The investment fund in Valverde: a successful micro-credit experience

The investment fund in Valverde: a successful micro-credit experience

Mao, Dominican RepublicMao, Dominican Republic
Organization type: 
nonprofit/ngo/citizen sector
Project Stage:
Established
Budget: 
$100,000 - $250,000
Project Summary
Elevator Pitch

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

The investment fund: a successful experience supporting micro-enterprises in Valverde, Republica Dominicana.

About Project

Problem: What problem is this project trying to address?

More than 51% of Valverde’s population lives below poverty line. In that context, micro-enterprises are a valuable tool for income generation. However, small producers find strong barriers to access to formal financial system, mostly for the lack of credit history and property title. This makes them ask for informal loans, with unsustainable interest rates.

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

ADELVA’s strategy is to support micro-enterprises owners to access to formal credit mechanisms. Through a Guarantee Fund created in 2001 with PNUD’s support and the allied Banco Popular, ADELVA has given loans to 203 small entrepreneurs in Valverde province in order to strengthen their productive units and give them full access to formal banking system. However, ADELVA hasn’t had the resources to offer property titles to producers to promote their business.
Impact: How does it Work

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

Ramon Jimenez, a small rancher, needed genetic improvement to increase his productivity and also capital to buy some milk to make cheese. He couldn’t get a credit because he has neither property nor title credit history. He received a Banco Pupular funding for US$ 1,350 at a market rate, through Guarantee Fund of ADELVA. He showed a correct payment behavior, so he received a US$ 13,000 direct loan from the Banco Popular. This story has been reiterated for more than 180 (89% of direct beneficiaries), men and women entrepreneurs (trade, services, industry and agriculture) that today are current clients of formal banking. They also receive other banking products, such as credit cards. ADELVA supported micro entrepreneurs by training and technical assistance programs, which help to develop an entrepreneur’s culture for a sustainable productive unit.
Sustainability

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

There are 5 institutions in Valverde that give micro-credits for entrepreneurs without credit history at a 35% annual rate. ADELVA makes a difference by facilitating access to 24% annual rates loans and being supported by a bank committed to turn them in credit consumers. ADELVA also makes a difference offering technical assistance in managing and accounting. The Guarantee Fund encouraged the association between entrepreneurs to include them in the city’s value chain.
Team

Founding Story

In October 2001, with the support of PNUD and Cooperación Italiana, we created a Guarantee Fund in the Banco Popular (US$ 290,000) to strengthen ADELVA in Valverde and build other ADELVA in Dabajón. Our goal was to stimulate local development, mostly through micro-credit activities. The agencies work independently, integrating partners of the public, private and social sector, joined by the Red ADECOM. ADELVA’s mission is to promote competitiveness in the province, based on a human development approach. Through its micro-credit program, ADELVA is the most successful experience developed to date.
About You
Organization:
Agencia de Desarrollo Económico Local de Valverde (ADELVA)
About You
First Name

Martín Eduardo

Last Name

Peña Taveras

About Your Organization
Organization Name

Agencia de Desarrollo Económico Local de Valverde (ADELVA)

Organization Country

, VA, Mao

Country where this project is creating social impact

, VA, Mao

How long has your organization been operating?

More than 5 years

Has the organization received awards or honors? Please tell us about them

No.

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Innovation
How long have you been in operation?

Operating for more than 5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

The Investment Fund improves credit capacity and productive potential of micro-entrepreneurs. ADELSA seeks not only to improve their productive processes but also contribute in strengthening the social capital of the area and the participation of the local financial sector in productive units. In addition, ADELSA will offer property tittle services for an easier productive funding.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Powerful incentives for financial service providers to move up-market.

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:
For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

The loans, given by the Investment Fund, have benefited 203 micro producers (see point 7). With the support requested, we seek to directly benefit 1,050 entrepreneurs in ten years, who have been excluded from the formal financial system. To be more specific, the direct beneficiaries are: 250 micro- agricultural producers with 1 to 7 hectares (property title services) and 800 micro-entrepreneurs with total annual sales of US$ 27,000 and 1 to 8 employees (credit and technical assistance). On the other hand, the activities planned will indirectly benefit Valverde population, through inclusion processes and social cohesion.

Could your solution work in other geographies or regions? If so, where?

Most micro-entrepreneurs and small agricultural producers of Latin America and the Caribe, have huge difficulties to fulfill the formal banking’s requirements. In this sense, an Investment Fund, managed by ADEL and with an allied bank, becomes an alternative to improve the access to funding in ALC. Some ADEL agencies of Republica Dominicana are executing this alternative in their own provinces.

