Posted by: Katherine Oglietti
Interview with: Gentain Cane
Marketing, ASC Union, Albania
ASC Union is a voluntary union of individual Savings and Credit Associations (SCAs), which are village financial institutions that are created and managed by their members and administrated by its member-elected Board of Directors. Each member makes a minimum deposit into the SCA, which constitutes the majority of the financing for loans and represents over a quarter of loan portfolio funding at the Union level. ASC Union supports its SCAs financially and technically, with the aim of promoting productive activities in rural areas. It is the first microfinance provider in Albania, out of a total of 7 microfinance providers registered by MIX in the country. In the following interview, Gentain Cane of ASC Union describes how the union reaches rural clients at competitive interest rates while covering its costs.
MIX: In the MIX Social Performance Report, ASC Union states that its social mission is "to provide financial services to the clients living mainly in rural areas and practically excluded from the conventional financial institutions." How does ASC Union use its market studies and client satisfaction surveys to design loan and savings products to meet the needs of its low-income clients in rural areas specifically?
Gentian Cane: The services offered and provided by ASC Union are primarily at the micro level. In contrast to commercial banks, microloans are offered to our clients at an interest rate approved by the ASC Board of Directors at the beginning of each year, (currently 11-16% depending on loan type) which is kept at a fixed rate throughout the year. ASC offers the most competitive interest in the rural areas where we work in order to both meet the social component of our mission as well as to mitigate the needs of low-income clients.
Market studies or client satisfaction surveys are used mainly when a new product or service is to be designed or launched. In case of launching of new products (such as our new savings/microloan products in Euro currency and overdraft protection), a preliminary market study is done in order to get feedback from the Savings and Credit Associations (SCAs) and clients about the terms and conditions of the new products.
Beyond that, feedback from SCAs and clients in the districts is received regarding client satisfaction with the existing products. From that feedback, we determine whether existing products meet the needs of our target population (rural, low-income populations), or whether, in some cases, the product can be modified in order to better meet the needs of clients.
MIX: 72% of ASC Union clients are reached through service points in locations where there are no other banking services or MFIs. According to the MIX Social Performance Report, ASC Union covers 830 out of 1226 villages in the 16 districts where it works (or 61% of them). How does ASC reach numerous remote villages while keeping its costs down, spending just 9.7 cents on every dollar in loans outstanding compared with 12 cents for other cooperatives in the region?
Gentian Cane: ASC Union is reaching the remote villages by serving to the clients living in these areas through SCA offices. SCA offices located in these villages serve as “the selling point” as they are the only financial institutions providing financial services for excluded rural inhabitants. Each SCA has its own Board of Directors composed of elected SCA members who are well respected within the rural community. Board members voluntarily take care of the administration of the SCAs and cooperate with the loan officer in lending and savings operations. This helps the institution to minimize both its costs as well as its risks. The board members serve as moral guarantors for the loans due to their close acquaintance with the respective SCA members.
MIX: From the client perspective, what are the specific needs that your clients have that might be different if they lived in an urban setting?
Gentian Cane: Some specific needs of our clients that differ from the needs of individuals in urban areas are:
- Means of funding for agriculture mechanization in order to improve the productivity in the agriculture sector
- Access to delivery systems so that clients can sell their agricultural and livestock products
- Other financial services such as remittances from abroad, utility payments, and other types of loans (housing, small and medium enterprise loans, etc.)
MIX: What are the specific challenges you face as an institution working in rural communities? Are there limitations to the types of products and services your institution can offer due to its rural outreach focus? What sorts of innovations has ASC made in order to overcome these challenges and limitations?
Gentian Cane: Some of the challenges faced by the ASC Union in working with rural communities are:
- Lack of a proper infrastructure in rural areas
- Inability to offer the other services beyond microcredit and savings that are demanded by our clients (due to regulations that guide our current legal status as a credit union)
- Lack of technology development in rural areas
- Due to the outreach in rural areas, microloans are offered mainly for the agriculture, livestock, trade and services purposes.
ASC Union is unable to mitigate some of these challenges due to external forces. For example, due to our legal status, our credit union has some limitations in terms of products and services offered imposed by regulations from the Bank of Albania and the Law on Credit and Savings Associations. As a result, ASC Union cannot offer money transfers, utility and other bill payment services, housing loans, or other services such as insurance and foreign exchange.
In response to client demand, however, ASC is working to meet the challenges it has the ability to overcome. It was recently able to initiate a loan product designed for Small and Medium Enterprises. Further, ASC Union is currently doing a lot of work to improve the infrastructure and appearance of the SCA offices in order to make them suitable for financial service operations. Development of the infrastructure and technology in the SCA office will enable the improvement of the quality and volume of services for borrowers and savers.
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For more information on ASC Union, please visit the website at: www.ascunion.org.al/. You can download their Social Performance Report at MIX Market: http://www.mixmarket.org/mfi/asc-union/files.
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