Rural Community Finance. Global Interconnectedness. Investing in a Prosperous Future for Guatemala.
Fueling the Entrepreneurial Spirit in the Developing World
Pajebal, Inc. is a U.S. 501(c)3 non-profit organization
Frequently Asked Questions
What is Pajebal's Mission and Vision? To significantly improve the level of
economic development and standard of living of the poorer, rural regions of western
Guatemala, with an emphasis on sound business management and intelligent use of capital.
This is accomplished through: 1) The guidance of volunteers from developed nations and
educated and dedicated Guatemalan nationals, working with less formally educated
managers and employees of small and medium-sized Guatemalan enterprises, transferring
skills through on-the-ground training and advising, to enable continued sustainable
development; and 2) Providing low-interest, fair financing—originating from
individual U.S. lenders such as yourself—to sound and potential-infused small
businesses and entrepreneurs of indigenous, western Guatemala.
How do I lend to Pajebal? Go to the See the Loans page and lend online with your
debit/credit card, or by sending a check, to support the small business of your choice. By
clicking on the LEND bar above the loan video you will be guided with instructions on how
to lend online, or how to lend with a check.
How long is the loan term? Loan terms can be for one, two, three, or four years
depending on the small business loan. Below each small business video on the See the Loans
page the term length will appear. However, you may lend for a longer period if you desire.
Note that since Pajebal supplies the funds in Guatemala for the loan before the loan is
posted to this website, the term end date is not determined by the exact date that you lend,
but rather is predetermined. For example: if the original term in Guatemala is, say, two
years, by the time the loan is posted on this website the payback date will be a little bit less
than two years from the website posting day (and from the day that you actually lend
For more information, see the section How Pajebal Works.
Is the term listed online the exact term for that particular borrower in
Guatemala? Not exactly. These term lengths online represent Pajebal's term with our
cooperative Local Field Partners in order to supply or reintegrate funds for that particular
loan, not the term of the cooperative's loan to the end borrower (meaning the cooperative
could have actually extended the loan before Pajebal supplied the funds, after Pajebal
supplied the funds, or on the exact same day that Pajebal supplied the funds. The funds
however are always linked for to the specific loan you choose, even though the term end
dates of you and the end borrower do not exactly coincide).
For more information, see the section How Pajebal Works.
Is there a minimum or maximum amount I can lend? The minimum loan
amount is $250. There is no maximum amount you can lend.
Will I receive any interest? Pajebal does not currently pay interest.
Does Pajebal lend directly to the entrepreneurs and small businesses we see
in the videos? Not exactly. Pajebal partners with two nationally registered Guatemalan
savings and loan cooperatives: La Cooperativa Integral de Ahorro y Crédito Pajebal,
(CODICAP), R. L., and Xe-Ixtamayac, R. L. The cooperatives, in conjunction with Pajebal,
analyze their loan solicitations, and Pajebal then funds the cooperatives for specific loans
that are most in accordance with Pajebal's development vision. Pajebal then posts videos of
these entrepreneurs and small businesses on the Pajebal website. Thus, Pajebal funds are
legally lent to the cooperatives, however the funds are directly channeled to specific
business borrowers that Pajebal has approved.
At what interest rates do the cooperatives lend? CODICAP currently lends at 24%
annual interest over the current loan balance, and Xe-Ixtamayac at 26%, all paid in
Aren't the 24-26% interest rates that the cooperatives lend at still quite
high? Local micro and small project finance institutions around the globe typically have
interest rates in the 15% to 30% range. This is mainly due to the high relative cost of
individually servicing many smaller loans. Although Pajebal typically looks to support
small projects, as opposed to micro projects, these loans are still small enough to lead to
high overall servicing costs for the institutions. Also, the majority of the loans of Pajebal's
Local Field Partners are not specifically funded by Pajebal, and those include both small
and micro projects, which determine the overall institutional interest rate.
