2010 PFIG Recipient Becky Cooper
McIntire School of Commerce and College of Arts & Sciences
Commerce and Spanish Major
2011 Graduation Year
Internship: Foundation for Sustainable Devlopment
Notes on the first week
I arrived in Cochabamba, Bolivia about two weeks ago. The first week I spent orienting myself with the city, and I just began my internship with CADEPIA this past Monday. I got the internship with CADEPIA through the Foundation for Sustainable Development. CADEPIA is a Bolivian NGO and micro-finance institution that works with small businesses by giving them loans, by offering training workshops, and by hosting events and fairs for its affiliates who pay 20 Bolivianos or about $3 a month for membership. In particular, I am working in the credit/loan office called APIMEC with one other intern from Ecuador. We basically are given completely free reign to do whatever sort of project we want. We have chosen to tackle one of CADEPIA/APIMEC’s largest problem, la mora, or the default rate. While this first week the two of us have mostly been learning about CADEPIA and APIMEC, we have also gotten a little work done as well. We have been researching other micro-finance institutions located in Cochabamba to determine what type of loans they offer, the interest rates, the duration of the loans offered, the amount of the loans offered, and if they require any guarantees from their lenders.
The guarantees aspect of micro-credit is really what has been confusing me this first week. I had always felt that micro-loans were for the extremely poor who couldn’t get loans from the bank since banks have so many rules and require guarantees such as a mortgage or some other personal guarantee. Poor people simply cannot provide guarantees which is one of the most important and debated aspects of micro-finance; however, micro-finance institutions in Bolivia seem to be moving closer and closer toward requiring some sort of guarantee and becoming more like a bank. There are still some micro-credit institutions in Cochabamba that do not require guarantees, such as ProMujer (which is a really good MFI for anyone interested in a future internship in micro-finance). With respect to the default rate, CADEPIA’s was around 30% in 2008 just as they started requiring guarantees (as opposed to ProMujer’s 1.38%). In 2009 CADEPIA’s dropped to about 15%, but it is still more than 10% higher than the other MFIs in Cochabamba. My job will be to analyze why the default rate is so high, whether or not the guarantees lowered la mora, and to provide overall suggestions to lower the default rate.
Our future plans are to interview a sample of CADEPIA’s 436 affiliates to understand their expectations of CADEPIA, analyze APIMEC’s 2008 and 2009 financial statements, and compare CADEPIA’s practices with other MFIs in Cochabamba. For more information, feel free to visit my blog which not only talks about my internship, but also my experience with Bolivian culture and my travels throughout the country: http://sustainabledevelopmentinbolivia.blogspot.com/
So I am halfway through my internship, and I have a feeling that this internship is completely different than anything I could have experienced back the states. First, a little about the Bolivian culture here in CADEPIA/APIMEC’s office: (1) Everyone loves to watch the World Cup. Work seems to stop whenever there is a game on. Work definitely stops whenever there is a game on with a South American team (it's too bad Uruguay, the last South American team, just lost). In fact, if I wanted to leave work to watch the game at the closest bar or restaurant, I would likely find someone from CADEPIA there screaming at the T.V. (2) Everyone likes to be involved in everyone’s love life. It seems as if I am currently going on several dates with friends of friends and family members of people in the office. I’m sure hoping it's all a joke. (3) If you come into work on time you are early. If you come into work 30 minutes late, you are probably still early. About 45 minutes late is right on time.
OK, enough of the fun stuff. Here is what I have been working on for the past four weeks. We have been gathering primary and secondary information on about 20 different micro-finance institutions in the city and comparing them with APIMEC to understand where the majority of the differences are. We also conducted interviews with 30 affiliates to understand how APIMEC can improve its credit system and how it might be able to promote its services better to CADEPIA’s affiliates. I actually finished my last project a few days ago, just before the four weeks were over. I have a 35 page report - yes, written in Spanish - about the findings.
The first section of the report examines the current system to ask for a loan, and proposes some questions to add to the application to get a better idea of the risk of a particular borrower. For example: What is the mission of your business? How much do you expect this loan to increase your earnings? Etc.
