Colombian FMM Popayán recently received an award for the best rural microfinance institution in Latin America. According to Leonor Melo de Velasco, Founder and Executive President of FMM Popáyan, this is because of the institution’s clear strategy to move more to rural areas. ‘We have developed a credit methodology tailored to the needs of small-scale farmers’
Fundación Mundo Mujer (FMM) Popayán is one of the biggest microfinance institutions in Colombia. How do you explain this success?
‘FFM Popayán was founded in 1985 to supply microcredits to entrepreneurial women with a low income. The intention was to increase the quality of life for these women, and their families, in the Southwest of Colombia. Currently we facilitate approximately 350,000 clients, also in the Northern coast region and in Bogota. An explanation for our success? The people need us. They want to earn their own money, for example as a farmer or a salesman. But to do this, they need money to grow their activities. They often can’t turn to a regular bank to acquire it as these banks are only interested in higher-income people and large companies. We are here specifically for those people living on a low income.’
What was the rationale behind the decision of FMM Popayán to move more to rural areas?
‘Most microfinance institutions have a strong focus on urban areas, while in rural areas access to finance is for most people very difficult. In line with our social mission we decided to start setting up a network of branches in these underserved areas and developing a methodology for offering agricultural loans to small-scale farmers. And to give you an indication of small-scale: the average hectare the farmers in our portfolio owns amounts to 1.5. And with success. In the last year alone we disbursed nearly 19,000 agricultural loans totalling in excess of US 16 million dollars.’
In what way do agricultural loans differ from the regular loans that FMM Popayán provides?
‘The payment schedule is tailored to the agricultural cycle of each produce. This means that it is tuned to the fluctuating cash flow position of the farmers throughout the year. The average loan amount is about USD 600 which is lower than the average loan amount of our other products which is about USD 1,000.’
What do you think was essential for building up Popayán’s agricultural portfolio?
‘Our loan officers. They have a thorough knowledge and understanding of the sector. They are able to make a good analysis of the farmer’s incoming and outgoing money streams during the year. They can draw up a well-founded loan and repayment plan that contributes to a viable enterprise. And like with all of our clients: each client has their own story and each of those needs an own unique financing plan. Another thing we did was the opening of so-called Points of Attention. These Points of Attention are kind of satellite offices around already existing agencies where clients can request loans and get loan disbursements. Rural clients see this as a great benefit as they do not need to travel long distances anymore. We currently have 42 agencies and 51 Points of Attention.’
How do you see the future for the microfinance sector in Colombia?
‘In the coming years the demand for microfinance in Colombia will remain. Traditional banks only provide loans to high-income people, causing the void between rich and poor to grow even further. It is difficult to change that. But by providing microfinance we can contribute to altering that. In Colombia there are momentarily more than five million small entrepreneurs. Many of them of started up with the help of a small loan.’
And for FMM Popayán?
‘With our activities, we ensure that people can invest in themselves. Our fight against poverty really makes a difference. Not only for our clients, their families and the community, but for the entire nation. We give people the opportunity to work hard, to earn their own living. That gives them security and the chance for a better life. That is how we contribute to a fairer and more equal country.’