|Bank Cooperativa Abaco|
The Credit Union ABACO expands their financial services around all the regions in PERU, but especially in two regions where there is very little government presence, low infrastructure (no roads or internet) – Naylamp of Sonomoro (Association of small farmer producers) in the region of Junín (Pangoa) and the small trout producers from Titicaca lake working from the lighthouse of Pomata in the region of Puno. Rather than offering a simple loan, our financial services are supporting the sustainable development of the rural area where we operate. This was made possible only because of the synergy with our strategic partners in the rural areas.
These cases showcase the successful experience of our customers, who in addition to receiving a loan, also receive technical assistance and a safe market from the trader companies who are selling the products they produce (COCOA BEANS in Pangoa and TROUT in Puno). The customers also received the financial assessment from ABACO’s personnel. ABACO is supporting the success of its clients by providing know-how and adequate funding. Our strategic partners are the companies that buy the products from our customers: Trout traders companies: “Piscifactoria de los Andes – PISCIS” and the company “Machu Picchu Foods – MPF” who buys the COCOA beans from our customers.
“These operations have enhanced our clients experience but also ours. In the case of the Association of Small Cacao Beans Producers (APANS) of Pangoa, they managed to organize and formalize their financial and legal documents to get their first loan from us. This opened more doors for receiving new funding, but also tools and training on financial management for their institutions provided by Abaco. This experience allowed us to visualize a new line of business for financing of small producer organizations at a national level.”
PUNO, a group of small producers of trout, received a training about the techniques of breeding trout to achieve a high-quality product for export. This group of producers has been receiving loans from ABACO, directed to purchase the food for the trout. We were able to give them loans with better conditions (lower interest rates, disbursements and instalments that match their productive flows), which they could not get in the existing financial market. For ABACO this business pilot helped to create financial evaluation tools for small producers and a new line of business products that could be replicated and used by others producers of trout in other regions. It could also be used for financing small farm producers of coffee, banana, mango, cocoa, being some of them.
APANS Association of cocoa beans producers in Pangoa, was introduce to ABACO through the company that buys and exports their cocoa beans. Before ABACO, they had never received direct financing from a financial institution. ABACO evaluated and accompanied them on a series of changes to put their administration in order (formalization of their legal and financial documents), and teach them to use cash flows (historical and projected), enabling them to get a proper funding to collect cocoa beans and sell it to their buyer Machu Picchu Foods (MPF). A requirement to provide a loan is to sign a tripartite contract. This contract works in the following way: The Association receives funding from Abaco to collect cocoa beans from their members; cocoa beans are sold to MPF and who makes the payment for the product directly to Abaco; Abaco takes the instalment of the loan of APANS and then transfers the rest of the money to the Association. This mechanism allows APANS to have the funding they need at the right time, MPF receives cocoa beans according to the technical specifications requested for exporting and ABACO has a secure payment of the debt.
In the case of PUNO, trout farmers were trained by the export company of trout (PISCIS is also a partner of ABACO) in the new production process that ensures the final product is according to the export standards (weight, colour, form). At the same time, PUNO was required to formalize their legal and financial documentation to receive funding to buy the food for the trout, which ABACO pays directly to their food supplier. So far, there are seven trout producers along Titicaca Lake who operate under this modality. The results show that the producers have increased their production from 5TN to 20TN monthly. We are expecting to do training workshops in financial administration for the small trout producers teaching them to handle financial management tools.
The possibility of replicating this modality for other producers or other cooperatives is very high, but would require the following:
- Trader companies (ABACOs strategic partners) to engage with their suppliers (Small producers) training them or giving them productive supervision and signed tripartite agreements with ABACO (Financial Institution) and their suppliers.
- Financing only agricultural products with comparative advantages in the region, high profitability and with the participation of organized small farmers’ associations.
- Producers and/or serious organizations, committed to formalized and follow a process of sustained growth.
The first loans are set up this way but after we get to know our clients and the strategic partners, we start providing them different types of funding (line of working capital, loans for assets, loans with different sorts of warranties).
In these two examples ABACO gave very secure and sustainable loans to small producers in rural areas with very good conditions (Interest rates, timing terms, warranties).