We spoke with Rossana Ramos-Velita, director of the rural bank that offers agricultural loans to the most vulnerable populations in the Andean country and that became the first Latin American microfinance company to receive an international loan of US$ 10 million.
Last week, the world of Latin American microfinance marked an important milestone, when the investment fund Accion Digital Transformation (ADTx) announced a capital injection of US$ 10 million to the Peruvian microfinance institution Caja Los Andes. It marks the first time that a Latin American entity of this kind receives a “world-class” investment.
With the contribution of Accion - an American non-profit organization specialized in supporting microfinance worldwide - Caja Los Andes will deploy various strategic actions in the second half of this year.
For now, the highland region of Puno, adjacent to the border with Bolivia, is the base of operations of the microfinance entity. And it is no coincidence that this is so. At more than 3,000 meters above sea level and surrounded by picturesque landscapes where pre-Hispanic ruins and the imposing Lake Titicaca stand out, thousands of Peruvians live from agricultural activity at the expense of poverty, hostile climate and social conflicts.
According to the 2022 National Household Survey of Peru, Puno has a labor informality rate of 90.2%. To be specific, this includes approximately 756,539 workers and of them, 41.8% participate in the agricultural sector. In this situation, access to banking is limited and therefore, financing opportunities for the productive chain as well.
It is in this complex scenario where Caja Los Andes has operated for more than 26 years promoting financial inclusion in Peru and seeks to become the “leading rural bank” of the Andean country. The company offers credits, savings, insurance, among other products for Peruvian farmers.
To date, Los Andes has 103 offices nationwide and in vulnerable areas; more than 450 financial advisors who accompany the communities and finally, more than 246,000 clients; In this last group, 43% live and work in rural areas.
THE ADAPTATION OF A MODEL
Rossana Ramos-Velita, president of the Board of Directors of Los Andes, is the main person responsible for the positive results of this emerging rural bank. Peruvian by birth and passionate about business from an early age, in 2004, she assumed the position of Chief Financial Officer (CFO) of Citigroup. At that time, the banking group supported numerous NGOs dedicated to microfinance.
There he had the opportunity to meet the Nobel Peace Prize winner, Muhammad Yunus, a Bangladeshi banker and social entrepreneur, who founded the Grameen Bank, a pioneer in the creation of microcredits aimed at vulnerable populations.
“Yunus came to visit me at my office in New York. I was really captured by how he ran Grameen Bank. Then, he invited me to the board of his foundation, where I worked ad honorem on the board. There I learned a lot, because I saw how small financing can change the lives of mothers and families, who all they want is to get ahead,” Ramos-Velita declared for AméricaEconomía.
Thus, in 2012, he decided that the time had come to adapt the idea to the Peruvian reality. For this reason, that year, he did not miss the opportunity to acquire Caja Los Andes.
“We have a banking license, because we take deposits from the public. So we are fully regulated and can provide all types of financial products, secure loans, savings, among others. Originally it was an institution with around US$10 million in portfolio. And although we only had four agencies, we also had a young group of girls and boys from Puno with a very high intellectual capacity and financial knowledge,” recalls the businesswoman.
Subsequently, Rosanna attracted private capital groups that were beginning to develop in microfinance to carry out the project. These groups made impact investments, which are made with the purpose of contributing to a positive social or environmental cause. But at the same time, it must be measurable and produce financial returns.
Growing revenues and subsequent expansion to other regions led Los Andes to acquire another entity and go from the initial US$10 million in portfolio to around US$180 million by 2020. The new decade welcomed them with the COVID-19 pandemic. , which reduced the number of clients and profits, although it kept the team intact. Currently, the Los Andes team wants to return to pre-coronavirus growth levels, but social conflicts in the Peruvian Altiplano, derived from the rejection of the current government, have hindered this objective.
“But despite this negative impact, we are the only microfinance entity that has generated profits in the last two years. Our motto has always been to be cautious and conservative with the management of portfolio assets. And that is why we largely use our capital to support these losses,” says Ramos-Velita.
