Rural Savings and Credit Unions in Honduras: a model to promote more inclusive market systems and women’s economic empowerment

By Team: Private Sector Engagement 27th Feb 2017
Reyna Araceli Reyes Sorto standing in a field of maize Reyna Araceli Reyes Sorto standing in a field of maize

Reyna Araceli Reyes Sorto, age 44, lives in Villanueva Cortes in Honduras. When she was a child she dreamed of being a doctor yet because of economic hardship and lack of access to higher education, she was unable fulfil her dream. Until recently, she never thought a woman of her age could have the opportunity to have a job, to own a business, or to be engaged in any income generation activities; she believed only her husband could generate income. Then she joined a Rural Savings and Credit Union.

That was in 2014, when the Rural Savings and Credit Union (known as CRAC from the acronym in Spanish) of Colinas de Suiza was formed and Reyna saw the opportunity to improve her life and the life of her family. She was able to take loans to open a small business to better support her family. She is now leader of a collective micro-enterprise, producing and selling bed linen and sheets, juices, cream desserts and tamales with eight additional members of the union. Reyna is also the president of the CRAC.

What is a Rural Savings and Credit Union?

CRACs in Honduras are formal entities regulated by the law of development and modernisation of the rural sector. Their main aim is to provide financial services in rural areas where there is often a lack of access to commercial banks and financial education and where people – especially women as they have reduced access to land –  have little collateral to offer formal banks, savings are minimal or in the form of livestock or other assets, and loans are taken from local money lenders at very high interest rates. In contrast, CRACs offer flexible financial service delivery, based on individual negotiation and a deep knowledge of local communities and their businesses. Each of the loans requires approval by the CRAC credit committee, tailored to specific business needs or personal situations. Their capitalisation is estimated at about US$1 million.

CARE recognised the potential of these institutions for more inclusive market systems and women’s economic empowerment through providing technical training, improving financial literacy and business skills of their members and with a particular focus on guaranteeing equal opportunities for women. The CRACs are very flexible entities and the savings and loans unions can also function as agricultural cooperatives for their members, selling products to large traders or processors. CARE’s private sector partner Cargill has used this platform to increase access to its own formal market, enabling small-holder farmers to sell their maize products to Cargill in Honduras.

Why do the CRACs have such an important role in rural market systems and for Women’s Economic Empowerment?

The CRACs present a sustainable market system-based solution to several barriers to market inclusiveness in rural Honduras, primarily limited access to financial services , weak capacity of producers’ collectives, limited technical skills, lack of business skills and low financial literacy. These are barriers for both women and men; however women are especially excluded from access to financial services because assets and therefore collaterals are not in their name, and are also more excluded from training and business opportunities because most of the members of traditional cooperatives are men.

Many of these CRACs are now established and managed by women, therefore improving women’s access and control over productive resources in activities traditionally controlled by men. The CRACs in CARE’s project have also taken up an important role in educating local communities regarding healthy nutrition practices and climate change adaptation, especially in areas that are particularly prone to both drought and floods, thus increasing the local communities’ ability to mitigate climate related losses.

CRACs problem tree impact flow chart

Are CRACs sustainable and replicable?

The CRACs have the ability to use seed capital from different stakeholders, not necessarily donor funding. In Honduras, local governments became aware of the large-scale development potential of this model and often provided seed capital funds for start-ups. The seed fund is partially recovered through CRACs interest rates and can be used as a revolving capital for new start-ups. The CARE-Cargill project is an example of a public-private alliance through which the private sector promotes CRACs as part of corporate social responsibility but also as part of a regional business model. The various producers’ groups and micro-enterprises promoted through the CRACs participate in Cargill’s value chain in different ways – both as suppliers and as clients of specific products like animal feed.

Small CRACs can also start from informal small savings and loans groups in local communities and then self-capitalise, grow and gain formal recognition. Other formal financial institutions in some cases also support their capitalisation when they perceive the CRACs’ creditworthiness. The technical assistance and business training services provided, in addition to financial services, are a result of partnerships established with the local private sector and governments. The CRACs are beginning to organise themselves into second level municipal organisations, with the ability to provide larger loans and support to producers’ associations and cooperatives.

In short, the CRACs are sustainable and replicable because they generate their own resources to grow and because both the public and the private sector continue to provide resources for new start-ups and for upgrading the existing CRACs.

CARE is providing support through advocacy at the national level in an effort to improve the regulatory and legal support for the formal legalisation of the unions that have recently been established and still need to go through bureaucratic processes that can be lengthy and demotivating.

What results have been achieved by the project?

This project in Honduras reached 499 smallholder producers and 306 women micro-entrepreneurs directly and 32,889 individuals indirectly. From 2014-2016 the project contributed to the following results:

  • 91% of producers have access to a form of financial services, 60% of entrepreneurs have savings and loans, and 100% of yellow maize producers obtained agricultural insurance.
  • 62% of women hold savings, with an average amount of approximately US$1,410 and 38% of men with an average amount of US$780. Only 11% of women had access to financial services at baseline.
  • The 26 CRACs supported by CARE have Boards of Directors with a total of 182 members, of which 106 are women and 76 men. 50% of the Presidents of the CRACs are women.
  • The productivity of yellow maize increased by 488.6%, white maize by 16% and red beans by 23%.
  • 67% of the women micro-entrepreneurs and 49% of producers improved their financial culture, which indicates that they have a clear objective of saving and have defined criteria for loans.
  • 99.6% of smallholder producers have access to new technologies and 97% have access to agriculture inputs.
  • 75% of CRACs have effective governance systems in place.
  • 88% of producers and 80% of entrepreneurs have started a new business.
  • 54% of women are now affiliated to associations and 61% of women and 39% of men are now participating in formal spaces of consultation and decision-making. Before the CRACs, only traditional organisations were functioning in the communities, with minimal participation from women.
  • 36,000 women and 84,000 men have benefited from policies of rural savings in Honduras.
Gianluca Nardi

Gianluca Nardi joined CARE in 2005. He is Senior Women’s Economic Empowerment (WEE) Advisor based in Brazil and he leads the Women in Value Chains component of the WEE strategy globally. His main areas of expertise are market facilitation, women’s empowerment, micro-enterprise development, rural development, private sector engagement and working with extractive industries.

With over 15 years of experience working in various management and consultancy roles in Brazil, Nicaragua, Angola, Cambodia and Italy, in both the private sector and NGOs, Gianluca holds a Masters in International Development from the University of Ferrara, an ILO Diploma on Markets Facilitation, a diploma in Extractive Industries and Sustainable Development from the Catholic University of Lima, and a certificate from the Advanced Social Management Programme from the University of Cambridge and the University of Queensland CSRM.