Credit with Community Involvement
Two of Fundación Campo’s borrowers in San Miguel. Photo by Emily Allred.
Between 1994 and 1996, CARE El Salvador implemented a lending project in 100 rural communities in the country’s four eastern departments. Called Credit for Sustainable Agriculture (CAS), the project combined community organizing, technical assistance, participatory research and credit. The credit component was developed under a specific methodology based on rural organizations called ADESCOs.
ADESCOs are community development associations that are non-political, non-religious, nonprofit and of a democratic character. They are legally incorporated, meaning they can create relationships and agreements with various national and foreign agencies.
In 1995, at the initiative of CARE El Salvador, 50 ADESCOs jointly founded Fundación Campo, a nonprofit organization with no partisan or religious position. This foundation develops programs, projects and activities to improve socioeconomic status and benefit members of the community development associations and associations of private interests they represent. Benefits are in the areas of health, education, recreation, environment, and more.
Two characteristics distinguish Fundación Campo’s work:
- Clients live mainly in rural areas, and the vast majority lack access to formal banking.
- Governance is vested in a board of democratically elected representatives from the ADESCOs.
How the rural credit program works
This program offering individual loans depends on decentralized credit management, the leaders’ knowledge of community members’ conduct and conditions, and the moral responsibility of credit committee members in program management.
The approach requires organization, participation and empowerment of community members, who are the guarantors of good management and good use of resources at the community level. They are the main members of the foundation.
Processes, regulations and policies designed for this initiative are easy to manage and understand for community credit committee members, most of whom have a low academic level.
A meeting of one of Fundación Campo’s many community credit committees. Photo by Carlos Arenas.
The first step is a presentation to a community organized into an ADESCO, with detailed explanations of the operation, requirements, responsibilities and duties entailed in the credit program itself. Upon being accepted by the majority, an agreement of understanding is signed to administer the credit program between the ADESCO and Fundación Campo, which sets out the conditions, regulations and policies governing both sides. At this time, the community elects a delegate to represent its ADESCO at Fundación Campo.
In a general assembly, the ADESCO democratically elects a credit committee represented by three leaders. Fundación Campo’s credit advisor trains these leaders in the credit management process, as well as customer service, administration, leadership, valuation of collateral, community management and more.
Also at this time, a checking account is opened in the name of the ADESCO, which will electronically transfer funds when the community credit committee considers loan applications viable and which, in turn, are authorized by Fundación Campo’s credit adviser.
The community credit committee is responsible for 90% of the actions that make up the credit cycle, including completing the application, verifying collateral, analyzing moral character and ability to pay, signing and delivering checks, and keeping credit files in the community safe and orderly. The only activity not performed by credit committee members is receiving payments. That is the exclusive responsibility of the Fundación Campo or financial institutions (banks) designated for this purpose.
To date, Fundación Campo provides coverage to 123 ADESCOs in 47 municipalities in eastern El Salvador, and, under this system, manages a loan portfolio of approximately $3 million, distributed among 3,550 clients.
By Walberto Lazo
Deputy Director of Fundación Campo