REDCAMIF: "Supporting networks and institutions"


Iván Gutiérrez, Executive Director of REDCAMIF, and Andrea Rosales, Head of Communication and Training, talk about their crisis management.

REDCAMIF is the Central American and Caribbean Regional Microfinance Network. It brings together 7 national networks including ASOMIF (Nicaragua), ASOMI (El Salvador), REDIMIF (Guatemala), REDMICROH (Honduras), REDOMIF (Dominican Republic), REDCOM (Costa Rica) and REDPAMIF (Panama), representing a total of 140 affiliated microfinance institutions and nearly 2 million clients.  Iván Gutiérrez, Executive Director of REDCAMIF, and Andrea Rosales, Head of Communications and Training, gave us an interview to tell us a little more about how they are managing the crisis.


How are you getting organized regionally and through 7 national networks to ensure the business continuity of member institutions
At the regional level, things differ from country to country because these phenomena are not regional, and policies aren’t either. As to the Pandemic we have been one of the last regions to be affected, because of its small size and relative isolation. However, everyone is facing risks. Micro and small businesses make up about 40% of a country's employment, we are not talking about big companies or large corporations. So, the impact on the economy is greater. Large cities having high population concentrations are affected. In our case, we have much smaller cities, but the fact that economic activities are at a standstill has a huge impact.

As to restricting activities at country level, all of them have implemented about the same policies.

Guatemala did it to a lesser extent, but it has imposed some restrictions such as time schedules for the population. There is the possibility of creating a fund but, so far, the network has had no access to resources. They are preparing proposals for the institutions and looking for solutions.

Panama, El Salvador and Honduras are the countries having the most institutional and mobilization restrictions. These are countries that are completely closed and have imposed compulsory lockdowns on their populations.
In terms of the microfinance sector, the best example is that of Panama. The government has set up a fund with the Inter-American Development Bank (IDB) and allotted some of it to the Micro, Small and Medium Enterprise Authority (AMPYME). The Panamanian microfinance network, whose presence in the country is quite significant, is designing liquidity facilities in alliance with AMPYME to help businesses and also reactivate microenterprises.

In El Salvador, I believe that the government is also promoting a fund trough the World Bank. They plan to allocate part of the fund for microenterprises through a state bank called Banco Hipotecaria. And the Salvadoran network, ASOMI, is establishing an alliance with Banco Hipotecaria so that its affiliated institutions can have access to that fund.

In the case of Honduras, a mandatory three-month moratorium was enacted for all clients. The REDMICROH network also participates in the emergency committee and the economic recovery committee, supporting micro and small businesses. An instance has been created where the network is participating. They hope that part of those resources can be used for the liquidity issue, but nothing has been decided yet. Unfortunately, the government is not well positioned to negotiate. The Honduran network is strong and important though, and it is active in the business chambers of the country.

Costa Rica is, comparatively, more flexible as it has the situation under control having the most developed health system in the region, as well as the highest cultural and educational level. That is why the impact has been lower, that is, the country has one of the lowest mortality rates in the world. Costa Rica has Development Banking: this is a law, not an institution. The government demands a certain percentage of deposits from private banks to set up a development fund. This is what they call Development Banking. It is creating programs so that institutions can access those resources using the accumulated reserves to support the sector.

The countries with the most problems are Honduras, the Dominican Republic and Nicaragua.
In Honduras, the mortality rate is very high and there have been significant restrictions. The country has two large cities with a high concentration of population and almost identical size. So, the risk is higher in this case and the death rate is already the highest in the region.

In the Dominican Republic, no overall restrictions have been imposed. During the first week of May[1] there will be presidential, parliamentary elections ... politicians are very concerned about their political future and no one dares to take drastic measures. So, the restrictions are not like those of other countries, and this has translated into very high contagion rates. The perspective of a change in government induces some instability, so the network has not been able to devise a participation scheme yet, in spite of having a lot of clout and presence in the government of the country.

[1] At the time of the interview. Later it was decided to postpone the electoral event for the first week of July.

Nicaragua is an atypical case. It is an isolated, very rural country, which has been in crisis since 2018. The government has not taken any restrictive measures towards the population and activities are going on normally. Currently, the country is limited by the political problem and no aid from international funds is planned. The ASOMIF network alone is trying to structure a liquidity fund for three to four months for the institutions with the most problems. As for the government, it has no intention of structuring such a fund and, moreover, it is in a bad situation.

What are the institution’s main concerns?
First of all, we are expecting an increase in arrears and liquidity problems from the institutions during a period of time, that is, the loss of income for a long period, the lack of economic activity reducing credit operations.

Another concern is risk management in today’s environment for issues such as loan rescheduling/carryovers, online collections, and operational mechanisms for collecting cash, given that offices are generally closed.

Public policies can negatively impact institutions. Governments can decide to establish moratoriums that may be understood by clients as “no payment”. This will create an environment of debt forgiveness and non-payment. It is very dangerous as it can induce systemic risk in the sector.

Finally, for most institutions in the region, branches cannot open and officers have trouble mobilizing. There is a significant demand for the development of digital strategies to meet customer needs. REDCAMIF is also seeking alternative digital communication tools. We are running a couple of pilot projects, and we are going to continue along the same lines of supporting digitization processes in communications, collections, etc.

What kind of support do you provide?
We support networks and institutions. We are trying to support different activities at the regional level.

One such activity, with the support of ADA, is that each country and each network be able to identify the magnitude of the impact in order to have greater clarity about what can be done. Furthermore, as part of the ADA project, we have allocated a small fund to support country-level lobbying efforts, because these policies are national, not regional. So, each network has to strive to come up with policies and practices that are favorable to the microfinance sector.

Another action we are planning is to share experiences through webinars with the CGAP FinDev portal so that experiences are shared among all, the best practices in terms of risk management...

We are also organizing digital laboratories that open up possibilities for institutions to acquire in the short term very simple and practical tools in order to improve their customer communication systems. And of course, supporting the networks about incidents.

How do institutions communicate with clients?
That varies greatly because some of them already have digital systems allowing them to do it effectively. Some institutions have created small call centers with two or three people making calls, although it is somewhat expensive. Now they realize that it is getting difficult and this will generate a great opening to digital media.

We are also creating messages to meet the needs clients now have. For instance, some clients may panic and rush to collect all their savings at the institutions. As REDCAMIF, we are developing financial education videos for clients, focused on 2 themes:

  1. Individual and family care, that is, giving the client information on the barrier gestures to adopt when facing the Covid-19;
  2. Taking care of business: advises clients on measures to be taken in their company and with their staff.

These videos will be disseminated at the regional level among the 140 institutions that are affiliated to REDCAMIF and its 7 networks will promote them in the region.

Interview by ADA

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