FINACOOP Speeds Agricultural Recovery After Devastating Hurricane in Honduras

Honduras is the third poorest country in Latin America, with 53 percent of the population living below the poverty line. When Hurricane Mitch struck the Central American nation in October 1998, the devastation to people’s lives and the economy was monumental. More than 8,000 died and one million people were left homeless. The country continues to rebuild bridges, roads and buildings destroyed by the hurricane more than three years later. Especially hard hit was the agricultural sector, which makes up 16 percent of the country’s gross domestic product.

With funding from the U.S. Agency for International Development in 1999, ACDI/VOCA developed a finance and credit initiative to help speed the recovery of the agriculture sector and rural areas. The project involves a $2.5 million grant in loan capital and technical support to a cooperative financial institution providing credit to farmers, FINACOOP. Since 2000, FINACOOP has approved 928 loans averaging $2,500, injecting $2.3 million into the Honduran rural economy. In addition to small-scale agricultural producers, the project provides microenterprise loans to rural enterprises as well.

Marco Tulio Fonseca, the general manager of FINACOOP, says that the loans came at an opportune time and adds that the cooperative bank is now a stronger institution as a result of ACDI/VOCA technical assistance. For example, over two years ACDI/VOCA volunteer executives have provided training in administration, loan portfolio management, account management, finance and operations, information services, banking procedures, new product development and organizational structure. “I’ve had the pleasure of collaborating with very qualified volunteers who have contributed their knowledge and experiences to assess FINACOOP,” says Fonseca. “It was amazing to me that people who are serving in top executive positions for major U.S. corporations and managing millions of dollars would come here as volunteers and share their knowledge and experiences. It is an incredible transfer of information, and it has helped us a lot.”

In the town of Danli, a couple of hours outside the capital city, almost 60 percent of the loan portfolio is derived from project funding, and the local office has served 123 client borrowers. In the first year of the effort, most loans were aimed at coffee farmers and the average size of the loans were $3,000 payable at the end of a year. In the second year of the project, the branch directed many of the loans to microenterprises, including clothing shops, a hardware, an office supply store and taxi and bus operations. Microenterprise loans vary in size from $125 to $12,500 and carry a 30 percent interest rate, payable monthly.

For example, one entrepreneur, the owner of an office supply store, borrowed about $6,000 in February 2001, payable over 18 months. He used the money to purchase inventory and to repair a photocopy machine. “FINACOOP met all of my expectations,” he said. “The store now has a greater variety of products so business has gone up. Suppliers have also given me a larger credit line. In fact, I’m thinking about the next loan already. I’d like to purchase a color copier and a new binding machine and, eventually, I’d like to add air conditioning and improve the overall appearance of the store. I’m making a special effort to take care of my clients because that is the success of a business—how you serve your clients.”

• Since 2000, FINACOOP has approved 928 loans averaging $2,500, injecting $2.3 million into the Honduran rural economy.
• ACDI/VOCA volunteer executives have provided training in administration, loan portfolio management, account management, finance and operations, information services, banking procedures, new product development and organizational structure.
• In the town of Danli, a couple of hours outside the capital city, almost 60 percent of the loan portfolio is derived from project funding, and the local office has served 123 client borrowers.