Archives des Microfinance

Testimonial at the SIDI General Meeting: resilience and social impact of Financiera FDL

This year’s General Meeting was an opportunity for SIDI to invite one of its partners to testify. Julio Flores, Managing Director of Financiera FDL, came to present the activities of this microfinance institution (MFI) which operates in Nicaragua, the 2nd poorest country in Central America.

The fruitful exchanges between Julio Flores and SIDI shareholders continued the following morning with a question and answer session. This time allowed us to go into more detail about FFDL’s business and its formidable resilience in the face of crises.

The NGO Fondo de Desarrollo Local (FDL) was created in 1993 by the Jesuits, following the civil war. FDL’s aim is to improve the living conditions of the most vulnerable Nicaraguans by providing them with loans, training and support services to help them develop their businesses, at a time when banks are not interested in this group. Financiera FDL has become the first MFI in the country and one of the largest in Central America. The institution mainly targets low-income people, farmers, breeders and micro-entrepreneurs in peri-urban areas. Thanks to its 38 branches, La Financiera has a strong territorial coverage, enabling it to provide 70% of its loans in rural areas, to populations with little access to credit.

Financiera FDL and its resilience to crises.

FDL’s growth was first slowed by the crisis between 2008 and 2011. In addition to the global economic crisis, an anti-MFI “Movimiento del no pago” (non-payment movement) has developed. It has led to a decline in the number of customers and payment defaults in the microfinance sector. FDL, despite a decline in portfolio and customers of around 50%, managed to restructure, before creating, alongside the NGO, the financial company Financiera FDL (FFDL) in 2016. To structure this financial company, FDL has chosen “international partners who share its vision”. As a result, SIDI became a minority shareholder.

A second crisis affected the country from 2018 to 2021. Politico-social conflict (murderous repression by the authoritarian regime) and economic instability led to a three-year contraction in GDP. Mass migration (10% of the population fled the country) was caused by persecution of civil society, including the Church. The number of FFDL customers has plummeted. This recession and drop in activity were exacerbated by the Covid crisis. Several MFIs have gone bankrupt, while FFDL’s portfolio has once again shrunk by 50% (more than $6 million in losses in 2018 and 2019)

FFDL overcame a number of challenges in order to emerge from the crisis: renewing its customer base, consolidating its portfolio and building up reserves. To support it, SIDI participated in the recapitalization of FFDL and made a 5-year subordinated loan (total outstanding amount of over €1.7 million in 2023). This second acquisition brings SIDI’s stake in FFDL to 4.4%. Backed by the support of its international shareholders, FFDL was able to negotiate with lenders to maintain its credit lines.

FFDL has achieved a spectacular turnaround. The portfolio has been growing since the end of the crisis, with a forecast +12% in 2024, which will enable us to recover the $6 million in losses recorded in recent years. All this has been made possible by the serious management and expertise of the company’s management team.

FFDL, an MFI with a strong social and environmental impact.

Nicaragua is one of the countries most exposed to climate change. The economy is partly based on cattle farming (54% of agricultural land), and the deforestation rate is the second highest in Central America. These activities are highly polluting and destructive, while severe droughts reduce agricultural yields by 20 to 40%.

Over the years, the MFI has developed a comprehensive range of support services for producers and breeders in the transition to agro-ecology. Support for producers in agro-ecological practices focuses on themes such as water management or arboriculture combined with animal husbandry. This technical assistance is paid for in part or in full by FFDL, depending on the customer’s standard of living.

To improve producers’ incomes and reduce poverty, FFDL supports product processing, such as packaging coffee for export. This on-site processing of raw materials by producers creates added value, reduces the number of intermediaries and enables them to sell their produce at a higher price, guaranteeing local producers a better income.

FFDL seeks to maximize its impact, and the results are there. According to an independent survey partly financed by SIDI, in 2023, more than 60% of FFDL’s customers will report an improvement in their standard of living. The structure adapts its loan amounts and terms according to customers’ needs. It grants loans from 14 months on average (for traders and businesses) to 36 months for agricultural activities. This earned FFDL a Microfinance Index award in 2023. (see related article).

FFDL has demonstrated impressive resilience, while maintaining a strong social and environmental dimension, with a focus on financial inclusion in rural areas and environmental protection.

For Julio Flores, “although SIDI is a minority shareholder, it is very much involved in FFDL’s key moments. SIDI’s active participation in FFDL’s governance through the involvement of a volunteer consultant (on its Board of Directors) is decisive”.

Discover SIDI’s 2021 activity report

The 2021 Activity Report is online!

The year 2021 was still very much marked by the effects of the Covid19 pandemic, but let us salute everyone’s commitment, which enabled SIDI to pursue its mission as a solidarity investor serving the financial and economic inclusion of populations excluded from conventional financial systems.

Discover the performances and achievements of SIDI and its partner organizations, all committed to ecological and social transition. Aware of the significant financing and support needs that remain, SIDI is fully mobilized to respond to the ever-increasing challenges facing the most vulnerable populations.

Let’s stick to our course and our ambition to promote socially responsible finance!