According to the businesswoman, this model continues to be attractive for international investors, because Los Andes has reached a level where people do not have to pay commissions to join the Fund. This detail allows them to gain ground in the most vulnerable areas, where financial services are scarce and frosts take their toll on agricultural activities every year.
CAPITAL INJECTION AND GAPS IN THE RURAL SECTOR
This is where the ADTx fund came into the picture to support Los Andes in making the leap to digitalization. Although the Fund has already been using technology in its operations for seven years, Rosanna recognizes that in a market where the majority of clients do not have access to the Internet or a high-end telephone, an additional boost must be given.
“There is still not a great level of trust in the banking system, as there is in microfinance. But there is still a long way to go for them to trust making transactions through cellular or digital systems. Even so, we have invested a lot in transforming our organization and now with this new investment we are going to achieve it,” he assures.
For his part, Ramos-Velita considers that Los Andes moves away from the model of a municipal fund by being an entity backed by private shareholders. Under this scheme, the rural bank is accountable and seeks to return profits to shareholders, while maintaining the social mission focus.
“Only we and our partners take the impact of the good times where we generated profits and also the losses. We have no relationship with local or national authorities. There is a great differentiation that also gives our clients much more security. Because they know that we are responsible private shareholders of international funds, who are going to protect their deposits more seriously,” he explains.
Rosanna regrets that many traditional banks in Peru overlook the development of exclusive services for rural populations. For example, only Mibanco, a subsidiary of Banco de Crédito, has a rural credit line. There is no independent bank that is committed full-time to Peruvian farmers.
In contrast, neighboring countries have managed to better grasp this need. As an example, in March 2024, Bancolombia and the United States Agency for Development (USAID) jointly created the Rurality Laboratory, an education and financial inclusion strategy, which promotes a group credit model to impact 30,000 farmers in the departments of Chocó and Nariño, who live in precarious conditions.
There are also entities focused on the female gender such as Banco Mundo Mujer, which provides credit and savings products to Colombian women. For her part, Rosanna will seek to apply a similar slogan with the release of “Lara de los Andes.”
This is a new digital platform dedicated to the empowerment of women microentrepreneurs. It serves not only as a space for financial support, but also for emerging entrepreneurs to share and disseminate their businesses, adopt savings habits and learn soft skills.
AGRICULTURAL CREDITS
But currently, perhaps the most widespread service of Caja Los Andes are agricultural loans. Ramos-Velita takes into account that in regions like Puno, if the cattle are fed well, the production of milk and cheese increases considerably.
“So, our task is to start evaluating the cows. Then we give a credit of US$200 to the farmer to buy a small cow, fatten it up and then sell it. If we see that it works, we can give you funds to repeat the process with two or three cows. And if it works, they begin to produce milk and cheese. It is a virtuous circle,” declares the businesswoman.
Thus, the entire credit evaluation is focused on the quality of the cattle, the quality of the feed and the opportunities to develop products around the cows. Although on the other hand, the model cannot be transferred to agriculture due to the environmental risk.
“We have a portfolio of less than 10% dedicated to crops, because the small farmer really has no way to protect himself. There is no insurance in Peru like there is in other countries, against pests or environmental disasters. They still don't have the know-how of how to project prices,” says Rosanna.
As a consequence, if there is too much supply of potatoes, the price plummets and they cannot pay the credits. For this reason, the executive maintains that the Ministry of Agriculture and the banks should establish policies that guide microfarmers to choose crops that are sustainable over time, such as avocados and blueberries, for example. “We try to create a comprehensive rural model that is not only dedicated to one crop, because it is really very risky.”
Regarding the capital of US$ 10 million that ADTx granted them, Los Andes aims to complete its digital transformation process and subsequently, propose new applications and products, the most important being the aforementioned “Lara de los Andes” initiative.
On the other hand, the director recognizes that to overcome the obstacles to financial inclusion in Peru, the State should introduce policies that encourage the use of technology in remote areas. Furthermore, a competitive market would be needed where not only banks or municipal savings banks intervene, but also fintechs and startups, even if only as pilot projects.
