The replicable finance and development model for rural SMES

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The replicable finance and development model for rural SMES

Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

The business model of FONDESURCO is a solution for the problems to access finance and development services of rural SMES in Peru; with that end an efficient credit technology has been developed, a methodology for each segment, products adequate to the economic cycles have demonstrated it to be a rentable and sustainable institution.

About Project

Solution: What is the proposed solution? Please be specific!

Our business model is different from similar institutions because we provide credit with development that is why our technology allows us to reach the most remote places. Our credit technologies can be adapted to the micro and small characteristics of a rural firm (individual, BBCC credit). We have innovative products developed on the base of needs and the reality of our clients –all of which is integrated with the services of development (education, training, technical assistance, welfare services such as health campaigns, etc.) hence, recognizing that financing alone does not assure the improvement of the quality of life of our clients.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

In Peru we are in an electoral period of Local and Central Governments, and the governors and the candidates can be tempted to announce a “reduction of interest” in the debt of the rural sector or potential guarantees (with public funds) to support late payments, like it happened in the past. Additionally, the entries to commercial credit institutions that have traditionally worked in urban areas, whose experience have led to the in-doubtement of the SMES. This Entry is about (Issues) Financial services and markets Income generation Microfinance Poverty alleviation rural development Tell us about the social impact of your innovation. Please include numbers and stories as evidence of your impact. The last impact study of the services provided by Fondesurco shows that 73.7% of the clients affirm that their income has increased due to the credit in a 32%. The destination of this increase was in house expenditures (37.8%) and education of their children (43.6%). In the impact report the following results are emphasized: Result Impact Increased in Employment 77.40% Facility of Employment 80.00% Increased in Employment Productivity 88.00% Increased in Employment Motivation 81.20% Increase in Activity Rentability 71.40% Increase in the quality of food of the family 75.20% Increase in the schooling of the children 61.70% Solicitation of new credit 84.20% On the other hand we count with satisfactory social indicators Portfolio with agribusiness destination 70.00% Women participation 3.00% Clients under the line of poverty 25.00% Exclusivity 69.00% Satisfied Clients 74.00% Districts with no credit offer + 40 TESTIMONIES OF OUR CLIENTS “I have been working with FONDESURCO for 9 years and thanks to them I have increased my capital and my children have been able to study; they have really helped me out. I cannot complain”. (LAS PUNTA, Mario Valdivia Guillén DNI 030852158). “Thanks to FONDESURCO I could start my business and like this increase my economic input. That is why I highly recommend that others access it. It is an entity that is always supportive”. (OMATE, Arnaldo Alvarado Villena DNI 047214534)
About You
Fondo de Desarrollo Regional – FONDESURCO
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About You
First Name


Last Name




Your Organization

Fondo de Desarrollo Regional – FONDESURCO


, AR

About Your Organization
Organization Name

Fondo de Desarrollo Regional – FONDESURCO

Organization Phone


Organization Address

Av. República de Argentina 326 Urb. La Negrita Arequipa Perú

Organization Country

, AR

Organization Type

Non-profit/NGO/Citizen-sector Organization

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Your solution
Country your work focuses on

, AR

If multiple countries, please list them here. If your solution targets an entire region, please select it below

South of Peru.

Region(s) your solution focuses on:

Latin America and the Caribbean.

Range of turnover in your target firms, in USD

$21-50 Million.

Average turnover in USD of your target firm

US$ 36 millones

Number of employees in your target firms


Average number of employees of your target firm


Specify the size, average and range of expected loans or investments in each target firm

We have a range of classified credits in products and sub products that can be adapted to the needs of our clients. Please see below. Under the methodology of the individual credit: Product 1 Work Capital (fondeagro$1992, fondemype$1,331, fondeganadero$1,500) Product 2 Work Capital (Fondehogar$1,833,fondeempresa$2,371,fondemaquina$2,448,fondeenergía $425) Product 3 Free Availability ($551) and under methodology BBCC $201. All these products are accompanied by our services od development such as education such as the product BBCC with modules such as increase of sales and healthy habits; personalized and group technical assistance; social welfare services like health campaigns, among others.

What stage is your solution in?

Operating for more than 5 years

How does your proposed innovation leverage public intervention in catalyzing private SME finance?

The current financing structure to develop our activities is 24% from national private entities, 72% of private international entities, and 4% from the State. Given that our institution has a high social impact it allows us to overcome the burocratic challenges and Access this type of financing with favorable conditions, hence we now have a line of credit with La Corporación Financiera de Desarrollo S.A. (COFIDE S.A.); as well as with Banco de la Nación.

What barriers does your proposed solution address?

Asymmetry of information, Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for financial intermediaries to serve SMEs, Lack of competition / incentives for financial intermediaries to serve SMEs, Underdeveloped local capital markets (term local currency funding, exit options for SME equity), General barriers to SME development related to investment climate.

