Fairstreet

Social entrepreneurship & finance

Tag ‘ éducation ’

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.

ETV: The video report!

May 21, 2009 | Comments Off | Enterprises, Videos

ETV: Water at the source of social change; the video of our second report…

Fair Street - ETV from Angalio Productions on Vimeo.

The second report takes place at Bariloche, in Northern Patagonia. After a meeting in Buenos Aires with the manager of Ashoka, a network that supports social entrepreneurs, we decide to change our itinerary and make a “small” 2000 km detour to Bariloche.

Problems:

Water: Water is a crucial concern, at the very heart of the environmental challenge confronting humanity. Management, supply and diminishing resources are all issues on which much progress still needs to be made. Water quality has a huge impact on the living conditions of the poorest populations. Better water quality improves both the food supply and the hygiene of those “at the Base of the Pyramid”. With improved hygiene they are better prepared to confront the challenges of their everyday life and they can shift their efforts from fighting for survival to their personal development.

Education : In developing countries, there are currently 75 million children who do not attend school, and 861 million illiterate adults. Access to education is universally recognized as a key factor for economic and social development. Education develops knowledge, and gives access to employment: by learning concepts and techniques, marginalized communities can benefit from growth and improve their situation. They are then able to take personal responsibility for themselves and for their families. In developing each individual’s potential,  Education makes a real difference to the dignity of the human condition. “To ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling” is one of the objectives of the United Nations’ program to eliminate poverty by 2015.

Context

Despite its status as an emerging country, Argentina is a country where poverty is still prevalent, be it in big cities like Buenos Aires or in far-off regions such as Bariloche. The economic crisis that hit the country at the start of the decade had a profoundly detrimental effect on the country’s economic and social situation (between 1998 and 2001, the GDP fell from 300 to 220 billion pesos!), and its consequences remain highly tangible today. In Argentina, over half the population lives below the poverty line, and one in five is in a state of complete destitution, with revenues insufficient to provide even the necessary minimum to maintain physical capacity. This situation is mainly the consequence of a high unemployment rate: in the region of Bariloche, a quarter of the active population is unemployed, and this figure reaches 75% in the most remote areas.

The direct consequence of this poverty is the marginalization and social exclusion of a substantial proportion of the population. People live in precarious conditions which are often difficult to escape.

The company:

ETV (Emprendimientos de Tecnologias para la Vida) was founded in 2006 and aims at developing, building and distributing technological solutions to improve the living conditions of the people at the base of the social pyramid. Currently, the main product developed by ETV is the Bomba de Soga, which pumps water. ETV’s objectives are threefold: to harness the potential of technological innovations for the poorest communities; to provide work to young people from the Fondation Gente Nueva; and finally, to use some of the revenues generated by the sales of their products to fund the foundation. However, at this stage, the profits generated do not yet allow significant progress towards the achievement this third objective.

Created 25 years ago, the Fondation Gente Nueva aims to promote education and access to employment to those excluded from the traditional educational system. Helped by a network of primary and secondary schools, and the development of workshops and regional education programs, Gente Nueva wants to give each individual a chance to realize his or her potential. The schools of the Gente Nueva network are free, and the salaries of teachers, who are selected by members of the foundation, are paid by the State.

ETV products are made in the workshops of Gente Nueva, which employs a workforce of young apprentices.

The entrepreneur:

Gustavo Gennuso is originally from Buenos Aires, but he has been living in Barichole for the last 30 years. He moved there when he started studying nuclear energy at the Balseiro Institute. He continued to work in this field until 2000, whilst developing his social innovations. After creating the Fondation Gente Nueva, Gustavo now wants to prove with ETV that a viable and lasting social impact is possible. Gustavo Gennuso’s ambition is to achieve profound social change. He wants to give the poorest members of society every opportunity to develop. By accomplishing social change, he wishes to transform not only the lives of the poor, but also society as a whole.

Social impact:

ETV aims at making significant improvements to the living conditions of the poorest people. Technology development is but a means to this end. The company’s social impact is threefold: first, it improves the living conditions of those at the Base of the Pyramid; second, it creates opportunities for those suffering from exclusion; and thirdly, it finances the Fondation Gente Nueva. In three years of existence, ETV has already succeeded in reaching out to 300 families. The long-term objective is to have a direct impact on the lives of 150 000 people.

Since its creation, the Fondation Gente Nueva has welcomed over 5000 young people into its classes. It has also trained  another 3000 young people through its regional education programs. Gustavo Gennuso’s initiatives have also had an influence on political decisions relating to education in the regions where he is active.

Financial impact:

In this case, the financial impact lies more in the role played by microfinance in extending the company’s social impact than in direct financing.

Microfinance : Micro-credit is an innovation that has allowed millions of people to extract themselves from poverty. If access to capital can allow poor people to create a micro-enterprise, why should it not also allow them to buy products that will significantly improve their living conditions? Such is ETV’s strategy. It is true that the targets of Gustavo’s social business can often not afford to buy his products. The “Bomba de Soga” costs 700 pesos (+/- €140). People who earn an average of €2 per day can hardly hope to find such an amount. So, in order to extend its social impact, ETV uses the micro-credit formula to make its products more accessible. Thus, ETV’s clients fund the purchase of a water pump with a micro-credit. This support from microfinance has a twofold impact: it extends ETV’s social impact, but it also increases the future benefits of the company — and, therefore, the financial resources available to Gente Nueva, who can in turn accelerate social change through increased access to education. As micro-credit is not one of ETV’s activities, they collaborate with different MFIs (Microfinance institutions) and NGOs from the regions where they are active (mainly Northern Patagonia and the Jujuy province). This collaboration with the microfinance sector is the only way to reach the targeted 150 000 people.

Financing: In parallel with its social vocation, ETV also aims to provide financial resources for the Fondation Gente Nueva. This type of model is fairly widespread among social enterprise initiatives: in order to avoid being dependent on donations, “business” solutions are preferred and “social businesses” are created with the aim of financing the non-profit side of their activity. The remainder of the profits are reinvested in the company in order to finance research for other new technologies.

ETV and Gente Nueva have received a financial contribution from the organization Ashoka — which we will present later — of which Gustavo is a member. The company also benefited from various funds, essentially from philanthropic investors, in particular a Swiss “business angel” who has provided a credit on very favorable terms (but about which we have not received any other details). Today, ETV is seeking financial backing amounting to $74 000 (€54 833) in order to finance investments necessary for them to achieve the objectives of their business plan — specifically, for the launch of new technologies.

The strength of Gustavo’s model resides in its capacity to tackle different problems simultaneously. The all-embracing nature of his organization is striking! His model features three essential elements in the fight against poverty: education, access to capital, and healthcare. By creating synergies between different organizations, he can considerably extend his social impact, and this allows him to implement lasting change.

Sources : Interview with Gustavo Gennuso, founder of ETV and of Fondation Gente Nueva

www.unesco.org

www.oms.org

www.schwabfound.org

www.changemakers.net