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News tagged as "microcredit"
November 21, 2013

The first microcredit adapted to the needs of small farmers in the Dominican Republic

Tags: rural microcredit, agricultural microcredit, Dominican Republic | by Manuel Sena, Fundacion CODESPA delegate in the Caribbean

Aware of the vulnerability of the agricultural sector in the Dominican Republic, which represents 16% of GDP, our local partner - ADOPEM Bank, member of the BBVA Microfinance Foundation -, took the first steps in 2008 to meet the demand for microcredit in this economic sector.

It was in 2010 when, with our support and AECID’s, the Bank designed a specific microcredit product adapted to the particularities of the agricultural sector and small farmers, according to the different production cycles and revenue streams, and therefore allowing, among others, full payment of the loan right after the harvest period.

 

Fuente: Fundación CODESPA

The pilot was developed in the province of San Juan de la Maguana in the Southern Region of the Dominican Republic, and allowed us to validate and adjust the product prior to its commercial launching.

The main problem we encountered was that policies, procedures, and the information system were specialized in meeting the credit demand in the commercial and service sectors, characterized by short term product cycles, regular income streams and capability to pay monthly loan fees. We also found that there was a lack of expertise in managing agricultural loans. These issues were also addressed for improvement.

By June 2013, the rural loan portfolio originated within the project reached USD 6.5 million and more than 12,000 microfinance loans. The agricultural loan portfolio reached over USD 2.5 million and more than 4,100 microloans.

Read more

November 13, 2013

The role of inclusive finance

Tags: microcredit, over indebtedness | by David Díaz de Quijano i Barbero, OikoCredit Catalunya

Why is microfinance so important and why does it works?

Anton Simanowitz, renowned British academic and specialist working with Oikocredit, gives us a great understanding of how the microfinance industry works, and the basis for it to have a positive impact in society.



In this interesting interview with Simanowitz on microcredits, he tells us that the ultimate goal of microfinance is to provide financial services to those people who are excluded from conventional financing channels. Thus, microcredits play a key role in providing the necessary resources when they are most needed, under appropriate and adapted conditions to the borrower, taking always into account the situation of uncertainty and unpredictability under which most of the target groups usually live.
 
Given the challenges presented by overindebtedness episodes, Simanowitz advocates a thoughtful and responsible use of microfinance, emphasizing the fact that its mere use doesn't erradicate poverty, but using this financial product along with a conscious choice of groups and their potential to pay back the amounts borrowed.

 

Microfinance client Valdomero Vizueto, with loan officer Marcelo Guamán, from credit cooperative COAC Fernando Daquilema, in Ecuador

Finally, Simanowitz presents the fundamental basis to stimulate the potential of microfinance: (i) extensive knowledge of the real needs of the clients, as well as (ii) a thorough screening and selection processes in place. Additionally, he emphasizes the importance of microfinance institutions being flexible, agile, tolerant and understanding towards their clientes, particularly in situations of default and higher risk cases.

 Read the whole interview to Simanowitz in Oikocredit's website
September 26, 2013

Microcredit in kind: an opportunity for the most excluded rural communities

Tags: microcredit in kind, micro farm, Haiti, revolving fund, access to credit, food security, farming tools bank | by Linda Facchinetti, Director Fundacion Nantik Lum

Noel Clautide lives in a mud house with a tin roof in a small rural village in the municipality of Balan, Haiti. She is a widow and has eight children. Five of them are deaf and mute and share their mother´s house with their own children. Their husbands abandoned them because of their disability. In Balan, as in most rural dwellings in Haiti, communities do not have access to water, electricity or proper sanitation services nor the local government has a plan to improve the current situation. In October 2012, Noel Clautide and her family survived hurricane Isaac and managed to save their house from collapsing thanks to a wooden pole borrowed from a neighbour. What is the opportunity that access to microcredit generates for women forgotten and in need like Noel Clautide?

(Photo: Noel Clautide with Beneco Enecia, head of Cedeso) 

The condition of extreme vulnerability of these women makes it necessary the use microcredits in kind, a new tool which consists in delivering directly to them consumer goods, tools, seeds or animals which have been previously selected and purchased in the local markets.

Microcredits in kind are especially effective when employed with very vulnerable populations who are not able to cater for their families´ basic needs or who do not have sufficient resources or knowledge to travel to the local market and purchase the goods they need to develop their micro businesses. 

Through the microcredit facility in kind, Noel Clautide received three goats which she raised for consumption and trade. Another 162 women participated to the initiative. They received goats and/or green beans seeds following approval of their application by the credit committee whose members are local communities leaders supported and trained by local professionals. 

One of the key objectives of this project consisted in providing food security to rural families in extreme poverty. Another stated objective was the generation of income through the sale of products from the micro farms in order to ensure their sustainability, thus improving the living conditions of the communities in the West Department of Haiti.

(Photo: first delivery of green beans seeds) 

Access to credit in kind works like an injection of capital in a farm so that, after several production cycles, the farmer is able to pay back in kind to the Fund the credit received (plus an ´interest´, also in kind). The monies accumulated may thus be disbursed as new micro credits in kind to other families in the community. This process achieves the constant rotation of the Fund. In order to maximize the impact of the Fund in the long term, the Haiti project included not only access to credit but also support to community-based organization and its leadership in the decisions relating the management of the Fund in kind so that this activity may be taken over by the communities without the need for constant external technical assistance.