If you checked any of these barriers, describe how your solution addresses them

Information Asymmetry: we have resolved it with market studies and with research that is provided by credit analysts from the area.
Informality: We orient our clients to take advantage of formalization.
Lack of guarantees: The majority of our clients do not have guarantees due to their informality or their scarce resources. That is why 94% is personal guarantee.
Lack of financial capacity: The resources available to the SMES sector are scarce. Nonetheless, by means of financing we provide a tool to override that barrier.
Lack of access of SMES to abilities/ knowledge/ markets, this barrier we solved it by means of the development services provided by Fondesurco.
Lack of availability of financial products adapted to the needs of SMES. Our credit technology is adapted to the SMES of the rural sector differentiating itself from similar institutions.
High costs of transactions for our intermediary financiaries to serve SMES, even if it is true that to attend the rural sector it implies high operative costs, however Fondesurco has managed to manage it with economies of scale.
The lack of competition and incentives for the intermediaries to serve SMES. Rural microfinance are winning the interest of microfinance institutions that usually worked in urban areas. However, more than incentives, it is about the commitment with the por areas of the rural areas which is inherent to FONDESURCO.
Sub development of the local capital markets (long term in local currency, exit option for the SME equity), with the incursion of Fondesurco in areas where the Access to finance is null to the opening of commercial entities from local development markets.
General barriers to de development of SMES related to the investment climate, the investment of the rural sector is very limited, however, with our incursion in this sector we have opened the doors to other investments.
All of this under our general strategy of being leaders in rural microfinance by means of innovation, expansion through deepening and consolidation of a strategic and highly competitive team.

Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

The empirical evidence of the success of our model lies in our risk calcifications (B++) and social development (4) one of the best calcifications of the, showing the sustainability of the model; additionally we count with the best social and financial indicators of nearly all the social organizations in Peru. Details to follow: 36 million USD millions portfolio with a growth average of 77% in the last 3 years, with 8015 clients growing at an average of 68%, cartera in risk by 1.59%, ROA 6.52%, running ROE 25.10%, ROE 31.8%, running costs 14.62%, financing cost 11.52%, portfolio for the rural sector 96%, portfolio for the agricultural sector 70%, exclusivity of clients 69%, clients under the poverty line 23%, women clients 43%.

How many firms do you expect to reach?

28,620 clients.

What is the volume of private SME finance you aim to catalyze?


What time frame will be required to reach these targets?

According to our projections we can achieve our goals in three years.

Does your solution seek to have an impact on public policy?


What would prevent your solution from being a success?

In Peru we are in an electoral period of Local and Central Governments, and the governors and the candidates can be tempted to announce a “reduction of interest” in the debt of the rural sector or potential guarantees (with public funds) to support late payments, like it happened in the past. Additionally, the entries to commercial credit institutions that have traditionally worked in urban areas, whose experience have led to the in-doubtement of the SMES.

List all the funding sources that are required for the sustainability of this solution

In order to achieve the objective of having a portfolio of 40 million USD with more than 28.000 clients; as well as covering the running costs there is a need to have 33 million USD whose structure would be 24% national private entities; 72 foreign private entities; 4% public entities. The sources of financing may be the following:
International Organism
• Inter American Bank (BID)
Foreign Organizations:
• Oikocredit
• Symbiotics
• Cordaid
• Alterfin
• Responsability
• Global partnerships
• Triple Jump Oxan Novib
• Microcredit
• Blue Orchard
• Fundación SCD

Private Organizations Peru:
• Cooperativa de Ahorro y Crédito FORTALECER
• Cooperativa de Ahorro y Crédito ABACO
• Banco Comercial

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

The development of our model does not depend on public financing. Only 4% of our debt corresponds to State resources, the rest is provided by commercial credits, hence it has the ability to leave aside the public financing at any time.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

One of the main policies of the firm if the diversification of sources of funding, for which there is a constant monitoringh of the management of the debt. Additionally we have planned to become a Caja Rural in order to capture deposits and manage a less expensive capturing of funds, all of this under the supervisión and strict monitoring of the Superintendence of Banks and Securities.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

Strategic alliances with institutions that may provide development services; alliances with the IADB; World Bank; United Nations; Grameen Foundation with the objective of receiving support as well as technonoligical transfer of rural microfinance

Are there non-financial issues that could threaten the sustainability of your proposed solution?

•• Climate change that affect directly on the rural zones of production;
• The variation of the prices of products due to over production and or reduction of the market;
• The populist tentemption of intervening in the microfinance market fixating rates and generating disloyal competition in the State;
• The instability of the international financial markets and the repercussion of the regional economy.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

In the medium term we aim to a reach a national level. For this, we are working to turn into a regulated institution (Caja Rural) which will allow us to have partners that provide capital that will increase our financial capacity and consolidate our patrimony.