The Problem Vs The Solution
In Colombia the levels of indebtedness are increasing dramatically in Colombia. According to information from the Bank of the Republic, between 2010 and 2011 the amount disbursed in credits grew by 22%. Almost 16 out of 100 pesos in Colombian households were used to pay loans. Since that study was completed, consumer debt levels have continued to grow by 13.9%. The subsequent evaluation showed that most of this growth occurred in households that already had high levels of debt. Mr. Carlos Gustavo Cano, co-director of the Bank of the Republic, said: “Personally, I am concerned about the publicity that tends to seduce houses at a higher level of debt and this can become a risk for debt stability. financial system if a part of those houses is in economic difficulties “. the need to provide sound financial advice to Colombian families, especially those with lower levels of financial education.
Instead, these people tend to save in their homes in traditional piggy banks or with funds hidden within the home. With the
savings close at hand, it becomes very easy to access the savings and use them
or for other family members to take the funds thus depleting the savings.
The situation of poverty is even higher in the rural areas where 61.2% of rural youth are classified as poor. The study went on to state that 29% of the youth neither study nor work with female youth registering an even higher level of 39%. Unoccupied youth are at a much higher risk of getting involved in illegal activities like gangs, prostitution, terrorist groups and drug consumption and trafficking. Their lack of skill sets and low education levels make for few options for employment.
There is an urgent need to educate the population on the benefits and dangers of the system and how to use it responsibly or offer alternative programs. Additionally, many of the microfinance organizations and formal financial institutions are not able to reach the poorest of the working poor because of misconceptions of the poor, low risk appetites and burdensome methodologies that prohibit these organizations from attending those in greatest need.
Investing Hope is currently working with 1.500
low-income youth and 500 adults in poor communities to increase their financial
awareness, promote a culture of savings and wise money management and encourage
entrepreneurship as a way of increasing income. It incorporates Biblical
principles for money management and social justice for dealing economically
with the poor. The foundation hopes to expand this number to over 2500 individuals
by working with churches, schools and foundations in 4 communities in the next
The program begins with a proposal to the youth or children to start a business partnership. Investing Hope Foundation will invest the training, provide the production and accounting materials. The kids need to put the production labor, the sales, as well as values of responsibility, honesty and commitment to savings. From the first weeks, the kids make products, we record how many they take and inform them of how much money they should bring the next week. They sell them to friends and family members. The following week they pay for the products and put the profit into their savings account. Training is both values based and business related including pricing, marketing, and sales strategies as well as business ethics. As the kids confidence increases, they are able to produce more product and increase their sales and thus their savings.