If your solution is dramatically successful, how will things be different in 10 years?

In the past ten years, ADELVA has widened its services coverage and offers, adding property titles to obtain funding. The planned results for the next 10 years are the followings: 1) 800 entrepreneurs turn into banking services consumers, 2) 250 people obtain their property title, 3) ADELVA achieve supporting resources from public, private and international cooperation to increase the Investment Fund. The main idea is to have much more beneficiaries and integrate the funds of companies identified as part of the local value chain.

What will have had to have changed to make this happen?

Adelva creates the Technical Unit of Property Tittle equipped with a topographic station (with highly precision GPS, distance control system, a theodolite and a micro computer) addressed to reduce services costs. The Agency makes agreements with official workers to fasten property title’s process. The Agency also expands its training and technical services to assist beneficiaries, improving their entrepreneur culture and productive technics. ADELVA contributes to introduce activities of the 5th action line of the third specific goal, part of the National Strategy of Development.

What has been the impact of your solution to date?

Since Fund creation, we have received more ?????than credit requests with a total amount of US$ 420,382. ADELVA achieved in positively responded to 203 requests. 41% of the approved credits benefited women. The total amount of given loans are US$ 296,020, with the following distribution: 72.43% Services (142 loans), 10.64% Industry (25 loans) and 16.93% Agriculture (36 credits). This population was able to access formal banking services and sustained more than 170 enterprises, guaranteeing income and jobs for more than 760 families.

What is your projected impact over the next five years?

In 5 years ADELVA will achieve the following outcomes:
1) Strengthen the micro-credit mechanism for micro-enterprises and small agriculture producers of Valverde.
2) A services office to assist micro-entrepreneurs and small agriculture producers in property services, located in Valverde (125 beneficiaries).
3) Over the first year we’ll be operating the strategy to increase the Guarantee Fund up to 300%.

What barriers might hinder the success of your project? How do you plan to overcome them?

Outcome 1) strong storms and hurricanes might hurt the supported productive units. In that case, it will offer a grace period, according to the partial or total damages.
Outcome 2) if property title’s demand is superior to offers, we will make agreements with other companies offering the same service.
Outcome 3) if there is rate instability between dollar and peso, we will transfer part of the fund to a certificate in dollars.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

1) Micro- credit – 12 assisted entrepreneurs. 2) Property title operation – 12 producers starts this operation. 3) Investment Fu

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Divulgación del fondo, evaluar solicitudes, colocar préstamos, darle seguimiento y acompañar con asesoría a los emprendedores.

Task 2

Contratar un Equipo Técnico, adquirir estación topográfica, divulgar el nuevo servicio y enlace con la Oficina de Catastro.

Task 3

Colocar el 64% del eventual premio Changemakers en el existente Fondo de Inversión.

Now think bigger! Identify your 12-month impact milestone

1) Micro- credit – 25 assisted entrepreneurs. 2) Property title operation – 25 producers starts this operation. 3) Investment Fu

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Divulgación del fondo, evaluar solicitudes, colocar préstamos, darle seguimiento y acompañar con asesoría a los emprendedores

Task 2

Divulgar el servicio y consolidar la relación entre ADELVA y la Oficina de Catastro para agilizar el proceso de titulación

Task 3

Apalancar el fondo aproximadamente en 26,316.00 US$ con recursos gestionados por ADELVA.

Sustainability
Tell us about your partnerships

As we mentioned before, ADELVA is an institution that incorporates 38 associates of the public, private and social sector (Universities, GNOs, business unions, value chains, etc.). It is a social actor’s catalyst that contributes to create territorial development strategies in Valverde. ADELVA receives technical assistance from PNUD, is part of the managing network ADELCOM, along with national governmental institutions, ILS LEDA and ReMALDH.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

See point 7 of Social Impact for current targeting population.
See point 8 of Social Impact for targeting population for the next 5 years.

What type of operating environment and internal organizational factors make your innovation successful?

Since 2001, ADELVA has operated as a “local Micro-finance company”, learning how to manage a micro-credit fund. This experience is part of a wider strategy for local development of Valverde, through internal potential identification of the territory. Having members of the productive sector in our Board of Directors, it helps to supply and demand services mentioned in outcomes 1 and 2, by reducing transaction’s costs significantly.

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list

We’ll use Changemakers Prize for:
Contribution to outcome 1-3 US$ 64,000 (investment)
Contribution to outcome 2 US$ 16,000 (human resources)
Contribution to outcome 2 US$ 20,000 (investment)
For more information about needed resources used, see point 12 of Social Impact.
For Partnerships / Networks: ADELVA has their own supportive associates (see point 4 od Sustainability)