The traditional banking system relies on credit scores, collateral and other quantitative data to approve clients and credit facilities. At the other end of the spectrum we find village banks, which provide small loans to low income individuals and small (sometimes informal) businesses. Village banks usually focus on a small geographical area, engage with local families and communities, and are built on the basis of trust. Village banks make their lending decisions on the personal and community relationships, giving community members opportunities to access financing, despite the fact that they do not have guarantees or a credit history.
The first village bank in Ecuador was founded in 1994 in the coastal community of La Sequita, province of Manabí. Little did the 17 women founders know then, that this milestone would help transform the lives of more than 190,000 Ecuadorian people through access to microcredits. The bank, named Maria Auxiliadora, was originally founded by the North American Foundation Project HOPE and in 2002 HOPE transferred the execution of the program to Fundación Espoir (FE) with all its assets, credit portfolio, and personnel.
“By being part of this group, I was able to apply for my first loan. I remember it was for 150,000 sucres (today US$6.09) and it encouraged me to initiate a small business and helped me overcome an illness. Today, I am 74 years old, and I would not qualify for a bank loan, but with Fundación Espoir I have the opportunity to continue taking out loans.” says Nayda Laz Anchundia, founding member of María Auxiliadora village bank.
Investing in women
In the years that followed, Fundación Espoir continued to support vulnerable communities using the group lending model, specifically for women clients which make up 75% of total clients. Under this modality, group members guarantee each other’s loan repayment. In the particular case of Fundación Espoir, groups have an average of 13 community members who are usually from the same neighborhood. Group loans are mostly used for working capital. Group members receive education and life insurance coverage with medical assistance.
Today, Fundación Espoir is a non-profit organization that focuses on the provision of financial services with a gender lens, including individual and group micro-loans and micro-insurance. In addition to financial services, FE provides financial and business training (both in groups and one-on-one education sessions during credit evaluation). They currently provide 400 jobs (65% of which are for women), and have 5 regional offices, 12 agencies, and 8 service points in 6 different provinces. FE was the first non-governmental organization to successfully enter the Ecuadorian stock market and has been recognized as one of the best microfinance institutions in Latin America and the Caribbean, trusted by national and international organizations.
“For us, a credit group is not only the space where a loan is received, it is the space where women begin a path of transformation and support for their families. 75% of our clients are women, many of them are heads of households, single mothers, widows, divorced or simply represent the strongest income in the family; we are cheered to support them. It is very enriching to see how these women have gained confidence and strength, and not only generate their own income, but also have a voice in the family and in their community. We are proud to see this momentum also reach new generations.” Francisco Moreno, Executive Director, Fundación Espoir.
When women access credit, the impact on their lives goes beyond the financial aspect. Women become empowered and grow on a personal level, their quality of life improves, and this is reflected on the family as a whole. Women are key drivers of economic prosperity and equality. When women earn income, they spend 90% of it on their households, including food, healthcare, and education. This creates a virtuous cycle of improved family and community well-being.
“One of the most impactful stories is from our client Neda Anchundia from the village bank in the “Cercita” (a municipality). She told us that at first, she even had difficulty going to the village bank meetings because her husband wouldn’t allow her. And now it’s her husband who reminds her that it’s the day of the meeting. She went from being voiceless and powerless to being a woman with a voice and owner of her life and business.” Claudia Moreno, Deputy CEO, Fundación Espoir.
Rebuilding the economy
The pandemic in Ecuador caused significant consequences as it triggered a rebound in poverty and amplified the macroeconomic imbalances, despite the challenging COVID-19 crisis, Fundacion Espoir and its clients have been resilient and have continued working hard and pushing their communities forward, helping to rebuild their economy. For example, when FE was forced to stop in-person meetings in early March, they developed 71 educational videos by the end of that same month. The videos were shared via WhatsApp to maintain their business training support to their clients during those challenging times. Their new approach was successful. Even though some of their customers did not have a smartphone with data connection, 60% had access to these videos which covered topics such as Covid-prevention, hygiene, mental health, family activities, among others. The rapid production and distribution of the instructive videos highlights their ability to adapt and provide during challenging times and use of the videos for learning on behalf of their clients demonstrates their commitment to grow. This correlates with Deetken’s continued commitment to making a difference, even during challenging times.
At Deetken Impact, we have a deliberate and intentional commitment to making a difference in the lives of women and girls and Latin America. It is through investing in organizations like Fundación Espoir, a pioneer of the group lending model in Ecuador, that we are able to have a meaningful impact towards gender equity and contribute towards the region’s sustainable development, while providing competitive financial returns to our investors. Together with Pro Mujer, we manage the Ilu Women’s Empowerment Fund, an innovative gender-lens impact investment fund to advance gender leadership and economic development in Latin America and the Caribbean.