New Horizons > December 1999

New Way of Saving in Columbia

ECLOF Colombia has devised a fund that allows its clients to save but does not threaten the legal status of ECLOF Colombia, which is not allowed to operate savings schemes because, as a non-governmental organisation, it is not under the supervision of the government’s Banking Superintendency. ECLOF Colombia’s new Inspection and Security Commission Fund instead acts as a reward for good repayment performance by borrowers. It also serves as an additional guarantee and protection for ECLOF loans.

Every loan now made by ECLOF Colombia carries a commission fee of 2% per annum. This amount goes into the new fund where half is used to cover the administrative and management costs of the Fund and the remainder is put into a savings account where it attracts above average interest. Loans repaid punctually receive 100% of the savings plus interest. However, the amount of savings returned declines if loan repayments are paid late. The later the repayments, the lower is the amount of savings returned.

Following the recent collapse of many savings institutions in Colombia, confidence in saving is low. Many have lost all their savings and investors have withdrawn their money causing near chaos in the country’s financial sector. Through its new fund, ECLOF Colombia hopes to stimulate savings awareness and offer an alternative source of income to clients if they manage their ECLOF loans well. This takes considerable sacrifice, discipline and dedication on the part of clients but the result is that they are then able to contribute more to the well being of their family and the enrichment of their community.

New way of lending
In a further development, ECLOF Colombia now has a scheme to grant larger loans to long-standing clients who belong to solidarity collectives. These groups have graduated through ECLOF’s Solidarity Collective Programme and entered a kind of credit gray zone. Although they need bigger loans than those available through the Solidarity Collective Programme the conventional credit market still does not consider them creditworthy.

So, ECLOF Colombia has decided to give substantial loans to solidarity collectives who have received and repaid at least three previous loans on time, and who have distinguished themselves in their communities and are able to provide adequate collateral. Typical loan amounts will be between four and twelve thousand US dollars.

In a further development to its lending programme, ECLOF Colombia will also make available larger loans for housing projects.

For individuals in the solidarity collectives, the loans will solve the problem experienced by families who qualify for a government housing subsidy but who do not receive any payment until they have built or improved their homes.
Housing collectives will use ECLOF credit to purchase or improve housing. One group expected to make use of the new loans is the Community Mothers organisation. These mothers provide day care for children in their homes and, in response to a growing demand, many mothers are now seeking a loan from ECLOF to enlarge their homes or improve the facilities.