Publication of SIDI’s 2021 Social and Environmental Report

SIDI’s Bilan Social et Environnemental 2021 (Social and Environmental Report 2021) presents the key figures of its activity in favour of the development of inclusive economies, mainly in rural areas.

In 2021, SIDI is pursuing its mission as a solidarity investor and demonstrating the added value of its action.

It supports
144 partners in 36 countries: rural or mixed MFIs, agricultural entities mostly certified organic and fair trade.

It continues to target the most vulnerable:

✔️ 73% of partners are located in countries vulnerable to climate change

✔️ 73% of partners are located in countries with a low or medium HDI

✔️ 57% of partners are located in low-banking countries

✔️ 53% of PF dedicated to Sub-Saharan Africa

Empowering partners remains a priority:

📌 51% of PF is devoted to capital investment ;

📌 1/3 of loans are for more than 36 months

It reinforces the customized support provided to partners via three channels:

→ participation in decision-making bodies

→ personalized support

→ technical assistance

Find all the figures and data from the Social and Environmental Report 2021

[CP] EIB lends €5 million to FEFISOL II fund

[CP] European Investment Bank lends €5 million to FEFISOL II to finance Africa’s agricultural sector

Building on the success of FEFISOL, the first impact fund dedicated to the rural world in Africa, which closed in 2021, its two founders, SIDI and Alterfin, have been actively working on the creation of a new fund: FEFISOL II, created at the end of 2021.

Today, the EIB is announcing its entry into the capital of FEFISOL II for an amount of 5 million euros! This renewed commitment will enable the Fund to pursue and deepen its social mission.

FEFISOL 1 has had a considerable impact over the past decade:

– 86M euros disbursed, of which 93% in Sub-Saharan Africa ;

– 75% of average outstandings in local currency ;

– 92 customers financed in 25 countries;

– 139 technical support projects carried out for 51 customers.

FEFISOL II builds on FEFISOL I’s pioneering support for rural microfinance and the agricultural sector. The challenge posed by the lack of financing for rural areas in Africa, and for farmers in particular, remains crucial.

In Africa, less than 5% of loans disbursed by traditional financial institutions are earmarked for the agricultural sector, and less than 10% of farmers have access to credit. And this despite the fact that around 48% of the population depends on agriculture. Although it makes a major contribution to many African economies, the agricultural sector is still poorly served financially, as it is often perceived as too risky or not profitable enough.

Rural communities face multiple challenges: the remoteness of financing, but also the growing risks induced by climate change, as well as the financial inclusion of women, who represent 60% of the agricultural workforce in Africa without often being able to benefit from the same rights as men.

FEFISOL II is structured to provide financial and technical support for solutions designed locally to meet these challenges. FEFISOL II will be implemented in over 25 countries in sub-Saharan Africa, and is expected to support 130 microfinance institutions or agricultural companies and cooperatives sourcing from smallholders and certified fair trade or organic.

Other investors are joining FEFISOL II for a round of financing that will close at the end of March: the first investments will be effective from May!

Focus on technical support for rural African players

Created in 2011 by SIDI and its partners, the Fefisol fund offers a technical assistance (TA) facility to African rural players, in addition to its financial support. After conducting nearly 140 TA projects on the continent, SIDI and Alterfin are due to launch a second fund in 2022, with the ambition of further deepening its social and environmental approach to the companies financed.

Financing and TA, fertile ground for the growth of agricultural entities in Africa

By Gabrielle Orliange, Head of Social and Environmental Performance SIDI/Fefisol (published in Secteur privé & développement #36, La revue de Proparco, 4th quarter 2021)

In Africa, microfinance and the rural sector are of little interest to the traditional banking system. However, technical support (TS) for agricultural entities, combined with appropriate financial services, play an essential role in the continent’s sustainable development. This is why the Fefisol fund (Fonds européen de financement solidaire pour l’AFrique), in addition to its financial support, offers a technical assistance facility to rural players. In this context, it provides its customers with specialized service providers who help them to strengthen their viability and improve their productivity, while preserving the living conditions of small-scale agricultural producers.

Since its creation just ten years ago, Fefisol has financed 139 support projects for 51 customers in 22 African countries. Over two-thirds of beneficiaries are small microfinance institutions (MFIs) undergoing consolidation[1] or agricultural entities. A quarter of the technical support projects supported by the fund relate to financial issues, in particular accounting monitoring and strengthening internal control.

The technical support program reinforces the impact of financial support. At the beneficiary level, the two levers of action are complementary: Fefisol loans enable companies to grow their business, while technical expertise helps them secure this growth by improving their efficiency. In terms of fund management, technical support in return enables investment managers to improve their understanding of how investee companies operate, thus guaranteeing greater operational efficiency.

Fefisol’s TA offer stands out above the rest by providing a tailor-made response to customer needs. The customer is heavily involved in the entire process, including the selection of the service provider. This sense of ownership is also reinforced by the direct financial contribution that each customer must make to the project[2].

