The pandemic hit Jorge Luis with two major setbacks: not only did construction work come to a halt, directly impacting his construction supplier business, his father was also diagnosed with cancer. Just as his income plummeted, his expenses also shot out of control. To pay for treatment for his father and care for his family, Jorge Luis needed to take money out of his business. His tone of voice indicates just how difficult a time it was as he says, “There wasn’t money coming in, and expenses were also high; as head of household, there are many who depend on you…the business really suffered.” As the pandemic progressed, Jorge Luis shrunk his business from four locations to two, sold four of his five trucks, downsized his team, and sold his excavator, thereby ending that line of business. “There were Saturdays when we earned just 100 pesos. You can imagine trying to cover expenses for the family on just that,” he says.
Jorge Luis’ business sells construction materials in Querétaro, Mexico. Before the pandemic, he sold construction materials in bulk to engineers and architects. He was able to sell in bulk because he had plenty of inventory between his four outlets and sufficient logistical capabilities to get materials when and where clients needed them. He provided many of these supplies on credit, knowing that construction schedules must move ahead even when cash is slow for builders. “The faster I can provide, the more I sell. Having inventory is really about service levels and being able to provide clients with a high level of service,” he says.
However, with slowdowns in sales and bills due, he no longer had liquidity to offer clients. His own suppliers, who used to offer him flexible payment schedules, also faced the same constraints. Liquidity dried up across the sector, and many like Jorge Luis were forced to liquidate assets and downsize. He remembers, “Suppliers that used to give me credit could not anymore.” He found that the few suppliers willing to offer credit were charging such high rates that would eat the bulk of his profit margin; the only way to stay competitive was to purchase in cash and pay for inventory upfront.
He finally caught a break when his supplier, Deposito San Francisco, introduced him to Caja Bienestar. Since Jorge Luis formerly depended on credit from Deposito San Francisco, they knew he would be a good candidate for the financial institution. Caja Bienestar gave him the credit needed to replenish his stockrooms as Jorge Luis noticed business was starting to pick up again. He was able to purchase supplies from San Francisco at advantageous prices, improving his competitiveness in the market. With stock on his shelves, Jorge Luis was again able to meet his customers’ needs and even order more when he didn’t have the relevant materials in stock. He says, “When we could fill the bodega, I first felt we would get out of this. We were finally able to do that with the money from Bienestar. I can get through slow days without feeling anxious. I know that Bienestar supports me and is by my side.”
Times have changed at Jorge Luis’ shop. Now, the shop is bustling with customers again. Between big orders and small orders, he has what he needs to fill them all on the spot. He says things have turned around, and now he is focused on rebuilding, “I want to open more outlets again and provide faster service to customers. The feeling of relief is enormous.”
To develop financial services that improve financial health for low-income people, Accion Global Advisory Solutions, with support from MetLife Foundation, partnered with financial service providers like Caja Bienestar. Read more about the insights we learned from this project in our new paper, How providers can build products that improve financial health: Examples from Mexico and Chile.