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FUNDEA Case Study: Executive Summary

Project Background

ABOUT GLOBAL PARTNERSHIPS

Global Partnerships (GP) is an impact-first investor whose mission is to expand opportunity for people living in poverty. GP invests in social enterprise partners that deliver high-impact products and services that enable people to earn a living and improve their lives. GP’s portfolio is comprised of a growing number of Investment Initiatives that are designed to address various facets of poverty.

Impact Management

GP is dedicated to understanding the outcomes achieved through its investments. They employ an iterative impact management practice that draws on qualitative and quantitative data from various domains to gain deeper insight into what works, why, for whom, and under what circumstances. As part of its on-going learning program, GP launched a case study initiative with partners across its focus areas. This report describes the results from a case study conducted by Microfinance Opportunities (MFO) in partnership with the GP-investee Fundacion para el Desarrollo Empresarial y Agricola (FUNDEA) in Guatemala.

ABOUT FUNDEA

FUNDEA is a non-profit microfinance institution that is aligned with GP’s Rural-Centered Finance with Education Initiative. FUNDEA serves smallholder farmers and micro and small enterprises (MSE) throughout rural Guatemala using both individual and group lending methodologies. FUNDEA offers ten different types of credit products for low-income clients. FUNDEA offers housing loans, bridge loans for MSEs, and loans for female entrepreneurs, among others.

Its primary loan product, and the focus of this case study, is Credi-Agricola, a working capital loan designed for smallholder farmers, a large portion of whom grow coffee. As part of an expanding set of services, FUNDEA began offering technical assistance (TA) to its coffee farmers. FUNDEA believes that access to financial services combined with TA will help clients improve crop quality and yields and subsequently income.

Research Objectives and Design

GP and FUNDEA initiated this case study with the goal of learning more about FUNDEA’s clients, their experience with the loan and TA program, and the effectiveness of the TA program so far. FUNDEA was especially interested in learnings that could improve its TA program, which they are continuously iterating. FUNDEA was specifically interested in learning about its coffee producing clients, which are concentrated in the department of Huehuetenango in western Guatemala. Together, GP, FUNDEA, and MFO agreed to focus on the following research questions:

What is the poverty profile of FUNDEA’s coffee-growing clients? How resilient are they to fluctuations in their cash flow and to economic shocks?

What was the experience of coffee-growing clients who received the TA? Is there evidence of improved agricultural outcomes among those that received TA versus those that did not?

To answer these questions, MFO interviewed 259 clients living in one of three municipalities in the Huehuetenango department: La Democracia, La Union Cantinil, and San Antonio Huista. MFO interviewed a mix of coffee-growing clients who had received TA and those that had not received TA to compare differences between the two groups.

Results

 POVERTY PROFILE 

The results from the survey show that clients have irregular and low incomes that are sometimes insufficient for them to cope with emergencies, requiring clients to turn to informal networks to pay for sudden expenses and ensure adequate food supplies. A typical client in this case study demonstrated the following characteristics at the time of the survey.

  • A married man who is unlikely to have completed classes beyond primary school.
  • He is a coffee farmer—a pre-condition for inclusion in this study—who farms on about 1.5 hectares of land where he grows a combination of coffee bean varieties.
  • He is likely to live below the national poverty line ($7 USD PPP) and is almost certainly living below twice that level ($14 USD PPP).1
  • He lives in a modest house with two or three children. While the family likely owns several household appliances, they still use solid fuels for cooking and only have access to a pit latrine.
  • He describes obvious signs of financial stress:
    • He reported not having enough savings to cover past or future unexpected expenses, instead relying on family and friends for loans and remittances.
    • He was likely to report that he had to reduce his expenditures on preferred foods during the past year.
    • If he were especially hard hit, he may have been one of the 24 percent of clients who reported they had to reduce the size of their meals because of monetary concerns at some point during the year.

