Ecuador: how SIDI supports a bank’s ecological commitment

A bank at the service of development and the protection of the planet? Banco Codesarrollo now has over 130,000 customers!

Created in 1998 on the initiative of the Grupo Social Fondo Ecuatoriano Populorum Progresso (FEPP), Banco Codesarrollo was initially a savings and credit cooperative.

Over the years, Banco Codesarrollo has developed as an institution of the social and popular economy of the Ecuadorian private sector, and has successfully transformed itself into a bank. Today, Banco Codesarrollo offers financial and non-financial services tailored to its target population, particularly in rural areas.

SIDI investisseur solidaire, committed 1.8 million euros to the bank’s capital in 2017. Cristina Alvarez, in charge of partnerships at Sidi, points out that this “first investment has enabled the Ecuadorian bank to reach the minimum legal capital required” in the country, which is $11 million. A second round of financing took place in 2019, which enabled SIDI “to accompany the steady growth of the portfolio while limiting Banco Codesarrollo’s indebtedness”, Cristina Alvarez continues.

Today, SIDI is represented on the Board of Directors of Banco Codesarrollo by Patricia Camacho. It sits alongside several Italian social banks, which are also shareholders in the institution. This special bond with Italy is embodied by the Chairman of Banco Codesarrollo himself, Giuseppe Tonello Foscarini, who is Italian by birth but has lived in Ecuador for over 30 years.

“Crediecológico, a financial product to combat climate change

With almost 130,000 customers by 2021, 46% of them women, 56% of them in rural areas and 27% under 30, Banco Codesarrollo is committed to several aspects of rural development as well as ecology.

In 2018, the bank launched a new financial product to finance the ecological transition, the “Crediecológico”. Cristina Alvarez defines it as “a product designed to promote environmental protection and combat climate change”.

With this new product, Banco Codesarrollo has “oriented its management towards environmentally-friendly activities such as sustainable farming, food sovereignty, soil reclamation, wastewater management and the use of alternative energies”, explains Cristina Alvarez. In 2021, through some 100 loans granted, one million dollars were able to finance these activities.

Another advantage of the “Crediecológico” loan is that it not only offers “preferential conditions in terms of interest rate, loan amount and duration”, but also includes “technical support for customers”, explains Cristina Alvarez.

Banco Codesarrollo has also been working on its own ecological footprint. In 2021, for example, the institution has integrated “an organizational environmental management system into institutional processes”, enabling better waste management, the allocation of donations to local foundations when equipment is replaced, or the funding of recycling campaigns or reduced energy consumption.

“Promoting SIDI’s vision as a solidarity investor”.

But SIDI’s role is not only to finance, but also to support its partners through technical assistance projects. Patricia Camacho, a member of the Board of Directors of Banco Codesarrollo, has played a key role in the design, implementation and coordination of various technical assistance projects financed by SIDI.

This support is important for SIDI, which has included environmental and social dynamics in its strategic plan,” explains Cristina Alvarez. The ecological and social transition has even become “a central plank of its strategy and a hallmark of its partnership policy”.

To demonstrate the success of these partnerships, SIDI organized a trip to Ecuador in early September for some fifteen of its individual shareholders, something it had not been able to do since the start of the Covid-19 pandemic in 2020. The aim of the trip: to make their commitment as a community shareholder a reality. SIDI points out that almost 40% of its capital is held by individual shareholders. A great way to connect civil societies here and there.

In Mali, SIDI helps the Nyèsigiso mutual network to continue its activities

Ten years of war in Mali have not left Nyèsigiso unscathed. Created in 1990, this mutual network of savings and credit cooperatives was forced to close the doors of its cooperative caisse in Diré, in the north of the country. A major blow for beneficiaries. Mainly located in rural areas, the network works with the poorest people, including many farmers.

With 15 cooperatives, 58 branches and 10 counters across the country, Nyèsigiso, or “house of foresight” in Bambara, is a key player in the Malian economy. With its finances in dire straits, the company had to look for ways to preserve its mission. It was in this context that the mutual network turned to SIDI.

SIDI grants loans or takes equity stakes in structures that share its values. In addition, SIDI lends money without requiring collateral, and therefore with a high risk of loss. A risky gamble, but an essential one: it was by granting a first loan to Nyèsigiso in 2020, at a time when it was being decapitalized, that SIDI contributed to the recovery of this Malian mutual network.

