Laurie Gutierrez reports from Ecuador where loan officers from a local microfinance institution are using hand-held computers to speed up the processing of microloan applications.
For Juan Campues, a farmer living 100 km outside of Quito in Ecuador, two microloans would enable him to rent a tractor, buy seed and fertilizer, and become financially independent of his parents. His father used to borrow from a government-run agricultural bank, but the loan turn-around time was far too long. Quick loan processing and disbursements are crucial for agricultural borrowers like Juan. As he says, ‘Farmers can’t afford to wait months for a loan to be processed. The price of potatoes can change a lot in that time’.
To address the needs of rural entrepreneurs such as Juan, Banco Solidario, ACCION International’s local microfinance partner, is now equipping its loan officers with personal digital assistants (PDAs) and PortaCredit, a customized software application that has greatly improved the efficiency of the process of approving and issuing microloans.
The PortaCredit application for PDAs has been designed by ACCION International, a nonprofit organization with a network of microfinance institutions (MFI) throughout Latin America, the Caribbean and sub-Saharan Africa. By synthesizing financial analysis, loan processing, and an understanding of the needs of the microenterprise sector, ACCION has created software that can be tailored to an institution’s lending structure and management information system (MIS) configuration. With PortaCredit, loan officers can record new client data; calculate financial indicators; decide with the applicant on favourable loan terms by running different repayment scenarios; and handle reports of late payments, loan maturities and restructuring.
Representatives of ACCION and Banco Solidario began working together in 2001 to customize PortaCredit for the bank’s lending methodology and information systems. Since implementing PortaCredit with its urban clients, the bank has seen its loan portfolio quality improve because decisions are more systematic and fewer loan applications have incomplete borrower information. The time it takes to process each application has been halved, so that Banco Solidario has been able to extend its outreach to more microentrepreneurs.
Traditional banks and MFIs are often reluctant to lend to rural clients because of the high operating costs, the time it takes to reach them, and the risks associated with agricultural businesses. ACCION’s technical staff are now further adapting the PortaCredit application to reflect the information needed in rural loan applications, and Banco Solidario’s unique agricultural microlending methodology, which takes into account risk factors such as climate, growing season, and market price fluctuations. Following a period of testing and evaluation, Banco Solidario expects to begin implementing the PortaCredit application for its agricultural borrowers in 2004.
There are challenges to implementing PortaCredit, however. For Banco Solidario, purchasing PDAs for its 155 loan officers is prohibitively expensive. The technology is changing so quickly that the PDAs may become obsolete and need to be replaced in just six months. The bank is currently using Palm m105 models, but would like to upgrade to hardware with wireless capability. With a new handheld and a wireless connection to the central office in Quito, a loan officer visiting a rural client could upload the microloan application to central office, and receive a message that the loan has been approved just ten minutes later. Meanwhile, the disbursement information would be sent to the nearest branch office where the client would be able to pick up a cheque in just a few hours. In Ecuador, however, the cost of wireless communication is still high, so Banco Solidario is investigating bulk rates for satellite communication time.
In spite of these challenges, ACCION’s PortaCredit technology offers significant benefits both to local MFIs and to agricultural borrowers in Ecuador. ACCION plans to extend PortaCredit for rural lending to other partner programmes in Latin America.
PortaCredit TM is a registered trademark of ACCION International.