Institutional Action Plan Raffle Winner: Albanian Savings & Credit Union

Congratulations to this week’s winner of the Raffle for Institutional Action Plan Submitters:

Albanian Savings & Credit Union!

Social Guarantee: A Success Factor in Achieving Sustainability 

Albanian Savings & Credit Union (ASC Union) has broad experience in offering microfinance services for rural inhabitants in Albania. As a product of the first microfinance project implemented in Albania in 1992, it aimed to alleviate poverty in rural areas through microcredit. These microloans are targeted to populations that lack access to financial services, particularly farmers. Since then, the project has gone through several transformations pertaining to institutional requirements and broadening range of product offerings.

During the 2000s, the first Savings and Credit Associations (SCAs), guided by the principles of the financial cooperative, were set up and launched to operate in villages. As a result, ASC Union was founded on January 25, 2002 as a non-profit federation of Savings and Credit Associations. Its mission is to provide financial services to rural populations that are excluded from the banking system in order to promote production activities, raise the living standards, and continuously develop rural areas.

ASC Union and its SCAs members are strongly committed to the financial cooperative philosophy as their activities steadily rely on principles of reciprocal trust, volunteerism, and solidarity. Establishing these principles in the Albanian context presented a challenge for ASC Union. There were early negative feelings from the local communities towards volunteerism and trust in addition to the complete lack of traditional credit among the rural population.

Loan products and services are tailored to the special needs and demands of our membership. As such, use of social guarantee is the foundation of our lending activity, thus ensuring good health and continuity of SCAs’ lending operations in the future. It’s already known that most farmers in our intervention areas suffer from lack of collateral (physical or financial), so the social guarantee has proved to a large extent to be the most effective mechanism to maintain a high repayment rate and a good quality of microcredit portfolio. Social guarantee works very well within the SCA system thanks to the trust among the membership and social pressure at the SCA level.

Social pressure is one of the key components that have led to the success of our lending activity. Social pressure mechanism enables members to exercise pressure on each other in case of loan repayment delay or should any other problem arise. Governing bodies of SCAs have excellent relationship with the members helping them either to select the best clients during the lending process or to offer suitable solutions for problematic clients. Through this process, the system has been growing through the years, achieving success and sustainability in its operations. Concretely, from year to year, ASC Union has had a high rate of growth in terms of membership (10% in 2010 and 7% in 2011) and financial activity (an operational self-sufficiency rate of 125%).

Savings and Credit Association is an innovative and pioneering system to Albania. The basic principles of this philosophy and the proximity of the institution with its members are the keystone of its sustainability. In line with its social mission and the developing needs of its membership, ASC Union will constantly be grounded on the social guarantee as a main advantage in comparison to other financial actors in the market. Thus, our institution will ensure a sustainable approach of lending activity and showcase a strong image in the public as already viewed as the exclusive provider of financial services for the rural population and the only “bank” that serves the village.