Rural Microfinance through Credit Cooperative System

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Rural Microfinance through Credit Cooperative
System

• The Russian Experience
• Michael Harvey Vladimir Pakhomov

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Russia Background

• Centralized, command economy
• Soft loans
• 1990s crisis in rural areas
• Two agriculture banks bankrupted

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Rural Credit Cooperatives (RCCs)in Russia 1990s

• Initial distrust of RCCs
• Law on Agricultural Cooperatives in 1995
• In 1996, seven RCCs established
• RCCs Set up by like-minded people with the goal
  of pooling resources for lending to rural credit
  cooperative (RCC) members.
• In 1997, Rural Credit Cooperation Development
  Foundation established

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Russian American Lending Program (RAL)

• Six million dollars pledged from U.S. Dept. of
  Agriculture
• USAID funded a technical assistance program
  implemented by ACDIVOCA
• USDA appointed ACDIVOCA as guardian of the grant
  capital
• RCCDF chosen as Russian partner organization to
  manage the RAL program

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Program Goals

• Foster independent, sustainable RCCDF
• Increase technical capacity
• Better than 90 of loans paid back on time
• Loans not to be subsidized
• Grow the Capital
• Improve legal/regulatory framework

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You are going to lose your shirts

• Russian Agricultural Producers had a record of
  not paying back state loans
• Agricultural lending inherently risky
• The end borrowers are thousands of kilometers
  away
• Collateral wont be any good

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Board of Trustees
RURAL CREDIT COOPERATION DEVELOPMENT FOUNDATION
(RCCDF)

• Supervisory Council
• (6 Members)
• ACDI/VOCA
• AKKOR
• One American Rep
• 2 Credit Coop Reps
• 1 Financial Specialist

Training Lobbying Research Literature
Financial Directorate RAL Program
CREDIT COOP
CREDIT COOP
Production Agricultural Loans
CREDIT COOP
CREDIT COOP
CREDIT COOP
CREDIT COOP
CREDIT COOP
Private Farmers/Members
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Loan Characteristics

• 80 Working Capital/ 20 Processing
• 12 months or less
• Loan range to credit cooperatives 60,000 -
  450,000 Avg. 210,000
• Loan range to RCC members from 200-17,000
  Avg. 5,000

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Results

• Better than 95 of all loans paid back on time
• 4 of portfolio restructured
• 1 of debt is doubtful
• Interest rates have been substantially higher
  than commercial bank rates
• RAL rates at 18-21 annually
• Capital has grown by 2.6 million or 33
• Russian American Lending Program accredited 47
  RCCs

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Results (continued)

• RCCs overall grew from 0 to 562
• RAL monies are financing 153 RCCs
• The Union of RCCs has 205 members that encompass
  45,000 RCC members
• Legislative Lobbying
• Political Weight
• Training Center Audit Union

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RCCs Why do they work?

• Set up by community
• Borrowers are well-known
• Joint Several Liability
• Managers know Agriculture
• Pride in Russias pre-revolutionary heritage
• Camaraderie among RCCs
• Training T.A. Support

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Challenges

• Adequate information systems
• Expanded Monitoring
• Continued Training Effort
• Attracting more funding to meet strong demand
• Standardized financial reporting
• Potential Government Support

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Rural Microfinance through Credit Cooperative
System

• Questions?

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