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Community-Driven Development Experiences

Community-Driven Development Experiences. Albania Microcredit Project. Albania Microcredit Project Rural Credit Component. Origins Current Status Lessons Learned. Albania Microcredit Project Rural Credit Component. Origins Current Status Lessons Learned.

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Community-Driven Development Experiences

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  1. Community-Driven Development Experiences Albania Microcredit Project

  2. Albania Microcredit Project Rural Credit Component • Origins • Current Status • Lessons Learned

  3. Albania Microcredit Project Rural Credit Component • Origins • Current Status • Lessons Learned

  4. Rural Poverty Alleviation Pilot Project (1993-1995) • Participatory design of “village credit fund” (VCF) system • revolving fund at village level • 3-member village credit committee • loans up to US$500 for any income-generating activity • maximum loan duration: 3 years • interest: pegged to US dollar + 6% • collateral: village solidarity

  5. Rural Poverty Alleviation Pilot Project (1993-1995) continued • Continuous “learning-by-doing” approach in 10 poorest districts • Implementation by autonomous government foundation (Albanian Development Fund - ADF)

  6. Rural Development Project (1995-1999) • Expansion of VCF system • More emphasis on financial sustainability • Lek-based loans at a real interest rate • Pyramid scheme crisis in 1997 proved strength of village “ownership”

  7. Rural Development Project (1995-1999) continued Results as of 3/31/99: • 225 VCFs in 10 districts • Over 9,300 active loans • Over 17,000 cumulative loans • Active portfolio: US$3 million • Average loan outstanding: US$325 • Real effective interest rate: 8%-14% • Portfolio at risk: 1.2%

  8. Rural Development Project (1995-1999) continued • Main challenge: institutional environment (ADF) not conducive to financial discipline or sustainability

  9. Albania Microcredit Project Rural Credit Component • Origins • Current Status • Lessons Learned

  10. Microcredit Project (effective December 1999) • New focus: development of private, sustainable savings and credit association (SCA) network • Goal: 340 sustainable SCAs in 11 districts in five years, governed by a private SCA union

  11. Microcredit Project (effective December 1999) continued • Separation of ADF Rural Credit Department to autonomous Rural Finance Fund (RFF) • VCFs in five northeastern districts transferred to IFAD-supported Mountain Areas Financing Fund • Revised law for SCAs

  12. Microcredit Project (effective December 1999) continued Results as of 12/31/00: • 21 SCAs (76 SCAs planned by end 2001) • 505 SCA members • 231 SCA loans totaling US$300,000 • 156 VCFs in 5 districts • Over 4,000 VCF loans amounting to US$2.4 million • Portfolio at risk: 3.5%

  13. Albania Microcredit Project Rural Credit Component • Origins • Current Status • Lessons Learned

  14. Lessons Learned #1 Base credit delivery mechanisms on local context and tradition

  15. Lessons Learned #2 Community-based microfinance can overcome rural finance systemic weaknesses and withstand political/civil crises • Decentralized borrower appraisal and loan decision making resolves “information barrier” • Non-traditional collateral substitutes for traditional collateral • Moral hazard is adverted because reputation of borrower at risk

  16. Lessons Learned #3 Place early emphasis on financial sustainability and institutional environment (Community-based microfinance is the marriage of social and financial approaches)

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