It’s not just about the money
By Andrea Ramirez, KF16, El Salvador
In recent years the microfinance sector has been hit with harsh criticism about the real impact it has on improving the lives of the low-income clients it serves. If it is true that microfinance, including micro-credit, is not the panacea for poverty; it is also true that Microfinance Institutions (“MFIs”) don’t have an easy job. MFIs and their staff are, in my opinion, the true heroes. Their loan officers and administrative staff are those who are out there, day after day, meeting clients and trying to help them achieve their dreams – and yes, realizing dreams doesn’t come cheap. Although there are many great institutions providing more than microfinance services, I have yet to come across an operating model as unique as that of Fundacion Campo (“FC”). They do so many cool things, and this will be a bit of a long post.
FC was established during the 1994-1996 period, as part of a social reinsertion effort following the peace accords that ended El Salvador’s civil war. The operating model of FC is based on the relationships the institution has established with the communities through Community Development Associations (ADESCOs for their name in Spanish). The ADESCOs are associations regulated by their municipal code. They work with their Mayor on the development of the community. Within each ADESCO there is a Communal Credit Committee, made up of three people from the community. The members of this committee live and are part of the community, and are the first point of contact when someone from such community wants a loan. The members of the committee meet with the potential borrower to help him/her gather the necessary documentation, fill out the loan application, and provide an assessment of the person’s ability to pay and reputation within the community. Working through these committees means that people don’t have to spend money on transportation to fill out a loan application or get information, or miss a day’s work. They can simply go to a neighbor’s house and get the process started. This structure doesn’t only help FC keep administrative costs down, but also gives FC access to information about the character of the borrower that otherwise they would not have access to. The members of the committee don’t get paid for what they do. When I ask them why they choose to devote so much time and effort to their roles, reviewing sometimes up to ten loans per week, they respond something like: “I do it because I am serving my community; I get to help people and I learn from them too.”
Once the committee has provided their assessment, FC’s loan officers get involved. There is a loan officer assigned to each ADESCO, and they are the ones who visit clients on a daily basis and develop a close relationship with the members of the communities that they serve. The committee meets with the loan officer, and based on the information provided by the committee, plus some other research and analysis done by the loan officer (some times that means meeting the client in person), the loan officer determines whether or not the credit should be recommended for approval. After that, the process is pretty similar to that of a bank – except that loans are usually disbursed within 3 days after the committee brings the application to the loan officer. Incredibly efficient!
One fascinating detail is that 2% of each loan disbursed to a client that came through the ADESCOs stays with the community. This helps the community invest in themselves, and the funds can be used for a variety of projects. One community installed street lights so that residents don’t have to walk to/from work or school in the dark. Others provide incentives for residents to attend the ADESCO’s general assembly, where FC provides financial literacy programs and other educational content. I met with the leader of a community last week who is hoping to build a little covered area for people to wait for the bus by the main road (so that people can have some shade during summer or shelter from the rain during winter). In the past his community has also donated new computers to the school, and even helped people who have been fallen ill. The entire community benefits from these funds, not just those who are clients of FC.
But loans are just a portion of what FC does. Through their Community Development Unit (UNDESCO) they help communities carry out a wide variety of projects. Projects range from helping the communities with legal support to legalize a soccer field for their local school, to repairing small bridges so that kids can cross a river during the rainy season and get to school, to building classrooms, establishing a small health unit, clean water projects, training for farmers on best practices, or helping a community develop their infrastructure for tourism (which is pretty much non-existent in El Salvador). The list of projects is extensive. Furthermore, FC doesn’t make money from these value-added services it provides.
FC’s staff is entirely dedicated to the institution’s mission. Loan officers start their days bright and early at around 7 am, and sometimes they don’t make it back to the office until passed 7 pm. They travel to the most remote places by motorcycle. Many times they have to park the bike by the main road, and walk 20 or 30 minutes through a small forrest, a river, and a few hills before they can finally meet with their client to go over their loan or to simply pay them a friendly visit. I made the trip with a couple of loan officers, and it is no easy task. Plus, the vast majority of FC’s clients live in rural areas – by rural I mean the middle of nowhere; where the roads are barely roads, there is no street lighting, and buses don’t run.
Relationships at FC are based on trust. FC’s loan officers, admin staff and management team give it their all every day so that clients do the same for the institution. Because of this dynamic, FC has a really low default rate and their clients pay on time. Many cients have been coming back to get loans from FC for 15 years. Even though this is a business, it is about more than just money. It is about community, trust, and friendships.
Andrea is a Kiva Fellow (KF16) working with Fundacion Campo in the Eastern region of El Salvador. Fundacion Campo is the newest Kiva Field Partner in that country. Andrea is loving her corn-based diet and the kindness of people in El Salvador. If you haven’t checked out Kiva.org yet, it’s never too late! Make a loan. Help change lives.