifeline to the many shop owners and people that operate in the informal economy.

For this reason, in 2017, Medellín built a novel microlending program known as Bancuadra, where borrowers form “trust networks” of five to 19 people. Usually made up of family, friends, or neighbors, each network member received cash that could go to business or household expenses.

The loans ranged from 200,000 to 1.8 million pesos ($55 to $500) at extremely low interest. The network prohibited taking out further loans until all members had settled their debts.

By the end of 2019, the program had loaned 3.4 billion pesos (about $950,000) to some 2,900 communal networks, benefiting more than 14,000 people in Medellín, according to a city government news release. The Medellín program had also reduced borrowers’ use of illegal loans, according to a study by researchers at Medellin’s EAFIT University.

share icon icon icon

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

What are your thoughts? Click here to send InSight Crime your comments.

We encourage readers to copy and distribute our work for non-commercial purposes, with attribution to InSight Crime in the byline and links to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

Related Content

COCAINE / 22 JUL 2019

US Coast Guard members intercepted a “narco-submarine” carrying 7,700 kilograms of cocaine as it raced through the Pacific Ocean, underscoring…

COLOMBIA / 4 OCT 2019

The tense calm that had persisted for six years in the town of Bello, near Medellín in Colombia, has been…

COLOMBIA / 27 OCT 2011

Alonso Salazar, the outgoing mayor of Medellin, has repeatedly accused a leading candidate in the upcoming elections of associating with…

About InSight Crime

THE ORGANIZATION

Who Are Memo Fantasma and Sergio Roberto de Carvalho?

24 JUN 2022

Inside the criminal career of Memo Fantasma  In March 2020, InSight Crime revealed the identity and whereabouts of Memo Fantasma, a paramilitary commander and drug trafficker living in…

THE ORGANIZATION

Environmental and Academic Praise

17 JUN 2022

InSight Crime’s six-part series on the plunder of the Peruvian Amazon continues to inform the debate on environmental security in the region. Our Environmental Crimes Project Manager, María Fernanda Ramírez,…

LA ORGANIZACIÓN

Series on Plunder of Peru’s Amazon Makes Headlines

10 JUN 2022

Since launching on June 2, InSight Crime’s six-part series on environmental crime in Peru’s Amazon has been well-received. Detailing the shocking impunity enjoyed by those plundering the rainforest, the investigation…

THE ORGANIZATION

Duarte’s Death Makes Waves

3 JUN 2022

The announcement of the death of Gentil Duarte, one of the top dissident commanders of the defunct Revolutionary Armed Forces of Colombia (FARC), continues to reverberate in Venezuela and Colombia.

THE ORGANIZATION

Cattle Trafficking Acclaim, Investigation into Peru’s Amazon 

27 MAY 2022

On May 18, InSight Crime launched its most recent investigation into cattle trafficking between Central America and Mexico. It showed precisely how beef, illicitly produced in Honduras, Guatemala…