In addition, we also worked to advance participants’ technical knowledge through training courses on farming techniques and small farms management with the objective to improve farmers’ skills in these areas. We must also remember that progress in the self awareness and empowerment of the women who participated to this action and who fulfill a triple role as mothers, workers and active participants to community life, represents a key strengthening factor for them as it helps them become agents for change and of community development. 

(Foto: protect banner in creole, Balan school)

After over twelve months since this proyect was launched, we can already detect two important signs of success. Firstly, more that forty farmers have applied for their second microcredit in kind; secondly, and not less important, the project has secured additional funding to set up a Farming Tools Bank which will rotate amongst the micro farms who have received a microcredit in kind, applying the same methodology. 

Through access to a microcredit along with training in Haiti, we can deliver opportunities to resolute and hard working women like Noel Clautide, who are the first to get up and the last ones to go to bed.  Stronger community awareness, social cohesion and socio-economic inclusion of women and their families represent some of the positive outcomes of micro finance. Noel Clautide is very special, but there are millions of stories of women who possess the abilities and who long for helping their families and communities but lack the opportunity. Micro credits in kind are the solution for many of them. 

This project and the Agricultural Tools Bank were managed by Fundaciòn Nantik Lum. Both initiatives were made possible by the generosity of Clifford Chance and the collaboration of the Haitian-Dominican NGO Cedeso.

March 14, 2013

Building trust: a basic asset to the community. A role to be played by NGO’s

Tags: microcredit, Angola, post-conflict states, trust | by Ana Fonseca- Habitafrica National Coordinator, Angola, Cristina Navarrete- Project Technician at Habitafrica and Jose Maria Malletan Perez- quality control and systems department at Habitafrica

The community, its basic habitat environment that feeds society, is its basic pillar and its main asset.

It is in these terms that we made a presentation at the Microcredit world Summit held in Valladolid in 2011. At that point in time, the Spanish risk premium was starting to be noticed and its consequences felt; this reality is much more present in countries were NGO's are working, in places that are affected by political instability, war conflicts, natural calamities and many more other situations that perpetuate them in being underdeveloped.

It is in this reality where the NGO's intervene, by promoting the training of men and women, improving the capacity of the youth, supporting the construction of infrastructure, developing community networks as well as supporting the economic and financial strengthening. In all our interventions we should start from a basic element: planning, the organisation of material and human resources in order to achieve objectives that will allow the communities own development.

Land use Management and Town Planning are our organisation main expertise. Nevertheless we also implement rotational funds actions, managed by the organisations that we collaborate with. We work together with regulated Microfinance Institutions organisations that manage and strengthen the funds to empower the community development. Therefore, our main aim is to build a basic environment from where the community can develop on its own.

In this work philosophy, the development of a microfinance environment is a key element to promote and finance the needed actions. On this line of work, firstly, our aim is to help communities to build trustful relationships within themselves  – in several cases affected either by war or displaced, as it happens in Angola or Mozambique; in other cases that have limited access to resources as Senegal, Mali or Niger; or, in other environments or societies that are more developed like in Morocco, but also affected by poverty.

After that trust is built, we aim for the creation, grow and strengthening of habits, know-how and knowledge – educating the society on how to handle financial tools, contemplating either credit and saving tools. Our goal in these places is not the construction of large volume portfolio micro-finance entities, nor looking at large economic efficiency ratios, but we aim to create a secure environment to live in, to work in, with its education, health, as well as with production and exchange of goods and services as basic livelihood elements.

In order to be able to continue with production and basic trade activities, financial support is needed, but in environments where they are at risk and in an unpredictable state, micro financing solutions do not seem to guarantee, initially, the implementation of a sustainable microfinance entity, but the establishment of rotational funds would have a guarantee, where the main guarantee is the community itself and its trust on it.

In this regard, the work and role that social agents play is crucial. The social agents should play the role of a “credit agent” in its initial status, with low number of clients, since the main efforts should be to promote and establish trust among community inhabitants. They should also train them in new saving and credit habits, as well as favour their social and personal growth, so that in this way it can enable the economic development of their family units, that would eventually in the future promote the development of their communities and cities. They would be the main engines of this development economies and later evolving into emerging and self-reliant economies.

We would like to highlight as a case study the Damba Maria Neighbourhood, in the city of Benguela, Angola. Habitafrica foundation has been working in this neighbourhood almost 10 years, since the civil war ended. In an environment with displaced people, we have promoted land use management, education and economic development services, through social agents that have implemented microcredit activities among economic entities in the neighbourhood, with a refund rate of more than 98%. At this point in time, it is being moved to the community perusing its economic sustainability.

 

 

Small trade stalls at a informal market in the Damba Maria Neighborhood- Benguela

 

This would be the reality that we would like to highlight, that working in small micro-economic sectors we can promote the creation of a basic asset in any type of economy, and the trust of their inhabitants, that would favour the inhabitants social development in developing countries and of the less favoured or excluded communities in more developed economic   sectors, with the aim of becoming self-reliant in every aspect, including the economic one.

Initiative financed by: Initiative financed by AECID
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