Rural Financial Institutions: Restructuring and Post Restructure Results
This case study presents the innovations adopted by Los Andes private financial fund (FFP) rural credit technology to expand the frontier of financial services and to overcome the delay in development of financial market in the rural areas.
The technology that the model uses has been adopted from successful urban model of FFP, and it has been customized for the rural market. The technology follows five fundamental principles:
- Minimizing transaction costs to borrowers;
- Evaluating the price of products (interest rates) according to their production costs;
- Maximizing operative efficiency;
- Adjusting credit terms and conditions to cater to the specific needs of each client;
- Ensuring demand for timely and prompt credit payment for long term sustainability.
The paper details the operations of FFP and its environment by analyzing five indicators:
- Portfolio of FFP;
- Geographic scope and diversification;
- Human Resources;
- Criteria;
- Productivity.
Emphasizing the need for client focus in rural credit delivery, the paper concludes that though FFP Los Andes developed its rural credit technology as an extension of a proven successful urban technology, such expansion faces boundaries set by the political, social, and economic context of the country.
