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CRECER: The video report!

July 11, 2009 | Comments Off | Enterprises, Videos

CRECER (Credito Con Educacion Rural) is a microfinance institution based in La Paz, Bolivia that focuses its activities on the development of rural communities in Bolivia. Using the “Village Banking” model, CRECER offers financial services combined with education programs to the most destitute Bolivian women. Changing the lives of more than 97,000 families, CRECER aims to build a financial network that the people at the base of the pyramid can access.

For more info, read the CRECER profile

Fair Street - Crecer from Angalio Productions on Vimeo.

Our sixth company visit takes place in La Paz, Bolivia where we have been warmly welcomed by the staff of CRECER, a microfinance institution. After a very interesting interview with CRECER’s management team, we went to “El Alto”, the poorest neighbourhood of La Paz, to meet microentrepreneurs and observe CRECER’s work on the field.

Problematic and context:

Providing access to capital to the people at the base of the pyramid is a key element to help them in getting out of poverty. Whereas the majority of the most destitute depends on loan-sharks that charge interest rates close to 10% per month, an access to credit at decent interest rates is a first step in their economic development.

Before the invention of microcredit at the end of the 70’s, the poorest populations in the developing countries could not have access to traditional credit as they could not comply with the lending conditions of the traditional financial institutions (proper ID, warranty, minimal deposit…). In addition, their financial needs were too limited to cover the cost of a classic financial operation and therefore did not appear as an attractive segment. Nevertheless, in most cases, these people owned small income generating activities but could not expand them as they lacked access to capital. In Bolivia, where 60% of the population lives under the poverty line, it meant that more than half the country could not develop an economic activity.

The apparition of microcredit allowed poor families to obtain small credits. Whereas traditional banks had always considered the poorest as insolvent, the reimbursement rate went over 95%. As a profitable industry generating a positive social impact, microcredit has met a skyrocketing growth in the last decades. From microcredit, it has enlarged to microfinance and now offers the marginalised populations a range of diversified financial services (credit, savings, insurance…)

Microfinance mainly targets women for two main reasons. Firstly, it has been proved that the impact of microfinance on the whole family is stronger when the loan is given to the woman. Secondly, as we already mentioned it in our reporting on Coronilla, women discrimination is a widespread phenomenon in Bolivia. They are still the target of domestic violence and do not enjoy the same level of recognition than the men. If it is encouraging to see that this situation has significantly improved in the last years, a lot still needs to be done.

The company:

CRECER (Credito Con Education Rural) is a microfinance institution that focuses its activities on the development of rural communities of Bolivia. Today, the company has more than 90.000 clients in the different Bolivian departments.

CRECER uses the “Village Banking” model. Concretely, CRECER works with “bancos communales” (village banks) constituted of groups of 8 to 30 women. CRECER’s credits to these “banco communales” can reach $800 but generally are around $300-$400. The members of the group self-manage the credits they receive and split the credit among themselves in function of their needs. However, whereas the women split the loan among themselves, the group shares the responsibility as a whole.

In addition to its banking operations, the innovation that makes CRECER special (even if it is not the only MFI to function this way) is that its financial services go hand in hand with an education program. All the women that receive CRECER’s loans have to attend training sessions that are aimed to enable them to better manage their microenteprise but also to deal better with other aspects of their daily lives such as health, children education, women rights…

This combination of financial and educational services is at the heart of CRECER’s model. People at CRECER are convinced that the association of these two activities is the best way to reach a sustainable rural development. In addition, with regards to their pure financial performance, they are convinced that the education program has a positive influence on the reimbursement rate.

Within its financial services, CRECER has recently started to offer individual credits and micro insurances. Up to now, these products have met great success. CRECER also gives a strong importance to the savings services; the members of the “bancos communales” must indeed save a part of the revenues they generate so as to have saved 20 to 50% of their initial credit at the end of the credit cycle. This obligation has two objectives: on the one hand, it constitutes an additional insurance for CRECER to be reimbursed and on the other hand, it teaches women how to better manage their patrimony.

Social Impact:

CRECER, by providing capital to more than 97.000 families has a positive impact in different ways.

Firstly, by offering credit and insurance services, CRECER enables the most destitute to be less vulnerable to external shocks. These populations are indeed particularly sensitive to events such as an illness, robbery, earthquake… as they have huge consequences on the families and their limited financial resources. Without efficient financial services, these families are brought down to a level of poverty from which they can take years to recover. In this case, CRECER’ services represent a safety net for these families that helps them in facing bad times with more serenity.

