How FMM Popayan Supports a Culture of Payment

Caroline BressanCaroline Bressan

As we began our descent, rolling green mountains peeked through the thick Colombian clouds. I had arrived in Popayan, a city of about 300,000 people located in Southwestern Colombia, in the heart of the Cauca Valley. People ask my impression of Colombia, and the first thing that comes to mind is, “It’s green! It’s really, really green.” As someone who loves the outdoors, this lush green quality gave the whole place a fresh energy. I was there to visit Women’s World Banking Popayan (in Spanish abbreviated as FMM Popayan), a microfinance institution (MFI) and a Calvert Foundation partner for over 10 years.

During my visit, I wanted to learn more about how FMM Popayan was serving nearby agricultural areas. In 2011, FMM Popayan won the Inter-American Development Bank award for Best Rural Microfinance Institution. Since 1985, FMM Popayan has been the leading provider of microfinance services to women in the Cauca region and now throughout Colombia. Their president, Leonor Melo de Velasco, is looked to as a thought leader in the microfinance industry globally. She was recently interviewed in Upsides Magazine, and is a very impressive example of female entrepreneurship in her own right.

FMM Popayan launched a rural loan product three years ago and had experience with the ups and downs of making agricultural financing work for both the client and the institution. Their goal was to meet the needs of small producers with uneven cash flows, and to encourage a culture of payment in an area where financial services have typically been inaccessible.

To learn more about how the product worked in practice, I sat down with Nestor, a 23-year old small-scale cattle farmer who recently repaid his first loan from FMM Popayan. For Nestor, no banks would offer him credit because he'd never taken a loan before, and had no credit history.

The catch in many developing countries is that you need a credit history to have access to credit - but if you come from an excluded area of society, access to that first credit can be a huge, sometimes insurmountable, task. Enter a microfinance institution like FMM Popayan. Nestor learned about the institution through his mother and mother-in-law, who both had accessed loans from the organization in the past and now connected Nestor to their loan officer. After explaining his idea - to purchase two cows and sell their milk to market - the loan officer went back to FMM Popayan to get the appropriate approvals. Then, and this is where FMM Popayan is truly innovative, Nestor and the loan officer designed his repayment plan to mimic the cycles of production. That way, when Nestor was selling a lot of milk, he made a bigger payment on his loan and when there wasn't anything to sell, he paid a minimum amount. By making this adjustment in payment cycles as well as extending credit to first-time borrowers, FMM Popayan is providing enormous value to the rural areas. Nestor plans to take a second loan to add higher quality chickens to his farm, and another stream of income for his family.

I met with a number of FMM Popayan staff members during my visit. Each one was excited and proud to be a part of such an innovative institution. On my walk home through the winding white streets of Popayan I felt proud as well – Calvert Foundation has watched FMM Popayan grow and mature over the past 10 years and our support has helped them to become the thought leader of rural microfinance that they are today.

Follow Caroline Bressan on Twitter: @CaroBressan.

 

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