The decentralised nature of ECLOF allows National ECLOF Committees to develop loan products that correspond to the needs of their country and different regions within their country. Here are several examples of ECLOF loan products:

Microleasing
Free use loans
Jiwezeshe (Self Help) Group
HIV/AIDS and Micro Finance
Kat gets the cream
Community water

ANED (ECLOF Bolivia) and micro leasing

In general, the only asset peasant farmers in Bolivia, or for that matter in the world, possess that is of value and that could be used as collateral to secure a loan for a piece of equipment is their land. Their land though has usually been passed down from generation to generation and is their only source of livelihood. It is understandable then why they almost instinctively refuse to put it up as guarantee. ANED offers them a solution that both respects their tradition and gives them the possibility to acquire the equipment they need. That is called ‘micro leasing'.

In a micro leasing arrangement, a client approaches ANED for a loan to buy a piece of equipment, but without collateral, other than their land, or a guarantor. ANED confers with the client to determine if the income the client would earn from the use of the object would be sufficient to pay for the piece of equipment in instalments as if repaying a loan with some amount of the extra income left over. ANED does not make a loan to the client. Instead, if the acquisition is feasible, ANED buys the piece of equipment and the client agrees to use it for an agreed period of time. In exchange for the use of the equipment, the client pays ANED fixed instalments. ANED retains ownership of the equipment. Once all the instalments have been paid, the client can opt to buy the equipment for a nominal price that is agreed upon before entering into the agreement.

Free use loans

Due to the cyclical nature of their income, peasant farmers often experience liquidity binds not necessarily associated with their farming activities. After spending the income from their main farming activity, they may be faced with one or a series of unexpected expenses. At these times, what is just as important as the financial boost they could get from a small loan is the speed at which the loan can be disbursed. For that reason, ANED (ECLOF Bolivia) incorporated free use loans into its rural solidarity collective micro credit programme. (See “Credit Steps” below.)

Almost all of ANED's rural solidarity collective loans are free use. Clients wishing a small loan must conform to basic solidarity collective requirements. They must form into a group with a minimum of three members and agree to sign for their parts of the group loan jointly and separately.

To ensure rapid delivery, the clients fill out a brief application form with the assistance of a credit officer. The concept of free use means that the client is not required to specify the use of the loan. The clients are not required to say how they will choose or have chosen to spent the cash. The loans are simple and standardised. The loans have a minimum of standard conditions, that is for example, maximum loan amount and repayment instalments and amounts; and everything is spelled out clearly.

When the group as a whole has repaid the debt in full and according to schedule, they can qualify for another loan.

ECLOF Bolivia
Solidarity Group Loan Program
"Credit Steps"

ECLOF Bolivia, like all ECLOF committees, gives small-scale group loans in increasing increments rather than one large sum. The group members cannot access the next higher loan amount until all the members have repaid their part of the group loan. As for the members, they can decide if they want to continue up the scale or stop at any time. This process provides intensive and practical training in credit, financial planning and decision making.

 

ECLOF Kenya
Jiwezeshe (Self Help) Group Lending Scheme

In the ECLOF Kenya Jiwezeshe (Solidarity) Group Lending Scheme, the groups must:

• be constituted by a minimum active membership of 15 and not more than 30 people. If membership is more than 30 people, then the credit officer could consider breaking the groups into smaller cohesive units.
• be made up of members who are coming from the same locality.
• be made up of members who are operating individual micro/small scale businesses whose capital base is not more than KSH 200,000
• have been actively existing for a least 6 months.
• have popularly elected group officials.
• have a constitution and clearly spelt out by-laws.
• demonstrate the capacity and ability to mobilise savings among members and manage the same for the benefits of its members.
• show the ability and demonstrate willingness to repay loans to the KECLOF, on behalf of its members.
• be registered with relevant government departments, i.e. Ministry of Culture and Social Services, prior to receiving any loan from K-ECLOF.
• have active bank account(s) supported by bank statements.

To develop clients' credit standing and borrowing experience, the Scheme is organised to give progressive access to different levels of credit (amount and repayment periods) as follows:

HIV/AIDS and Micro Finance

(Powerpoint / Word)

Kat gets the cream

Financing agricultural production and processing in Armenia

A key difference between wealthy countries and poor countries is the ability of the former to process raw materials into more profitable finished goods. Without an abundant supply of raw materials, and the machinery and technology to process them, an economy cannot develop.

Armenia is a case in point. Following the collapse of the Soviet Union, about 90% of previously state-owned companies, plants and factories in the country closed. At the same time, state-owned land was either privatised or re-distributed. Redundant skilled industrial and commercial employees, many originally from rural areas, took advantage of the opportunity to return home and work the land they had received. Private, small-scale farming activities grew to become the primary source of employment and the basis of Armenia's economy.