Secondly, by allowing thousands of women to become economic actors, Crecer enables them to empower, to affirm themselves and to increase their influence within society.

By providing credit, CRECER helps the poorest in developing their activity and therefore increasing the revenues they get out of it. This has a positive effect on food security, education, health and increases the probability that they can get out of poverty.

Through its association of financial and education services, CRECER increases the knowledge of many women in Bolivia which has a positive effect on the way they manage their household and educate their children. The trainings on savings combined with the obligation to save at least 20% of the amount they borrowed makes women aware of this matter and forces them to manage their budget on a conservative way.

Finally, at the macro level, CRECER’s actions also stimulate job creation and the integration of new actors into the economic system.

Financial impact:

As the majority of the MFIs, CRECER benefits from the support of several financial actors. Generally, these financial institutions are actors from the “North” that want to finance MFIs from the “South”. The close to perfect reimbursement rate and the professional management of MFIs are attractive arguments for investors. In addition, the reduced amount of intermediaries enables to generate a direct impact on the living conditions of the people at the BoP.

CRECER is supported by different Investment Funds (Oikocredit, Incofin, Alterfin, Blue Orchard,). In this case, Fair Street focused on the financial support it received from Alterfin a Belgian organisation and Blue Orchard, a Swiss organisation. As the demand for microloans is huge and the need for development urging in Bolivia, the support of such institutions enables CRECER to grow rapidly and serve a higher amount of clients while not endangering its solidity. Within CRECER, the impact is of such external investors is considerable as each $500,000 loan enables them to reach 1.200 additional families.

Alterfin is a Belgian Social Investment Fund that mainly invests in MFIs and cooperatives. Alterfin has provided two credits to CRECER at the LIBOR rate +3%: one of $600.000 and another of $700.000. Alterfin was one of the first organisations to support CRECER.

Blue Orchard is the largest financing institution for MFIs worldwide. It is based in Geneva, Switzerland and has recently invested in CRECER through a $2m loan (biggest loan CRECER has ever received). This loan has a 3 years period. Given the size of Blue Orchard and the size of its loans, CRECER hopes this collaboration will last long in the future.

Throughout the years, CRECER achieved to position itself as a solid and professional institution. As it received an A- rating and different awards for its strong social impact, it represents a very attractive target for the funds mentioned here above. CRECER will soon expand its offer to credit cards and savings management to build a financial network that is even more accessible for the socially and economically destitute people.

After the fascinating discovery of the solar cookers, Fair Street made a second reporting in Cochabamba, Bolivia. We had indeed the chance to meet Martha Wille who manages Coronilla, a family business created more than 40 years ago. Through her actions, Martha made of Coronilla the perfect example of a company that beneficiates to all the actors of its value chain.

Problematic and context:

Coronilla addresses problematic that are directly linked to the political and social situation of Bolivia. Even if a progressive opening to market economy has improved the economic situation of the country, Bolivia remains today the poorest country in South America with strong inequalities between urban areas where 60% of the population is poor and rural areas where this figure rises to 80%.

The bad living conditions of the Amerindians (60% of the total population) is one of the main issues in Bolivia. Evo Morales’ accession to power triggered a lot of hope among this segment of the Bolivian population. Nevertheless, many still live in precarious conditions. As homeland for the majority of the Indian population, the Bolivian Altiplano, region of high plateau at heights of more than 3000 meters is particularly poor. There, people essentially live from agriculture, first sector of activity of the country, and earn unstable and little wages.

If it is the case of many poor countries, the situation of women in Bolivia is particularly worrying. In the 90s’, this problem was even considered as one of the plagues of the country. A study made in 1994 showed that close to 70% of the women endured domestic violence. Today, Bolivian women still suffer important discrimination compared to men. With their main task being house caring, they have a limited economic power and are therefore strongly depending on their husband. This isolation, combined to wife-beating prevents women from taking part to the development as they are too busy defending themselves.

At the root of the women marginalisation stands their low level of instruction that reduces their emancipation possibilities.

Fortunately, in the last 10 years, the situation of women has become a central preoccupation in Bolivia and many initiatives and laws that aim at improving their situation have appeared but a lot still needs to be made.

