Day8

17th April 2001 - Practices in Bolivia
Meeting with Mr Soruco, General Manager of FIE - La Paz

The origin of FIE comes from the crisis that stroke the country in 1985. The hyperinflation (28000% in August 1985) led the government to reduce the state involment in the economy by transfering its main participation in firms to the private sector as well as closing some of them. One consequence has been a high level of unemployment and the development of micro economic activities.

FIE (Center for Development of Economic Initiatives) was created as an NPO by 5 women, to improve the support facilities to urban low income households. For these 5 former social workers, the sustainable support of economic activities was the right alternative to the simple assistance in order to give the beneficiaries more dignity. At that time, the lack of access to the banking sector was one of the problems. This was due to :
- the lack of financial resources of the microentrepreneurs,
- their low level of education.

Consequently FIE tried to facilitate :

- the access to financing,
- the access to training.

It set up its own projects and methodologies. In 1986, it applied to a loan and received in 1987 a financing from the Banco Interamericano de desarollo of $ 500 000. In addition it received two loans from a Swiss (COTESU) and a Swedish NPO (Diakonia). It permitted the launching of two projects :

- its own microcredit program (individual loans) which differs from the lending group scheme methodology developed by Accion Internatonal and introduced in Bolivia by Prodem with a high level of capital rotation. FIE focused on small manufacturing activities. In 1992 it enlarged its activities by including commerce in order to give an effective support to the entrepreneurial activities of the women, who plays an important role in the household economy.

- training program to reinforce the knowledge of its clients in comptability, administration and finance.

In order not to limit the growth of its microcredit activities, FIE chose to create in March 1998 the FIE private Financial Fund, FFP - FIE SA, with the support of institutional and private investors and under the supervision of Banking Regulatory authorities of Bolivia. The NPO transfered to the fund its $ 12.5 million portfolio. In 2001 this portfolio is $23 million with 22 500 clients.
The NPO FIE keeps on its activities of technical assistance, leasing... to its former clients with various degree of success, in particular because of the new economic crisis that has been striking Bolivia since April 2000.

The main shareholder of the financial fund is FIE with 73% (originally 59%). This important share should be temporary as FIE is looking for new shareholders that could be interested by the positive results of the fund and the respect of the social aim. Currently the other shareholders are a Swiss NPO with 7%, Icco ( a Dutch NPO) with 2.7%, Corporation Andina de Fomiento with 14% and two individuals with 5%.
FIE clients are peri urban microentrepreneurs who want to develop their business and who have a good knowledge of their market. It operate in 7 regions of the 9 in Bolivia, with 15 branch offices and a 174 employees.
The saving products offered by FIE are : time deposit, programed savings (under experimentation), savings account (not operational yet).
The loans are individual loans (no lending groups) to manufacturing, commerce or service activities, and also mortgage loans, consuming loans and emergency loans.

Mr Soruco talks then about broader topics :

- about FIE evolution : like all the microcredit institutions, over the last years FIE had to cope with the market distorsions introduced by micro consuming loans (especially developped by banks). However the presence of the NPO FIE in the capital prevents the fund from forgetting its mission. For Mr Soruco, the evolution of the fund depends on the shareholders and then it is essential that these shareholders have social requirements. For M. Sorucco, the high level of profitability of the first regulated microcredit institutions is not sustainable in such a competitive market. FIE keeps on providing small loans (an average of $ 1026) : smaller than those of Bancosol. The interest rates of FIE are higher than those of the banks but it is due to the higher risk, and these rates are the lowest among the Bolivian microcredit institutions.

- concerning the microcredit environment : Mr Soruco considers thate the state speaks in favor of microfinance as a means of fighting against poverty, but does not make any decision especially in education improvement. The microfinance played a serious role in the social stability of the country over the last years by providing employments and meeting basic material needs.
Int 1992 and 1994, FIE conducted an impact assessment of microcredit loans on its clients. It showed that : they have increased their assets, their revenues by 15%, the number of jobs has increased by 8%, with $1700 a job was created, the conditions of housing were worse, but it was so because the clients were able to leave their parents house and purchased their own, with temporary worse sanitary conditions.
Nowadays such a study would show an over indebtment because of the economic crisis and the high level of indebtment of the clients.