Increasing Access to Financial Services in Colombia

Increasing Access to Financial Services in Colombia

A loan client in her minimarket.
Lack of capital is one of the major difficulties that farmers face in Colombia because it limits their capacity to invest, produce, buy inputs and trade their commodities. In Montes de Maria, isolation of rural communities further limits their capacity to access formal financial services as they usually are not able to fulfill the requirements established by the banks.
Colombia Responde Montes de Maria (CR MdM) and the Cocoa Producers Association (Aprocasur) are implementing a strategy to fund small businesses through rural microcredit funds. To implement this strategy, the project selected five legally constituted associations: Mugesco and Asoafrolib in San Onofre, Asprocamm in El Carmen de Bolívar, Asojuventud in Ovejas, and Asomudepaz in San Jacinto. The organizations, composed of 182 members, received $26,413 of seed capital. After saving for four months, each of the 182 members of the associations gave a total contribution of $36, collecting a total of $1,310 per association. The five associations collected $6,552, which are significant savings considering the extremely low income level of the families. The resources were deposited in saving accounts opened in the Banco Agrario and the Banco de Bogota.
Yamil Caraballo, an Asofrolib member in San Onofre, considers that “this is a very good initiative because it encourages communities to generate their own income in spite of our high levels of poverty and vulnerability”.
During the process, organizations were trained to create and manage microcredit funds. As Yamil explains, each association established procedural rules and appointed a board in charge of managing the fund, approving loans and collecting debt. The five funds disbursed a total of 67 microloans for an amount of $10,459.
 

Another resident used her loan to expand her tailoring business.
An important aspect to highlight is women’s participation, which has not only increased transparency in the process, but also empowered them through savings and financial management and transforming the economy of households and communities. Indeed, 35% of the participants are female and 33% of the 67 loans were allocated to women. This is a significant percentage, considering the low participation rates among this group.
Yamil affirms that nowadays the associations have the capacity to promote access to formal financial services through entities such as Banco Agrario, benefiting not only members but also the entire community. Indeed, Asofrolib supported 15 loan applications, of which Banco Agrario approved 4, for a total of $14,153.
The five associations participated in business tours to exchange experiences and best practices. The members were able to confirm the importance of implementing clear procedures when selecting clients and recovering debt. These were identified as key elements to capitalize and maintain the funds. As a result, the members have better understood the financial system.
Yamil Caraballo considers that the business tours are important activities because “they help us to be able to see what we can achieve. Through this activity, we find organizations that were able to create new businesses thanks to the fund capital gains”.
The rural microcredit funds are a sustainable project that will be replicated in the rest of the communities because the associations obtained the capability to train others in the methodology for supporting the creation of new funds. They will be able to sustain their investments by collecting interests from the loans and capitalizing on the five funds.