MOU 16, amendment 4 FEDECOOP phase II

In general, phase II achieved its goals and objectives. To make the cooperatives less financially dependent on FEDECOOP and to establish a mutually beneficial relationship between the banks and the cooperatives, the phase II project channeled its credit funds through three banks, which assumed the full credit risk. This innovation was a major breakthrough. The private banks are more efficient as financial intermediaries than is FEDECOOP (through which the loans were channeled during phase I), which in fact has no capacity as financial intermediary for long-term loans; it is specialized in short-term crop financing. Moreover, the co-ops have learned to work with formal sector banks, and the banks have shed their reluctance to work with co-ops. The banks were very careful in analyzing the co-ops and imposed appropriate financial conditions. In future, more banks should be allowed to participate on a competitive basis as financial intermediaries. The TA provided by Agricultural Cooperative Development International (ACDI) during phase II was efficient.