Most small-scale entrepreneurs in developing countries do not have access to the financial services they need — such as savings and financing — to grow their businesses and generate profits, even though if successful, they become important engines of economic growth in their countries.
"After gaining access to financial services and growing my business, I was able to build a house from my profits and send all my children to school," says Margret Mseteka, businesswoman and client of the Entrepreneurs Financial Centre (EFC) established in Zambia by Développement international Desjardins (DID) with CIDA's support. One of CIDA's three priority themes is to stimulate sustainable economic growth in developing countries.
DID is a pioneer in the development of microfinance, also called community finance. Since 1970 it has been sharing the success of the Quebec model with developing countries. DID and CIDA have helped to create 12 EFCs in West and East Africa, and in Latin America.
These EFCs fill a void — reaching clients who require more advanced services than those offered by microcredit institutions, but who do not meet the criteria imposed by traditional banks often because they do not have enough collateral.
"If the EFC didn't exist, I would quite simply be unable to develop my business, because I have no other alternative," explains Ouedraogo Boureima, a cattle farmer in Ouahigouya, Burkina Faso.
Since 1996, these 12 EFCs have supported more than 75,000 small entrepreneurs, including women who participate as clients, employees and directors. Using the Social Return on Investment Calculator of the Calvert Foundation, it is estimated that the EFCs have contributed to creating or maintaining over 500,000 jobs since they were established:
In Zambia, the EFC reaches 13,062 entrepreneurs (42.9 percent of whom are women) and has a loan portfolio worth $9.2 million. It ranks number one among the country's microfinance institutions in terms of assets ($14.5 million representing 40 percent of the market in the country), loan portfolio (35 percent of the market), and voluntary savings (60 percent of the market).
In Burkina Faso, only 3.5 percent of loans made by traditional financial institutions go to the agricultural sector, although agriculture accounts for nearly 35 percent of the country's GDP. The Réseau des Caisses Populaires de Burkina Faso (RCPB) network of financial cooperatives in Burkina established four EFCs, three in rural areas. They made it possible for farmers to increase and diversify their production and their income and strengthen food security. Since 2009, about 1,000 agricultural loans have been issued with a value of more than $8 million.
Abibata Ouedraogo adds: "I have been a member of the RCPB for 15 years. The first loan I obtained was for 125,000 CFA francs ($300). Today, thanks to this institution, I am a prosperous business owner and the most recent loan the EFC approved for me was 20 million CFA francs ($40,000). Everything I have today, I owe to this institution."
"Desjardins began to set up savings and credit institutions in developing countries in early 1972 with the creation of financial cooperatives in Upper Volta, today's Burkina Faso. That was a milestone in our history. It was my job at the time as a technical advisor in the field to adapt the Desjardins financial cooperative model to the circumstances in Africa. The goal was to provide security for the savings deposited by smallholders and provide financing for productive endeavours," says Michel Lagacé, who retired from DID in 2007, after having served as the program director and executive assistant to the President/CEO.
"At that time [in 1972], donor agencies proposed injecting so-called cold money from their budgets for lending out as lines of credit. Drawing on the Desjardins model, DID instead promoted converting the deposits of the members in the cooperatives (or warm money) into financing for the community. This would build on the solidarity among those members and ensure local and regional development. The financial services provided by the financial cooperatives expanded over time in relation to the needs of rural and urban communities."
"DID is continuing to provide assistance to the network of financial cooperatives in Burkina Faso. These financial cooperatives have now set up regional unions and recently established a national federation reaching over one million members or clients. This is an excellent example of a longstanding DID partnership and illustrates the success achieved by this self-sufficient network of financial cooperatives in Africa."Adapted from DID