rural and agricultural lending bob price finca international

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Rural and Agricultural Lending Bob Price FINCA International

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Page 1: Rural and Agricultural Lending Bob Price FINCA International

Rural and Agricultural Lending

Bob Price

FINCA International

Page 2: Rural and Agricultural Lending Bob Price FINCA International

Overview of Microfinance

FINCA: Village Banking and Rural Applications

Case Studies: Rural Microfinance

The Frontier: New Directions & Products

Page 3: Rural and Agricultural Lending Bob Price FINCA International

Why Microfinance?

Sources: World Bank, CK Prahalad, The Fortune at the Bottom of the Pyramid; Visa estimates

4.0B people$2.6T income

Sub-tier 1 “$2-$4/day” 1.3B - $730-$1500 income - $1TSub-tier 2 “$1-$2/day” 1.6B - $360-$730 income - $890B

Sub-tier 3 “<$1/dy” 1.1B - <$360 income - $198B

1.7B people$6.8T income

$1,500-$20,000/year

100Mpeople

>$20,000/yearLimited

access to financial services

The traditional financial

service marketRural Problem

70-75% of poor live in rural areas; most depend on

agriculture for livelihoods.

Page 4: Rural and Agricultural Lending Bob Price FINCA International

How Finance Helps

Access to financial services

Builds confidence in the future and willingness to make long-term investments

Increases & diversifies incomeBuilds assets & securityEMPOWERS WOMEN

Page 5: Rural and Agricultural Lending Bob Price FINCA International

Sources: Measuring the Impact of Microfinance: Taking Stock of What We Know, Grameen Foundation USA Publication Series, December 2005. Doocy et al., Journal of Microfinance. Vol. 7, #1, 2005.

have 12-56% higher household

income

are 14%-68% more likely to move up the

economic ladder

show family-wide improvement in

nutrition

invest more in their

children’s education

Compared to non-clients, microfinance clients…

Impact of Microfinance

Page 6: Rural and Agricultural Lending Bob Price FINCA International

Overview of Microfinance

FINCA: Village Banking and Rural Applications

Case Studies: Rural Microfinance

The Frontier: New Directions & Products

Page 7: Rural and Agricultural Lending Bob Price FINCA International

Where FINCA Works

Eurasia

ArmeniaAzerbaijanGeorgiaKosovoKyrgyzstanRussiaTajikistan

DR CongoMalawiTanzaniaUgandaZambia

EcuadorEl SalvadorGuatemalaHaitiHondurasMexicoNicaragua

FINCA HQWashington

DC

Latin America

Africa

AfghanistanJordan

Greater Middle East

San Jose, Costa RicaKampala, UgandaKiev, Ukraine

Regional Hubs

Page 8: Rural and Agricultural Lending Bob Price FINCA International

Profile of FINCA’s Clients

70% of clients are women

20-50 years old

Support five family members plus other relatives, neighbors and orphans

Typical Businesses– Rural clients: smallholder

farmers, animal husbandry, agricultural marketers, food processors, etc.

– Urban clients: street vendors, service providers, artisans, etc

Page 9: Rural and Agricultural Lending Bob Price FINCA International

FINCA’s Products

Credit– Village Banking (i.e., group loans)– Individual– Rural Loan Product– Housing, etc.

Savings

Insurance– Credit Life– Accident– Health

Remittances

Page 10: Rural and Agricultural Lending Bob Price FINCA International

The RLP is a specialized loan product is:

Rural Loan Products (RLP)

designed for

rural communities

where there is a huge unmet demand for

financial services

supports

rural income generating activities

crop planting, animal husbandry, market gardening, dairy production, processing, and

trade in rural produce

Delivers loans from

$200to

$1,000

with a term of up to twelve months

(varies by locale)

Relies on

group solidarity

to guarantee loans, capitalizing on the value of a client’s reputation in the

community

Page 11: Rural and Agricultural Lending Bob Price FINCA International

staple crop production

Traditional Agricultural Lending

• Finances a

specific

commodity or

growing

activity.

• High risk for

client and

lending

institution.

