Specialized bank offers helping hand
WITH ITS POLICY OF HANDING OUT MICRO-CREDITS TO ITS CLIENTS, BANCO SOLIDARIO HAS ENABLED THOUSANDS OF ECUADORIANS TO START UP PROFITABLE BUSINESSES AND HELP REVITALIZE A TROUBLED ECONOMY

SANTIAGO RIBADENEIRA TROYA Executive President of Banco Solidario

The struggle against poverty is a constant problem for the Ecuadorian authorities. Particularly active in this field is the privately-funded Banco Solidario, which has assets of $40 million and has handled a total of 40,000 customers over the past five years. The bank grants small credits averaging $1,000 to financially-restricted purchasers with the simple aim of giving them a hitherto unobtainable property or business purchasing opportunity.
Executive President Santiago Ribadeneira Troya believes that to continue the positive growth obtained after dollarization, Ecuador needs to concentrate on activities where it has a clear economic advantage, such as in its large agro-industrial capacity.
“Businesses connected with agriculture have seen themselves converted into the world’s number one: bananas, cacao, shrimp, flowers,” he points out. “And not by quantity but by quality.”

Ecuador’s magnificent geographical location has helped–only Kenya is similarly placed to provide such products. “The challenge is to use this environment to create an increasingly profitable business,” he adds.
Careful measures are needed to revitalize and create confidence in the banking structure. “If opportunities are handled right, the banking system will be the first beneficiary,” says Mr. Ribadeneira. At present, stricter controlling processes are still required and many banks are simply not ready, representing a high risk to their shareholders. Most banks have a capital structure and interests have to be invested for them to capitalize effectively. Current investment remains low as many countries still have doubts about Ecuador, not least because of its relatively small economy.

Banco Solidario is solid and has survived the crisis for three clear reasons. Firstly, it had overseas partners who provided back-up in the near-catastrophic period of the late 1990s. Secondly, its passive structure is based on installment deposits with no current or deposit accounts. (“So no one rushed to our bank in the moment of crisis to withdraw funds,” claims Mr. Ribadeneira.) Lastly, all assets are liquid with a genuine flow of funds: average installments are of 120 days and payments made fortnightly or monthly. To get his or her next loan, the borrower must have paid off the previous one.

Because of Banco Solidario’s customer-friendly system, clients have been loyal and more inclined to invest even in times of crisis. “Specialized banks like ours have access to real opportunities, and other banks need to analyze their own particular needs, as sooner or later the foreign banks will be here in competition,” says Mr. Ribadeneira.
Of his overall achievements he claims “we have converted a social problem into a business and this has had a clearly visible effect on reducing poverty.” Banco Solidario’s micro-credits have indeed opened up a wider range of possibilities to those financially stretched members of the population who work in modest jobs or operate small businesses on a low income. According to Banco Solidario, 60% of the adult working population has no access to the financial system. Mr. Ribadeneira wants to improve their quality of life by offering them an affordable and reliable loan system and a chance to buy their own home by quotas, an infinitely more practical deal than that of the country’s traditional profit-oriented money-lenders who charge up to 50% interest and offer no benefits at all in return.

“Banco Solidario was set up without any form of government handout,” says Mr. Ribadeneira. The shareholders are all private and include national and international non-governmental organizations. “We have developed a very innovative business model and are now aiming to extend our network throughout the country by building partnerships with NGOs, particularly in agriculture-related projects.”