Posts filed under ‘Costa Rica’
The Power of Education and Collaboration
As I described in a previous blog post, EDESA (Kiva’s field partner in Costa Rica) works with a network of Community Credit Enterprises (ECCs by their Spanish acronym). To reiterate a bit, the ECCs are small, grassroots microfinance organizations formed by rural community members. FINCA Costa Rica provides extensive training in these communities to teach members how to work together to create and run a profitable business that provides financial services among other things. I recently visited one of the oldest and largest ECCs, La Asociación de Productores de El Sauce (The Association of Producers of El Sauce – El Sauce for short).
This ECC is a phenomenal example of what people can do with just a little money, a little training, and a lot of motivation. The El Sauce ECC started about 17 years ago with only 13 members and no money. They quickly grew to 23 members and Finca provided them with their first loan: just over US$1,100 to invest in farming projects across all the members. Over the years they have grown steadily and currently have 136 members holding 531 shares and have given a total of 2,062 microloans.
The beauty of the El Sauce ECC, however, is not just the manner in which it has provided financial services to the community, but how it has used the foundation of the ECC to expand in many ways. (more…)
An Innovative & Effective Microfinance Model
Intro to EDESA and their network of Empresas de Crédito Comunal
Kiva’s field partner in Costa Rica, EDESA, provides credit services to a network of “Empresas de Crédito Comunal” (Community Credit Enterprises), or ECCs, established by FINCA Costa Rica. The ECCs are small, grassroots microfinance organizations formed by rural community members. The objective of each ECC is to provide financial services to individuals within the community for the development of economic activities that allow them to move out of poverty. FINCA Costa Rica works to establish ECCs to serve as the financial engines of the neediest communities across the country. To form the ECCs, FINCA provides comprehensive training to rural community members that includes financial and business elements and culminates in the formal establishment of the ECC as a legal autonomous business.
The capital of each ECC is generated by the investment of its members through the sale and purchase of shares in the organization. These purchases provide the loan capital that the ECCs then use to issue loans to their members and to invest in other community development projects. As shareholders, individuals in the community become owners of the ECC, earning dividends on the shares when the business is profitable and fully determining the rules, policies, and projects of the organization. Not only do ECCs provide financial benefits, but many of them also work with other organizations in sectors such as health, education, and sports and often provide other programs such as investment education for children and youth. While each ECC governs its own policies, the average price for a share across the network of ECCs is 2,000 Costa Rica Colones (approximately US$3.50) so becoming a partial owner of the business is fairly accessible, even in the poorest of communities.
Over the years, as the ECCs grew and their members’ businesses expanded, some members began requesting loans that exceeded the ECCs’ lending capacity. The ECCs started looking for other sources of financing. EDESA was established by FINCA Costa Rica, the ECCs and some individual investors in February of 2005 in response to the ECCs’ growing need for external financing. EDESA serves as the ECCs’ national financing institution, with the mission of bringing credit services to the ECCs. EDESA is a firm operated just like an ECC, but on a national level. The ECCs are the shareholders and receive profits (dividends) if positive financial results are achieved.
This model of community members becoming partial owners of the ECCs and the ECCs being partial owners of EDESA has proven remarkably effective. Not only does the sale and purchase of shares at the grassroots level facilitate the capital needed to run these organizations, but the fact that the borrowers are receiving loans from an enterprise they partially own creates an additional vested interest in paying back the loans and ensuring future success of the organizations. As evidence of how effective this strategy is, EDESA maintained a zero percent (0%) delinquency rate in its first four years of lending! In addition to being effective in terms of loan repayment, this model is also extremely empowering to the individuals and the communities investing in the ECCs and EDESA. By being participants and owners of these organizations, the beneficiaries also educate themselves on financial and business issues and shape how the businesses grow and what they do within their own communities.
offices of one of the oldest and most developed ECCs, El Sauce
ECC El Sauce sign
ECC El Sauce even has internet and bike rental services
To lend to EDESA’s borrowers, please click here.
