In this ‘MSME Champions’ interview, Yves Moury of Fundación Capital describes how Fundación Capital contributes to improving the economic and financial livelihoods of micro, small and medium-size enterprises from three angles: financial inclusion, economic inclusion, and digital inclusion. ‘MSME Champions’ is a series of interviews capturing the expertise and experiences of individuals and institutions supporting enterprises in the missing middle of agriculture, as part of an advocacy campaign for the International Day for Micro, Small and Medium-sized Enterprises (MSMEs) on 27 June 2024.
The International Day for Micro, Small and Medium-sized Enterprises (World MSME Day) is an opportunity to reflect on the key role of enterprises in the missing middle of agriculture. Please tell us why and how Fundación Capital supports their growth.
Small producers represent not only a significant proportion of the global food supply, roughly 80% in value terms, according to FAO. But it is also estimated that at least 80% of their farms are less than two hectares and managed by families. Their crucial role in food provision, coupled with agriculture’s role as an employment generator, in the context of climate change, presents two major risks: 1) food shortages, and 2) a highly vulnerable group being left without a regular income. This is a combination that could trigger a humanitarian crisis of significant proportions. That is why working with rural MSMEs is crucial for Fundación Capital.
We work on financial inclusion for small rural enterprises by facilitating primarily their access to savings or e-wallet accounts. These instruments serve to make payments, receive remittances, save, get insured, and eventually have overdraft facilities. We also have an interest in ensuring that medium-sized agricultural organizations continue to grow, generate income, and create a favorable environment that positively impacts families in poverty, which is our focus.
At Fundación Capital, we also work on learning and improving fiscal inclusion solutions. A high percentage of SMEs and farmers live outside the formal financial sector, and have no social protection like retirement packages or health insurance. . We need to find ways to formalize them with innovative strategies and differential approaches.
To mention some examples of the work we do, we provide technical support to smallholder coffee farmers in Colombia and Mexico to receive their harvest proceedings through e-wallets, which involved disseminating financial education and training programs.
In Paraguay, for the production of tomatoes, we have introduced high technology for irrigation and fertilization among rural MSMEs, based on precise measurements of soil humidity and plant nutrients. Most of the time, technology exists but given price and information limitations, farmers cannot access it. We have an important role to play as bridge builders.
In Colombia, we design and implement solutions and instruments that enable financial inclusion and access to credit for small and medium-sized rural entrepreneurs involved in the coffee, cocoa, natural ingredients, and tourism value chains. In this endeavor, partnering with other organizations was crucial to conduct a financial health assessment, which in turn allowed us to tailor solutions to current challenges, transfer methodologies and digital payment toolkits, and promote access to financial services.
Please describe some of the challenges your institution faces when lending to agricultural MSMEs in LAC. What are some of the innovative approaches you use to navigate them?
Working directly with producers and small and medium agricultural organizations, we have encountered significant challenges to overcome, such as the lack of financial history, lack of information on their economic activities (mainly due to cash use and informality), and lack of financial infrastructure (offices and agents) in the areas where small producers live.
Regarding financing, one of the main issues is the perception of increasing risk in agriculture due to the rising effects of climate change in recent years. There is concern that all the progress made in terms of financial inclusion could regress significantly, but we still have time to prevent this from happening. This requires a strong push for financial innovation to mitigate the risks faced by producers, who are ultimately the most exposed to climate risks.
In the face of these challenges, our innovation focus is on digital solutions, using applications to train and encourage people on their path to economic inclusion. We create data-driven strategies: if we cannot collect, analyze, and use data, we can not make significant progress. We obtain this data through digital solutions.
It is important also to highlight that we work to change systems that produce poverty, marginalization, and exclusion. We aim to move from a basic social protection system to a transformative social protection system that helps families to escape extreme poverty. When the system changes, you cannot go back. The actions we develop are pilots to convince governments and other stakeholders to work at scale. If we do not work at scale, we cannot make a dent in the world.
What message would you like to share with donors, commercial banks and other players that hesitate to lend to agricultural enterprises?
Do not do anything that is not based on genuine demands; listen to small farmers without intermediaries. Directly finance community groups, cooperatives, and productive associations of small producers. We recommend directly transferring resources to organized producer groups through a contractual relationship that requires public accountability on how the resources were used but allowing them to decide how to use the money.
Finally, this is the time when farmers are most exposed to climate risks, and therefore, we must accelerate financial innovation to ensure that these risks are distributed more equitably across the value chain. Otherwise, we risk significant setbacks in the progress made toward financial inclusion.
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Meet the champion
Yves Moury is the Founder and CEO of Fundación Capital, a nonprofit social enterprise working to improve the financial lives of people living in poverty around the world. He has received numerous international accolades for his work as a social entrepreneur, including from the Skoll and Schwab Foundations and Ashoka. He has spent many years working on the ground with low-income families throughout Africa and Latin America, and applies a wealth of expertise in finance, banking, development economics, anthropology and sociology in his work. He is a trained economist and management engineer from the University of Louvain in Belgium.