The company:

Founded in 1972 by Guillermo Wille, Coronilla has been a pasta producing company from its beginning. In the mid-90s’, the export market strongly contracted, putting the enterprise close to bankruptcy. Martha Wille, daughter of Guillermo Wille redynamised the company by diversifying the product range. If Guillermo Wille already paid attention to the well being of its employees, it is with Wartha that the second life of Coronilla as a social enterprise really started. Today, the company produces pastas and snacks mixing quinoa and a traditional andine cereal that makes them gluten-free.

Coronilla wants to fight poverty by having a positive impact throughout its value chain. As CSR (Corporate Social Responsability) is a relatively unknown concept in South America (even less in Bolivia), Coronilla wants to be a pioneer. In its buyings, the enterprise purchases its ingredients (quinoa, rice…) directly to destitute local producers, negotiates in their own language (Quechua or Aymara) and offers them price stability.

The employees also have a very important place in the company’s strategy. 75% of the employees are women and 10% are disabled. The working conditions are optimal in terms of hygiene and security and the enterprise provides its employees with the possibility to study or to follow complementary training. Finally, Coronilla offers support to the working families so they can put their children at school.

As there is very little demand for organic food in Bolivia, Coronilla only focuses on exportation. Today, the company exports to 11 countries in North America, Europe and Oceania.

The entrepreneur:

Daughter of Guillermo Wille, Coronilla’s founder, Martha Wille was influenced by the social convictions of his father and incorporated them to the family business. As manager of the family business and being extremely attentive to the well-being of its employees, Martha wants all the employees to feel part of the Coronilla family.

After being elected social entrepreneur of the year 2005 by the Schwab foundation, Martha was invited to participate to the World Economic Forum in Davos where she met many other social entrepreneurs. As a follow-up to the exchange of ideas taking place there, Martha’s next challenge is to launch a foundation « the Guillermo Wille Foundation » that will work on the to replication of Coronilla’s model by giving advice to Bolivian companies and encouraging them to adopt CSR policies.

Social impact:

Buying its ingredients to local producers following Fair Trade principles, Coronilla provides a stable source of revenues to 1500 families allowing them to maintain a certain life standard.

As Martha told us during the interview, by providing a respectful and blossoming work environment, the company wants to have a positive impact on the lives of its 65 employees. After the production manager noticed that an employee had developed a skill at resolving the problems that occurred on the production chain, the company encouraged her to attend a two year engineering program. Today, this employee enjoys a much higher wage that allowed her to provide her children with higher quality education.

The economic autonomy aquired by women working at Coronilla facilitates their emancipation.

Financial impact:

Since 1997, two organisations have contributed to Coronilla’s development

The first, SEAF (Small Enterprise Assistance Fund), has invested $400 000 (mix of capital and debt) through its fund « fondo Capital Activo de Bolivia », to finance its needs in working capital. More than the supply of capital, SEAF support helped Coronilla in improving its accounting practices and in transforming into a stock corporation. SEAF essentially professionalised the company. Coronilla bought back SEAF’s shares in 2004.

After SEAF’s help, Coronilla still only used 20% of its production capacity in 2004 and the enterprise needed capital to keep growing. Back then, Coronilla obtained a loan of €350 000 from the Dutch organisation Cordaid. This loan allowed Coronilla to double its exports within the same year. Today, Coronilla’s exports are close to $1 000 000 using 50% of the productive capacity. If the company has met a high growth in the last 5 years, it still enjoys important growth potential that should enable it to spread its fixed costs better and increase its margins.

By continuing to create value for all its stakeholders (producers, employees, shareholders and clients) Martha Wille is convinced that Coronilla is meant to be a major company in Bolivia.

Sobre La Roca: Cooking with the sun

June 12, 2009 | Comments Off | Enterprises

Our first reporting on the Bolivian soil takes place in Cochabamba. We came to Cochabamba earlier than expected to meet Ruth Saaverda, our entrepreneur, before she was leaving on holiday for one month. This interview has been incredible: in addition to our interview with Ruth, we had the chance to attend a demonstration of the product in the Bolivian countryside. After a three hours-long journey through muddy roads, we got to a community of miners where we discovered the numerous advantages of the solar cooker.

Problems:

The environment: Families living in rural areas in Bolivia usually do not have a proper access to gas and electricity. As a consequence, they are forced to use firewood to cook. UNICEF estimates that in developing countries, more than 80% of the wood is used to cook.  On average, this translates into a yearly consumption of 100kg of wood per month per family. This intensive use of wood, in addition to emitting destructive gazes such as CO2, participates considerably to the deforestation in these countries (10% of the deforestation could be avoided thanks to the use of solar cooking).