The national food processing industry, however, was nowhere near able to absorb the increased agricultural production, and the standard of living of agricultural producers rapidly declined; they soon became the poorest sector of society and the economy as a whole suffered.

Dairy plant

In 1998, three unemployed engineers and a teacher, all with university diplomas and business experience, came together to open a milk processing plant in Etchmiadzin, a town with a population of almost 68,000, in the country's Armavir Province, and 18km from Yerevan, the capital.

The four founders called their company Diet-Tun , meaning 'diet house', but later decided the name was inappropriate because they were not producing dietary products per se but milk products, such as full creamed and skimmed milk, natural yoghurt and cottage cheese. The company, therefore, became Etchmiadzin Kat (Etchmiadzin Milk). It is one of only a small number of private dairy processing plants that have opened in the country during the past ten years.

Tigran Nahapetyan ( right ) and Gohar Tadevosyan operate Etchmiadzin Kat's new packaging machine.

Loaded and ready to roll. An ECLOf loan enabled Etchmiadzin Kat to buy its new delivery van and distribute its increased production.

Kat's vats. ( l to r) Gohar Tadevosyan, Azaik Hovhannisyan and Sofia Topazyan produce quality milk products with Etchmiadzin Kat's new equipment.

Expansion

Demand for Etchmiadzin Kat 's products has grown consistently. Today, the plant supplies a total of 90 retail outlets.

In 2000, Etchmiadzin Kat began a pilot project to produce fruit yoghurt, and the following year received an ECLOF loan of US$25,000 to expand production. In order to grow, Etchmiadzin Kat needed not only to buy additional raw milk and a large supply of fruit but also a bigger packaging machine and more packing materials.

Last year, Etchmiadzin Kat took out a second ECLOF loan for US$50,000 and, together with US$60,000 of its own cash, bought more fruit and raw milk, as well as an extra packaging machine and materials.

Stimulating the economy

Etchmiadzin Kat buys raw milk from farms in a number of villages in the Armavir Province; two of these farms are Armenian ECLOF small-scale family solidarity groups. The plant buys fruit from about 100 small, family farmers. Armenian ECLOF also has clients who, while not suppliers of milk, gather wild fruits and sell them to the plant as a supplementary source of income to their own sale of milk.

The founding and expansion of Etchmiadzin Kat has generated an increasing number of jobs in the area. In 2000, the plant employed 17 people; today the number is 27. Out of 23 production employees, 11 are women and 14 are young people. The average monthly salary for production workers is U$75, about US$17 above the national average.

Fair trade

Dairy farmers in the Armavir Province around Etchmiadzin have no other large-scale buyer for their milk than Etchmiadzin Kat . This is both an advantage and disadvantage because, while they at least have a ready buyer, the farmers have no real say in determining the purchase price of their milk. In the case of Armenian ECLOF's milk producing clients, Armenian ECLOF's staff and board have exercised their good offices to 'referee' negotiations over the price that Etchmiadzin Kat pays, to ensure that it is in line with the market. This also benefits milk producers who are not Armenian ECLOF clients because they get the market price as well.

International prospects

Besides credit and mediation, Armenian ECLOF supports Etchmiadzin Kat in another way. One of the institutional members of Armenian ECLOF is a small-scale business consultancy organization with international ties. Thanks to its intervention, two international development agencies, as well as a large foreign yoghurt manufacturer, are working with Etchmiadzin Kat . At the same time as these partnerships are opening up international marketing outlets for the plant, they are also making it possible for Etchmiadzin Kat to acquire the training and technology it needs to meet international quality standards and output requirements.

Community water

Two of a number of innovative ECLOF loan products are the Mukurine Kiagaru Water Project and Kiigene Ciirimu Water Project. In these cases, and others like them, rural families came together to satisfy their need for water.

In the spirit of community, the Mukurine Kiagaru Water Project brought together 500 rural families in Kanyekini area of Kenya. Their project received an ECLOF loan to help them buy 7.2 km (approx. 5 miles) of piping to tap into the Iraru River.

The Kiigene Ciirimu Water Project brought together 204 rural families in Katheri Village. An ECLOF loan helped them finance the construction of a retaining wall into a deep gorge and the site of a waterfall to capture water and then to buy some 6 km (approx. 4 miles) of piping which the members of the community themselves laid to tap the water down hill to their homes.

Now, the women and children in both communities no longer have to make the long and hazardous trek to the community's source of water and carry back heavy containers of drinking water. The constant supply of water in both cases has also made it possible to efficiently transform dry areas of land in the areas into fertile fields.