Microcredits

Microfinance in Alto Perú


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Project Overview

In July of 2009, a team of three, working under Asociación SOLAC’s name, set out to implement a new project in the community of Alto Perú, Huachipa, district of Lurigancho-Chosica, department of Lima: the pilot project Microfinanzas en Alto Perú (‘Microfinance in Alto Perú’).

Justification

The need for such an initiative was identified through the development and results of SOLAC’s previous projects in Alto Perú. The latter addressed the issue of working children in the community and had the aim of improving the school environment and increasing attendance. The Microfinance (MF) team estimated that the creation of job alternatives through a microfinance programme would allow the parents of the community to be able to forego some of the children’s participation in income earning, which would allow the kids to spend more time and energy on their academic development.

Despite there being a very well-developed microfinance sector in Peru, and especially in Lima, some sub-urban areas of the capital remain excluded from the microfinance network due to a shared perception, on the part of the Microfinance Institutions (MFIs), that these areas are too remote and lacking commercial movement to allow the successful implementation of a microfinance programme in general, and in particular a Village Banking methodology system.

Up until 2009, Alto Perú was one of these ‘remote’ suburbs: the objective of this project was to introduce the Village Banking methodology to this area, and stimulate the expansion of such a system on two fronts: on the one hand, introducing this new concept to the inhabitants of the area, encouraging them to participate by demonstrating the benefits of such a programme; and on the other hand, fuelling an interest on the part of MFIs to enter Alto Perú, by proving that its inhabitants could be eligible borrowers.

The Project


The project was carried out over a period of 19 months, from July 2009 to January 2011. It was divided into three phases: Diagnostic, Implementation and Extension.

Phase 1: Diagnostic

The diagnostic phase was composed of primary and secondary research during the months of July to October of 2009, where the specific issues affecting the living conditions of the inhabitants of Alto Perú were studied and analyzed so to be able to develop and carry out, in the Implementation phase, a Village Banking methodology adapted to the specific needs and expectations of the local population.

Phase 2: Implementation

During this phase, which ran from November of 2009 to June of 2010, two village banks – referred to as ‘Asociaciones Solidarias’ (ASOLs – Associations of Solidarity) - were formed, and together worked through one cycle of six monthly instalments, during which each member successfully reimbursed an individual loan, with a 100% repayment rate. On top of receiving this small capital to invest in the micro-businesses, the participants benefitted from having access to a series of other services, namely a savings programme, an entrepreneurial training course, individual support in the development of their micro-enterprises, and the building of a stronger social network within their community.

Phase 3: Extension

About half way through the Implementation phase the need for a strengthening of the concept of Village Banking microfinance was identified by the MF Team, who proceeded to plan an Extension phase, which, overlapping the end of the Implementation, ran from April 2010 to January 2011, with the fourfold objective of:
  1. fortifying the existing ASOLs;

  2. expanding the access to the program to more inhabitants of the area;

  3. implementing some changes to the program;

  4. organizing a series of complementary activities for the enhanced benefit of the participants.

During this phase, two more ASOLs were formed, bringing up the number of participants from 19 to 34, and all four groups were provided with an intensive entrepreneurial training course especially designed, by the MF team and the Peruvian enterprise incubator INCUBA Network, to fit the needs and educational level of the members of the ASOLs. These workshops, divided into pre- and post-disbursement sessions, specifically addressed those participants who yet had to implement a business, fostering theirs, as well as the other participants’ entrepreneurial conscience. A more intense individual support was provided during this phase, closely following the development of each microenterprise.

To complement the programme, SOLAC was able to provide two cycles of very successful handcrafts courses, one in knitting and crochet, and one in jewellery making. Both cycles were closed with a catwalk event where the produce of the workshops was presented by the participants to the rest of the community.

Before the end of the project, the MF Team offered the participants the chance to participate in two complimentary activities: a ‘Seed Money’ Competition, and a daytrip in celebration of the one year-anniversary, as well as the closure, of the project.

Project Sustainability

The culminating moment of the project was the pass-over of the groups formed by the MF Team to an established MFI which could expand the provision of services of Village Banking microfinance to more people in the area of Alto Perú, and secure a long-term availability of these services.

After having drawn up a list of MFIs in Lima, it resulted only possible to pass-over the groups to an institution already present in the district of Lurigancho-Chosica. Two NGOs were contacted and their programmes were explained to the ASOLs. Each NGO came to present themselves to the ASOLs and to clarify any doubts the participants may have had. All four ASOLs chose the NGO EDAPROSPO, with which two of the four groups have already started a collaboration, whilst the other two have decided to postpone the start of their next cycle and remain in contact with the organisation.

As originally intended by the MF Team’s efforts, EDAPROSPO’s aim is to continue expanding the outreach of microfinance within Alto Perú.

Results

Having introduced a microfinance institution to the area, which is currently providing its services to the people in Alto Peru and having awoken the interest of more inhabitants of Alto Perú in the system of Village Banking microfinance, the MF team has achieved its immediate goal of ensuring the long-term presence of an MFI in the area.

Its project coordinators have a personal interest in following the foreseeable growth of microfinance in the area through the continuation of our work by EDAPROSPO, with the long-term aim of enhancing socio-economic development in Alto Perú.

For more a more detailed description of the activities and achievements of Microfinanzas en Alto Perú, please see the links to our Informe de Resultados (Results Report) and Informe Narrativo (Narrative Report) – (only available in Spanish).

More information is available on the Microfinance SOLAC blog.

Project Coordinators

The pilot project and its pass over has been implemented and is being coordinated by three European graduates of the University of Sussex, in Great Britain, who have been working alongside SOLAC for the past two years - Valentina Martufi, Marta Dormal, and Ruth Pollak.