Rural Lending in Sierra Norte-Ecuador
This case study outlines the progress of two projects of the Ecuador bank, Banco Solidario S.A, in partnership with a non governmental organization, the lessons learnt and the impacts achieved.
Founded in 1995, the mission of Banco Solidario S.A. is to balance financial and social profitability by facilitating access of financial services to hitherto unreachable sections of the population.
The bank started two projects that allowed adding a product to the portfolio and carrying out comparative analysis of the portfolio behavior. Started with a product development methodology, the process was done across four phases:
- Analysis and internal preparation;
- Prototype design and development;
- Pilot testing;
- Massification.
These projects also helped build product development process within the organization. The lessons learnt from the two projects are classified under the following heads:
- Human resources;
- Operations;
- Marketing;
- Culture;
- Regulations/Government Policy.
The study reveals that products comprise an integrated portfolio and the client's profile (urban/rural) can lead to differences in offerings. This flexibility facilitates clients movement across products that meet their needs and growth expectations. Rural lending is more expensive but costs can be decreased by some variables that enable cost reduction.
The author is of the view that assessing the impacts at this stage would be premature. However, anecdotal information and sampling can, to some extent, show the economic and non economic improvements.
