Caja Los Andes (Bolivia) Diversifies into Rural Lending

This case study examines the adaptation of Caja Los Andes's (CLA) urban lending methodology for rural and agricultural loans, its risk management techniques for agricultural finance, and the impact of socio-economic constraints in Bolivia that limit portfolio growth. The paper discusses:

• CLA's background and its motivation for rural expansion;
• The challenges of rural lending;
• Steps taken by CLA to overcome these challenges:
  • Strategically locating offices in densely populated rural regions;
  • Providing combined lending to rural as well as urban clients;
  • Making larger first loans to agricultural clients if warranted;
  • Basing loan sizes on repayment capacity;
  • Focusing on serving clients who diversify their own risk;
  • Adapting existing policies on collateral, appraisal, disbursement and repayments to meet rural conditions;
  • Employing qualified, experienced staff and providing training;
  • Taking a hard stance on repayment.

The paper then discusses:

• The growth in CLA's loan portfolio in spite of the recession in Bolivia;
• The donors and investors that have provided technical assistance to CLA;
• The following lessons learned by CLA:
  • Combine agricultural loans with other types of rural and urban financing;
  • Initiate operations in populous, low-risk, high-opportunity regions;
  • Target borrowers engaged in diverse economic activities;
  • Structure loans and repayment schedules to fit the inherent seasonality of rural enterprises;
  • Be strict with loan repayments.

The paper concludes that CLA's experience demonstrates the sustainability of agricultural lending as well as the difficulty in overcoming macro economic problems.