CLIENTS’ EXPERIENCE WITH TA 

As a member of FUNDEA, clients can access a TA program. The TA program offered by FUNDEA is not a systematic intervention; rather, FUNDEA offers the service ad hoc, responding to specific client needs. Thirty-two (32) percent of surveyed clients reported receiving some type of formal technical assistance. Overall, clients did not actively seek out TA, but rather 87 percent of those clients received TA because a branch employee or agronomist, offered it. In general, clients’ experiences with the program were positive:

  • Agronomists completed about 70 percent of their planned visits; on average, they completed about two visits per client.
  • Clients were focused on resolving pest issues, although shade management, pruning, and fertilization were common agricultural topics.
  • Clients reported that, to the best of their knowledge, they had a high degree of compliance with the technical recommendations. Ninety-three (93) percent of clients said that implementing these recommendations improved their crops’ health.
    • The study did not attempt to measure actual improvements in crop health, but the clients were asked to report this year’s and last year’s crop yields and MFO did not find that exposure to the TA was associated with higher crop yields.

INSIGHTS FOR FUTURE TA PLANNING 

The experience of the clients who received TA and the feedback of those that did not receive it suggest several priority activities for FUNDEA to pursue. This study found:

  • Thirty-two (32) percent of surveyed clients reported receiving some type of formal technical assistance from FUNDEA, and in general, clients’ experiences with the program were positive.
  • Clients were predominantly focused on resolving pest issues, although shade management, pruning, and fertilization were common agricultural topics.
  • Clients reported that, to the best of their knowledge, they had a high degree of compliance with the technical recommendations provided by the agronomist.

The study did not attempt to measure actual improvements in crop health, but rather clients were asked to report on perceptions of crop health and crop yields. Based on clients’ reports:

  • MFO did not find that exposure to the TA was associated with higher reported crop yields.
  • Of those clients that received TA, ninety-three (93) percent of clients said that implementing the technical recommendations of the agronomist improved their crops’ health.
  • Overall, clients likely experienced a negative agricultural event in the past year—either a plague of pests or a negative weather event—and have not seen sustained growth in yields in the past three years.

Key Insights

 Irregular and unstable household income is an important factor in how FUNDEA’s coffee farmer clients are experiencing poverty. Coffee plants are harvested once annually, and many of FUNDEA’s clients have experienced negative weather and/or pest events that can directly impact the households’ annual income. These households’ experience of poverty is particularly linked to their depending on a single source of income, which differs from other farming households living in poverty that are reliant on several subsistence crops and on rural family businesses.

 The TA provided by FUNDEA agronomists is not a set curriculum, but is rather catered to the needs of each farmer as determined by the farmer and agronomist. Due to this design, clients’ desired outcomes and the recommended interventions may differ, making it difficult to generalize on the effectiveness of particular content provided by the agronomist. In addition this study did not attempt to measure crop health nor validate crop yields, but relied on perceptions reported by FUNDEA’s clients. Clients that received TA reported perceived improvements in general crop health due to implementing the recommendations. Rather than attempt to evaluate the effectiveness of a curriculum or the implementation of disparate interventions, this study was able to ascertain that clients who receive FUNDEA’s catered TA are generally happy with the services they receive.

 FUNDEA has expressed an interest in scaling up their TA program, and the feedback from clients who were not offered TA by FUNDEA suggests that there is unmet demand for TA. Taking resources into consideration, FUNDEA has an opportunity to raise awareness of the TA program, and potentially develop an additional, less resource-intensive offering. The current TA services are tailored to each farmers’ needs, and often take place 1:1 on the farm. This requires little additional effort from farmers to participate, but scaling up of the existing services would be both time and resource-intensive for FUNDEA. Clients overwhelmingly reported the need to address pest infestations, providing FUNDEA a clear topic around which to develop and test a standardized group training program. Starting a narrowly focused program on a high-demand topic like this would likely be beneficial and appealing to clients.