The Process of Adapting a Lending Technology: Financiera Calpia in Rural El Salvador
Navajas, S.
Publication Date: 1999
Published by: OSU Rural Finance Program
Document Type: Paper
What are techniques that can be carried between urban and rural areas?
The paper describes how Financiera Calpia initiated operations in 1988 as a non-regulated financial intermediary then in 1995 became part of the regulated financial system. It outlines shifts in targeting from micro and small enterprises in the urban areas to the rural areas and these occurred following consolidation of the urban business.
The paper highlights three techniques carried forward into the development of these rural services: - A lending technology already developed for the urban poor;
- Careful selection and training of the personnel needed for the rural environment;
- A policy of understanding each new sub-market before entering into it.
The author identifies four significant features of Calpia's expansion strategy:
- Portfolio diversification: household level- diversification of household livelihoods; rural portfolio level - general credit demand, total portfolio level through urban-rural cross subsidy;
- Monitoring of changes in the risk profile of its clients without targeting any specific activity;
- Emphasis on collateral assets that the poor have yet without excluding tenants;
- Importance given to the selection and training of its loan officers with a requirement for formal training in agriculture.
These work with techniques such as initial market studies to build a knowledge of demand, better design of products and to give loan officers a first taste of their market. This has allowed innovations such as seasonal credit. However other factors are involved and the author sees that:- Calpia's lending technology is not designed to deal with more specialised farmers;
- In the market, specialized rural lenders without an urban partnership or nexus will find it more difficult to deal with systemic risk;
- A great deal of Calpia's success is due to its human capital, but where most of its loan officers have an undergraduate degree then wage pressures could reach unsustainable levels;
- Rural lending is expensive and products priced highly through interest rates and other charges. This might attempt sustainability but may be politically infeasible.
| 
View this Document
Email this Document
