September 11, 2011

As part of an ongoing effort to fully migrate risk ratings to our new and enhanced risk rating system, Kiva has conducted a re-assessment of the level of risk posed by this institution.

During this re-assessment, our analysts were able to gather updated operational and financial information about the institution, as well as speak with key members of the staff. 

Kiva's new risk rating system, which now includes half stars, has enabled us to display FUDECOSUR's risk rating with a higher level of granularity. As a result, FUDECOSUR's risk rating will now be displayed as 2.5 stars instead of 3 stars. 

We have prepared a blog post with more information on Kiva's new and enhanced risk rating system, along with a chart showing the relative magnitude of the overall changes for Kiva's portfolio.  To view that, please go here: http://www.kiva.org/updates/kiva/2011/09/07/kiva-risk-ratings-now-with-half-stars.html.

FUDECOSUR has been informed of the change in the display of their rating on Kiva's website. 

The Foundation for the Development of Southern Communities (FUDECOSUR) is a not for profit micro-finance institution established in 1993 with the objective of promoting development in the poorest regions of Southern Costa Rica. FUDECOSUR operates in 165 communities located in the counties of Perez Zeledon, Buenes Aires, and San Vito. As a non-profit all income earned from interest payments are funneled back into local communities to expand credit opportunities and fund non-financial services such as computer education. The main source of income for FUDECOSUR’s clients is small-scale farming, supplemented in many cases by variable farming income working for large plantations in the area. To service the unique needs of the agricultural market, which runs on the ups and downs of the harvest cycle, credit is often extended on longer than Kiva average loan terms with principle payments made once yearly.

FUDECOSUR utilizes the village banking model to facilitate lending and education. This model empowers the communities in which FUDECOSUR works, allowing each loan recipient to participate in the credit communities. These credit communities receive logistical support and training from the central office in order to provide credit to low income residents who would otherwise be excluded from the formal financial system. These village banks are comprised of a locally-elected president, vice-president, treasurer, secretary, and up to 3 vocals, who meet twice monthly to receive payments and distribute credit to their local community. Loan officers from the FUDECOSUR central office visit once monthly with each village bank in order to review procedures and approve new loans. A board of directors comprised of elected borrowers and government officials oversees this community credit provision and meets at the central office fortnightly. It should be stressed that 30% of these elected positions are designated for female participants, helping to empower the women living and working in these communities. The village banking model helps mitigate risk by utilizing the intimate knowledge that these communities possess about market conditions on the ground. It also creates a bond of trust in these farming communities between the organization and its users, ensuring decision-making starts at the community level. Finally, the ability to obtain loans without having to leave the community helps keep costs down and ensures a low cost of debt for the communities FUDECOSUR serves.

In addition to credit, FUDECOSUR provides assistance in promoting organic farming methods and the use of hydroponics. FUDECOSUR also offers courses encouraging rural tourism projects, computer courses, and small business generation, helping ensure a steadier source of income for the agricultural households FUDECOSUR is serving.

To support additional village banks for new clients in need, FUDECOSUR opened a second office in San Vito in April 2011. FUDECOSUR currently operates 45 village banks, and plans to expand along the pacific coastal region to communities such as Dominical and Uvita.

If you'd like to learn more about FUDECOSUR please watch this short video. Please visit fudecosur.org for more information.