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Megan Tatman Montgomery is in her fourth and final placement as a Kiva Fellow. Prior to EDESA, she served at Friendship Bridge and FAPE in Guatemala and ADEPHCA in Nicaragua. Please feel free to contact her at megan.montgomery@fellows.kiva.org with any questions, comments, or requests for future blog posts.
Adios ADEPHCA, Hola EDESA
I’ve just arrived at my fourth and final placement as a Kiva Fellow. Less than two weeks ago I was wrapping up work with ADEPHCA in Nicaragua and, following a week of whirlwind travel through southwestern Nicaragua, I arrived to start my first week with EDESA in Costa Rica. Based on initial impressions, ADEPHCA and EDESA have very little in common other than the fact they are both identified by somewhat confusing acronyms and are both quite small organizations in the world of microfinance. But that is where the similarities end. ADEPHCA is based out of Bluefields, Nicaragua: a town of less than 50,000 where the tallest building in town is the 3-story discotheque and many people haven’t even heard of Diet Coke. EDESA is based out of San Jose, Costa Rica, a bustling metropolis of over 1.5 million people that feels more like the United States than any other place I’ve ever been in Latin America. ADEPHCA’s clients live in tin and clapboard houses that may or may not have a real floor. The EDESA clients I’ve seen so far live in cement houses and may even have tile covering the concrete floors.
The working poor in Bluefields have very few options in terms of starting up microenterprises. Accordingly, nearly all of ADEPHCA’s loans are invested in daily consumption items such as rice, beans, and soap for little stores or in the purchase of clothing for resale. That’s it. The kinds of businesses EDESA’s clients are investing in run the gamut from agriculture and livestock, to fishing and restaurants, to sewing, bakeries, traditional handicrafts and more. One community they work with used to be dominated by coffee cultivation. Several years back coffee prices dropped dramatically, and many in the community used microloans to invest in other agricultural endeavors, a bakery, a tailor shop, etc.
While I’ve only been in Costa Rica for a week, my initial visits into the field (the rural areas where microfinance is most utilized) have shown that the levels of poverty and challenges to development are markedly less severe than in Nicaragua. To some extent, this is to be expected. Nicaragua is the second poorest country in the western hemisphere, while Costa Rica is among the most developed countries in all of Latin America. Costa Ricans take great pride in the fact that their country has not been torn apart by civil war and government corruption like much of the rest of Central America. While other countries were embroiled in internal conflict, Costa Rica was able to focus on things like infrastructure and education. In addition to investments such as this, Costa Rica is blessed with fertile lands conducive to agricultural production of all kinds and incredible biodiversity that attracts tourists from all over the world. They are so far ahead of Nicaragua in almost every way that it’s hard to believe that these tiny Central American countries share a border.
As a longer-term Kiva Fellow, it has been extremely valuable to see microfinance in action in a variety of regions and contexts. The thing I am most excited about regarding my time in Costa Rica is getting a feel for how levels of poverty here really compare with elsewhere I’ve been in Latin America. Are the poorest of the poor in Costa Rica still way ahead of Nicaragua’s poor? Or is there still extreme poverty in some parts of the country? Because Nicaragua and Costa Rica share a border, and because Costa Rica has so many more work opportunities than Nicaragua, nearly one million Nicaraguans have immigrated to Costa Rica. One million Nicaraguans in a country with just over four million Costa Ricans. It’s my understanding that Nicaraguans actually comprise much of the poorest of the poor in Costa Rica. But is their quality of life in Costa Rica still better than their life in Nicaragua? I look forward to seeing just how well Costa Rica has done in terms of development and poverty alleviation. In such a small country, have all corners benefited from the growth and prosperity I see in San Jose and nearby rural communities? Or have some still been left way behind? Hopefully I’ll be able to provide some answers in the coming months.
An EDESA borrower's chive fields in beautiful Costa Rica
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Megan Tatman Montgomery is in her fourth and final placement as a Kiva Fellow. Prior to EDESA, she served at Friendship Bridge and FAPE in Guatemala and ADEPHCA in Nicaragua. Please feel free to contact her at megan.montgomery@fellows.kiva.org with any questions, comments, or requests for future blog posts.