“Our intervention created a leverage effect,” explains Jean-Baptiste Cousin, SIDI’s Partnership Officer. SIDI’s commitment has restored the confidence of other international donors and ” Nyèsigiso has been able to raise ten times the amount lent by SIDI”. The mutual network then ended the year with a “profit of 285 million CFA (over €435,000)”, and increased its equity to 7.19% of its capital.

Strong local roots

It was the strong local roots of the mutual network that convinced SIDI to invest. In a study carried out in 2022, 60 Décibels, a firm that measures the impact of companies, found that 91% of respondents said their quality of life had improved thanks to Nyèsigiso. The study also shows that almost 9 out of 10 customers had never before been able to access a service such as that offered by the mutual network.

Finally, while “60% of its members live in rural areas, often with an agricultural activity”.The study shows that most customers who take out loans from Nyèsigiso use the money for business expenses, mainly in the agricultural sector: “71% for agricultural inputs, 22% for labor”.says Jean-Baptiste Cousin.

On a day-to-day basis, Nyèsigiso has had a major impact on customers’ quality of life: 47% report an improvement in their income, 26% an improvement in their agricultural production, and 88% say they have improved their ability to plan their finances.

Making Nyesigiso sustainable

To continue this “beautiful story”, Nyèsigiso applied for and obtained a second loan from SIDI in 2021. Indeed, a cooperative network must manage to hold 15% of its capital in equity, which was not the case. ” They have a lot of members, but they’re rather poor people who aren’t in a position to contribute a lot of capital,” explains Jean-Baptiste Cousin. And if Nyesigiso forced its members to buy shares at a higher price, the risk would be that it would focus solely on the middle classes, and lose its target audience.

“We made a subordinated loan, which is quasi-capital: it allows us to make a long-term loan that the local banking authorities consider precisely as capital,” he continues. Better still, this type of loan acts as a guarantee for other investors, because here too the risk is very high: if the structure collapses economically, SIDI would be the last to get its money back!

After this second loan, it’s hardly surprising that SIDI has noticed a second leverage effect. ” For the moment, we have lent the equivalent of 500,000 euros” to the Malian organization, says Jean-Baptiste Cousin. The first loan is for three years, with a one-year grace period, and the second for five years, with a two-year grace period. Extremely favorable conditions for Nyèsigiso.

For SIDI, the risk remains, but it is assumed. And so far, so good. The partnership manager is delighted with this successful cooperation and the trust placed in Nyesigiso. The Malian mutual network reaches no fewer than 250,000 people in Mali. And the fact that it operates as a mutual network, electing local representatives to take joint decisions, means that people who are far removed from governance bodies can be brought into the various strata of the structure: “Nyèsigiso is also a school of citizenship”, he concludes.

SIDI acquires a stake in ACEP Burkina

[chapeau]SIDI acquires a 20% stake in ACEP Burkina by purchasing the shares of the Incofin CVSO fund.[/chapeau]

Today, ACEP Burkina is the second largest microfinance institution (MFI) in Burkina Faso by portfolio size and reach: over 32,000 active customers, 23% of whom are women, and more than 15,000 borrowers. It focuses mainly on micro, small and medium-sized businesses.

Through this acquisition, SIDI wishes to strengthen its commitment to the development of inclusive finance in Africa and more particularly in the Sahel region. Given the multiple challenges facing the region – political and security issues, the impact of climate change on the agricultural sector, lack of employment opportunities particularly for young people – SIDI considers it a priority to develop its activities in the area in order to achieve its mission of social and environmental transition.

SIDI is currently working with 9 partners in Burkina Faso in a wide variety of sectors: inclusive finance, sustainable agricultural value chains, renewable energies and seed capital for small-scale industries that create jobs and added value. In Burkina Faso, 40% of the population still lives below the poverty line.

Becoming a shareholder of ACEP Burkina is a strong commitment on the part of SIDI and an opportunity to strengthen and diversify its activities in the country by including in its portfolio one of the leading and strong MFIs in the financial inclusion market. SIDI will therefore play an active role in governance to help strengthen the institution and promote social and environmental performance alongside financial and operational viability.

Read the press release here

 

Palestine – SIDI pursues its commitment to the economic rights of the Palestinian people

[chapeau] In the face of a major new crisis affecting Palestine, SIDI rejects all violence and recalls that the Palestinians are first and foremost a people, of all secular and religious persuasions, deprived of their rights. SIDI intends to pursue its commitment in this area in order to provide the population with access to the essential financial services they need to develop their economic activities. [/chapeau]

SIDI has been involved in Palestine since the 90s, defending the economic rights of the population through its work with local microfinance institutions ACAD and ASALA. It was the first solidarity investor.