Page 12: Rural and Agricultural Lending Bob Price FINCA International

salaries

pensions

remittances

trade income

market gardening

services income

dairy production and sale

• Analyzes all income streams.

staple crop production

• Constructs a suitable loan treating the rural household as an integrated economic unit.

FINCA Rural Loan Product

Page 13: Rural and Agricultural Lending Bob Price FINCA International

Overview of Microfinance

FINCA: Village Banking and Rural Applications

Case Studies: Rural Microfinance

The Frontier: New Directions & Products

Page 14: Rural and Agricultural Lending Bob Price FINCA International

FINCA & Food for Progress (FFPr)

Partnership– Began in 2000– Ecuador, Georgia, Guatemala, Nicaragua,

Tanzania, Uganda, Zambia, to date

Purpose– Infuse capital into rural & agricultural economies– Increase ag production, processing & marketing– Increase on and off-farm incomes– Increase access to food

Outcomes– 116,000+ clients served– 676,000+ lives benefited– $93 million in recycled FFPr loan capital

disbursed every year

Page 15: Rural and Agricultural Lending Bob Price FINCA International

FFPr Impact in Ecuador

FFP #1

FFP #2

10-fold increase in client outreach and 50-fold increase in loan portfolio

Page 16: Rural and Agricultural Lending Bob Price FINCA International

FFPr Impact in Georgia

0

5,000

10,000

15,000

20,000

25,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Nu

mb

er

of

Cli

en

ts

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Ou

tsta

nd

ing

Lo

an

Po

rtfo

lio

(U

SD

)

Number of Clients Outstanding Loan Portfolio

FFP

2006: Exceed client target by 35%

Doubled outreach, tripled portfolio, introduced an agricultural loan product (grew it to 32% of portfolio), grew from 9 to 27 offices

Page 17: Rural and Agricultural Lending Bob Price FINCA International

FFPr Impact in Guatemala

FFP

Client outreach increased 115%, loan portfolio increased 180%”3 new offices opened in secondary cities

Page 18: Rural and Agricultural Lending Bob Price FINCA International

to $3.17

(inflation-adjusted).

Avg. USDA client loan

size grew 29% from

$406 in 2006 to $570 in

2008.

to 15% in 2008.

only 18% reported the

same in ‘08.

FFPr Impact in Guatemala

Standard of Living Increased.

Daily per capita spending grew

from $2.92…

Jobs Created.

The number of clients with employees nearly

doubled, from 8% in ’06…

Food Security Enhanced.

In 2006, 30% of clients reported food insecurity…

Agricultural Economy Strengthened.

Nearly 70% of clients used their loans to build

and grow ag. / ag-related business, a sector

dominated by the poor.

Page 19: Rural and Agricultural Lending Bob Price FINCA International

Overview of Microfinance

FINCA: Village Banking and Rural Applications

Case Studies: Rural Microfinance

The Frontier: New Directions & Products

Page 20: Rural and Agricultural Lending Bob Price FINCA International

Challenges

Long-term Problem: Reaching the Remote Poor– 75% of world poorest reside in rural areas– 60%+ of rural families depend on agriculture (85% in Africa)

Tactical Challenges: Operational RoadblocksDeveloping a sustainable service model is challenging– Dispersed and uneven demand– Poor infrastructure– Lack of client information – High risk enterprises– Lack of useable collateral

Prevailing Circumstances: Global Economic Slowdown– Donations – stable, but at risk– Investments – drying up– Clients – remittances down

increase transaction costs

increase provisioning

Page 21: Rural and Agricultural Lending Bob Price FINCA International

Future Directions & Innovations

Build Safety Nets to Enhance Resilience

– savings, insurance, targeted loan products (e.g., micro-energy)

Deploy Technology(mobile phones, ATMs, PoS)

– expand to un-served rural areas– reduce human resource costs– improve availability of client

information (performance / risk)

Build Partnerships & Strengthen Existing Mechanisms

– provide credit to the dairy value chain(outgrowth of FFPr activity in Zambia)

Page 22: Rural and Agricultural Lending Bob Price FINCA International

Thank You