The second section of the report offers some suggestions on how to provide incentives to affiliates to get loans from APIMEC instead of from a bank. From our research, primary and secondary, we found that banks offer interest rates much lower than any of the micro-finance institutions can offer. This means that the MFIs need to have incentives to attract borrowers. First of all, APIMEC already has a few; for example, the guarantees you have to give are much more minimal and the requirements you must meet are much easier. However, we felt that APIMEC needed something more. First of all, we proposed that APIMEC make use of volunteers both from the local university and internationally to have a progress check (and yes, we believe APIMEC would be able to find local volunteers since it offers several becas, or scholarships, to university students each year). The progress check would happen either monthly or bi-monthly to make sure that each borrower was on track and to give any help if he or she needed it. The second incentive we proposed was a free period. A free period could be one of two things. It could be a couple of months where borrowers did not have to pay anything at all if they had an investment loan, because sometimes it can take a few months to start seeing profits from an investment. The second kind of free period would be where a person could choose to have a few months principle-free, but would still have to pay interest.
And the final section of the report had to do with a model that we constructed in Excel. The model consists of seven risk factors and each factor is assigned a value between one and four depending on that particular loan or borrower. The higher the value, the more risk is associated with that factor. From there, the value is given a weight based on how important that factor is in relation to the rest of the factors to produce the final point value. With this final point value, we created a set of interest rates ranging from 15%-28% depending on the final point value.
Well that is about all for now. There has been a bit of a lull at work now that the project is over and the World Cup is coming to an end. Hopefully I will have a new project sometime soon.
Tomorrow my internship ends. It is so hard to believe that I have been working in this tiny 8x12 foot office with Alvaro, the micro-loan director, Yudozca, the head of projects, and sharing a desk with Esteban, the other intern from Ecuador. These entire past eight weeks have been a complete mix of extremely hard work - perhaps only in spurts of 2 or 3 hours - and an extremely fun and crazy atmosphere. It's hard to believe, but in just a few hours, I will be heading to a discoteca with every single person from my internship to celebrate my last day. Being here, I have realized one very important thing that I read from the pages of Greg Mortensen's Three Cups of Tea at the beginning of my internship: we all need to "...slow down and make building relationships as important as building projects." Yes, I certainly built projects, but more importantly, I hope I have built some lasting relationships - even if they might only be continued through Facebook.
With my last project, I talked about how I created a model to help reduce the default rate here at APIMEC. After finishing that project, I felt like I was starting over at CADEPIA again because I didn't have a project to work on, and the staff did not have much to say in terms of what needed to be done. Certainly, CADEPIA had some problems which really hit me when my favorite employee had to quit because CADEPIA simply did not have enough money to pay her. I thought to myself, "Does CADEPIA even get any donations? I feel like there is someone out there who would donate if they found the information online. Even just a few dollars is better than nothing." So I went to work on developing a way to get donations, and online seemed to be the perfect way. I compared CADEPIA's website with websites from other micro-finance institutions like ProMujer, and decided that first of all, it needed to be completely reorganized and I had to fill in a lot of missing information. Secondly, I felt like it needed to be translated into English to better globalize the institution. And finally, it needed a section on how to donate money so that no other employees would be forced into the same situation as Berenice. I also decided to add a mini website for CADEPIA's affiliates where they could post information about their businesses so that CADEPIA's website could be a sort of platform or advertising mechanism for affiliates. From there, I worked with a web developer that CADEPIA had previously hired to make the desired changes. If anyone would like to visit the website, here is the link: www.cadepia.org.
It's hard to believe that in a little less than two weeks I will be back in the United States where I can drink from the tap, where I can take a warm shower, and where the internet does not move at the speed of an ant. But I will also be back where my friends might not appreciate my love for Latin music, where my real mom won't be able to make empanadas and canapés like my host mom, and where the atmosphere is not so "tranquilo." From watching the World Cup in a South American country to traveling to such rural places where I can't take a shower for 5 days to living with an amazing host family to learning more about development in one summer than I ever could have in a classroom, this summer has definitely been the most memorable and exciting ever. While my organization might not have been quite what I was expecting with all the internal bureaucratic issues, it was a very real-life experience which has proven to me my love for development work.