The Many Faces of Microfinance

By Meg Gray, KF10 Costa Rica

One of the benefits of being a Kiva Fellow for more than one placement is getting to see how different MFI’s (microfinance institutions) with very different models all fit under the microfinance umbrella. There is no one-size-fits-all methodology. I just finished up my second full placement as a Kiva Fellow and along the way I also visited a third MFI for a week. For those of you just getting started with microfinance or for those who are interested in seeing the diversity amongst Kiva’s partner’s, I thought a brief rundown of a few MFI models side by side might be interesting. So here I go (ordered chronologically)

Model #1 CEPRODEL (Managua, Nicaragua)- Individual Loans only

One of CEPRODEL's branch office is inside a stall in a main market

From a head office in Managua, CEPRODEL runs 16 branch offices throughout western Nicaragua. All of the loans they offer are individual loans and require formal collateral. The work with a wide range of clients with a portfolio balanced between male/female and urban/rural. In addition to loans, some branch offices offer voluntary small business management trainings when the demand exists for this type of program. CEPRODEL also constructs housing cooperatives throughout the country and is an active leader in Nicaragua when it comes to housing issues.

Model #2 Fundación Mujer (San Jose, Costa Rica)- Group and Individual Loans

A Fundación Mujer loan officer reviews paperwork with two group members

While Fundación Mujer offers individual loans to clients with a friend or relative with a salaried job who is willing to guaranty the loan, they consider group loan their signature product. In a typical group loan around 5-8 women all guaranty each other’s loans, but no formal collateral is offered. The loan is guarantied purely by the solidarity of the group. Before dispersing loans to new group, loan officers lead the women through three short trainings that focus on themes like small business management, marketing, and women’s empowerment. Another thing that makes Fundación Mujer unique is that they work almost exclusively with women both in urban and rural areas.

Model #3 FUDECOSUR (San Isidro de General, Costa Rica)- Village Banking Model

A FUDECOSUR loan officer (right) helps a loan committee member review a list of clients

FUDECOSUR operates 39 loan committees in 39 very small rural towns in southern Costa Rica. They have a head office too, but the loan committee in the rural communities is where most of the work happens. FUDECOSUR trains the committee members to review applications for new loans, collect repayments, and review who needs to pay. After being trained, the committees meet about twice per month. A FUDECOSUR loan officer goes to at least one of each loan committee’s meetings each month to help out and to answer any questions. Instead of relying on credit checks, each loan committee relies on their knowledge of their (very small) community and their neighbors when they make decisions about loans. The loans are all made to individuals and each individual must find another person in who is willing to guaranty the loan.

Meg Gray just finished a placement as a Kiva Fellow with Fundación Mujer in San José, Costa Rica. And soon she’ll have a perspective from a third and final placement with KF11. Like what you read, join the “Friends of Fundación Mujer Lending Team” or make a loan to an entrepreneur in Central America today!

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