Posted by: Katherine Oglietti
Interview with: Fabiola Céspedes Quiroga
Research Coordinator, CRECER, Bolivia
CRECER began in 1990, following a new management philosophy developed by Freedom from Hunger called Crédito con Educación (Credit with Education). Currently, CRECER facilitates financial services and products integrated with development services to 102,212 clients, of which 90% are women, 64% have only completed primary education, and 38% live in rural areas. As a non-regulated NGO, government policies prevent CRECER from accepting deposits or offering insurance products. However, the organization has taken creative measures in order to facilitate these services to their clients. While commercial banks such as Parabank in Azerbaijan are downscaling in order to adapt their financial services to microfinance clients, NGOs such as CRECER are searching for ways to increase their institutional capacity in order to offer more financial services to their clients. In this interview, CRECER speaks about the various financial products it offers.
Social Performance Management in CRECER
CRECER is experienced in social performance management practices and the use of related development tools. It conducts annual social audits as well as periodic impact and client satisfaction evaluations in order to continually adjust its operations to improve its services. It also has a social rating by Planet Rating. Starting in 2009, CRECER began implementing a formal system of social performance management, establishing objectives, indicators, and monitoring goals at both the institutional and branch levels. It is currently initiating an action plan that will include policies, strategies, and adjustments to its internal information systems and processes.
MIX: In the MIX social performance report, you reported that “according to the CRECER methodology, the village bank members contribute savings at the beginning and during the cycle that are administered entirely the village bank. The savings and interest earned are returned to the members at the end of the cycle.” Could you summarize the principle benefits of saving from the client perspective? Are these savings required for obtaining credit (functioning as a loan guarantee)?
Fabiola Céspedes: The village bank is a credit technology in which the loan guarantee comes from the group’s solidarity, owing to its joint nature. This type of credit has a very special characteristic because it is managed during group sessions, giving the opportunity to offer education on topics related to strengthening the solidarity of the village bank and the familiar unit.
As part of the methodology, the members make an obligatory savings contribution (between 10-25% of the value of the loan) with their loan payments. In addition, they have the option to contribute to their voluntary savings. Each village bank has an administrative committee comprised of elected bank members. This committee is authorized to administer internal loans using the members’ accumulated voluntary savings. The interest earned from this process is returned to each member along with their savings at the end of the cycle.
Client surveys affirm that this savings dynamic, in addition to creating a savings culture among the members, directly benefits the clients because they receive a return on their savings. They feel that they are making an investment towards their future and so they willingly contribute to the collective capitalization of the group savngs. They do not worry about the security of their savings.
A 2009 client satisfaction survey demonstrates that the accumulated savings and interest is a program component highly valued by the clients. 74% of the clients are satisfied with the obligatory savings component, and 97% are pleased with the interest and savings distribution mechanism at the end of the cycle.
MIX: Have you encountered difficulties on the part of the clients in their ability to repay their loans and interest when they are also contributing to obligatory and voluntary savings?
Fabiola Céspedes: The unfavorable current economic situation has increased our clients’ income instability, which makes meeting their financial obligations even more difficult. However, our methodology and conditions for loan repayment have proven to be appropriate to their needs and capacity. This is demonstrated by our low levels of loan default that were 0.98% in January, 2010.
MIX: What microinsurance products does CRECER offer?
Fabiola Céspedes: There are two types of microinsurance that we offer through an existing insurance company:
Credit Life Insurance: This applies in the case of death or permanent injury and covers the outstanding loans of the client in CRECER and other financial institutions. It also returns the client savings to the beneficiaries and covers funeral expenses. It lasts for the length of the loan.
Personal Accident Insurance: This applies in the case of clients who suffer accidents. In the case of accidental death or permanent injury, the beneficiaries receive a fixed sum without taking into account the clients’ outstanding balance. For an affected client who survives the accident, it covers medical expenses.
MIX: How does CRECER evaluate the insurance needs of its target population and ensure that these insurance products are accessible to the clients? What is needed in order to gain the trust of the client?
Fabiola Céspedes: CRECER assures access to microinsurance to all of its clients who have current loans. CRECER evaluates the needs of its clients through periodic surveys and studies that seek to indentify institutional strategies that can produce positive impacts on the condition of client lives and reduce their vulnerability. When we implemented the microinsurance component, we ensured that it was accessible to all of our clients without incurring an additional cost to them. All additional costs are assumed by CRECER.
Client trust in the microinsurance program is achieved through educational sessions that explain the program’s benefits. Clients are especially interested in the ability to cover funeral expenses.
MIX: What are the difficulties that CRECER has encountered in product design, management, and follow up in microinsurance products? How have you overcome these difficulties?
Fabiola Céspedes: Due to our legal status, CRECER is not able to offer microinsurance directly, so we do not intervene in product design. However, we assume the responsibility of management and follow up of funeral expense coverage, facing the principle drawback of the slow response time of our partner insurance company. In some cases, this has forced us to assume the costs that should have been covered by the microinsurance company in order to meet our clients’ needs.
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For more information about CRECER, please visit their website: http://www.crecer.org.bo/. You can find their social performance report and their social rating on MIX Market: http://www.mixmarket.org/mfi/crecer/files.
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