Given the recurrence of crises and the violent effects of occupation, it became clear to SIDI that microfinance could not develop without a guarantee fund to cover these contextual risks. Current events once again confirm the relevance of the DAMAN guarantee fund, set up in 2008 by SIDI with its two partners ACAD Finance and ASALA Credit & Development.

This risk is in fact multiplied, and concerns in particular the foreseeable destruction of economic projects financed by microfinance institutions. In practical terms, DAMAN enables local microfinance institutions to continue covering the risk of lending to vulnerable populations in the West Bank and Gaza: when the beneficiary of a microcredit is unable to repay due to acts of war or the consequences of the Israeli occupation, the MFI can then call on DAMAN for compensation.

DAMAN was perpetuated in 2015 by the creation of a non-profit company recognized by the Palestinian Monetary Authority. The DAMAN fund is therefore open to financial support from other players, and today enjoys the support of the NGO Paix Juste au Proche Orient.

SIDI is pursuing its mission as a solidarity investor in Palestine and is standing by its partners as they face up to the dramatic challenges of today. It will continue to call for sincere dialogue and a just peace.

A strong commitment for Forest Fruits in Zambia

[chapeau] Despite the health situation and the temporary suspension of field trips, SIDI is continuing its activities and, at the end of the year, opened a new partnership in Zambia with a company that processes and markets honey products. For SIDI, this is both an opening to a new country of intervention, and a major first in terms of support for the beekeeping sector.[/chapeau]

Since 1998, Forest Fruits has been collecting, processing and marketing beekeeping products for local and international markets. It buys raw honey produced by certified organic (Ecocert) Zambian beekeepers at a remunerative price, and processes it at its Mwinilunga factory. The social enterprise then transports the production to its packaging plant in Lusaka, where the finished product is exported to the sub-region (Zambia, Botswana and South Africa) and abroad. In addition to marketing forest honey for direct consumption, Forest Fruits is developing several types of processed honey-based products (beeswax flakes, candles, honey mustard, etc.). In recent years, thanks to technical support from FEFISOL[1], the company has developed the production of honey vinegar by fermenting lower-quality honey.

Most of the company’s business and its supplier beekeepers are located around the Mwinilunga district. In this isolated region with little economic dynamism, beekeeping is traditionally practiced and represents a considerable source of income for families. Thanks to Forest Fruits, producers benefit from higher remuneration and training to improve the quality of their honey and diversify their agricultural production (trials underway for tea tree production, for example). To develop the region, the company, which currently employs 63 people, also favors local recruitment, and training to enable its employees to upgrade their skills.

Forest Fruits’ business is directly linked to the bees’ honey production periods. Harvesting is spread over two periods of the year, depending on the flowering cycle of the Zambian forests in which the honey is harvested. In such periods, the company needs working capital to enable it to pay producers in cash. FEFISOL has been funding Forest Fruits campaigns since 2014, but this year the fund, which is in transition, was unable to commit to funding for 2021. SIDI has therefore decided to step in and support the next honey campaign by granting a line of credit of $750,000 over 12 months. This loan, backed by several regional and international buyers, will enable the company to purchase 600 tonnes of raw honey at a remunerative price for beekeepers as soon as the harvest is complete.

Despite the current context, SIDI continues to innovate by opening this partnership with Forest Fruits, to contribute to the economic, social and environmental development of a remote region of Zambia.

To find out more about the Forest Fruits social enterprise: https: //www.zambezigold.com/

[1 ] European Solidarity Fund for Africa, managed by SIDI.

NUTRI’ZAZA: a company committed to fighting malnutrition

[chapeau]In a country where child malnutrition still affects one in two infants, Nutri’zaza offers a sustainable way of combating this scourge by marketing a local, effective product that is accessible to all. [/chapeau]

In Madagascar, food security is still very fragile. Children are particularly at risk: it is estimated that one in two children under 5 suffers from chronic malnutrition (ESD, 2008-2009). Less visible than acute malnutrition, which is characteristic of food crises, chronic malnutrition nevertheless delays children’s development and weakens their health. The after-effects are irreversible after the age of two, and chronic malnutrition is one of the main causes of mortality in young children. This is due to the inadequate quality of young children’s diets (breastfeeding practices and diets that do not cover essential needs, poor-quality complementary foods).

