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3.2 Strengthening Rural Financial Cooperatives

Financial cooperatives often receive technical assistance to strengthen operations, increase rural outreach, and expand financial services to farm households. This section summarizes some examples.

An ambitious program is underway in Mexico where a complex structure of member-owned institutions is estimated to have more than four million members (Gomez Soto and Gonzalez-Vega, 2006). Many are small and perform poorly. The Mexican Secretaria de Agricultura y Ganaderia (SAGARPA) is implementing Proyecto Regional de Asistencia Tecnica al Microfinanciamiento Rural (PATMIR) to provide training and technical assistance. German, Canadian and U.S. cooperative organizations implement it in various locations. They choose among strategies to 1) create new financial institutions; 2) strengthen and consolidate existing institutions; and 3) assist existing institutions to expand into marginalized areas. Aggregate data report number of credit unions assisted, access points created, new members, savings mobilized and loans made, training in financial education and credit union management, and introduction of new technology and management practices. Little information is reported, however, about the performance of individual credit unions or their agricultural operations.

The most detailed information about the Mexican project was provided for WOCCU's Semilla Cooperativa, a model emphasizing savings mobilization to link rural members with credit unions. Field officers travel to remote villages to explain the approach and interested persons form groups of ten to 30 people and set a schedule of meetings. The elected president, treasurer, and a spokesperson verify loan application information and collect payments and savings deposits. Field officers issue small loans in the meetings while larger loans are reviewed by the credit union. The model reduces the risk of keeping savings at home and lowers costs and travel time for members who live long distances from credit unions located in larger communities. Participants have full credit union membership, hold the same shares as other members, and can access their accounts at any time. Individual credit unions determine their terms and conditions for loans and savings. The credit products are intended for microbusinesses, but also finance home repairs, emergencies, health care costs and school fees.

New technology, such as personal digital assistants (PDAs) and point-of-sale (POS) devices, is used to increase efficiency and reduce costs. Field officers use PDAs during village visits to enroll members and transmit account data through cell phones to the credit unions. POS devices located at local retailers permit members to access accounts and field officers to deposit cash collected from members. A travel route costing tool utilizing census and cost information (e.g., salaries, travel, maintenance) is used to identify cost-effective service routes for both members and credit unions (WOCCU, 2010).

A study found almost 80 percent of PATMIR clients live in towns of less than 10,000; 55 percent are female; 15 percent are illiterate; and they are some of the poorest rural households in the country (Paxton, 2007). Important tradeoffs were found among the different assistance strategies. For example, assisting existing credit unions may generate a rapid increase in membership (breadth of outreach) but the existing culture may not favor adopting new operating methods and increasing access by the poor (depth of outreach). Creating new institutions may resolve these problems but requires longer term subsidization to achieve selfsufficiency.

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