It is time to turn the spotlight on a partnership especially close to our hearts. Beyond the financial investment, it is an investment that typifies Alterfin’s values in its constant search for partnerships that make sense in a society where humanity is increasingly factored out of the equation.
Alterfin insists on emphasising its principles and strong commitments through its financing projects, so it is a pleasure for us to return to the story of a rich and eventful partnership that has lasted for more than 20 years.
The Fondo para el Desarrollo Local (Fund for Local Development) or FDL, a Nicaraguan microfinance institution, saw the light of day in 1992. As an organisation granting microcredit loans in rural areas where there were no financial services available to the local population, it has seen its client numbers - farmers, small businesses and local traders - increase progressively. At present almost 49% of FDL’s clients are women living in rural communities.
As the brainchild of brilliant minds at Nitlapan University Institute based in Managua, it started out in the late 1980s with the ambition to set up a microfinancing programme to support the activities of small farmers in the region. Once the project’s long-term viability had been demonstrated, a specific institution was created in 1992 to manage the programme. The Fondo de Desarrollo Local (FDL) was born.
At the time, the project was closely monitored by Saúl Castro, currently Alterfin’s Senior Adviser for Latin America, who was employed at that point by the Nicaraguan Ministry of Agriculture:
“It is difficult to imagine that back then FDL’s offices were housed in a back room on campus at the Catholic University of Managua. Seven to ten people were sat behind computers trying to come up with specific financial development ideas.”
A first loan of 80,000 USD was paid out in 1999. Back then, Alterfin was among the very first foreign investors. As time went by and the institution began to grow, the financing that Alterfin granted to FDL increased up to today’s level of 1.7 million USD, partly in the form of equity funding of the institution.
What is more, in two decades FDL has become one of the largest microfinance institutions in Central America and an academic benchmark in terms of rural microfinance that prioritises the agricultural sector.
However, things have not always gone without a hitch over the years.
“At the end of the 1990s, Hurricane Mitch affected most of the countries in Central America, including FDL’s clients. The result of this catastrophe was a loss of more than 750,000 USD across 17 branches.” “Not long afterwards, in 2001, one of the biggest coffee crises in the last 20 years hit the same region. At that point prices dropped to less than 50 USD per quintal. All at once, FDL had to revise its lending policy and general strategy. Nevertheless, what has survived is the closeness of the mission and vision to the local communities, along with development in the countryside and sectors where getting access to credit is still difficult!”
Add to this the ‘No Pago’ movement in 2008 and the political crises that have been afflicting the country since 2013.
In spite of these ups and downs, however, FDL has demonstrated remarkable resilience that has enabled it to face these challenges and continue with this IMF.
“Here at Alterfin, we never pulled out of our relationship with FDL, not even in difficult times like the 2008 crisis when a significant proportion of the country’s external credit facilities were cut off.” (Saúl Castro)
Throughout these times of crisis, Alterfin has never abandoned FDL. The financing that Alterfin granted to FDL mirrored the developments in the institution’s activity. Today it amounts to a total loan financing of 1.7 million USD, partly in the form of equity funding of the institution.
A meeting between the Alterfin team and the managers of FDL during one of their visits to our offices (in October 2019)
It is thanks to fantastic partnerships like the one we have with FDL that we can better understand what ‘Financing Made in Alterfin’ means and the commitment it entails.
Let’s not forget that Alterfin is one of the pioneers of financial support to rural areas in developing countries!
And last but not least, here is what Saúl Castro has to say as Alterfin’s Senior Adviser for Latin America and the man who initiated the relationship with FDL more than 20 years ago: “The relationship between Alterfin and FDL represents a real personal triumph.” “With Alterfin’s ongoing support, FDL has been able to tackle all the challenges one by one and remain a leader of the best microfinance institutions in Nicaragua.”
Let’s hope that this partnership will continue to be successful for a long time to come, still characterised by this ongoing commitment to ethical and sustainable financing!
FDL in figures
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