Digital Loans for Rural Colombians: The Road to a Greater Financial Inclusion

Colombia’s sophisticated financial system largely fails to reach post-conflict rural areas, due to high operation costs, risk, and other difficulties. This creates many barriers for rural inhabitants to access legal, formal, regulated and secure financial services, to support equitable economic growth. To address this development challenge, while supporting the 2014-2018 country cooperation strategy DO3 “Improved conditions for inclusive, rural economic growth", USAID designed the Rural Finance Initiative (RFI). This Activity aims to reduce barriers of access to financial services for rural Colombians through different means, including promoting and using technology as a way to facilitate access and reduce costs for both financial entities and rural customers. To do so, RFI partners with banks and other financial institutions, including financial cooperative Microempresas de Colombia (MDC). RFI helped MDC design and launch the first all-digital loan offered by a financial cooperative in Colombia, with the potential to drive financial inclusion by reducing costs and risk for the cooperative and rural customers.

RFI implemented the CLA approach “CLA in Activity management” and integrated all four strategies: 1) Set the tone for a collaborative relationship; 2) Collectively Validate and Revise the Theory Of Change at Start-Up; 3) Facilitate CLA in implementation; and 4) Enable Adaptive Management. These strategies helped create a trusting, collaborative relationship that set MDC on a path towards reducing barriers of access and expanding its reach in target municipalities through innovative tech tools. With RFI co-investment and technical collaboration, MDC created a digital loan called Credifácil, aimed at expanding their customer base among rural Colombians, driving financial inclusion. Some results are: Digital loans awarded nation-wide 2019 - 2020: 4,480 loans worth more than $4 million. Digital loans in 44 of RFI’s target municipalities through 2020: 1,614 loans worth a total of US$1.5 million (included in the $4 million nation-wide).