During the last two years, those of us who are Ecuadorians seem to have been denied any good news.

Natural disaster has affected national life and the country faces its most profound economic and social crisis of the 20th century.

In 1999, the El Niño phenomenon devastated the land and destroyed production facilities along the Ecuadorean coast. Also, two volcanoes, Tungurahua and Guagua Pichincha, erupted and brought about incalculable economic and social losses.

These events hit our economy, which was already weak, extremely hard. Bankruptcies, the unbridled rise in unemployment, the exorbitant weight of internal and external debts, growing mistrust in the financial system, the almost total loss of credibility in the political institutions, the exacerbation of regional tensions, and increases in poverty, violence and crime reached unprecedented levels

At the end of December 1999, Ecuador’s situation was serious. Inflation was running at 60%; the highest in Latin America; incomes had declined by over 30%; and unemployment was around 18%, with under-employment at about 50%.

Poverty is acute in Ecuador. Almost 80% of the population now exist close to the so-called poverty line, and according to the World Bank, almost 45% of the people live in abject poverty.

As a result, crime has increased and the political situation continues to be marked by instability and uncertainty. Since February 1997, Ecuadorians have had to endure five different governments including a short-lived dictatorship.

Migration is running at an all-time record. In a recent study, 74% of Ecuadorian families said at least one of their members was unemployed or under-employed. During the first two months of 2000, almost a quarter of a million people left the country in search of work.

In order to moderate the effects of the crisis, the government has introduced a series of economic reforms. The long-term effect is unpredictable but, in the beginning, they will certainly affect the most vulnerable as prices increase steeply. Many other indicators can be cited to show how serious the crisis is. However, we know we have to act to overcome this situation and there is a strong determination on the part of our people to do so.

Not everything is despair. It is incredible to see the way in which peasant farmers have adapted production practices in the face of the crisis. There has been a growth in organic farming, which adds value to what is produced. Solidarity systems are in place to deal with health and education problems. These and other solutions have come from the poor themselves. It is also interesting to see how the indigenous and black populations, neglected by the rest of society until recently, have become important actors in Ecuador. The authorities have to consult them before taking decisions on national affairs.
Non-governmental organisations, including ECLOF Ecuador, are also involved in rebuilding Ecuador and eradicating poverty.

As elsewhere, credit is an important instrument in our country to improve income and create employment. In the past, the formal financial system has not been prepared to help the poor. The economic crisis has not changed this approach and those most in need cannot obtain credit from traditional lending organisations.

Around ten years ago, ECLOF Ecuador borrowed US$500,000 from the Inter-American Development Bank to increase its lending capital. This has made ECLOF Ecuador a significant player in the area of rural finance. ECLOF-Ecuador is now creating what we have called the Rural Financial System (RFS). We aim to create sustainable and far-reaching financial assistance for small producers, shopkeepers and rural handicraft workers.

Almost 20 institutions make up the Rural Financial System Group (GSFR). These include savings and credit co-operatives, national and international technical co-operation organisations, non-governmental development organisations, and a micro-credit bank.

The GSFR has agreed its objectives: “To debate and to propose mechanisms, based upon the accumulated experience and the institutional practices of the integrating members, for the constitution and operation of a financial system, which meets the financing demand of the social sectors not covered by the formal banks, particularly those located in the rural sector.”

The Rural Financial System Group made good progress during 1999. It drew up guidelines for its work and began the design of a self-regulatory framework. It also defined in detail the group’s purposes and future strategies.

The perseverance of GSFR members, and their regular involvement with government bodies linked to the credit sector, such as the National Financial Corporation, means the GFSR is now recognised as an important authority in the drawing up of regulations in the rural financial markets. This year the group intends to increase its effectiveness in order to put in place a credit system that will ensure financial services are available to the poorest sectors of the rural areas.

The crisis in Ecuador has hit us hard. At the same time it has created fortitude and the creation of alliances, which will help us to overcome and construct a new country.