Alternative Development Areas at the Municipal Level

AECOM International Development is working as a subcontractor to Associates for Rural Development (ARD) to bring sustainable financial services to micro and small entrepreneurs, agricultural producers, and producer groups in 100 Alternative Development Areas at the Municipal Level (ADAM) municipalities throughout Colombia. Low-income populations in rural areas of Colombia have not traditionally been served by the banking sector due to erroneous perceptions of risk and cost and legitimate security concerns. Although a number of NGOs, cooperatives, associations, and state organizations do operate in these areas, they tend to be small and have few resources and low impact. Accordingly, populations in many of these municipalities have had no access to loans, savings accounts, current accounts, and transfer and payment services. Providing these services is critical to the development of capital accumulation and legal, sustainable economic activities. In addition, the state has often intervened in these rural markets and developed its own financing instruments with directed credit, excessive guarantees, and subsidized interest rates.

AECOM International Development consultants areworking in the following areas to bring sustainable financial services to ADAM municipalities in rural areas of Colombia: Commercial Banks and Non-Banking Correspondents, Cooperatives and NGOs, Development of Savings, Loans and Financial Products, and Loan Methodologies. The Commerical Banks and Non-Banking Correspondents activities include developing expansion strategies that can be carried out in branches participating in pilot programs or through non-banking correspondents (such as retail establishments that enter into agreement with banks to set up a user window to provide financial services, especially in isolated areas where banks do not operate). The Non-Banking Correspondents program will be used by the Government of Colombia’s Opportunity Banking Program to promote access to financial services. This model is based on that of non-banking correspondents operating in other countries, including Brazil and Peru, and includes observation and training visits between those countries and Colombia. Appropriate products, credit methodologies, and diverse services are being developed for the target populations, particularly for rural producers and entrepreneurs. In addition, under the Development of Savings, Loans and Financial Products activities, AECOM International Development is developing market-based savings and loans products, with the goal of encouraging product diversity and competition between financial entities. Savings products serve both as a source of sustainable financing for financial entities and provide a service key for the growth of rural producers and entrepreneurs.