Reaching the most vulnerable and remote areas of the Colombian population with formal credit is not easy. The lack of connectivity, means of transport and communication that make the operation of the microfinance makes that job difficult.
But now these obstacles are added to the issue of public order that slows down the access of entities to some regions where hundreds of micro-entrepreneurs had been managed to be rescued from the clutches of ‘drop by drop’.
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Despite this, María Clara Hoyos, president of AsomicrofinanzasHe told EL TIEMPO that this year they hope to grow between 10 and 15 percent in credit irrigation for the countryside and remote areas, but they need more support from the Government in this work.
María Clara Hoyos Jaramillo, president of Asomicrofinanzas.
Mauricio Moreno / EL TIEMPO
What role do microfinance institutions play in the economic and social development of the country?
One of the fundamental roles is to serve productive businesses through financial and non-financial services at different stages, from when they are a survival business idea, that is, those whose surpluses are barely enough to survive, to when they were set up as a microenterprise of accumulation, when they begin to have their own assets, processes that are attended with microcredit and technical assistance. The important thing in all this is that the person knows his business to avoid failure, because learning a business through credit is a guarantee of total bankruptcy. The support that is provided is not to teach them about the business but to support them so that they get ahead with their knowledge of that activity that they are developing or are developing. Our entities grant these first credits in conditions that people can pay with the daily surpluses of their business and the resources are destined to buy the raw material, in such a way that they will not have to resort to the ‘drop by drop’ for it.
How far does this technical support extend?
In general, the first loan is for six months and we adapt to the speed at which the micro-entrepreneur advances, because not all of them grow at the same rate. But when new opportunities arise, what is done is grant you a new loan, the balance of the previous one is canceled and you can invest in the new business or in the expansion of the one you have, always taking care not to over-indebt it. There, the issue of financial education is key in this accompaniment, which is why one of the important projects for us has been that of sustainable productive chains for rural development in peace, which work in 1,103 municipalities, regardless of whether the initiative is agricultural or not, or whether it is in an urban or rural area. With the support of the Citi Foundation, we promoted this project reaching 21 Pdet municipalities (Development Programs with a Territorial Focus), with which we have managed to get nearly 1,200 families out of coca cultivation, to plant cocoa and obtain Fairtrade certification, which allows all these producers to have a better price when exporting , ensuring that they do not return to illicit crops, for example. And there financial education has been key so that they do not fall into the ‘drop by drop’, so that they know what saving is, when to take out a loan and how to make their cocoa production more efficient, among other topics.
What has been the impact of that program?
There are about 5,000 direct and indirect beneficiaries. 550 victims of the armed conflict were attended, of which 107 were mothers head of household, 95 indigenous, Afro-descendants and disabled people, with which this mezcal of the productive business, financial education, the institutions that offer these financial services and some additional resources allow the achievement of important results where people are not waiting for a subsidy, but they themselves can cancel their businesses for their families.
Are those results measurable?
Undoubtedly, this mix of projects is what makes microfinance contribute to overcoming poverty. In this single program, 4,000 million pesos in credits were granted to 990 microentrepreneurs from Pdet municipalities who already had a productive business. But when we serve a survival microentrepreneur for the first time, with their third loan, the poverty indicator goes from 67 to 66 percent, their vulnerability situation improves, and when they go for the fifth loan it drops to 64 percent, a substantial improvement ; So, part of that impact is that they realize that they are capable of having a loan, of taking care of it and of noticing a change in their lives.
How much credit have they managed to irrigate those sectors of the population?
The 43 entities associated with Asomicrofinance handles 96 percent of formal microcredit in the country. And the total portfolio placed is close to 19 trillion pesos in about 3 million micro-businesses, on which about five people depend, three from the family nucleus and two workers. With the exception of the pandemic, when one looks at the growth of microcredit compared to housing or commercial, it rebounds more, it is countercyclical, when there are difficulties it grows better, supporting the dynamics of the economy, because at the same time it reactivates consumption.
The 43 entities associated with Asomicrofinanzas managed 96 percent of the formal microcredit in the country.
In the future, how do you see that behavior?
There are several fronts. One is the government program to support this population that will be ready in two months and in which the Bancóldex and Finagro, and guarantees from the National Fund aimed at those micro-businesses that in the last four years have not had credit. We hope that there will be growth with these businesses of between 10 and 15 percent in 2023. We are going to focus on the rural and agricultural area, which is where there is more poverty, but great support from the Government is needed.
What kind of support?
There are a number of factors, such as the lack of connectivity, the high cost and the lack of means to reach those remote rural areas that need this care. There are many risks there for the microfinance institutions, several of which have to take the cash, carried in sacks to make disbursements to the population, as occurs in Guainía.
And in the fight against ‘drop by drop’…
The fight against informal credit is with a line that the Government announced through the Bicentennial Group and it is aimed at those who have had no credit in the last four years, but have a productive business. The goal is to reach one million microbusinesses. But, in addition, we need to continue serving those 3 million who today need to continue with their loans and reach many more, because according to Dane in the country there are some 6 million micro-businesses and productive businesses that do not have access to formal credit and that need other types of non-financial services, such as guidance on how to obtain a RUT, a chamber of commerce or have insurance, among others.
How to break those barriers that prevent you from reaching certain areas with credit?
One of the big problems today is public order and that prevents microfinance institutions from reaching separate areas because the advisors receive threats and this causes them to go back in some spaces that were already conquered with formal credit.
How good are the clients of these entities?
The best quality of the portfolio is seen in the agricultural sector with a past-due portfolio indicator of 1.8 percent. Many were lent to plant vegetables, but with the heavy downpours due to the La Niña phenomenon, they lost everything, but since those business units also had chickens, pigs, the help was to improve that part that was not affected and thus how you can meet your loans.
What comes after the project of productive chains?
We are close to starting another plan, also closely related to cocoa, but in other regions, such as arauca where we will support productivity as well as the transformation of the product, where we believe that there can be a greater benefit for the communities. That is where we want to continue promoting with entities such as the Citi Foundation, there were 350,000 dollars that were invested, this year it will be less, but mixed with microcredit it is greatly enhanced and we help young people to stay in the countryside and value their businesses.
ECONOMY AND BUSINESS