It was to address this problem in a sustainable way that the social enterprise Nutri’zaza was created in 2013. Following on from the “Nutrimad” project launched ten years earlier by GRET, Nutri’zaza distributes a complementary food, Koba Aina, to underprivileged populations via a network of baby restaurants (hotelin-jazakely) and a home sales network. [blockquote noquote=”1″ float=”right”] By becoming a founding shareholder of Nutri’zaza, and an active shareholder on the Board of Directors, SIDI is helping to support the company’s development and give it the means to experiment with different models in order to perpetuate a service that plays a key role in reducing chronic malnutrition in Madagascar. [/blockquote] This highly nutritious infant flour provides the elements needed for infant growth when breastfeeding is no longer sufficient (from 6 months) and traditional household meals are not yet sufficient. Koba Aina is produced and packaged from Madagascan raw materials and based on a nutritional formula developed by GRET. The product complies with the strictest international quality standards, both in terms of nutrition and health. This product offers the best value for money on the market, so that we can reach the most vulnerable households. Nutri’zaza also provides families with a place to check their children’s health, with regular weighing and monitoring of undernutrition. To reinforce its impact on the most disadvantaged populations, Nutri’zaza has also developed long-term partnerships with local associations, regularly supplying them with Koba Aina at highly preferential prices.

In order to guarantee the equilibrium of its economic model, Nutri’zaza is banking on the transformation of Koba Aina into a mass consumption product, intended for and accessible to as many people as possible, notably through the traditional distribution network (supermarkets, local grocery stores, etc.).

News from UCLS in Madagascar

A long-term partnership

The Union des Coopératives Lanzan’ny Sambirano (UCLS) is a Producers’ Organization (PO) for cocoa beans located in Madagascar around the Sambirano valley near Ambanja. It was created in 2010 by an association, ADAPS[i], whose aim was to structure agricultural value chains. The UCLS was therefore originally institutionalized by a local development association. SIDI’s partnership manager in Madagascar, with her knowledge of the country and its stakeholders (NGOs from the North, in particular AFDI, the French NGO for the Development of the Industrial Sector), was responsible for the project.[ii]), came into contact with UCLS at a time when SIDI was seeking to strengthen its commitment to agriculture. UCLS and Ethiquable[iii] also wanted to commit to a long-term business relationship.

Ups and downs, but a continuing partnership

SIDI’s first financing operation took place in 2011, with the aim of pre-financing UCLS member cooperatives to enable them to acquire certified organic cocoa beans for export (12.5 tonnes, equivalent to 1/2 “standard” container). Today, SIDI financing enables UCLS to export almost 250 tonnes of certified organic cocoa beans a year. This partnership has not been linear, as UCLS has suffered slowdowns in its activity and misappropriations, which led to the suspension of SIDI funding in 2016. However, SIDI, along with other players, continued to support the Union by providing assistance, in particular in strengthening the organization’s accounting function.

Results today

Beyond the quantitative results, with volumes rising from 12.5 tonnes of cocoa exported in 2011 to almost 250 tonnes today, UCLS has made progress in its organization, reach and member loyalty. It has grown from 6 cooperatives at the start of its activity to almost 20 today, with between 300 and 400 producers depending on the year, who supply it with increasing quantities of cocoa. The relationship is established and the trust present so that growers regularly supply their cooperatives (instead of selling to others).

Despite the difficulties mentioned above, the organization has adapted to the needs of its members. It has succeeded in structuring 20 small cooperatives and supported them in the process of certification by Union agricultural agents. Despite the state of the infrastructure, UCLS manages to send containers of cocoa on a regular basis to meet its annual contracts with Ethiquable and Valrhona.[iv]. Today, the UCLS is looking forward to the collection campaigns with a little more serenity. Its campaign financing resources are more diversified (self-financing, SIDI financing, buyer’s advance, supplier’s credit) and larger.

And challenges

Despite the situation linked to the COVID-19 pandemic, SIDI and UCLS intend to continue working together. SIDI’s long-term approach makes it possible to tackle certain challenges, such as strengthening the structure’s administration without overburdening its processes and costs, increasing income for producers, integrating the smallest producers into cooperatives, and encouraging young people to take up cocoa farming.

Jean-Marie CAVARROC,

SIDI Partnership Officer

[i] Association for the Development of Agriculture and Farming in Sambirano (ADAPS)
[II] Agriculteurs français et développement international (Afdi), an international solidarity association that builds partnerships between French farmers and those in developing countries.
[III] Ethiquable is a French cooperative specializing in the sale of organic fair trade products.
[IV] Valrhona is a French food company specializing in cocoa processing.