INVOLVE THE CUSTOMER IN ALL PHASES OF THE PROCESS

Over the decade, the needs of Fefisol’s customers have changed considerably. For almost two years now, due to the economic crisis linked to the Covid-19 pandemic, requests to the fund have mainly been for equipment coverage not provided for in their annual budgets. For their part, MFIs have asked for support in managing liquidity in a crisis context. Fefisol has responded to this need by organizing, with partners, an online training course on this topic.

The independent evaluation of the facility in 2019 will assess the impact of technical support on beneficiaries. Many TA missions respond to opportunities and needs for fundamental change within beneficiary institutions. In many cases, TA projects have helped to kick-start an in-depth transformation process. By enabling customers to test innovations more quickly and easily, they help speed up the implementation of optimal solutions.

Several lessons can be drawn from these ten years of activity. The main one remains the need for the customer to take ownership of the technical support project. As such, his involvement in the process is crucial, from defining his needs for a customized solution to managing the consultant. It is also important to maintain a certain degree of agility throughout the implementation of TA projects, to ensure an effective response.

MEETING THE CHALLENGE OF PROJECT IMPACT ASSESSMENT

Downstream, the major challenge of this type of scheme remains that of evaluating the impact of TA programs on beneficiaries. Thanks to the possibility of granting successive financing and to its processes for monitoring the performance of its customers, Fefisol nevertheless has powerful tools for characterizing and documenting this impact over time.

To support this ramp-up, a Fefisol 2 fund will be launched in March 2022. Following on from Fefisol 1, it will continue to offer financial and technical services to rural MFIs and agricultural entities, with the ambition of deepening its social and environmental approach to projects. As such, the AT facility will have a compartment dedicated to improving sustainable agricultural practices and financing agriculture, while retaining its “tailor-made” approach so as to meet all its customers’ needs.

[1 ] Tier 3 MFIs, with total assets of less than USD 5 million.

[2 ] This mandatory contribution – at least 15% of each mission – explains the relatively low average value of TA projects.

Focus on technical support for rural African players

Financing and TA, fertile ground for the growth of agricultural entities in Africa

By Gabrielle Orliange, Head of Social and Environmental Performance SIDI/Fefisol (published in Secteur privé & développement #36, La revue de Proparco, 4th quarter 2021)

INVOLVE THE CUSTOMER IN ALL PHASES OF THE PROCESS

MEETING THE CHALLENGE OF PROJECT IMPACT ASSESSMENT

[1 ] Tier 3 MFIs, with total assets of less than USD 5 million.

[2 ] This mandatory contribution – at least 15% of each mission – explains the relatively low average value of TA projects.

Successful 5th African Microfinance Week in Kigali

[chapeau]The ^5th edition of African Microfinance Week brought together nearly 600 inclusive finance professionals from 55 countries in Kigali, Rwanda. A tremendous success![/chapeau]

African Microfinance Week (AMW) is the largest conference on inclusive finance in Africa. Organized every two years in a different African country, it features conferences, training and workshops, an innovators’ village, and of course the investor fair in which the SIDI team plays an active part. A networking event dedicated exclusively to investors and African MFIs, the investor fair enables SIDI to forge future partnerships.

The SAM is an essential event for exchanging and sharing expertise on inclusive finance. The theme chosen for this year’s event was resilience: ” You’re not born resilient, you become resilient: strengthening inclusive finance to better overcome crises “. This was the first time the SAM had been held in Rwanda. This choice has enabled us to shine the spotlight on a country that has shown tremendous resilience and a phenomenal ability to adapt.

As always, the SIDI team was on hand. The emotion of being back in the flesh, and seeing the success of our participation, was palpable.

Why so many people? The impact of microfinance has always been the subject of debate. It’s a fact that microfinance is resilient, that it continues to provide concrete solutions and that, thanks to the leverage it generates, it enables individuals to define their own destiny.

At this ^5th edition, everyone was able to gauge the vitality of African MFIs. In the face of the health crisis, MFIs ultimately managed to cope with the liquidity problems they faced. This shows the considerable work carried out by MFIs over the past 20 years, making them already resilient. The current crises – whether the health crisis linked to Covid19, the ensuing economic crisis, the issue of access to employment for young people, or the crucial challenge of adapting to climate change – must also be an opportunity to change practices, innovate, and advance the solutions that enable this adaptation. From the investor’s point of view, crises can have the beneficial effect of encouraging us to get closer and more involved together.

SIDI continues to forge ahead, placing solidarity at the heart of the economy and finance. Invest in small MFIs, establish long-term partnerships, share the partners’ vision and risk, so that these partnerships serve to consolidate the structures. Supporting the MAIN network in its capacity building program for its members – over 125 African MFIs! Defend the importance of technical assistance and support in response to the needs expressed by partners, to serve an inclusive economy in a process of ecological and social transition.

Some pictures of the event:

(c)GODONG // (c)SIDI

The 2020 activity report is available online

A pioneer in solidarity investment in the South and East, SIDI publishes its annual report

SIDI offers its partners tailor-made financing and support, and thus works towards a form of finance that generates greater social and environmental impact, transparency and solidarity. A look back at the highlights of 2020 and our activities in favor of the ecological and social transition.

Tag: Microfinance

Inscription à la Newsletter

Next steps : Synchronizing a mail module