Pajebal represents one of the cheapest financing options for the cooperatives, and thus
through increased Pajebal lender support we can further reduce interest rates to
At what interest rate does Pajebal lend to the cooperatives? Pajebal currently
lends to the cooperatives at 6%. This may be lowered depending upon how much money
Pajebal is able to raise. However, the interest rate will never be raised beyond 6%. Pajebal’s
interest spread is used to cover various overhead costs such as international wire costs,
lawyer and accountant fees, fundraising expenses, rent, online bank account fees, website
server fee, online credit/debit card processing fees, and the salaries of our Guatemala
associates. We encourage donations to Pajebal so we can cover these costs without solely
relying on the interest paid by the Guatemalan cooperatives, and thus lower their rate not
too far down the road.
Financing at 6% and under is considered quite cheap in the Guatemalan cooperative-
Will the project ever make money off of poor people? No. Pajebal is a 501(c)3
nonprofit organization, and will conduct our operations to the highest of moral standards
and legal soundness. End of the year tax returns (form 990) will be made public.
Do the borrowers pay back well? The most commonly used method to calculate
default rate is to compare how much principal should have been paid back to how much
principal has in fact been paid back. In the five year history of the cooperative CODICAP
(as of November 30th, 2009), of the 13,274,506 quetzals ($1,609,031) that they have had
programmed to receive in principal payback, they have so far received 12,398,212
quetzals ($1,502,814). That’s a 93.4% recovery rate, and thus a 6.6% default rate.
Please note CODICAP counts each late monthly payment as being in default if it is more
than 30 days late, even if there is considerable time left on the total loan term. This
practice is a way of being more on top of the late-paying tendencies of certain clients and
confronting the issue, at the very least from an internal awareness and discourse
perspective, from the get-go.
Furthermore, note that not one penny of principal is considered paid down until all interest
due on that date is first paid.
Are the loans collateralized? Yes. The absolute maximum amount of each loan is 75%
of the value to the collateralized property. This is a good way of assuring that the borrower
realizes psychologically that the responsibility of debt is a serious issue. A foreclosure
process would only be an extreme final option in the case of gross negligence— not making
any payments whatsoever for over a year. Initiating legal proceeding with a particular
borrower is a decision of the cooperatives, not of Pajebal.
Very few loans are close to as high as that 75%, and thus we have sufficient cushion for
changes in home and land prices.
Pajebal and the cooperatives ascribe to a more old school banking philosophy in which we
take a conservative approach to lending-amount thresholds. Furthermore, before
extending a loan, we first get to personally know our clients, and we work one-on-one with
them in both times of prosperity, and times of hardship.
My knowledge of “micro finance” is that it consists of loans of a maximum of
a few hundred dollars extended to women’s entrepreneurial groups. Is this
what Pajebal and the cooperatives do? Although Pajebal does in fact lend such
micro funds to female entrepreneurs through the cooperatives, Pajebal's loans are not
exclusively such. Pajebal lends to various entrepreneurial and business projects for both
men and women, and we are also not opposed to lending for rural business projects that
may or may not meet one’s definition of “micro.” Thus we prefer to be seen as a rural
development finance institution rather than a micro finance one, even though almost all of
our loans up to this point would be considered small by U.S. business-lending standards.
The idea is that we want to consider the varied spectrum of different development requests
for financial backing, and after hearing them and analyzing them, determine if the financing
and pay back is feasible, and if they will realistically lead to improved economic
development and increased standards of living in the community. For more information,
please see the section What Makes Pajebal Different.
What happens if the exchange rate changes between the dollar and local
currency during the loan term? Your loan will be managed by Pajebal in U.S.
dollars. This is to say that our loan contracts in Guatemala are denominated in U.S.
dollars, a legal currency there, and we always return your principal in dollars if you choose
Are there any costs to be covered by or contributions required of myself, the
lender? No. However you certainly may choose to donate to Pajebal either in addition
to lending, or as an alternative to lending. Donations will go to cover operational expenses
so that we can provide our training and advising services on the ground in Guatemala.
Are loans to Pajebal tax-deductable? For those only lending money, not donating it,
there is no tax-deductibility because there is an expected payback. Concerning donations,
Pajebal is denominated as a 501(c)3 nonprofit federal tax-exempt organization by the IRS,
and all donations are tax-deductible.
Learn more about donating by clicking here.
Who can I contact if I have further questions?
Where does the name Pajebal come from? Pajebal is the old indigenous K'iche'
Maya name for the village the cooperative CODICAP is located in.
Where exactly is the cooperative CODICAP located? Aldea Vásquez,