Since 1996, approximately 25,000 families each year have been forced to leave their land and livelihood in the countryside and flee to Colombia's urban areas for safety. With the guerillas, para-militarists and narco-traffickers vying for control, until recently, Colombia had the highest murder and kidnap rate in the world.
Whether due to violence or due to economic development, the problem of displacement within Colombia continues with the result that families that previously earned their living from the land are deprived of their livelihood when they flee to safety in urban areas. They are not deprived, however, of their skills or willingness to work. With a small loan from The Colombia Project, coupled with mentoring by an effective Colombian grassroots organization, these families can start to rebuild their lives.
Partnering with existing grassroots organizations
The Colombia Project partners with non-profit organizations registered in Colombia. Partners are typically established non-profits that already have the stability of a board, bank account, internet access, and related support structures and are already effectively engaged in programs to serve the poorest communities in Colombia. The role of The Colombia Project is to help start a micro-credit program that the Colombian partners will eventually continue on their own.
Loan repayments build a locally sustainable loan program
The Colombia Project encourages the local non-profit to charge interest to cover costs associated with mentoring the projects and administering the loans. Most loans are repaid within one year and all repaid funds remain in the local community. To strengthen these non-profits that truly are working effectively with the disadvantaged communities, initially 50% of the repaid loans are allocated to the mentoring non-profit to cover its costs. The remaining 50% of repaid loans is recycled to support new loans within the community. This structure encourages and rewards good results rather than good intentions.
Over time, as more of the loans are funded from the permanent loan pool rather than funds sent from abroad, the Colombian partner has less opportunity to earn 50% from repayments on the initial fund transfers. Interest earnings become the primary revenue stream to cover administrative costs. Once the loan pool has achieved sufficient size (approximately $5000US), and as the Colombian non-profit increases its skill at identifying and mentoring good projects, 100% of repaid loans return to the loan pool, making it sustainable and no longer dependent upon outside donations.
Success is measured by both quantitative and qualitative measures. Each partner submits monthly reports of payments received and new loans issued. These transactions update a spreadsheet maintained in Miami which balances to each partner’s starting and ending balance, and provides both individual and global performance statistics and provides accurate data regarding interest and repayment earnings available to each partner to fund their various community initiatives.
Board members make periodic due-diligence visits to Colombia and report back their personal observations regarding the impact of loans on displaced and marginalized families in Colombia. Workshops held at the MINICOL annual partners’ meetings provide additional opportunities for exchange of qualitative information. Replication of the micro-loan model by other entities (in Santa Marta and Popayan) also constitute a qualitative measure of success, as do the steady stream of requests from prospective new partners who wish to implement micro-loans.
Within the U.S., The Colombia Project is run by an all-volunteer board of former Peace Corps Volunteers and Colombian-Americans that meets six times per year in Miami. The board of Returned Peace Corps Volunteers of South Florida, Inc. provides oversight for The Colombia Project.
Colombia Project board members conduct periodic due-diligence travel to program sites, at their own expense and communicate with Colombian partners via SKYPE, phone and email on a regular basis. Thanks to these efficiencies of the web, administrative costs for the US operations is kept to a minimum. Returned Peace Corps Volunteers of South Florida, inc. (RPCVSF) hosts the TCP website and provides banking services. RPCVSF allocates 100% of the proceeds from the sale of the Madison Wisconsin Returned Peace Corps Volunteer calendars to The Colombia Project to cover administrative expenses associated with wire transfers, printing of brochures, website updates and partner travel to annual meetings in Colombia. This RPCVSF support enables 100% of donations to be sent to Colombia for distribution as micro-loans.
Funds are generated through an annual Spring Fundraiser in Miami, through contributions made in memory of family or friends or in lieu of birthdays or Christmas gifts, and through campaigns to solicit individual donations. Ongoing support from Returned Peace Corps Volunteers of South Florida and Friends of Colombia has helped the program to steadily grow and expand. Operating under the umbrella of the Returned Peace Corps Volunteers of South Florida Inc, The Colombia Project is a 501(c)3 organization, making all donations tax deductible to the extent allowed by law.
The goal is to bring both the loan recipients and the Colombian partners to the point where they no longer need rely on the kindness of strangers. That occurs when the small entrepreneur has attained a level of stability that allows access to traditional loan sources as needed and when the Colombian partner has a permanent loan pool sufficient to meet the micro-loan needs of its community.
The agreement with our Colombian partners is simple: The Colombia Project provides funds for micro-loans. The partner distributes 100% of those funds as loans to marginalized entrepreneurs and mentors them to ensure they are successful in their income-generating efforts.
Partners are rewarded for good RESULTS not for good intentions. The partner’s compensation is solely through repaid loans.
Partners are encouraged to give a series of small, short-term loans but funding decisions are made at the local level, with the understanding that future disbursements depend on a successful repayment rate for the initial rounds of loans. There is a powerful incentive to stay focused on the success of the client since the partner’s compensation is derived from the client repayments: 50% of the principal repayment for loans funded by U.S. donations (i.e. loans not funded by the revolving loan pool), in addition to the interest on all repayments.
By introducing the proper incentives, The Colombia Project can let the partners work out the details for the structure that works best for them. Partners are encouraged to share best-practices at the annual partner’s meeting and encouraged to support each other through email and personal visits during the year.