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Tag ‘ village bank ’

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.