Access to Finance for Smallholder Farmers

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Access to Finance for Smallholder Farmers Access to Finance for Smallholder Farmers Learning from the Experiences of Microfinance Institutions in Latin America In Partnership With © International Finance Corporation 2014. All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The contents of this work are intended for general informational purposes only and are not intended to constitute legal, securities, or investment advice, an opinion regarding the appropriateness of any investment, or a solicitation of any type. IFC or its affiliates may have an investment in, provide other advice or services to, or otherwise have a financial interest in, certain of the companies and parties (including named herein). All other queries on rights and licenses, including subsidiary rights, should be addressed to IFC’s Corporate Relations Department, 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433. International Finance Corporation is an international organization established by Articles of Agreement among its member countries, and a member of the World Bank Group. All names, logos and trademarks are the property of IFC and you may not use any of such materials for any purpose without the express written consent of IFC. Additionally, “International Finance Corporation” and “IFC” are registered trademarks of IFC and are protected under international law. Photo credits: IFC/World Bank photo libraries, Banco ADOPEM, Bancamía, Financiera Confianza, Caja Huancayo , Martin Spahr, and Panos Varangis. Table of Contents Foreword ................................................................................................................................................ iii Acknowledgements ................................................................................................................................. v List of Abbreviations ............................................................................................................................. vii Executive Summary ................................................................................................................................. 1 Background, Objectives, and Methods .................................................................................................... 5 Background ..............................................................................................................................................................................5 Study Objectives ......................................................................................................................................................................7 Research Methodology ............................................................................................................................................................7 Case Study Selection ................................................................................................................................................................9 Current Practices and Lessons ............................................................................................................... 11 Institutional Structure and Management ...............................................................................................................................13 Client Segmentation, Products, and Services ..........................................................................................................................15 Institutional Performance .......................................................................................................................................................23 Enabling Environment and External Support ..........................................................................................................................26 Conclusions and Next Steps .................................................................................................................. 27 Good Practices and Success Factors .......................................................................................................................................27 Taking MFI Smallholder Lending to the Next Level ................................................................................................................29 Implications for Donor Involvement .......................................................................................................................................30 Case Studies .......................................................................................................................................... 33 Case 1: Banco ADOPEM, the Dominican Republic ..................................................................................................................35 Case 2: Bancamía, Colombia ..................................................................................................................................................42 Case 3: Financiera Confianza, Perú ........................................................................................................................................47 Case 4: Caja Huancayo, Perú ..................................................................................................................................................55 Endnotes ................................................................................................................................................ 61 References ............................................................................................................................................. 65 Annex – Desk Review List of Examples ................................................................................................. 69 TABLE OF CONTENTS I ACCESS TO FINANCE FOR SMALLHOLDER FARMERS List of Boxes Box 1. The hidden agricultural loan portfolio—risks and missed business opportunities .........................................................7 Box 2. Main forms of collateral reported in the study ............................................................................................................18 Box 3. Coffee rust in the central region: Financiera Confianza’s proactive risk management strategy ...................................51 List of Tables Table 1. Years serving microfinance, smallholder, and rural clients by institution (March 31, 2013) .........................................9 Table 2. Portfolio outreach by institution (September 30, 2013) ............................................................................................10 Table 3. LAC MFIs and agricultural lending ............................................................................................................................12 Table 4. India MFIs and agricultural lending ..........................................................................................................................12 Table 5. MFI sustainability and efficiency ...............................................................................................................................23 Table 6. Portfolio at risk > 30 days (September 30, 2013) ......................................................................................................24 Table 7. Agricultural loan portfolios by MFI (September 30, 2013) .........................................................................................33 Table 8. Institutional performance by MFI (December 31, 2012) ............................................................................................34 Table 9. ADOPEM portfolio composition (September 30, 2013) .............................................................................................36 Table 10. ADOPEM credit products .........................................................................................................................................37 Table 11. ADOPEM savings and insurance products ...............................................................................................................37 Table 12. Bancamía portfolio composition (September 30, 2013) ..........................................................................................42 Table 13. Financiera Confianza portfolio composition (September 30, 2013) .........................................................................47
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