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Bursting Micro-finance sector in Ecuador: Challenging Poverty from the bottom |
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 I had to live out of loans of loan sharks before, and
that was expensive for my business. I never had certainty!
Now I’m able to satisfy my clients’ needs better. Thanks to the loans
I’m able to educate my daughters now
Maria Isabel Coral
CHALLENGE
The 1999-2000 economic and financial crises in Ecuador left thousands
of already impoverished Ecuadorians unemployed and below the poverty
level. From March 1998 until May of 2000, poverty grew from 35%
to 68%, real wages fell approximately 40%, and unemployment increased
from 8% to 17%. Most Ecuadorians who lost their jobs in the
formal sector had no option but to start their own micro businesses in
order to survive. However, the lack of credit options in the
financial sector for these small borrowers hampered their ability to
start their own businesses.
INITIATIVE
In response to this need, USAID/Ecuador initiated a microfinance
project to help the Ecuadorian financial intermediaries extend credit
to these small entrepreneurs. USAID support for the creation of a
strong microfinance sector is one of the most effective tools in the
fight against poverty. A robust and vibrant microfinance sector
helps thousands of Ecuadorians access credit from the formal financial
system. Accessing credit from the formal financial system has
been a key factor in promoting expansion for new or existing
micro-businesses. Expansion of these small and medium sized
enterprises has proven to be a critical source of employment,
especially for new entrants into the workforce and those with less
education and blue collar skills.
RESULTS
As a result of USAID assistance, from December 2001 to December 2004,
the micro-credit loan portfolio grew from $86 to $302 million; a 250%
increase. In that same period, the number of borrowers increased
from 105,000 to 302,000, an increase of 220% the highest in Latin
America. Today 21 USAID assisted micro-credit institutions have
become sustainable and profitable. Institutions that are part of
a regulated financial system can better serve clients like María Isabel
Coral, a micro-entrepreneur and now a regular client of Cooperativa
Tulcán - institution that receives assistance from USAID/Ecuador.
Since she got her credit at market interest rate, María Isabel Coral
who’s the owner of a store employs her two daughters and her brother
during the high season. She’s been able to buy more merchandise
and improve the quality of her products. This has increased her
profits allowing her to pay for her daughters’ higher education
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