Agrocapital & Bai Tushum: Lessons from 2 Rural Financial Service Foundations
Drawing on the experiences of Agrocapital in Bolivia and Bai Tushum in Kyrgyzstan, this paper explores the suitability of foundation structure in providing rural financial services, which remain underserved by commercial entities, as:
- Transaction costs are high;
- Covariant risks are also high;
- Political interference is another challenge.
The paper suggests that the two entities have been successful in demonstrating the viability of rural financial services, in spite of the perception that foundations cannot attract capital as they do not have clearly defined ownership structures. In both the cases, the foundation structure has allowed donors, local players, and technical assistance providers to develop a new financial service that enjoys a significant market demand. Specifically, the foundation structure has allowed them to:
- Enter into legally enforceable contracts with borrowers;
- Develop products and market recognition for reliable services;
- Maintain portfolios at risk comfortably below 10%;
- Operate at levels of operational self sufficiency.
The author concludes that the ability of these foundations to attract commercial capital to rural finance will be a true measure of their success.