Women emancipation: Cooking can strongly complicate the life of women, if they do not have the appropriate technology. Women in rural regions are often forced to walk several hours per day to bring wood back home. This harassing task prevents them from working and to participate to the economic and social life.

Context:

In Bolivia, 40% of the population lives in isolated rural zones and is not properly served in energy. Moreover, as their access to technology is limited, the people situated at the « Base of the Pyramid » generally use rudimentary cooking methods. The Bolivian Altiplano, where Sobre La Roca’s activities are concentrated, is an ideal location for the use of solar energy: it is at more than 3000 meters of altitude and enjoys 300 sunny days per year.

The company;

Headquartered in Cochabamba, Bolivia, Sobre La Roca was founded in 1997 to produce and distribute solar cookers to the Bolivian farmers living in rural areas. The solar cooker is a thermal box constituted of different mirrors that reflect solar rays within the box. The good insulation of the box enhances heat conservation enabling temperatures of 150°C and therefore making it possible to cook all kind of dishes. Solar cookers are easy to build which allow Sobre La Roca to sell them at the attractive price of €50.

Sobre La Roca has also developed complementary activities. It has launched awareness campaigns on the ecology. It also offers trainings to teach Bolivian families how to use the solar cooking and to improve their food habits. The company is in a growth phase: if up to now, Sobre La Roca has already sold 5000 solar cookers and educated more than 2400 women, it should reach the number of 10,000 solar cookers sold by the end of 2009.

The entrepreneur:

Ruth Saveerda de Whitfield is a Bolivian social entrepreneur living in Cochabamba. Convinced of the potential of solar cookers, she dedicated her life to Sobre La Roca that she founded 12 years ago. The first years of Sobre La Roca have been very difficult. During this period, Ruth did not hesitate to visit to the most isolated regions of Bolivia and to meet local communities to promote her product. In 2004, as the company was close to go bankrupt, Ruth and her husband conceded huge sacrifices which allowed Sobre La Roca to survive. Believing that “real” value relies in Sobre la Roca’s mission, they went until selling their wedding valuables.

Social Impact:

The use of the solar cookers contributes to the environmental, social, sanitary and economic development. Firstly, solar cookers favour nature preservation as 500 cookers enable the preservation of 5000 acres of forest per year without any CO2 emissions. Secondly, solar cookers, given the time savings they allow, enhance the women social and economic emancipation. They can indeed allocate time to other activities instead of spending hours to collect wood and watch out the cooking of their dishes. Lastly, cooking with solar energy increases the nutritive value of the meals as it leaves more vitamins within the ingredients giving them a higher nutritive power.

Beyond its product, Sobre La Roca has a positive social impact throughout its value chain. The basic elements of the social cookers are built in a prison of Cochabamba as part of a reinsertion program for prisoners

Financial impact:

E+Co’s support: During the first years, Ruth Saveedra financed Sobre La Roca with her own money. Her launching strategy consisted in offering 10 solar cookers to different farmers in order to measure their social impact and to promote the product. Then, the company grew through auto financing; the profits generated by the sales of its cookers were reinvested and allowed it to grow but at a limited pace.

After 7 years, Sobre La Roca had sold 2,500 cookers. However, the financial situation of the company became not sustainable as it had to renew its infrastructures with no capital to do so. The social investment fund « E+Co », believing in Sobre La Roca’s future and potential, backed the company with a $20,000 loan refundable in 3 years. This loan enabled Sobre La Roca to increase its production capacity and to reach a larger proportion of customers. The total impact of the loan is striking as it triggered a 300% growth of the production and gave the possibility to Sobre La Roca to convert into a small enterprise owning its own infrastructure.

E+Co’s support has been decisive in Sobre La Roca’s economic development and in the extension of its social mission.

The use of microfinance: The price of the solar cooker is 50€. While being affordable, this price remains too high for some people at the « Base of the Pyramid ». To cope with this situation, Sobre La Roca, collaborated with E+Co and created a fund that proposes micro credit loans. Moreover, Sobre La Roca is currently building a strategic alliance with FIE, a leading microfinance institution in Bolivia, whose broad network of agencies will ease the access to capital for many people and consequently ease the acquisition of solar cookers.

Sources:

Interview with Jorge Gronda, founder CEGIN and SER System

www.solarcooking.org

www.adesolaire.org

www.eandco.net