More hot topics in Ecuador
By Ellen Willems, KF13, Ecuador
Las week I finished my Kiva Fellowship in Ecuador. During the past three months I traveled throughout the country to work at Kiva’s three Ecuadorian field partners. I believe that now, at the end of my Fellowship, is a good time to refer back to my first blog entry and, using my personal experiences, reflect on some of the topics mentioned there.
These reflections represent only my personal experiences and should by no means be considered anything more than that. I realize that my experiences are based on a relatively short stay in Ecuador and are limited to only three of the more than 300 Microfinance Institutions (MFIs) active in the country.
In my previous blog I gave an overview of the laws and regulations currently in effect in Ecuador. At this very moment the Ecuadorian government is voting on a new law (Ley de Economía Popular y Solidaria). This new law will increase the number of MFIs monitored and regulated by the government.
During my Kiva Fellowship I asked the managers at the three field partners how the current government regulations, especially the interest rate caps, influence their operations.
Cooperativa San José: General manager José Guillen and Assistant manager César Capuz at Cooperativa San José both told me that they have no problem complying with these regulations. It is not so much the government but the fierce competition of many other cooperatives, active in the central mountains of Ecuador, that forces Cooperativa San José to focus on efficiency and low operational costs. While I wondered through the streets of Guaranda, the capital of the Bolivar province, I instantly understood what they meant; there is a cooperative on every street corner.
Fundación D-MIRO: Fundación D-MIRO’s main challenges in providing microfinance services in Ecuador, are 1) the interest rate caps and 2) the cost of funding. Recently the Ecuadorian government imposed an extra tax (2% – Impuesto a la Salida de Diviases) on the international outflow of capital. Fundacion D-MIRO’s reaction to the changing regulatory landscape is its conversion to a bank. This process is costly and challenging but being a bank will allow them to capture savings from the public. Management at Fundacion D-MIRO believes that eventually this change will enable them to continue to offer their services to their existing clients and to expand their reach to many more people in the marginalized peri-urban areas of Guayaquil and its surroundings.
Fundación ESPOIR: Dr. Francisco Moreno, the General Manager at Fundación ESPOIR, said that these new regulations make it more and more difficult for NGOs to offer microfinance services in Ecuador. Other MFIs decided already to stop offering loans smaller than $4,000 because it is not sustainable. Fundación ESPOIR wants to continue to provide small loans (< $600) to its village bank clients and is currently figuring out what would be the best way to continue to serve their target market.
Even though all three MFIs face different challenges and they react differently to the current changes in government regulations they all work towards the same goal of alleviating poverty by providing financial services to low income people.
You can help Kiva and Kiva’s field partners to reach that goal, start lending here.
Posted by Ellen Willems, KF13, roaming Kiva Fellow in Ecuador.