CAF and COFIDE sign Agreement for strengthening Savings and Loans in Peru

Microfinance Focus, April 12, 2010: In line with the Andean Development Corporation’s (CAF) objective of supporting Peru in combating poverty by educating its population in microfinance and business,  CAF Director representative in Peru Eleonora Silva Pardo, and the President of the Development Finance Corporation (COFIDE), Alfonso Zárate Rivas, recently signed a technical cooperation agreement to assist the “Program for Development and Financial Strengthening of Savings and Loan Unions (UNICAS) and their Regional Network, says a press release.

The agreement aims to strengthen this type of association in the Lambayeque region of northern Peru, and create conditions in which the UNICAS can efficiently and sustainably cooperate with the financial system and their partners in the market. “As a result, UNICAS members go from being passive borrowers to actors who learn to manage financial resources while being able to access them and develop their family economies,” the CAF representative said.

The UNICAS are self-managed multi-family associations formed by 10 to 30 families, mutually selected based on knowledge and confidence in order to offer savings and loan services to their members. The associations build their capital stock by issuing and purchasing shares, and in general meetings set interest rates, decide who receives loans and with what collateral.

Silva Pardo said the agreement would lead to the financial maturity of over 350 UNICAS in Lambayeque, which CAF and COFIDE have been promoting since 2006. This second stage will expand the benefit to 5,100 families living in poverty in the region. “The program – executed through the CAF Vice Presidency of Social and Environmental Development – will improve the sustainability and strengthen the organization and financial management of the UNICAS Network in Lambayeque, as well as providing integrated business assistance. These associations form the starting point for business development by building business capacities, and internalizing the process of formation and accumulation of capital,” he added.

The COFIDE president said the signing of the agreement with CAF would improve generation of income as a result of the loans granted for productive activities, satisfy the basic needs of housing, education and health, and raise the standard of living of the participating families. On the financial results of the UNICAS as of January 2010, Zárate Rivas said that 354 UNICAS had been formed in the Lambayeque region with a total capital stock of 1,274,309 soles. This generation of savings has been used to make 26,541 loans since 2006 for a total of 6,859,946 soles. These loans have stimulated the local economy and generated interest income 1,036,369 soles with a 0% NPL rate.

COFIDE is a joint venture development agency owned 98.7% by the Peruvian state, represented by the National Fund for Financing State Business Activity – FONAFE, attached to the Ministry of Economy and Finance, and 1.3% by CAF. CONFIDE raises financial resources from multilateral organizations, international banks, and the capital market for intermediation through the national financial system.

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